In a world where Russia is willing to start a new land war in Europe, there are new calls for Western powers to get more serious about their defence policies. It will be just as important that they develop robust and realistic policies on energy.
Discussions about investments in armed forces or hitting NATO funding targets are moving fast. But so is sentiment around energy sanctions, new liquefied natural gas facilities, and ending long-term reliance on Russian oil and gas imports. It comes down to this: If you really want to deter the world’s third-largest crude producer from its aggression against Ukraine, you would hit where it will hurt the most – its oil and natural gas exports. It’s where Russia derives not only its wealth but also the confidence to initiate such a reckless war.
The problem is – and Vladimir Putin surely knows this – that any such action will undoubtedly hurt the Western world, too. And badly. Global demand for oil and natural gas is high. European countries already facing much-elevated energy prices rely on Russian supplies of oil and natural gas. Such a move almost certainly would increase fuel prices in the United States, which has imported regionally significant amounts of Russian oil and fuel products in recent years. And restricting Russian exports of oil could cause a global shock to prices that forecasters believed could soar above US$100 a barrel, even before the invasion of Ukraine, whether a country is reliant on Russia supplies or not.
There are legitimate concerns about the global instability, and unintended consequences, that could be created by a sharp hike in already high energy prices.
In the first few days of the Russian invasion of Ukraine, Western powers seemed to have made these concerns paramount. Last Thursday, the White House said “our sanctions are not designed to cause any disruption to the current flow of energy from Russia to the world.” With near identical sentiment, Canadian Natural Resources Minister Jonathan Wilkinson said economic sanctions “are not intended to affect world energy markets.”
But on Sunday, it appeared the mood was shifting in small ways. Notably, White House press secretary Jen Psaki told ABC News that “energy sanctions are certainly on the table.” And Germany, which last year counted on Russia for about 60 per cent of its natural gas imports, announced it would accelerate work to build two liquefied natural gas terminals in the country, to diversify its supply. Canada is the world’s fifth-largest producer of natural gas but currently has not a single facility for shipping LNG overseas. The imperative to get non-Russian natural gas to Europe could rapidly make those proposed Canadian LNG projects to feed global demand a much higher priority.
It also became clear on the weekend that Western powers are interested in isolating Russia in the longer term. British Foreign Secretary Liz Truss warned that the world must be prepared for a conflict with Russia that could last years, and told Sky News, “I would be in favour of having ceilings on how much oil and gas is imported from Russia so that over time we cut the dependency right across Europe,” and “that’s what we’re working on with our G7 partners.”
But major new energy projects don’t get built overnight, and the immediate pressure of how to close in on Russia is one every leader is considering. When Jason Kenney raised the issue of energy sanctions on Russia last week, critics immediately chalked it up as a boorish example of self-interest – pointing out the Alberta Premier is the leader of a fossil fuel producing jurisdiction where already high bitumen prices are providing a lifeline to his province’s finances.
But the Biden administration’s resistance to cutting off Russian oil and gasoline imports can also be viewed at as a nakedly self-serving act. U.S. President Joe Biden’s popularity numbers have plummeted ahead of midterm elections. For months, his climate-focused administration has been in the humiliating position of imploring OPEC to produce more oil to keep a lid on rising gasoline prices. It seems the gas price problem was so politically salient that even before Russia invaded Ukraine, electorally vulnerable Democrats were contemplating a plan to remove the federal gas tax.
Proponents of the North American energy industry have said roadblocks to new fossil fuel infrastructure, and a lack of investment, has got us to this point. On the other side, U.S. climate envoy John Kerry worried in the days before the invasion that Russian aggression would distract the world from critical efforts on climate change.
But this year and next, global oil consumption is on track to go higher than the 100 million barrels a day the world consumed in 2019. Oil is still, by far, the world’s main source of energy. It doesn’t seem controversial to say that if Western countries stop building and investing in oil and natural gas, while demand continues to increase in the next decade or two, we are by default outsourcing more of our energy production – likely to Russia and OPEC.
The dawning realization that energy security and independence actually do matter doesn’t mean all other issues don’t matter. Even if there has been some talk in recent days of resuscitating mothballed oil sands pipelines, such as Energy East, environmental opposition is likely to remain formidable. Ms. Psaki on Sunday put down the Republican suggestion that the Keystone XL project be revived, saying it wouldn’t solve any problems for the U.S.
Still, as long as the conflict with Russia rages, Western leaders will continue to revisit their assumptions, and priorities. And those who have shuffled off the importance of energy security will have to think again.
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