International Affairs Analyst
THE GLOBAL ENERGY CRISIS OF 2021-2022: A SHIFT IN WORLDWIDE ENERGY DYNAMICS
The worldwide energy crisis of 2021-2022 was initiated mainly in the aftermath of the COVID-19 pandemic in 2021, with most countries facing resource deficiencies and inflated prices in servicing their respective petroleum, natural gas and electricity demands. The crisis was mainly forced by an amalgam of labour shortages, economic factors, quarrels, and climate change, and was further compromised by the 2022 Russian invasion of Ukraine. The COVID-19 pandemic generated an instantaneous reduction in energy demand and a related cut in oil extraction, and despite the 2020 Russia–Saudi Arabia oil price war, the Organizations of the Petroleum Exporting Countries reacted gradually to the demand recuperation under the new normal, causing a supply-demand imbalance. Furthermore, the concentration of Russian troops close to the Ukrainian borders and the ensuing invasion jeopardized the energy supply to Europe from Russia.
During the Russo-Ukrainian War and Russian annexation of Crimea in 2014, international sanctions were imposed and thereafter tensed following the 2022 Russian invasion of Ukraine, with the certification of the Nord Stream 2 pipeline concurrently frozen. Moscow, prior to the subsequent invasion, had already declined to raise exports to European markets and reacted to EU sanctions by lowering gas deliveries to Germany via Nord Stream 1, followed by a complete termination in September 2022. During the same month, gas leaks took place, thus resulting in making the pipes completely non-functional, in an event that both NATO and EU officials described as sabotage.
ENERGY TRANSITION
Aside from inflationary tensions, the 2021 - 2022 energy crisis has also boosted the usage of coal in energy production globally. Coal utilization in Europe already rose by 14% in 2021 and is predicted to have increased by another 7% in 2022. Skyrocketing gas costs have made coal more competitive in multiple demands, and several countries have turned to coal as a replacement for probable energy rationing for the winter of 2022 - 2023. Igniting coal or oil derivatives emits far higher quantities of carbon dioxide and gaseous air contaminants, thus the resort to coal delays the transition to greener energy sources.
Europe has been leading with respect to the international climate approach, vowing to diminish emissions to at least 55% below 1990 levels by 2030, though embargoes on Russia are destroying global reserves of fossil fuels with severe expense proliferation.
Nonetheless, the Russo-Ukrainian war in 2022 hazards tattering years of formidable and dedicated work to decrease emissions on the European continent. After an elongated period of favourable prognoses on decreasing Europe's carbon footprint, nations are unable to keep anything off the table, including also reopening coal-fired power plants or even extending oil imports, as well as lengthening the phase-out for nuclear energy.
Furthermore, if Russian gas imports were to terminate in the next months, an estimated 25% of Europe's gas demand could not be met at zenith times for a winter similar to that in 2021. Moreover, that shortfall is due to a deficiency of proper transport infrastructures such as pipeline capacity and Liquefied Natural Gas terminals, while the supply interval can be sealed by 2025 if natural gas consumption drops by 20% across Europe and infrastructure is developed at the same time.
European policy-makers in March 2022 decided to substitute Russian fossil fuel imports with alternate ones and European coal energy production. However, Russia was also a key partner and supplier of materials utilized for clean energy technologies, meaning that estimations have foreseen a general damaging effect on the climate emissions reduction path.
Altogether, the reaction to this rising problem has been the return to coal and other polluting energy sources, subsidizing expenses, relieving gas taxes, or even reducing the cost of carbon dioxide emissions. These short-term resolutions decrease electricity bills but move precisely in the opposite direction of what is required to contain the 1.5-degree increase in temperature, advancing the probability of a climate catastrophe.
DESIGNING THE MEDITERRANEAN ENERGY HUB
The establishment of a Mediterranean gas epicentre in Southern Europe will diversify the EU's energy suppliers and routes. Consequently, the EU is committed to a dynamic energy discussion at a political stage with Eastern Mediterranean and North African partners. Taking into consideration the immense prospect of Algeria, both for traditional and unconventional gas resources, and also the new gas resources in the Eastern Mediterranean and the associated infrastructure growth projects, the Mediterranean region can function as a pivotal source for supplying gas to the European Union. As a result, Cyprus, Egypt and Israel, due to their significant offshore gas reserve, established the Eastern Mediterranean basin as a strategic ally for the EU in its endeavour to diversify its gas stockpile routes. The two major options to transport gas from across the Mediterranean to the EU, and the global market, would either be via pipelines or in the form of Liquefied Natural Gas. Specifically, there are two significant Projects of Common Interest in gas concerning the Eastern Mediterranean Pipeline, and the CyprusGas2EU Liquefied Natural Gas terminal.
SOUTHERN GAS CORRIDOR
In 2008 the European Commission proposed the initiative of the Southern Gas Corridor, a natural gas supply project commencing from the Caspian and Middle Eastern regions to the European market. The objective of the Corridor is to diminish Europe's dependency on Russian gas and to diversify sources of energy supply. The route itself, from Azerbaijan to Europe, is composed of the South Caucasus, the Trans-Anatolian and the Trans-Adriatic Pipelines. Inaugurated during the last quarter of 2020, as of March 2022, the Corridor supplied approximately 10 billion cubic meters of natural gas to Europe. It is anticipated that the Southern Gas Corridor will supply a maximum capacity of roughly 10.5 billion cubic meters of gas annually. The European Union is taking a series of actions to support the mega project by upholding the infrastructure projects necessary for the Corridor under the fourth list of EU's Projects of Common Interest.
