War in Ukraine makes energy one of Europe's top crises in 2022

Energy crisis has dominated European agenda since Feb. 24.

War in Ukraine makes energy one of Europe's top crises in 2022

Energy issues dominated the European agenda in 2022 as the continent is facing one of the most significant energy crises in history after Russia launched a war against Ukraine in late February.

The EU has a dependence on Russian natural gas and depicting Russia as using energy as "a weapon" has always been an issue from time to time. But energy-related developments and the political stance of Europe continued "as usual" when 2022 began.

The first warnings were issued by several Western countries such as the US and the UK on possible a "Russian invasion of Ukraine" in January.

When Russia's war started on Feb. 24, energy prices sharply increased as it was expected that the war would lead to rising production costs and significant supply chain challenges.

On the first day of the war, the per barrel price of Brent crude reached the $100 level for the first time since 2014 while gold hit its highest in 17 months.

Additionally, there were declines in Asian stock markets, and the US, and European index futures contracts hit nearly 3% while commodity prices rose sharply.

Following the start of the war, the West began making its first retaliation steps to stop "Russia's war machine" from looking for new gas suppliers to cutting ties with Moscow in many fields by imposing a series of sanction packages and isolating Russia.

But Western sanctions have also brought a "reverse impact" to European inflation and living costs also started climbing, accompanied by a rise in energy prices. Many countries across Europe have seen inflation not seen in decades.

Demanding Ruble payment

A plan to wean Europe from Russian gas was issued by the International Energy Agency (IEA), as the 10-point scheme aims to reduce the EU's reliance on Russian gas supplies and targets a one-third reduction of imports of Russian natural gas in a year.

During the first week of the war, many sectors in Russia announced a suspension of activities, ranging from technology to automotive as well as energy. British Petroleum (BP) and Shell stopped operations in Russia by halting partnership activities with Russian companies.

In response to the sanctions, Russian President Vladimir Putin instructed the government in late March that the central bank and Gazprom company would switch to rubles for payments for deliveries of gas to "unfriendly countries."

A hike in prices and increasing inflation overshadowed the EU's "unity" in imposing sanctions as Hungary announced it would not join sanctions on Russia as it would also affect Europe.

After criticism by Europe about "using energy as a weapon," Russia said the energy crisis was created by talk of an embargo on the use of Russian hydrocarbons.

Amid the war and sanctions, the euro area's annual consumer inflation refreshed its record, hitting 7.5% in March, according to provisional Eurostat data.

'Groundbreaking’ deal with US

In the meantime, the EU signed a deal with Washington which was labeled "groundbreaking" as it will involve the US and other countries supplying an extra 15 billion cubic meters of gas.

A month after the UK and the US announced to ban on all export of Russian oil, Lithuania announced that the Baltic state has completely ended gas imports from Russia.

Despite criticism from environmentalists, countries signaled they would continue using fossil fuels or nuclear energy amid the energy crisis as the UK announced plans on April 7 to put nuclear power at the center of its new energy strategy. Later, the EU parliament backed labeling gas and nuclear investments as green.

In the second week of April, the IEA made the largest stock release in its history with 120 million barrels of oil from emergency stocks in response to significant oil market restraints from the war in Ukraine.

In line with the plan to reduce dependence on Russian energy, EU countries continued to sign deals to find alternative suppliers to the bloc and separately. On April 11, Italy signed a gas supply deal with Algeria aimed at reducing the country’s energy dependence on Russia.

As Qatar has become an important alternative gas supplier following the energy crisis, it announced in May that it would invest close to €5 billion ($5.33 billion) in Spain in the coming years.

Energy prices continued to play a dominant role in the spiraling crisis with Germany’s annual inflation hitting a record for the third consecutive month at 7.9% in May.

'Import ban on all Russian seaborne crude oil'

Just before the summer began, EU countries were still united on reaching a deal on an embargo of Russian oil. But at the beginning of June, the EU released its sixth package of sanctions, including a complete import ban on Russian seaborne crude oil and petroleum products.

In June, when some EU countries including the Netherlands, Austria, and Germany already announced plans to return to coal power plants to cope with the energy crisis, France, which also announced its desire to restart coal-fired power plants, urged oil-producing countries to allow the return of oil from Iran and Venezuela to the market.

