How the War changed the Global Energy Map

The Russian-Ukrainian war is already drastically altering the global balance of power. It is a systemic conflict, which, regardless of the outcome on the field, will change the multipolar trend of global power distribution, which arose after the dissolution of the Soviet Union. Although a military confrontation between Russia and NATO seems to be ruled out due to the nuclear balance of terror, at the economic level what is taking place in the relations between Russia and the West and especially Russia and the EU, since the very day after the Russian invasion, is equivalent to a previous and almost total economic war on the part of the USA, the EU and much of their G7 allies.

That the E.U. was not ready for this economic war was shown by the fact that the Russian natural gas outages that escalated between July – September 2022 increased natural gas (NG) and electricity prices fifteenfold in the previous year. The total cost of these increases, shared between governments, businesses and consumers, reached, according to an IMF report published in December 2022, 1 trillion. euros or 6% of the EU’s GDP. It is, however, indicative of the determination of the Europeans, that despite this cost they did not hesitate for a moment to align geopolitically and militarily with Ukraine, seeing that any defeat of Kiev would be equivalent – given the satelliteization of Belarus and Kazakhstan by Russia – with the reconstitution of a new Russian empire with strong revisionist tendencies, even the eastern borders of the E.U.

It is not an exaggeration to underline that the goal of the US – E.U. is to turn the world’s 11th largest economy into an economic pariah, a giant “North Korea”, cut off from the network of economic globalization. For Russia, at the core of this globalization was its role as an energy exporting “superpower”. But what did this “title” correspond to?

Over the last twenty years, Russia has consistently been the largest FA exporting country. the world’s third largest exporter of coal, while after 2003 Russia has consistently emerged as the second crude exporter (after Saudi Arabia), the second oil exporter (after the US) and the world’s largest oil exporting power if crude exports are included and products, which in 2021 reached 7.5 million barrels/day (EC.B./H.).

Of these 7.5 EC.B./U., approximately half ended up in the OECD-Europe markets. By 2021, Russia produced a total of 10.5 EU.B./U. or 14% of global production, the largest contributor after the US and Saudi Arabia, while exporting 12.8% of global crude exports (4.7 EC.B./U.) and 15% of global petroleum product exports (2.8 EC.B./H.). Russia exported more petroleum than all the countries of Europe combined, while meeting 20% of the fuel needs of European OECD countries.

US and EU target is to turn the world’s 11th largest economy into an economic pariah.

According to the BP Statistical Review of World Energy, in 2021 Russia exported a total of 241.3 billion cubic meters/year (BCM/E) of natural gas accounting for 19.76% of global natural gas exports, the third best performing of its history, of which 146.7 DKM/E or just 60.8% were headed to the EU. The corresponding percentage in 2008, a year before the great Russian-European F.A. crisis, was at 81.81% (126.33 DCM/E in the EU against global exports of 154.41 DCM/E), as still Russia had not started exports to China (which started in 2020) and did not export any liquefied natural gas (LNG), which was done systematically after 2010.

The strategy of diversifying markets and especially routes that Russia followed throughout the decade preceding its invasion of Ukraine proved to be particularly difficult in the case of F.A. New F.A. conductors or liquefaction plants take years to build and it must be ensured before their construction that the export of the F.A. through long-term sales contracts, which are becoming increasingly rare. But the same was not true for exports, especially crude oil, where finding an alternative buyer can be done in a few days, while if the exports are made by tankers they can reach anywhere in the world within 30 days at the most. So how successful has the aforementioned Russian diversification strategy been in the oil sector? Russia dominated European oil markets for more than two decades.

This dominance was made possible by the expansion of the Baltic Pipeline System (BPS) which was completed in 2000 allowing Moscow to drastically reduce its transit dependence on the Soviet-built Druzhba pipeline system, thus ensuring a large degree of global reach. , although most of the tankers carrying Russian oil exports were not owned by the Russian state-owned tanker company Sovcomflot until 2022. Alongside the upgrade of the BPS and the construction of the Tenguiz-Novorossisk pipeline, Russia built between 2011-2018 three new oil pipelines to China, systematically even using Kazakhstan’s pipeline network to export oil to Beijing after 2017.

Russia had begun reducing its dependence on Western oil markets a decade before its second invasion of Ukraine, accelerating its pivot to Asia after annexing Crimea and part of the Donbass in 2014, a strategy it pursued with less success and in the field of F.A. As a result, between 2011-2021 the weight of the European market in total Russian oil exports decreased from 80% to 50%, while by the end of 2022 this share fell below 25%.

It is indicative that in 2010 Russia exported more oil to the US than it exported to China. In 2021 China alone accounted for 34% of all Russian exports, up from just 8% in 2010. It is precisely this strategic flexibility combined with an aggressive policy of undercutting crude to find markets that has made Russian oil extremely popular in Turkey, China and primarily to India, with the latter absorbing 11% of total Russian exports in 2022, up from less than 1% in 2021.

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