On December 15, the Valdai Club hosted a discussion titled “Energy Crisis: Will Europe Have the Coldest Winter in History?” featuring Pavel Sorokin, Deputy Minister of Energy of the Russian Federation.
The moderator, Oleg Barabanov, Programme Director of the Valdai Discussion Club, invited the participants to discuss the prospects for energy policy in Europe and globally. He noted that this year, the energy crisis weighed on the Glasgow climate summit and on expectations of the green transformation, and that last autumn the energy sector was again held hostage by the geopolitical struggle, an example of which is the situation concerning the Nord Stream 2 gas pipeline.
Deputy Minister of Energy of the Russian Federation Pavel Sorokin, commenting on the decisions made at the climate summit in Glasgow, pointed out that they were mostly declarative in nature and contained a minimum number of specifics. “No matter how good the goal may be, it is very important to reach this goal, and in a normal economic situation,” he stressed. He added that slogans need to be “grounded in reality”. If the real goal is to reduce emissions, the main concern should be exactly how much it is possible to reduce emissions, and not what “good” or “bad” fuel is used. “A one-time transition to clean, green, light but very expensive energy can lead to a sharp rise in electricity prices throughout the world,” Sorokin said. An important factor, he said, is the cost of financing. A growing share of emissions comes from developing countries, which lack the luxury of being able to borrow at the cheap rates found in Western countries, which means that the green energy transition will become an unaffordable burden for them.
Konstantin Simonov, Director General of the National Energy Security Fund, analysed the origins of the European energy crisis. This is the first time we are witnessing an energy crisis organised by buyers, not sellers, he said. He stressed that manufacturers are only increasing their supply, but consumers have suffered from the market model that they have diligently created themselves. Simonov identified three reasons for the current situation — the Europeans’ belief in renewable energy sources (adding that their increased use will lead to lower hydrocarbon prices), belief in the spot market and belief in market diversification. “When the European Union changed the rules of the game, the key point was that it stopped considering the reliability of supply as a value for which you can pay extra,” the expert noted. When this new market model began to malfunction, European officials continued to claim that it was okay — and accused Russia of “withholding gas supplies”.
Marc-Antoine Eyl-Mazzega, Director of Ifri’s Centre for Energy, presented what is happening from the European point of view. In his opinion, a real drama is currently happening on the energy scene, caused by a reduction in gas use and an increase in coal usage in the energy balance, which leads to an increase in CO2 emissions. He believes that Russia could supply more gas to the European market to ease pressure on prices and reduce the attractiveness of coal. “The paradox is that Russia now has dramatic export opportunities, but the export itself is not so great,” he said. Eyl-Mazegga acknowledged that Russia is honouring its long-term contractual obligations, but believes that Russia should have responded to calls to increase supplies and that refusal to do so is bad for its image and future investments in gas projects.
