Europe is facing an ongoing energy crisis, the effects of which are reshaping the fields of security, trade, international cooperation and, more broadly, geopolitics, revealing decades of vulnerabilities and mistakes that the population of the Old Continent is now called to pay for.
Europe’s energy crisis is an impetus for a major geopolitical restructuring on a global scale. No one knows exactly what the world’s energy and political landscapes will look like years from now when the dust settles from today’s crisis, but it is guaranteed to be significantly different than it was the day before the Russian invasion of Ukraine. It should be noted that Russia has always been the largest exporter of oil and natural gas in the European Union.
This year’s annual energy outlook from the International Energy Agency (IEA) warns that we are currently experiencing a “global energy crisis of unprecedented depth and complexity” and that there is “no going back” before the unprecedented double shock of the novel coronavirus pandemic and Russia’s war in Ukraine. Together, these events have already reshaped global energy trade, but the shockwave to the global economy is just beginning to take effect.
Many view Europe’s current energy deficit as a kind of heroism, as the European Union has taken a huge financial hit to impose energy sanctions on the Kremlin, the only kind of sanctions that could actually cripple the Russian economy in hopes of ending the war. in Ukraine. In the struggle to help Ukraine and resist Russian aggression, Europe has shown unity, toughness and a principled willingness to shoulder huge costs.
But, Europe’s actions cause great concern. Natural gas prices are currently six times higher than average prices, and new models suggest that a 10% increase in real energy prices is associated with a 0.6% increase in deaths over a typical winter season, equivalent to with more than 100,000 additional elderly deaths in Europe in the coming months.
Moreover, it is not only Europe that has to bear these costs. Economic vulnerabilities emanating from Europe threaten to destabilize not only some of the most heavily indebted European countries, but also developing countries and net energy importers around the world. As always, it is the poor who stand to lose the most, and the global south will inevitably bear the brunt of an energy war it had nothing to do with in the first place. While the devastating effects of the pyrrhic energy war between Russia and Europe are already weighing on consumers around the world, they will only get worse in the coming year.
The OECD’s recently released flagship annual forecast predicts a “significant slowdown” for the global economy in 2023, declining to 2.2%, followed by a “slight recovery in 2024” to around 2.7%. For the United States economy, which has been relatively immune from the crisis until now, the outlook is even bleaker. The OECD predicts the US economy will grow just 1.8% this year (compared to 2.2% for the global economy) and a paltry 0.5% next year before “recovering” slightly to achieve a weak 1% growth in 2024. It is clearly headed for a “brutal economic squeeze” that will be a major endurance test for Europe, its allies and its enemies.
There is growing fear that the reshaping of the global energy system, US economic populism and geopolitical rifts threaten the long-term competitiveness of the European Union and non-members, including Britain,” the Economist reports on the lasting effects of the crisis. “It is not only the prosperity of the continent that is at risk, but also the health of the transatlantic alliance.” Many European leaders have sharply criticized the protectionist and nationalistic energy strategies of the United States, including the recent Deflation Act, which provides $400 billion in stimulus for US energy, manufacturing and transportation.
A long-term dependence of Europe on cheap fossil fuels by an unstable and aggressive autocrat has turned out to be a dangerous dynamic, unsurprisingly. But the shift away from Russian influence is already pushing many nations further into China’s arms, risking the same kind of vulnerabilities and future energy shocks should that nation decide to exert its power over the Earth’s numerous rare earth minerals and other clean supply chains. energy it controls, almost completely.
