Vladimir Putin’s threats over Ukraine could backfire to damage the Russian economy, the head of the International Energy Agency has warned, as any escalation of the current tension would cause a “seismic” upheaval of the EU energy market that would have “more consequences for Russia” than for Europe.
Fatih Birol, the executive director of the global energy watchdog, said that if Russia reduced gas supplies further it would prompt European countries to seek urgently to shift away from Russian gas, which would hurt Putin economically.
“If Russia stops the gas supply to Europe, it could have a seismic impact on European energy. [Russia] has to consider the consequences if existing oil and gas supplies to Europe are halted,” Birol told the Guardian.
“Failure to maintain [supplies] would shatter Russia’s reputation as a reliable partner and that would be a tectonic shift. Russia would be seen as a threat and that would have far-reaching consequences for European economies, but even more consequences for Russia. Europe would choose a strategy to diverge from Russia,” he predicted.
He said the next two months would be “critical” in deciding how the current energy crisis played out. A mild winter would ease the pressure, but if not then Europe would face stark foreign policy choices on how to deal with Russia, he said.
Birol has previously said Putin was exacerbating the gas crisis in Europe for political reasons, as Russian gas supplies to the EU had dropped 25% in recent months despite increasing demand. “I hope this was only a coincidence,” he added.
The worst outcomes could still be avoided, he said: “Of course, we do not know what will happen if this political tension goes beyond being tension. I hope there will be dialogue, and that there will be no major geopolitical distortions.”
Birol, one of the world’s foremost energy economists, also sharply criticised as “irresponsible” those who have claimed the high energy prices in the UK, Europe and the US should be blamed on the shift to low-carbon power.
“Claims that the current volatility is owing to renewable energy are misleading to say the least, and are not based in fact,” he said. “This is not a clean energy crisis, or a renewable energy crisis. These claims are irresponsible and are being used to attack public support for the net zero transition.”
He added: “Countries should understand that the current situation is not happening because they have a lot of clean energy policies, but because we do not have enough clean energy policies.”
Renewable energy helps to reduce the volatility in energy markets, which was being caused by high gas prices and gas supply issues, he said. The impact of the gas price was at least eight times bigger in raising energy prices than the impact of the price that some countries have put on carbon, he added.
People making false claims that the shift to net zero was raising energy prices either did not know the facts, or were deliberately attacking clean energy in service of the vested interests of fossil fuel suppliers, Birol said.
He urged governments not to give way to those calling for stronger investment in fossil fuels as the remedy for high prices. “That would be myopic, and against the fundamental economic interests of these countries,” he warned. “The cure would be worse than the disease.”
Birol was also optimistic that the resurgence of coal use, particularly in China, would prove to be temporary. “The production increases [in coal] are strong, but mainly driven by post-pandemic demand and high gas prices,” he said.
He said the economics of renewable energy were still an attractive investment, accounting for more than 90% of the new power capacity installed last year globally. To reduce the pressure of high gas prices, governments should “accelerate efforts on renewable energy and energy efficiency”, he said.
The world did not need large amounts of gas power to make up for the intermittency of renewable energy, as some have claimed, he said, as this could be achieved with more investments in the electricity grid to balance supply and demand, and in battery storage, as well as hydroelectricity, nuclear power and using carbon capture and storage technology with any gas-fired power stations that remained. Hydrogen could also replace gas in some applications, he predicted.
Despite the current energy price, Birol said he was “more optimistic” about the world’s chances of tackling the climate crisis and moving to net zero emissions since the Cop26 UN climate summit in Glasgow last November, where governments affirmed their commitments to reach net zero emissions and hold global temperatures to 1.5C above pre-industrial levels, though few yet have detailed plans.
“Many governments see the current high energy prices as confirmation of their long-term plans to reduce the share of fossil fuels,” he said. “Of course, high energy prices are taken by some to push back on and reduce public support for the net zero transition. But I think this is a temporary thing. The long-term structural trends are in favour of clean energy options.”
