Wednesday, August 17, 2022

OPINION | Reducing dependence on Russian energy is more realistic than you think

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Russian President Vladimir Putin. (Photo: Sasha Mordovets/Getty Images)

As Russia visits an increasingly brutal invasion on Ukraine, the moment has come to finally scrutinise the actual meaning of “unrealistic”, says Liam Denning. 

There is nothing realistic about our global energy system
apart from the fact that it exists.

Modern society depends on long, complex systems that tap
deposits of fuel, often located in unstable or inhospitable parts of the world,
and carry it across deserts, mountains and high seas to eventually flow from
spigots everywhere — even Antarctica. Power grids in much of the world reliably
supply not only dense cities but also remote villages and homesteads that could
never justify the cost of those long lines on their own. Increasingly, we use
electricity sources that operate at the behest of the weather and time of day
rather than our demands. We also — get this — split atoms in order to do stuff
like charge up our phones.

Raise the idea of maybe doing all this differently, however,
and an inevitable reply is that doing so would be “unrealistic.” As
Russia visits an increasingly brutal war on Ukraine, the moment has come to
finally scrutinise the actual meaning of that word.

On Thursday, the International Energy Agency released a
10-point plan to reduce Europe’s imports of Russian gas by a third within a
year. That amount is the equivalent of the entire annual consumption of France,
the EU’s second largest economy, and then some. This would involve a
combination of things like bidding for every spare cargo of liquefied natural
gas, delaying closures of nuclear power plants, a 200-billion-euro hardship
fund for poorer households — funded by a tax on power generators’ profits — and
encouraging everyone to turn down their thermostat by 1 degree Celsius (1.8
degrees Fahrenheit).

My first reaction was along the lines of “yeah, right.”
Doing almost anything energy-related within a year is a tall order. Plus, I am
perhaps scarred by the memory of American politicians who staked out vociferous
pro-choice positions on … incandescent light bulbs. As a species, we like our
energy cheap, instantaneous and out of sight and mind. There are multiple
vectors of skepticism with which to attack the IEA proposal, including the cost
of those LNG bids, the corporate backlash against a hardship tax, and the
challenge of persuading several hundred million Europeans to put on sweaters
indoors or get around to installing decent insulation.

Consider the alternative, however: Continue to tie the
continent’s fate to the whims of a regime now trashing the security paradigm
that has preserved peace for almost eight decades. Accept that the Kremlin can
threaten economic ruin, invasion and even nuclear war if its demands aren’t
met, while funded in part by its potential victims. This doesn’t sound
particularly realistic either; adjusting thermostats en masse sounds like a
snip by comparison.

But only by comparison. None of this is easy. All forms of
energy come with trade-offs and questions about what’s achievable under — and
this is the vital part — our prevailing understanding of risks and rewards. For
example, Europe relied on the USSR and its successor states for energy supplies
for decades, even amid all the tensions of the Cold War, because the forces
keeping the two sides connected were taken to be stronger than those dividing
them. That was just reality, unlikely as it seemed.

These days, our conception of what’s realistic is confronted
by uncomfortably large doses of reality. A major war in Europe involving a
nuclear power seems as if it belongs to another era. And it does; the old era
is just making a comeback. For much of history, it was simply unrealistic for
relatively weak states such as Ukraine to expect to do their own thing in the
shadow of empires. In order for that ahistorical situation to actually become
reality, it must be willed into being. The postwar, American-led order was one
way of willing it, but that order began to lose its bearings once the USSR was

The current resurgence of solidarity among Western
democracies is, possibly, another. But that involves all sorts of things that
would, until a week or so ago, have been deemed unrealistic: sudden German
rearmament, Finland getting serious about joining NATO, the European Union
openly supplying weapons to kill Russian soldiers. Taking the further step of
drastically reducing the West’s dependence on Russian energy exports is risky,
a sacrifice, complicated and prone to compromise and setbacks. But in this
context can it be deemed unrealistic? As my Bloomberg colleague Nat Bullard
notes, the world eased its oil habit relatively quickly in the face of
other crises in the 1970s.

In addition to Europeans shivering with cold or dread,
plenty of other actors are struggling with what’s realistic. For starters,
there is Russian President Vladimir Putin, who appears to have held deeply
untethered ideas about Ukraine’s will to resist. “Putin assumes it’s a
weak political system to be had at a low price,” is how Thane Gustafson, a
Georgetown University professor and expert on Russian energy, put it to me this

There is a school of environmentalists, especially in
Germany, who will no doubt decry the IEA’s call to keep existing nuclear plants
open, not recognising the reality that the threat of recession or war will
force governments to use every energy source at hand. That includes coal — as
Berlin is contemplating already. At the other end of the spectrum, there is OPEC+.
Amid triple-digit oil prices spurred by the actions of a leading member, the
self-styled guardian of oil-market stability held a brief meeting this week
where it essentially put its fingers in its ears and chanted “la, la, la!
I can’t heeaaar youuuuuuu!”

Looming over all of this is the slower moving but clear and
present threat of climate change. Compared with the required retooling of our
energy system to deal with that, reducing dependence on Russian energy exports
seems eminently realistic. While the acute crisis in Ukraine must take
precedence, both efforts are part of the same process. Both involve accepting
costs or, rather, internalising existing costs — in Russia’s case, the cost of
insecurity, and in the case of climate change, the cost of catastrophic
environmental degradation. What happens to your financial model when you factor
in a Russian swipe at a NATO member or an Antarctic ice-shelf collapsing? Faced
with implacable threats, the only unrealistic option is to say nothing can be

Liam Denning is a Bloomberg columnist. Views are the
author’s own. 

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