Energy Crisis Faced by the EU: Cooperation with India Might Help

As the war in Ukraine started, the dominant wisdom of that time was that the West, especially the European Union (EU) and its allies, might have to face the challenge of securing their energy supply as Russia has the bargaining chip of being the largest fossil fuel supplier to the bloc. We are already close to completing the second year of the war, and both sides are nowhere near a compromise. It is high time to assess the state of the energy security in Europe and in other countries, which include the major suppliers of fossil fuels other than Russia and the emerging powers in the energy market, such as India and China, whose demand and supply matrix can heavily change the energy security paradigm of Europe.

The State of Energy Security in Europe After the Start of Russia-Ukraine Conflict

The EU imports 90 per cent of the gas it consumes. Until 2021, Russia accounted for 40 per cent of its total gas consumption, 27 per cent of its total oil imports and 46 per cent of coal imports. Other than Russia, the EU has other partners in the fossil fuel energy supply market, like Qatar, which by 2021 supplied just 4.9 per cent. Similarly, the USA provided the EU with 6.6 per cent and Algeria 12.6 per cent of its total gas imports. Another substantial chunk of these supplies came from the reliable Nordic partner of the EU, Norway, which accounted for 23.6 per cent of its total gas supplies in 2021. However, in the first quarter of 2023, the share of Russia significantly dropped by 21.4 per cent, and the shares of its other suppliers, such as Norway (8 per cent), Algeria (7.4 per cent) and the UK (4 per cent).¹
The EU has banned seaborne imports of Russian oil, accounting for 26 per cent of its supplies being the largest oil provider to the bloc. In the first quarter of 2023, Russia supplied only 3.2 per cent of petroleum oil to the EU, which has increased its dependency on other suppliers such as Norway (3.8 percentage increase), Saudi Arabia (3.4 percentage increase) and the UK (2.7 percentage increase).²

For the Liquified Natural Gases (LNG) supplies, Russia (18.1 per cent) was the second largest supplier to the EU after the USA, which accounted for (48 per cent) of the total supply in 2021. In the first quarter of 2023, Russia supplied only 4.9 per cent of LNG to the EU, while Norway, Qatar and Algeria increased their supplies by (6.5) and (2.4) respectively.³

Since the war started, the EU as a collective entity and its member countries (individually) have begun securing alternate routes for energy supplies. Germany, the largest energy consumer in the EU market, has changed its suppliers from Russia to Norway and the Netherlands. Germany has also reached an agreement with Qatar for LNG supplies. The largest state of Central Europe, Poland, is developing terminals to get LNG supplies from Norway, the US, and Qatar. One 580 KM Poland-Lithuania Gas Connector (GIPL) aims to “boost energy security” in Central and Eastern Europe. The southern European states have also started seeing other suppliers. Italy, the second largest buyer of Russian gas, planned to boost its imports from Algeria (which has significantly increased the supplies to the EU), Congo, Egypt, etc. Azerbaijan has also emerged as a favourite destination where the EU can have its natural gas supplies.⁴

Other than the Middle East, Africa also has a vast amount of energy that the European leaders have tried to harness in the wake of this crisis. German Chancellor Olaf Scholz had this in his agenda during his visit to Africa. However, because of the tensions in the western Sahara and other regions of Africa, the region is not stable enough for countries outside to exploit its energy resources. Africa is also home to a vast amount of critical rare earth minerals.⁵ These minerals are critical to the EU’s endeavours to shift to clean energy. They provide essential components for high technology, such as smartphones and computer hard disks. China has the most robust foothold in the African rare earth minerals scramble. Since 2010, the country has exploited substantial reserves of various South African states. Interestingly, the demand and supply systems are such that the Chinese have the upper hand in deciding the price of these commodities.

In addition to the efforts made by individual states, the European Commission launched its REPowerEU plan in May 2022. The plan has three main aims: (i) save energy, (ii) produce clean energy, (iii) diversify its energy supplies. REPowerEU has included a Fit for 55 packages, according to which “the European climate law makes reaching the EU’s climate goal of reducing EU emission by at least 55 per cent by 2030”. If this legislation works out, the EU will become climate-neutral by 2050. In the REPowerEU mechanism, the EU has both long and short-term goals. The short-term plan includes diversifying the supplies as much as they can. It is saving energy, the need of the hour for the EU and the world. After the advent of the war, the EU has saved 20 per cent of its energy consumption, which is helping the bloc for gas storage. The EU has achieved 90 per cent of gas storage till August 2023.⁶

With the long-term goal of securing energy, the EU has mobilised massive funding for the REPowerEU projects. The project will require a massive 300 billion Euros. Around 225 billion Euros will be invested in loans, and the EU will give the remaining 72 billion Euros in grants. About 12 billion Euros in this plan will go for the immediate needs of fossil fuels, reducing the reliance on Russian energy sources. By 10 May 2023, the project had launched its first tender for joint gas purchases under the EU energy platform.⁷

One of the top priorities of the REPowerEU is to ensure a smooth transition from fossil fuels to greener energy sources. Since the start of the war, the EU has produced more electricity from solar and wind energy sources than from gas. It has installed 41 Gigawatts of new solar energy. It has also increased the wind capacity by 16 gigawatts. The EU has also raised the binding targets for the share of renewable energy to 42.5 per cent. It also has the ambition to reach 45 per cent. For this, the EU has proposed a Green Deal Industrial Plan for Europe, which will help the budding industries in hydrogen, biotech and nanotechnology for renewable energies.