The EU and Azerbaijan announced a new deal to double Azerbaijani gas imports as part of the bloc’s efforts to decrease dependency on Russian energy.

The bloc signed a Memorandum of Understanding with Egypt and Israel to export Israeli gas to Europe.

Defining the current crisis caused by Russia's war against Ukraine, Fatih Birol, executive director of the IEA, said the world has never witnessed such a major energy crisis in terms of depth and complexity.

While EU leadership continued the continent's winter preparation during the summer, EU countries also took individual steps. In July, Italy sealed 15 agreements in key sectors of cooperation with Algeria, including the increase of gas supplies necessary to face a possible cut in Russian gas.

The European Commission demanded countries in the bloc decrease their natural gas use by 15% by next spring in fear of Russia cutting the supply, which was followed by an extraordinary meeting by energy ministers to discuss the bloc’s emergency plans to save natural gas for the winter.

Russia halts gas deliveries to Europe

On Aug. 31, Russia halted gas deliveries to Europe via the Nord Stream pipeline for maintenance that caused a surge in gas prices in Europe.

With countries facing the energy crisis, Türkiye's energy minister announced that no disruptions to natural gas supply are expected in his country this winter if suppliers comply with their shipment plans.

Following a G-7 finance ministers' plan to discuss putting a price cap on Russian oil, Russia said in early September that it will suspend the supply of oil and petroleum products to countries that have agreed to cap prices on Russian oil.

Soaring energy bills also drove changes in television shows as "This Morning," a popular UK show, offered to pay viewers' energy bills as part of its Spin To Win game to help with the cost of a living crisis.

The UK government announced that household energy bills will be capped at £2,500 ($2,876) per year for two years amid the crisis.

A record-high and war-driven energy crisis led the European Central Bank to make a historic hike in interest rates of 75 basis points.

European countries continued taking measures during September such as limiting energy prices, reducing taxes, helping the needy, and lowering the temperatures in public buildings against rapidly increasing natural gas and electricity prices.

Explosions in Nord Stream pipelines

French authorities decided that famous landmarks in Paris -- the Louvre Museum and the Palace of Versailles -- will turn off lights in advance of evening hours alongside the Eiffel Tower as a symbolic gesture toward conserving energy.

The European Commission proposed energy market reforms, including taxing energy companies, decoupling gas prices from the overall electricity bills as well as a mandatory 5% reduction in electricity consumption during peak hours to ease the bloc’s dependence on Russian gas.

On Sept. 23, Poland's natural gas company, PGNiG, signed a 10-year contract with Norway's state-owned energy firm, Equinor, to secure up to 2.4 billion cubic meters of natural gas annually until Jan. 1, 2033.

Due to explosions on Nord Stream 1 and line A of the Nord Stream 2 gas pipelines, pressure levels dropped and gas leaks occurred on Sept. 26.

On Oct. 10, gas prices in Greece hit a record high with a 332% annual increase.

A hike in prices and increasing inflation caused by the Russian war against Ukraine prompted strikes and protests across the continent including in the UK, France, and Germany.

On Oct. 20, strikes at nuclear power plants in France affected 12 of the country's 18 nuclear power plants, raising fears that the country's energy crisis will worsen.

In November, it was announced that the Irun pipeline, which transports natural gas between Spain and France, began operating with 66% expanded capacity.

Price cap, ban on oil export

One of the latest energy deals in 2022 was signed in November as Qatar Energy and ConocoPhillips agreed to sell Qatari liquefied natural gas (LNG) to Germany.

On Dec. 1, “energy crisis" was chosen as the "ugliest word of the year" in Austria in a vote by a jury of experts headed by Rudolf Muhr of the Society for Austrian German (GSOD).

Meanwhile, Britain and the US forged a new energy deal that will enable America to export more gas to the UK amid the war-driven energy crisis.

Germany inaugurated its first LNG terminal in the northern port city of Wilhelmshaven.

After EU member countries agreed on a $60 per barrel price cap for Russian crude oil exports transported by sea, Russia announced a ban on oil exports to countries using the price cap that takes effect Feb. 1 and will be valid until July 1.