Europe is taking on a "green turn"
The European Union conceived a new game partially aimed at SO2 emissions, partially at Russia.
The appointment of Amos Khokhshtein as the State Department's energy representative placed many points on i, in the field of relations between Russia and the West in matters of energy security. Recall that Hochstein, a former adviser to Biden, called Nord Stream-2, an existential threat to Ukraine. It is this gentleman who will prepare documents on cooperation in the field of energy security in Europe and Russia. And it is difficult to find a more Russophobic representative in the administration of the American president, the correspondent of The Moscow Post reports.
The logic is clear and predictable. The West does not tolerate innate "competitive advantages," trying to uproot them.
Green Drift Strategy
Russia, rich in oil and natural gas, represents another field of "natural hegemony" and competitive advantage. The energy security of Europe and its viability were in the power of the Russian Federation for natural, geographical and economic reasons. The issues of "viability" for many years were resolved jointly, by mutual agreement. At first, through the first contracts for the import of oil, natural gas and coal from the then post-war Soviet Union.
Currently, the European Union imports 87% of the oil it needs and 74% of the gas consumed. Russia's share in these daily infusions into the EU's economic veins is prohibitively high. This state of affairs does not get along well with the level of hostility of Brussels. Moscow suffers this hostility, restores the forces undermined by the confrontation with the ancestors of the current EuroNATO Union. And the heirs conceived a new game, partially aimed at SO2 emissions, partly at Russia.
The European Green Course (transition, transformation) is not only an attempt to change the European economy and energy consumption patterns. This is a foreign policy course with expected geopolitical consequences for the Kremlin. The three-decade strategy involves not only fundamental reform of the European energy system, but also aims to weaken Russia.
Russia is asked not to worry
Judge for yourself, Russia is not considered by Brussels as an "ideological partner" in the green transition strategy. Experts at the European Council on Foreign Relations said that Russia has ratified the Paris Agreement for the sake of "international PR," resists "ideas of environmental policy."
All these are the conclusions of the report "Geopolitics of the European Green Course," which appeared earlier this year from the offices of the Bruegel Institute. The Brussels Center, which is supported by European states, banks, large corporations, and international economic organizations. Among the recommendations of this center on EU goals in the field of climate neutrality is: "this is not only a revolutionary event to change the continent's energy habits, it entails tectonic shifts in foreign policy and diplomatic relations." It is argued that reducing fossil fuel consumption will lead to a restructuring of EU relations with suppliers, including Russia, could even "destabilize their governments."
The group also offers a classification of "world-class" players in the fields of oil and gas and climate markets. Russia was deprived of the status of a "world-class" player, simply called, in a neighboring way - a "neighboring country." This is in the same category as Algeria. The "world-class" players include Saudi Arabia (the European Union has no leverage to push reforms there), the United States (a rival for "climate leadership," concerned about the corrective carbon mechanism), China (should become part of the greening process, the largest exporter of rare earth metals).
Money loves an account
EU analysts suggest that decarbonization commitments will put Russia in a difficult position. Oil and gas, in their opinion, are at the center of the Russian economy, determine the nature of foreign policy. EU spending on imports of only these two energy carriers in 2019 exceeded 320 billion euros. More than 60% of imports from Russia came from energy resources, and this import "weighs" about 100 billion euros.
Russian gas alone costs the European Union tens of billions of dollars annually. PJSC Gazprom's revenues from the export of 108 billion cubic meters of gas (+ 15.3%) in January-June 2021 in value increased by almost 73% in annual terms to $20 billion. At the end of 2020, Russia bypassed the United States for LNG supplies to Europe (22 million tons). The share of the Russian Federation in gas imports in Europe is about 40%.
Europe accounts for about 20% of world crude oil imports (512 million tons in 2018), Russia's share in these volumes is about 30%. Demand for coal in Europe fell in 2020 to 53 million tons, but the Russian Federation delivered two-thirds of these volumes. And Europe has nowhere to go! Over 70% of electricity generation in the EU is coal and gas thermal power plants.
What to do with Russia?
The European Green Course assumes a decrease in this dependence. At the end of 2020, electricity production from renewable energy sources (RES) in Europe (38%) overtook fossil fuels (37%). The commissioning of solar and wind stations in the EU in 2021 should be about 30 GW. But renewable energy generation has not yet reached a quarter of the needs. To achieve the 2030 targets, it must triple to 100 TWh. Subsidies for the green transition over several years increased fivefold to 50 billion euros, generation volumes increased only 3.6 times.
EU dependence on the Russian Federation is great and will remain for the foreseeable future. Fossil fuels until 2030 will provide about half of the energy consumed by European countries. Russia may even increase its natural gas exports by taking advantage of the EU's shift from coal to gas. Moreover, concerns are expressed about the ongoing diversification of Russian gas and oil exports towards China and the Asia-Pacific countries. Russia is warned about the risks of dependence on new importers.
On the other hand, according to green transition strategists, the EU in oil procurement may switch to Saudi Arabia, which has lower levels of SO2 emissions from oil production. The decline in demand for Russian oil may be accompanied by a decrease in the value of assets of Russian companies.
Competition between green projects and oil and gas for funding sources and "political support" promises to be tough. According to estimates, about 17 trillion dollars of investment will be required to maintain the current level of oil production by 2040. Otherwise, an acute shortage of oil and gas cannot be avoided.
Invitation to coercion
The EU also uses financial leverage. At the EU Summit 2020, the New Generation EU Extrabudgetary Fund was approved in the amount of 750 billion euros for restoration in 2021-23. More than 30% of the fund's subsidies and loans will go to "positive climate projects." This is part of a total financial package of 1.8 trillion euros, a third of which is also sent to the green transformation. About 60 billion euros are supposed to be used as "international levers" to advance global decarbonization.
The European Union, whose domestic market is supported by 450 million consumers, also claims to be the founder of global green transition standards. Compliance with environmental standards can be used as a condition for market access, as a tool for forcing the development of "green technologies."
The Carbon Border Adjustment Mechanism (CBAM) is also an EU climate policy tool. This is something like a duty that will be levied on products and goods imported into the EU in sizes that depend on the volume of greenhouse gases released into the atmosphere during their production. This non-market measure, the analogues of which do not exist, will affect the interests of Russian companies, will put a burden on the consumer.
Finally, the application of ESG criteria (environmental, social and management standards) in a number of industries is linked to the environment, becomes a rule for business. Brussels is preparing a package of laws designed to reduce the financing of "harmful" industries. Large ESG funds and banks can significantly change capital flows. Climate risks turn into investment risks.
And who are the judges?
One way or another, the Russian authorities, the government and business have to defend national interests in relations with the European Union, defend the interests of the country's economic development and certain sectors of Russian industry, without creating reasons for reproaches for evading the tasks of the climate agenda.
According to the Russian Foreign Ministry, climate change requires coordinated, realistic, thoughtful and joint actions. They should not be carried out in a fire, unilateral manner. Increasing "climate ambition" should be based on the results of scientific analysis, taking into account the characteristics of states. Russia intends to act in the climate and environmental areas reasonably and carefully, firmly adhering to the course of reducing greenhouse gas emissions.
As for the issues of relations with the European Union, much can happen in the perspective of the three decades intended by Brussels for its own "green transformation," especially in the field of atomic and hydrogen technologies. Russia in these areas is leading or preparing for leadership. Brussels does not take this into account, but in vain. Russophobia interferes.