It must be noted that it is not the EU’s first energy crisis. Nearly 50 years ago, in the wake of the 1973 Arab-Israeli war, the European Community (predecessor of the EU) had faced such a crisis. The oil embargo imposed by the top oil producers, mainly Middle Eastern states, because of the West’s support for Israel in the war had increased the European search for secured energy. Before that, from the 1950s till the early 1970s, west Europe thrived on the cheap energy sources provided by the Middle East. The 1973 crisis led to oil search drills in the North Sea by Britain and Norway. The crisis paved the way for West Germany to approach the Soviet Union for gas, as the data has shown, Norway and the UK are increasingly supplying elevated energy sources to the EU.

It clearly shows that there is a window of opportunity in every crisis, but it can close up as soon as the new ad-hoc provisions are being made. This time, the EU’s prompt and concrete actions can better solve its energy needs and take the world to cleaner and greener energy solutions.⁸

The Chinese Conundrum

According to the EU, China is one of the biggest energy producers and consumers today. China is also a “systemic rival”. The EU and China have been constantly meeting for an annual energy dialogue since 1994. This dialogue currently works on four primary areas, i.e., (i) energy efficiency, (ii) renewable energy sources, (iii) design and transformation of the energy system and global energy markets, and (iv) the role of innovative energy actors. We can see a difference in the approaches of the 2020 energy dialogue between the EU and China, which focused on providing cleaner energy policies and mitigating the economic crisis caused by the COVID-19 pandemic, on the other hand, the 2022 energy dialogue focused on LNG, natural gas and oil market which shows that the EU’s concerns about the needs for immediate energy demands.⁹

The EU-China energy cooperation platform is also one of the institutional mechanisms in place since May 2019 and caters for the needs of different players in the energy sector, be it civil servants from both sides or energy associations, industries, business and leading energy research institutes and think tanks. The EU-China energy cooperation platform also publishes a monthly magazine which talks about the current discourses in energy security from the EU-China point of view.

However, all is not hunky-dory in this relationship, as China supported Russia in the war. Both states believe in old mercantilist techniques of weaponising the economy for the state’s gains. China is more critical than Russia as the EU has quickly diversified its energy supplies, which came from fossil fuels. China is the biggest producer and consumer of rare earth minerals essential for making solar photovoltaic plates, lithium-ion batteries and semiconductors. Europeans started panic buying 7 billion euros worth of solar PV plates when the war began. These plates are lying idle in many warehouses in Europe. Ninety per cent of Europe’s solar panel came from China in 2022, a phenomenal 37 percent increase from 2018 levels and can be catastrophic for Europe, which has just suffered a severe energy crisis because of Russia. Europe should not swap dependencies from one like-minded state to another. The latest report by the Spanish presidency of the EU mentioned that the EU should search for other partners in Asia, Africa and Latin America for rare earth minerals critical for the European Green deal. ¹⁰

India and the EU: Reluctant Partnership and Prospects

Since the beginning of the Russia-Ukraine conflict, India has become the topmost buyer of Russian energy sources. India’s topmost exports are refined petroleum products for jets and other vehicles. The EU has continuously criticised India and threatened to curb petroleum exports if they come from Russia. In an interview, European foreign policy chief Josep Borrell said, “If they sell, it is because someone is buying. And we have to look at who is buying”.¹¹

India and the EU should recognise the fact that both have fewer resources when it comes to non-renewable resources of energy, especially fossil fuels. As a developing country, India is the world’s third-largest energy consumer and will need more energy resources as it seeks to fulfill the developmental aspirations of its people. At the same time, India has its climate commitments and has its targets to achieve climate neutrality by 2070. It has ambitious targets (500 GW of non-fossil energy production capacity) and is aggressively channelling its resources for this. It is important to state here that in 2016, the India-EU Clean Energy and Climate Partnership was established. The partnership aims to develop cooperation for clean energy sources to achieve the Paris Agreement. The partnership has three main focus areas: (i) Energy efficiency, (ii) Renewable energy and (iii) climate change.¹²

India-EU Trade and Technology Council set up in 2023 can be used to harness the EU’s technological advancements and where India’s workforce can be used for the much-needed supply chain diversification for the EU. India has only 4 GW capacity for Solar PV plates making facilities. It is much less to cater for its demands. Until 2011, India had produced best-in-class solar PV plates from renowned makers like Tata Power Solar Systems Bharat Heavy Electricals Ltd. Currently, China is the topmost manufacturer and supplier of such products, while the EU is a top buyer. The EU can help the Indian clean energy startups, which can help both India and the EU with their growing clean energy security needs.¹³

Fusion energy is one sector where India is a significant player, and it participates with major powers on a multilateral basis for the ITER fusion project in France. Fusion is the power through which the Sun and stars get their power. India and the EU bilaterally work under a Euratom cooperation agreement on fusion energy research.¹⁴

Another critical focus area in energy security where the confluence of the EU and India is possible is green hydrogen as the energy source. In 2020, the EU published its Hydrogen Strategy. In the wake of the Russia-Ukraine conflict and the resultant energy crisis, the EU has pledged 3 billion euros in innovation funds for green hydrogen suitable for clean energy transition. India has also approved its clean hydrogen mission in 2023, where it has allocated more than 17000 crores for the task. Hydrogen can be a favourite for India and the EU because it does not emit CO2 like fossil fuels and helps both to reduce their carbon footprints.¹⁵

India-Middle-East-Europe-Economic-Corridor provides an excellent opportunity for both India and Europe to recalibrate their needs and formulate their energy security goals. The corridor is an excellent example of North-South cooperation. It creates ample opportunities for energy security (fossil and non-fossil). It has been portrayed as the answer the West and India can provide to the Belt and Road Initiative (BRI) of China. If the corridor materialises as intended, it can usher in a new era of cooperation between India and Europe.

Endnotes: