The European Union's Response to the Russian Gas Crisis

• Financial

In the summer of 2022, tensions were high as the European Union (EU) faced a major crisis after Russia's invasion of Ukraine. The potential consequences were dire, with warnings of catastrophic industry shutdowns, disrupted supply chains, and mass unemployment from Germany's economy minister.

However, as the winter of 2023 draws to a close, it is evident that the EU has overcome this historic challenge. In the face of adversity, the EU replaced approximately 80% of the natural gas it previously received from Russia within eight months of the invasion, according to The Guardian.

The Netherlands, the EU's largest natural gas producer, played a key role in this effort. Despite relying on Russian gas for 15-20% of its supplies, the Netherlands doubled its liquefied natural gas (LNG) import capacity, reducing domestic demand by 22%.

The country also delivered excess gas to neighboring countries like the Czech Republic, France, and Germany.

Energy Saving Policies Prove Effective

Gas prices rose throughout the EU, but were capped and subsidized to mitigate the impact on consumers.

Simone Tagliapietra, an energy expert at the Brussels-based thinktank Bruegel, praised the EU's response to the crisis, stating, "Europe managed to avoid the temptation of protectionism and managed to keep its internal market intact." Spot gas prices fell to around 55 euros per megawatt hour (MWh) in February 2023, compared to a high of 330 euros per MWh in August 2022.

According to Bruegel estimates, gas demand in the EU was 12% lower than the average from 2019 to 2021. Germany, which was highly dependent on energy exports from Russia, managed to consume 14% less gas in 2022 and entered February 2023 with 80% full gas storage tanks, compared to 36% at the same time the previous year.

The Nordic countries were even more successful in reducing gas consumption, with Denmark, Sweden, and Finland cutting total demand by 24%, 36%, and 47%, respectively. The EU's response to the Russian gas crisis showcases its resilience and ability to work together in the face of adversity.

Despite initial reluctance from some southern European countries, the EU successfully implemented energy-saving policies, reducing gas consumption, and maintaining its internal market. While the impact of high gas prices has been felt, particularly in Germany, the consequences have not been as catastrophic as predicted. The EU's success in overcoming this crisis serves as a reminder of its strength and unity in the face of challenges.