Geopolitica
Ferdinando Angellotti
Energy and geopolitics: two faces of the same coin
Table of contents:
· Abstract
· The geopolitics of the European Green Deal
· Algeria
· Saudi Arabi
· China
· Russia
Abstract:
The spread of the war in Ukraine has deeply traumatized the international community as a whole and in particular the European Union[1]. The conflict will have long lasting consequences, especially in the fields both of energy and security, obliging the European Union to accelerate its strategy for energy diversification. The Russian invasion has changed the European energy paradigm, which now requires a quick reduction of Europe's dependence on Russian gas. Diversifying energy supply means to reduce the economic power of the Kremlin, depriving it of billions of euros in energy revenue, since the European Union keeps importing oil, gas and coal at very high prices. Despite the warnings from some member states about the use of energy flows by Russia to boost its political influence, the relation between the European Union and Russia expanded for decades. A first effort towards the diversification of both energy sources and suppliers was already put in place in 2019 with the European Green Deal[2]. After the invasion of Ukraine, any previous plan must be expanded, since the EU started to understand that it cannot be so reliant on the Russian gas anymore. Consequently, the European Union adopted a series of hard financial sanctions against Russia, but none of those involved the energy sector: compared to the US and UK - which have announced an end of energy imports from Russia - the EU has been more cautious due to its overreliance on Russian supplies and due to the fear of further price increases, carefully evaluating new alliances and partnerships with different suppliers to improve its situation.
The geopolitics of the European Green Deal
The European Green Deal is a plan to decarbonise the EU economy by 2050, an ambitious target wich aims to revolutionize the European energy system and deeply change the economy in a strong effort to combat climate change. In order to achieve such an ambitious plan, several matters have to be taken into consideration:
· A constant and reliable gas supply, central to manage the repercussions of the European Green Deal. Especially after the outbreak of the conflict in Ukraine, the EU must engage with exporting countries in order to foster energy diversification;
· The security of raw materials supply and the effort to limit dependence, in particular from China. Essential measures are a greater supply diversification, increased recycling volumes and substitution of critical materials;
· The need to stimulate a setting on international cooperation, in order to achieve meaningful results in the field of the protection of the environment.
Almost three-quarters of the EU energy system relies on fossil fuels. Oil dominates the EU energy mix, followed by natural gas and coal. Renewables are growing in share but their role remains limited, similarly to nuclear (12.6%). This situation will change completely by 2050, if the European Green Deal is successful, but change will be incremental. According to European Commission projections, fossil fuels will still provide about half of the EU's energy in 2030. But fossil fuels differ in their pollution intensity. Use of coal - the most polluting element in the energy mix - has to be substantially reduced by 2030, while oil and, especially, natural gas can be phased out later; oil is expected to be almost entirely phased-out, while natural gas will contribute just a tenth of EU energy in 2050. This intense transformation of the EU energy system will have a wide variety of geopolitical repercussions: repercussions for oil and gas-producing countries in the EU neighbourhood; repercussions on global energy markets; repercussions for European energy security; and repercussions for global trade.
The decline in EU imports of oil and gas will have an immediate effect by reducing investment in new fossil fuel infrastructure and even reducing maintenance expenditures for existing infrastructure. On the other hand, the EU is expected to keep importing oil and natural gas at almost unchanged volumes for at least another decade. It is important to note that for gas, in the 2030 timeframe, Russia - as Europe's main energy supplier - could have even benefitted from the European Green Deal, as a coal-to-gas switch is necessary to quickly restrain EU energy sector emissions. Moreover, a possible surge in trade in green electricity and green hydrogen have to be taken into account. One of the major drivers to deliver the European Green Deal will be electrification. To meet its increasing need for renewable electricity, Europe might well rely over the next decades on imports of solar and wind electricity from neighbouring regions: the Middle East and North Africa. While renewable electricity is expected to decarbonise a large share of the EU energy system by 2050, hydrogen is increasingly seen as a way to decarbonise parts of the energy system electricity cannot reach (e.g. some industrial processes such as steel and cement, and certain transport segments such as trucks, shipping and aviation); this is why the European Green Deal includes a hydrogen strategy. Considering North Africa's renewable energy potential and geographic proximity to Europe, the region is being considered as a potential supplier of cost-competitive renewable hydrogen to Europe: Germany, for example, has partnered with Morocco to develop Africa's first industrial plant for green hydrogen, with intention of future exports to Germany. Future imports of renewable electricity and green hydrogen from the Middle East and North Africa (or other neighbours, such as Ukraine) could raise new energy security concerns, which will have to be mitigated with proper diversification.
In Europe, energy security has always been associated with the need to ensure sufficient oil and gas supplies in the short term, since - as explained before - due to the limited domestic resources available, the EU has to import the large part of oil and natural gas it consumes. Moreover, being reliant on a limited number of suppliers [Figure 1], puts the EU in a concerning position of overdependency, especially regarding natural gas, given its rigidities arising from reliance on pipeline infrastructure and long-term contracts. These features contrast with the flexibility of the global oil market in which bilateral dependencies are limited by a global transport infrastructure (oil tankers). After the Russia-Ukraine-Europe gas crises of 2006 and 2009, Europe started to pursue a diversification strategy targeting infrastructure (liquified natural gas terminals ) and legislation. These efforts have already slightly increased the security of supply for natural gas imports into the EU, however, the European Green Deal can also create new energy security risks: most notably from the import of the minerals and metals needed for the manufacturing of solar panels, wind turbines, li-ion batteries, fuel cells and electric vehicles. These minerals and metals have particular properties and few to no substitutes. While some of these are widely available and relatively easy to mine, others are geographically concentrated in a few resource-rich countries, or treated and processed in a few countries; Europe itself has no significant mining and processing capacities for these critical raw materials. For instance, it produces only around 3% of the overall raw materials required in li-ion batteries and fuel cells[3]. In 2011, the European Commission produced a first list of critical raw materials, which has been updated every three years. At time of writing it includes 27 materials judged critical because of their importance for high-tech and green industries, their scarcity and/or the risk of supply disruption. China is a leading producer and user of most critical raw materials. The import of rare earths from China is probably the most critical issue in this area, also because of Europe's aforementioned lack of these important minerals [Figure 2]. For Europe, dependence on China will further increase as demand for green technologies increases. For example, the JRC [4]estimated that the EU's annual critical raw material demand for wind turbines will increase between 2 and 15 times over the next three decades. Overall, the European Commission [5]expects Europe's demand for raw materials to double by 2050.
[1] Di Gregorio A. (2019). "Produzione e valore del comparto oil & gas in Italia nel periodo 2020-2050".
[2] Ammanati L. (2018) "La Transizione Energetica".
[3] JRC, (2020). Study on the EU's list of Critical Raw Materials. Available at: https://rmis.jrc.ec.europa.eu/uploads/CRM_2020_Factsheets_critical_Final.pdf
[4] JRC, (2020). Study on the EU's list of Critical Raw Materials. Available at: https://rmis.jrc.ec.europa.eu/uploads/CRM_2020_Factsheets_critical_Final.pdf
[5] European Commission, (2020). ‘Stepping up Europe's 2030 climate ambition: investing in a climate-neutral future for the benefit of our people', SWD/2020/176. Available at: https://eur-lex.europa.eu/resource.html?uri=cellar:749e04bb-f8c5-11ea-991b-01aa75ed71a1.0001.02/DOC_1&format=PDF
f oil and gas will not cow China. Available at: https://www.economist.com/briefing/2020/09/17/americas-domination-of-oil-and-gas-will-not-cow-china