Vladimir Putin's invasion of Ukraine heralds a new era of energy instability in which secure supplies are no longer guaranteed. The shock to markets has already sent the price of gas, power and motor fuel into the stratosphere, with painful consequences for consumers and an urgent political imperative on the Government to tackle the rising cost of living. But there could be much worse to come if the flow of Russian energy into Europe grinds to a halt.
These are no small risks. For all the barbarity of Putin’s military campaign, European leaders still baulk at closing the pipelines that carry his gas and oil. That stance owes much to Germany’s reliance on Russian supplies. Yet the longer the war continues the more pressure will intensify to retaliate by targeting the energy backbone of the Kremlin’s ailing economy. A durable peace deal is not in sight and no-one trusts Putin’s negotiators anyway, lies and violence being the defining feature of Russia’s engagements with Ukraine.
Now Moscow has raised the stakes, threatening to stop deliveries to "unfriendly countries" if they don't switch to rouble payments from the euro. Europe is right to resist this ploy, not least because it was designed to circumvent financial sanctions and strengthen the Russian currency. Although the real test won't come until payments for energy used today fall due in late April and May, the implications are stark. Germany and Austria have activated emergency plans that could lead to rationing, moves that point to severe economic disruption, broken supply chains, soaring inflation and hardship for those deprived of heat or power.
Would Putin really cut the flow? Any assessment must be measured against the miscalculation and strategic blunder that characterise his deadly venture in Ukraine.
The fact that Ireland draws much of its gas imports from Norway via Britain provides some measure of short-term comfort. Yet the impact of war on pricing could hardly be clearer – and any interruption to Russian supplies would drive it to even more punitive levels. Mounting concern about the possible supply crunch when demand peaks next winter has already led the Government into quiet talks with industry on a contingency plan for rationing, a discussion that centres on the need to maintain power in hospitals, schools and the food and pharmaceutical sectors. Trade-offs are inevitable. Coal-fired electricity, bad for climate, is likely to be prolonged. A Government opposed to fracking might yet seek to build liquefied natural gas infrastructure as the US plans to boost European shipments.
Energy insecurity will outlast the battle for Ukraine, regardless of its duration. So the need to push on with investment in renewables has never been clearer, even while building up emergency wartime capacity.