Qatar and Japan have agreed to cooperate in stabilising the global energy market, last week.
Qatar National Bank (QNB) has stressed the immediate threat the Russian invasion of Ukraine poses for the Europe’s energy security.
In their Economic Commentary, the bank noted that Russia’s gas is currently running in full flow to the EU, however any disruption to that could potentially create a major energy security crisis in that region.
QNB, the largest financial institution in the Middle East and Africa region and owner of a brand value worth of $6.1 billion, said the “negative shock” brought in by the conflict will advance “stagflationary”, which is low growth with high inflation trends. It also said the war could possibly “reverse some of the economic gains generated by the extraordinary policy stimulus that followed the Covid-19 shock.”
61% of EU’s energy consumption is imported, which places it in a vulnerable position as negative supply shocks in the global energy complex can directly affect it. Liquified natural gas is a major source of energy in the EU, constituting approximately 25% of its total consumption. About 90% of this natural gas is being imported.
Europe receives 40% of its gas supplies from Russia and almost a third of those shipments pass through Ukraine. The region is juggling with an energy crisis as a result of a hike in oil prices, amid the unstable nature of the current geopolitics put forth by the Russo-Ukrainian conflict.
Russian oil volumes are “currently” crucial to maintain the normal operation of Europe’s energy system.
Some European countries are highly dependent on Russian gas supply which makes them worse off than their counterparts if Russia were to place an embargo on its oil deliveries. In particular, Germany imports 42.6 billion of cubic meters from Russia, whilst Italy imports 29.2. In March, Berlin had discussed energy supplies with Qatar as it looks to reroute its oil supply from Russian gas industries.
Major LNG exporters, including Qatar, have made it clear that they cannot ‘unilaterally’ replace Russian energy supply in the EU with LNG in the short-term. “This is due to a lack of energy infrastructure capacity in EU consumer countries,” QNB argued.
EU’s “power grid is not integrated and LNG re-gasification facilities are limited in number and scarcely distributed across the continent,” it added.
In response to the possible ban on Russian energy exports, Germany’s Foreign Minister Annalena Baerbock said the move would be ‘pointless’ as it could not be sustained long term.
“It is no use if in three weeks we find out that we only have a few days of electricity left in Germany and therefore we have to go back on these sanctions,” she told a German public broadcaster last month.
In a separate interview, she said that Berlin was prepared “to pay a very, very high economic price” however “if tomorrow in Germany or Europe the lights go out, it’s not going to stop the tanks.”