These are undertakings which may profit from a streamlined licensing procedure, acquire preferential regulatory treatment, and are qualified to apply for EU grants from the Connecting Europe Facility. Furthermore, the European Union is subsidizing the construction of the Trans Anatolian Natural Gas Pipeline (TANAP) and the Trans-Adriatic-Pipeline (TAP) to transport natural gas from Azerbaijan to Italy via Georgia, Turkey, Greece, Albania and the Adriatic Sea respectively. Lastly, there are initiatives to boost cooperation with transit nations, while simultaneously facilitating closer collaboration with gas suppliers in the area.
EU – AZERBAIJAN GAS DEAL
In July 2022, the European Commission signed a memorandum of agreement with Azerbaijan to increase natural gas imports to at least 20 billion cubic meters a year by 2027 from the Azeri gas fields, in order to significantly diminish European reliance on Russian resources and sustain the development of a pipeline to do this. Europe acquires Azeri natural gas - since December 2020 - via the Trans-Adriatic pipeline, which is part of the aforementioned Southern Gas Corridor, and is transporting gas to Europe from the Shah Deniz II offshore field in the Caspian Sea. Linking with the Trans Anatolian Pipeline (TAP) at the Greek-Turkish border, TAP traverses Northern Greece, Albania and the Adriatic Sea and it is finally coming ashore in Italy.
The way that the TAP is constructed allows it to facilitate gas supply to various South Eastern European countries, such as Bulgaria, which has already linked with the pipeline through Interconnector Greece-Bulgaria, and it will provide for almost one-third of its yearly consumption. At this point, it is worth mentioning that until recently Sofia was relying on almost 100% of its gas imports from Russia.
On the other hand, this deal stands in complete defiance of the EU's human rights standards and climate goals and will also indirectly support the authoritarian regime of Baku, infamous for uncontrolled corruption and the repression of all opposition in the Petro state. Furthermore, what has been neglected is the fact that the necessary infrastructure required to extract and transport the gas from the Caspian Sea to Europe is co-owned by Lukoil, a Russian oil and gas colossus closely related to Putin’s government and a company that is on the United States sanctions list.
It is also supported that this agreement is unable to help address the EU's potential gas deficiencies at the moment, given the fact that it is technically inconceivable to implement gas production and transportation needed in less than five years, while the EU must already commence shortening its gas demand greatly to achieve its own climate goals by 2030 and 2050.
THE CONFLICT BETWEEN ARMENIA & AZERBAIJAN
Earlier this year the de facto regime of the breakaway, ethnic-majority Armenian territory of Nagorno-Karabakh, noted that the Azerbaijani military had battered the region, while the latter claimed “an anti-terrorist operation against illegal Armenian armed groups in the territory of Azerbaijan”. This has resulted in a military mobilization.
The escalation came just a few weeks after President von der Leyen visited Azerbaijan and signed a bilateral deal seeking to more than double European Union imports of Azerbaijani natural gas, given Baku’s importance in reducing Europe’s Russian energy dependency. Furthermore, the outbreak of conflict in the 2020 Armenian-Azerbaijani war over Nagorno-Karabakh is one more indication that the West’s policy to Azerbaijan is failing. Europe’s negligence to take relations with Azerbaijan carefully jeopardizes strengthening the bloc's energy crisis, worsening the security crisis in the Caucasus, and strengthening Moscow. That being said, Azeri President Aliyev, while adopting the role of Europe’s energy rescuer, has also pursued accommodation with Russia - only a day after Putin recognised the puppet states of Donetsk and Luhansk, Azerbaijan signed a declaration on allied cooperation with Russia.
In late October 2022, the two leaders of Azerbaijan and Armenia, with the presence and mediation of President Putin in the Black Seas city of Sochi, decided to halt hostilities and adhere to previously agreed accords that aimed to terminate fighting between the two Caucasian neighbours that left over 200 people dead. The two states agreed to abstain from the use of military means and to examine and settle all challenging queries exclusively based on joint recognition of sovereignty, territorial integrity, and the inviolability of borders. Despite the fact of the aforementioned resolutions, recently energy behemoths have been aiming to divest from Azerbaijan, since the American Chevron sold out in 2020 and ExxonMobil is contemplating a similar scenario, while the British BP noted that the company would forfeit its remaining stake after failing to uncover commercial gas resources.
CONCLUSION
In conclusion, it is of utmost importance that the leaders of the European Union start learning from past mistakes related to energy diversification and energy security concerning deals struck with authoritarian governments. In that way, those agreements only serve to eternalize Europe’s fossil fuels desire, precisely when it most desperately ought to be terminated. On the other hand, if Azerbaijan is indeed going to become a replacement for energy provision for Europe, immediate and well-calculated work needs to be done to accommodate investment in its energy sector. That will also contain the EU agreement’s renewable energy commitments, which are essential to free up more Azerbaijani natural gas for export.
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