Evolving energy crisis sets in in Eurasia as winter approaches

Power outages in Tajikistan, energy shortages in Ukraine, rising electricity costs in the Balkans and short-term benefits for state-owned enterprises in Russia.

These are some of the first ripple effects felt across Eurasia from an accelerated global energy crisis caused by fuel shortages for power generation in China and soaring prices across Europe which affect consumers and producers.

The worsening crisis in Europe and Asia also risks putting the global economy at risk as it tries to recover from the downturn caused by the coronavirus pandemic.

As winter approaches, the sudden energy crisis hitting the world threatens already stressed supply chains, stokes geopolitical tensions and raises questions about preparing the world for a transition to greener forms of energy .

“The global rise in energy prices has affected economies around the world as the prices of oil, coal and gas have increased,” Jack Sharples, expert at the Oxford Institute for Energy, told RFE / RL. Studies. “In addition, the energy crisis has revealed the inelasticity of our energy demand: even with high prices, we continue to consume hydrocarbons because we do not have a readily available alternative.

Chinese coal imports from Russia have tripled compared to last year. The rising cost of natural gas has also given Moscow and Gazprom, its state-owned gas company, additional leverage over Brussels as it pushes for final approvals for its new and controversial Baltic Sea gas pipeline to the Germany, Nord Stream 2, which will bypass Ukraine. .

China’s energy-producing neighbors, such as Kazakhstan and Turkmenistan, have also seen increased demand for coal and gas, respectively, although these shipments have been hampered by logistical and production limitations to deliver gas. larger quantities than expected to China.

An employee checks a gas valve at the Atamanskaya compressor station, part of Gazprom’s Power of Siberia gas pipeline, outside the far eastern town of Svobodny in Russia’s Amur region. (archive photo)

Elsewhere, the government of North Macedonia has held emergency meetings to deal with the ongoing crisis, announcing temporary funds to boost energy companies and introducing caps on electricity consumption for businesses.

Within the European Union, disagreements over how to respond to the crisis are emerging, with some leaders asking for help from the bloc and others – like Hungarian Prime Minister Viktor Orban – attributing the price hike to radical policies of the EU to fight climate change and reduce emissions.

“This energy crisis could affect the way Brussels implements its flagship Green Deal climate policies, in particular the expansion of the EU’s emissions trading system,” Charles Dunst told RFE / RL , partner of the Global Macro team of the Eurasia group. “The plans were already unpopular and the energy crisis risks [make any] support decreases [even further] In the coming months.”

Origins of an energy crisis

The current energy crisis first emerged in China, the world’s largest manufacturer, as global demand for its products has suddenly and unexpectedly increased this year amid a post-pandemic economic push.

Due to an unofficial Chinese ban on Australian coal, which was previously the country’s largest supplier, coal stocks were low. China’s electricity deficit has also been worsened by conflicting climate policies adopted in the country.

Chinese President Xi Jinping has vowed that China will be carbon neutral by 2060, leaving Chinese regional governments to scramble to bring emissions of carbon dioxide and other greenhouse gases into line with set limits. As a result, factories had to contend with electricity rationing and blackouts.

With coal supplies dwindling at home, Chinese power companies have also turned to the natural gas market, leading to purchases at an even faster pace than European traders had anticipated and sparking prices.

A coal stacker in the Russian Far East prepares shipments to customers in China, South Korea, Japan and elsewhere in Asia.

A coal stacker in the Russian Far East prepares shipments to customers in China, South Korea, Japan and elsewhere in Asia.

“The energy crisis has disrupted production in China, which risks further slowing global supply chains ahead of the busy Christmas shopping season in the West and beyond,” Dunst said.

Natural gas prices have since hit a series of records.

In Europe, the prospect of supply shortages is growing as demand increases across Asia as well, where buyers are willing to continue paying more and outbid their European counterparts.

This disparity is likely to intensify after China in October ordered state-backed companies to secure energy supplies, regardless of the cost. Since then, imports of coal and gas have grown steadily.

China’s move suggests other parts of the world will have an even harder time getting the fuel they need, Dunst said.

Crisis and opportunity

Amid the fluxes in the global energy market, Russian President Vladimir Putin has decided to take advantage of his country’s vast energy reserves.

During the pandemic, overall gas exports to the EU from Russia – which supplies around 50% of the bloc’s imports – fell due to falling demand as economic activity contracted. Although it has accelerated again in Europe, this downward trend continues, with supplies declining this year. This has led to the depletion of European stocks, which in turn drives up prices.

Putin and Russian officials have urged Germany to speed up its regulatory approval of Nord Stream 2, suggesting it will provide a long-term solution to the country’s energy problems.

Meanwhile, on Russia’s eastern front, energy companies have moved quickly to meet growing demand from China, supplying the country with three times more coal this year than in 2020, according to Chinese customs data.

Smoke rises from a coal-fired power plant near Datong, in China's northern Shanxi province.  (archive photo)

Smoke rises from a coal-fired power plant near Datong, in China’s northern Shanxi province. (archive photo)

“The current two-pronged energy crisis offers Moscow a short-term opportunity to push for its energy projects in Europe under sanctions and to strengthen its position as an energy supplier to China,” said Vita Spivak, analyst at consultancy firm Control Risks, told RFE / RL. “While the current crises appear to be primarily the result of post-coronavirus economic development, energy shortages could arise in the future as the world tries to embark on the ‘green transition’.”

Moscow has pivoted to meet China’s ever-changing energy needs, with oil and gas accounting for more than 60% of Russia’s exports to China, a trend that may continue as China wears off coal and becomes more dependent on it. gas.

The Power of Siberia gas pipeline launched in 2019 is already supplying gas to China, with plans for its production to increase in the future. A second pipeline, Power of Siberia 2, is also under discussion.

In the meantime, Russia continues to focus on coal.

Moscow has announced that it will temporarily halt coal shipments to Ukraine from November 1, saying it is necessary for domestic consumption, despite increasing its exports to other countries.

Later, Russia is also looking to increase its coal supplies to China and is currently investing $ 10 billion in rail infrastructure in its Far East to meet future Chinese needs before the country progresses in its transition to alternative energy sources. .

“In order to take advantage of its position, Moscow needs to ensure that the appropriate energy export infrastructure is in place, which presents a challenge in this window of opportunity,” Spivak said. “Moscow realizes that the window of opportunity to sell its hydrocarbons to Europe and China is limited.”

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