The Dutch TTF natural gas price index shows that prices have risen from 16 euros per megawatt-hour in early January to 88 euros in late October, an increase of 450 percent in less than a year. Although the EU is gradually severing its long-standing dependence on fossil fuels, and for the freight sector, renewable resources became the most important source of electricity generation in 2020; this change has not been quick and efficient.

Factors affecting price rise and Russia’s role

One of the reasons for the formation of the current situation is the increase in energy demand after the end of the Corona epidemic. Although demand for natural gas fell by 1.9 percent in 2020, estimates by the International Energy Agency show that between 2020 and 2024, annual gas demand will increase by 9 percent. European gas production, including in the Netherlands, has also declined, and for this reason the Europeans will be more dependent on more gas imports, especially from Russia and Norway. On the other hand, supply of gas in world markets has also decreased. Apart from the consumption of coal, the use of wind energy has also decreased due to weather conditions. Due to the unexpected decrease in temperature, demand for home heating has also increased. We also see that after the general vaccination this spring, the activity of businesses increased rapidly and offices and restaurants resumed their activities. The combination of such factors has led to the rise in energy prices in the European Union.

On the other hand, the sharp decline in Russia’s new natural gas supply which is the most important gas exporter to the Union, has raised concerns that Moscow is seeking to use the current crisis and put pressure on the European Union to put Nord Stream 2 into operation. For example, while criticizing the European Union for opposing the signing of long-term contracts, Vladimir Putin has said that Russia could increase gas exports to Europe by 10 percent if the EU backs Nord Stream 2. Moscow is also trying to somehow use the current situation to put pressure on Ukraine. One of the first signs that Russia may be disrupting gas transfer through Ukraine was turned out on October 1, when Gazprom announced that gas which had been historically transited via Ukraine would be redirected to a southern corridor linking its new TurkStream 2 pipeline across the Black Sea to infrastructure in Bulgaria and Serbia.

Gazprom has long refused to increase gas supply to the spot market, where trade is based on short-term needs rather than long-term contracts. Gazprom’s move means Russia is trying to put pressure on Europe in the Nord Stream 2 affair. It can be said that Russia’s recent position has caused concerns in European countries. According to European leaders, Russia is using the gas lever as a weapon against the EU and using the energy lever to put pressure on Brussels and Berlin to obtain technical and legal approvals for the Nord Stream 2 pipeline.

Iran and European energy security

In recent years, the Europeans have thought they could quickly exploit the vast gas reserves of Iran and Central Asia, but a combination of components such as the high cost of infrastructure development, continuation of US sanctions against Iran, and rising Chinese energy demand has prevented the European Union from achieving their target. The ambitious Nabucco pipeline project was eventually abandoned. In fact, the Southern Energy Corridor has further strengthened Russia’s position rather than weakening it. In 2016, the European Union envisioned that a nuclear deal with Iran, along with new natural gas explorations in the eastern Mediterranean, could end Russia’s dominance of the European energy market. As was noted, the lifting of UN sanctions, along with the reduction of US punitive measures, could pave the way for massive investment in Iran’s natural gas sector. At the same time, a consortium of Eastern Mediterranean governments was expected to be able to develop the discovered gas fields and provide the infrastructure needed for transfer of those resources to European consumers. In fact, the idea that countries in Eastern Mediterranean, North African, and West Asia could compete with Russian manufacturers was an important impetus for Russian companies to participate in some of those projects. However, the Trump administration’s decision to pull out of the Joint Comprehensive Plan of Action (JCPOA) and re-imposition of sanctions meant that the dream of Iran’s gas presence in Europe would not come true. The Mediterranean countries also failed to compromise on their claims in the Eastern Mediterranean. It seems that if sanctions are lifted and tensions between Iran and the West are reduced, Tehran could play an important role in supplying gas to Europe in the long run.

Concluding remarks

It can be said that the failure of European energy policies has little to do with fossil fuels and renewable sources. Achieving energy security requires balancing market forces, technology, policies, and geopolitics. The fact is that both the ideology of the right-wing market and the suppression of the left-wing market in Europe have shaped the current energy crisis. Rising energy prices have caused serious concern in Brussels, as it could lead to strong criticism of the EU and the EU’s green policies, as well as widespread protests.