Prof. ST Hsieh
Director, US-China Energy Industry Forum
March 21, 2022
Nikos Tsafos is a respected scholar, and his comments always make a lot of sense.
- The term “energy weapon” is easily misused and often abused.
- Traditionally, weapon specifically means a killing machine that only hurts/kills people. Unless we touch upon the Weapon of Mass Destruction (WMD), traditional weapon has limited range and force of destruction.
- But energy is a necessity for human activities, a society without energy security simply dies a slow death. So weaponizing energy is equivalent to a WMD that affect civilian life indiscriminately.
- Further, energy industry is a major global business: the upstream, mid-stream and down stream provide millions of civilian jobs around the world. These jobs are high-paying and skilled jobs; they are the mainstream economic forces in many countries.
- But the energy industry is not the same as military-defense industry complex, energy trade is not a restricted business. OPEC did exercise an embargo in the 1970’s but it did not directly kill anyone, so OPEC did not really weaponize energy.
- Humanity is not the reason why Russian gas keeps flowing to Europe now even during the Ukraine war, financial interest is in every party’s mind. But any financial interest has a limit. If US led alliance keeps adding sanctions on Russia and when Putin realizes that he faces a bridge of no return, then he may completely turn of the gas flow to Europe. This scenario is much more plausible than the hype that Russia will us nuclear weapon to end the Ukraine war, which is a real WMD!
The Energy Weapon—Revisited
March 18, 2022
The term “energy weapon” is easily misused and often abused. U.S. policymakers have often accused Russia of weaponizing energy. Successive U.S. administrations have worried that Europe would not mount an effective response to aggression because of its reliance on Russia for energy. And as U.S. oil and gas production started to increase, so did hopes that the United States could counter Russia’s energy weapon with its own—a belief most clearly articulated during the Donald Trump presidency under the banner of “energy dominance.” A few weeks into the conflict, what can we say about the energy weapon?
The first observation to make is that Russia has not cut off natural gas to Europe—not during the initial invasion, nor in response to Western sanctions. Russia could cut off Europe’s gas; the conflict is not over, and Russian leaders have threatened to suspend deliveries through the Nord Stream pipeline. The risk that Russia might cut off gas has gone up. Even so, gas exports from Russia have risen since the conflict started. What is the best way to explain this paradox?
Maybe Russia is desperate for money. But if true, under what conditions might Russia cut off gas supplies (something so many strategists have been worried about for years)? Is such an act anything other than an act of desperation? Or maybe Russia believes that continuing to export gas gives it leverage to use later. Yet that syllogism contradicts the view that Russia weaponized energy by not sending enough gas to Europe in 2021. If Russia reduced exports to trigger a crisis and mute Europe’s response to an invasion, why send more gas now? Why not force an even bigger crisis?
What the evidence shows so far is that the flow of gas is more durable than many people assumed. Russia can cut off supplies at any time. But such an act would be seen as an act of war by Europe. It will rally Europeans further and bring them closer to Ukraine. It is a blunt instrument that could backfire. In war, miscalculations are rife and nothing can be ruled out. But the willingness, among governments at least, to continue trading despite the war is one takeaway from the crisis.
The fear that Europe’s dependence on Russian energy would dilute its response to Russian aggression proved similarly unfounded. This has been a concern of U.S. administrations since the 1950s. Europe has mounted an effective and bold response. In fairness, the robustness of the response has been a surprise. Europe has never acted so decisively in response to an external threat. But there is a threshold above which the fear of losing Russian energy is no longer a deterrent. Europe has crossed that threshold.
One unexpected development has been the response of private actors. Companies have severed their ties with Russia, announcing plans to leave the country and refusing to buy Russian energy. Usually governments restrict trade; in this conflict, companies have gone beyond what governments have called for. This “self-sanctioning” is an unforeseen dimension to the weaponization of energy. It is driven by public opinion and other stakeholders—not governments.
This public pressure complicates government policy. Western governments have tried to insulate energy from sanctions. The Biden administration had to succumb to public outrage and ban imports of Russian oil, gas, and coal. Calls for a quick break from Russia are putting pressure on European governments. Who could have imagined that Europe, rather than Russia, might be the one to turn off the taps? This is uncharted territory—it is one thing to import energy from an adversary, another to buy it from an enemy.
Placing the idea of the energy weapon in the context of a conflict is also difficult. Some Ukrainians want Germany to shut down the Nord Stream pipeline, forcing Russia to send gas to Europe through Ukraine. Ukraine always believed that being a major transit corridor accorded it protection—either that Russia will not risk attacking it, or that Europe will come to its defense sooner. It is hard to judge the merits of these arguments at the moment, after an invasion has taken place and Europe is supporting Ukraine. But it shows the need for drawing more complex linkages between energy and the war effort.
The interplay between export revenues and the war is also complicated. There is no doubt that export revenues from oil and gas have supported the Russian economy and allowed it to invest in the military forces that are now fighting in Ukraine. There is, similarly, no doubt that Western sanctions have hit the Russian economy hard, imposing costs that are higher than what Russia’s leadership might have anticipated. But how exactly sanctions on energy will help win the war is less clear. Yes, they “punish Russia.” But to what end? A weapon is most useful when aimed at something—it is not clear what the Western weaponization of energy exports is meant to accomplish exactly.
Another set of assumptions that have not fared well during the war are the concepts of “energy independence” and the ability of the United States to counter Russia’s weapon with its own weapon. The United States is energy independent—at least in the way people measure independence, which is to say that the United States is a net energy exporter. Being a net exporter does nothing to insulate the United States from the shocks of the global oil market. This is not a surprise. But for people who think producing more oil is a way to avoid oil shocks, this crisis could be a correction of sorts. Or it should be.
The story is similar for gas. U.S. liquefied natural gas (LNG) has been indispensable to European energy security. For months, the United States has been Europe’s top LNG supplier, and these volumes have helped Europe make it through a tough winter. But what matters in a crisis like this is not just scale but spare capacity. And the United States has none (nor does anyone else). The United States could be part of the solution to European energy security because it could export more LNG in several years’ time. This helps Europe—but only so much, and only if Europe is ready to make a deal (it is not clear that it is).
This war is only a few weeks old. But it has already provided fodder to upend and rethink some core ideas around the use of energy as a weapon. What it has shown is that the public discourse about the energy weapon is at odds with what the world is observing. It is too soon to draw new inferences about what it means to leverage energy as a weapon; but most of the old inferences are not faring well against the evidence during an actual conflict.