THE Independence cannot sail into the Baltic port of Klapeida a moment too soon. Built in South Korea, this floating gas terminal is a weapon of geopolitics as important as any warship. Designed to tap into global supplies of liquefied natural gas (LNG), it will allow Lithuania to break free of its total reliance on Russia. Given the fear that the Crimea crisis could turn into a sanctions war with Russia, the arrival of the Independence later this year should give Lithuania some solace.
Russia’s most obvious retaliation against Western sanctions would be to choke off energy supplies, particularly gas. It provides about a quarter of the gas burned in the European Union, and almost all of it in several countries, including the Baltic trio, Finland and Bulgaria. Eastern Europeans are urging Germany to wean itself off Russian gas, and America to increase exports of shale gas. Europe had a taste of gas wars in 2006 and again in 2009, when Russia shut the pipelines to Ukraine, leaving many downstream countries, mostly in south-eastern Europe, to shiver in the winter cold. Five years on, is Europe any less vulnerable?

 In the short term at least, the outlook is not too bad. After a mild winter, gas-storage reservoirs are still half-full and companies are filling them while the gas still flows. The EU’s gas network has become more integrated, with the installation of interconnectors and reverse-flow technology. This means that, if gas through Ukraine is interrupted, countries in central Europe can receive it from the west via Germany. Much of this would still come from Russia through alternative pipelines, such as Nord Stream, built under the Baltic directly to Germany.
But what if Russia decides to cut off the gas to the whole of Europe? Through a combination of finding alternative suppliers, switching of fuels and rationing, most (but not all) countries should get through the next six months or so. The more acute problems would begin next winter, when demand for heating rises sharply. Yet most Europeans think Russia would never dare go so far. After all, if the EU is reliant on Russia as its main gas supplier, Russia is even more dependent on the EU as its main customer, accounting for about half its gas exports. Given the extensive Europe-bound pipeline network, finding other buyers would be near-impossible, at least in the short run.
The longer-term picture is more mixed. The advent of shale gas in America has transformed the global gas market, making LNG more available and affordable (and often cheaper than Russian gas). But as European sources of gas decline, the European Commission reckons the EU will import a growing share of its gas: perhaps 80% by 2030.
Over the years, the EU has pursued contradictory policies. It aspired to lead the world in reducing CO2 emissions, and so pursued ambitious renewable-energy goals. With the economic crisis, it started to worry more about the rising price of energy (in part caused by subsidies for renewables) and a growing competitiveness gap with America, which benefits from cheap shale gas. At this week’s EU summit the focus will inevitably turn to energy security. The leaders will probably approve a plan to reduce import dependence in June.
Radek Sikorski, the Polish foreign minister, put it well when he said this does not mean doing without Russian gas altogether, but rather ensuring secure supplies at competitive prices. “We have nothing against consuming Russian gas. There is nothing morally wrong with the molecules,” he said. But Russian pipelines should not be used to exert pressure on countries, or to force them to pay outrageous prices. One reason why Lithuania wants the Independence is that it pays about a third more for its gas than Germany, which is farther from Russia.
Europe must do three things to reduce its vulnerability. First, it should reduce its reliance on imported energy by developing renewable and nuclear power, shale-gas resources in the EU and promoting energy-saving measures.
Second, it needs to diversify its sources of imported gas. More could come from Norway. The promise of gas in the eastern Mediterranean might spur a settlement to the Cyprus problem, but this remains uncertain. Future exports of shale gas from America would help. Beyond that, weaning Europe off Russia to become more reliant on Algeria, Qatar, Azerbaijan and Kazakhstan may not seem very savoury. But the more rogues who sell them gas, the harder it is for any one to hold Europe hostage.
Market power
Third, and perhaps most important, the EU should ensure that natural gas, wherever it comes from, can reach all who need it at a reasonable price. That means investment in an integrated, flexible and liberalised EU-wide gas grid that allows energy to be traded and moved from where it is available most cheaply to where it is most needed. This would reduce the scope for Russia, or anyone else, to pick off vulnerable countries. The same goes for the electricity grid. Moreover, a proper energy market, together with an efficient emissions-trading market (with fewer exemptions for favoured polluters), would help other objectives, such as reducing the cost of low-carbon energy.
European leaders grandly set the end of this year to achieve a single energy market. But, plainly, it is still some way off. Take the Baltics: despite their fear of Russia, they have long bickered over the location of LNG terminals, the building of a joint nuclear power station and much else. Or Spain: it has several LNG terminals and ample supplies of renewable electricity, but lacks the interconnectors to France to export energy to the rest of Europe. There is much that Europe can and should do. A British “non-paper” doing the rounds in Brussels this week speaks of needing a 25-year strategy. It would be best to start right now.