OPINION: Sabre-rattling by Russia on the Ukraine border has led to military preparations in the West and sent the cost of Brent crude to nearly $90 per barrel.

Gas prices have already hit record levels in Europe this winter, partly due to a downturn in supplies from Russian state gas monopoly Gazprom.

With Ukraine being a key energy pipeline hub, some argue Europe is facing the worst energy crisis since the Arab oil embargoes of the 1970s.

There are fears that military turmoil in the Ukraine could cause Russia to turn off gas supplies, potentially causing power blackouts and heating loss in Europe.

The Kremlin cut gas exports from Russia into the Ukraine in a series of disputes between 2005 and 2009 allegedly over payment issues, but the moves were also seen as political.

After seizing Crimea from Ukraine in 2014, Russia has made clear it regards Kiev’s increasingly close political and economic relationship with the West as a threat.

Nord Stream 2 warnings

In return, Nato and the West are mobilising ships and military equipment while warning that permissions around the planned Nord Stream 2 gas transport system under the Baltic from Russia to Europe should be withheld.

The US is also under pressure at home to beef up sanctions against Russia and President Vladimir Putin, and to further target oil and gas executives who have close connections with him.

Pursuing alternatives

Russia produced nearly 10 million barrels a day of crude in the final quarter of 2021 – much of which ended up in European refineries.

Poland has recently brought in Saudi Arabia to provide more crude to the eastern European country and invest in its domestic refineries in a bid to reduce reliance on Russia.

Poland and Russia have also recently been in dispute over the price of gas.

The European Union in normal times receives 40% of its gas from Siberia and is feeling increasingly compromised over how to deal with Putin’s threats.

French President Emmanuel Macron, has caused concerns inside the US and the Nato military alliance by saying the EU should forge its own response to Russia.

Overtures to Qatar

Meanwhile, the US has contacted energy-rich Qatar to request help with providing more gas to Europe in the event of a Russian invasion of Ukraine.

Most Qatari gas currently goes by ship as liquefied natural gas to Asia, with European supplies limited after a row between Doha and Brussels around past fixed contracts.

Europe’s need to dilute its dependence on Russian gas may encourage a more positive dialogue with Qatar and bring back stalled investment.

In October, QatarEnergy (previously Qatar Petroleum) signed a deal with Royal Dutch Shell to develop hydrogen projects in Britain – now outside of the EU.

Some argue that Russia’s ability to use gas as a weapon in Europe to pursue political or economic goals is another reason why countries should fast track home-grown renewables such as wind power.

Meanwhile, Gazprom has started to look to China as a more interesting future export market as Europe becomes increasingly complicated.

Putin’s winter manoeuvres may have already changed the global energy map in ways the Kremlin might not have anticipated.

(This is an Upstream opinion article.)