Russia should be terribly vulnerable to international sanctions. It imports almost every product that defines a modern economy. Its elites have stashed enormous sums overseas, where they are vulnerable to foreign regulation and sequestration. Its total GDP is a little less than Canada's, a little more than Mexico's.
And yet by all accounts, Russian President Vladimir Putin has been shrugging off threats of new sanctions if he attacks Ukraine. Maybe Putin is bluffing. But if so, he has taken his bluff very far, keeping more than 100,000 Russian troops in battle-ready positions through mid-winter.
Maybe, however, Putin has assessed that Western democracies' threat to issue sanctions "like none he's ever seen" is a bluff? He has some good basis to doubt European resolve.
Western Europe is facing sharp rises in electricity prices this winter. Through the autumn and early winter, wholesale electricity contracts traded for more than 300 euros per megawatt-hour almost everywhere on the continent; in France and Switzerland, prices reached nearly 400 euros. Contracts in the United States at the same time normally traded in the $20-$35 range, and rarely exceeded $100.
The price increases stemmed from a worrying shortfall of natural gas. Europeans have invested heavily in renewable energy. But gas remains a crucial gap-filling fuel, not only for power generation but also for heating homes and cooking food. European energy markets apparently foresaw grim natural-gas shortages ahead.
Putin sees the same thing, and that may be what is emboldening him this winter. Russia is a key supplier of European gas. Europe gets supplies from elsewhere too: from Dutch and Norwegian fields in the North Sea; from Algeria via pipelines across the Mediterranean; by tanker from Qatar and Nigeria. But those other sources have been disrupted by a series of troubles, notably a dispute between Algeria and Morocco that closed one of the trans-Mediterranean pipelines.
The result: In a normal year, Europe would enter the winter with something like 100 billion cubic meters of gas on hand. This December began with reserves 13 percent lower than usual. Thin inventories have triggered fearful speculation. Gas is selling on European commodity markets for 10 times the price it goes for in the United States.
These high prices have offered windfall opportunities for people with gas to sell. Yet Russia has refused those opportunities. Through August, when European utilities import surplus gas to accumulate for winter use, deliveries via the main Russian pipeline to Germany flowed at only one-quarter their normal rate. Meanwhile, Russia has been boycotting altogether the large and sophisticated pipeline that crosses Ukraine en route to more southerly parts of Europe.
The Russians have blamed the slowdowns on a series of unfortunate accidents. And there may even be some truth to their explanations. The gas market is cyclical. Sustaining gas production requires large, continuing investments. When gas prices fall to lows, as they did in the mid-2010s, investment slumps. When demand rises, supplies do not keep pace, which spikes the prices, which summons new investment, which expands supply, which propels the cycle forward again. Because Russia treats so much of its gas production as a state secret, it's difficult to know exactly how much of its delivery slowdown is being willed and how much is being forced by the country's own production shortfalls.
But by design or default, the shortfalls have put a powerful weapon into Putin's hands.
At a minimum, the shortfalls painfully remind European leaders how much they need the gas to be delivered by the controversial Nord Stream 2 pipeline from Russia, under the Baltic, to Germany. At a maximum, the shortfalls reverse the economic leverage that the West should normally hold over Russia. If the weather turns cold in Europe in January and February--if prices rise; if absolute shortages close businesses or black out homes--then Putin could be in a position to scoff at Joe Biden and NATO no matter what actions he takes against Ukraine.
Emergency fixes to the shortfalls are available. Market forces have already summoned some two dozen tankers of U.S. liquid natural gas to Europe. Each tanker carries enough gas to supply 75,000 homes for a year.
But to keep the peace in Europe, the U.S. and its allies will need longer-term plans. Europe has made itself unnecessarily vulnerable to Russian pressure via missteps such as closing perfectly functional German nuclear facilities. In 2021, nuclear power met more than 10 percent of Germany's electricity needs. Replacing that supply will take a lot of carbon-emitting natural gas, unless Germany reverts to burning coal, an even worse climate offender.
Renewables offer a promise of European energy independence. But that is a distant promise, and without the German nuclear supply, the route will be even longer and more difficult. Gas helps us get there. But gas from where, if not Russia?
Over the past decade, the United States has emerged as an energy superpower. It's now the world's biggest oil producer, pumping almost twice as much as the runner-up, Saudi Arabia. The United States has likewise become the world's top gas producer, delivering as much as 50 percent more than second-place Russia. The U.S. began exporting liquid natural gas in 2016. In 2022, the U.S. will become the world's largest exporter of liquified natural gas. Liquified gas is not as cheap as pipeline gas. To liquify gas requires large investments in very costly facilities to compress the gas at the point of loading and embarkation. But it's cheaper than energy insecurity at the terminus of Putin's pipelines.
The U.S. will have to move fast to make up for the time lost during the Trump years. Donald Trump mouthed words of support for liquid natural gas, but he as usual slighted the necessary work. Natural-gas-industry leaders complained to me that it actually took longer to get favorable decisions out of the Trump administration than out of the greener Obama administration, in great part because Trump did not fill all five seats on the Federal Energy Regulatory Commission until after the November 2020 election. Even that belated move disrupted the industry more than it aided it, because at the same time Trump fired the commission's chairman, supposedly to punish him for supporting some carbon pricing, but likely also as a slap at one of the chairman's allies and sponsors, then-Senate Majority Leader Mitch McConnell.
Hampering progress on gas, on both sides of the Atlantic, is a pervading sense that natural gas is somehow "un-green." And yes, natural gas is a hydrocarbon; it does emit greenhouse gases. But here's the big idea the world needs to understand on its way to reaching climate goals: Renewables alone simply will not get us there in time. Under current technology, renewables alone probably cannot get us there at all.
Renewables are hard to scale, and even at scale they face inherent physical limits given today's technology: The winds blow and the sun shines on God's timetable, not the consumer's. Until humanity develops currently unimagined storage technologies, the fluctuating output from renewables must be joined to generating systems that can be turned up or down at will. Wind and solar are not an alternative to power sources such as coal, nuclear, hydroelectricity, and natural gas. Renewables can work only in conjunction with such more controllable sources to provide steady and predictable power as needed not only by mature economies, but by the three-quarters of the human race rushing to emulate our enviable way of life.
And for the time being, the way they are getting there is by burning more coal. China alone burns as much coal as the rest of the world put together. Over the next four years, China intends to add more coal-burning output than the entire installed capacity of all U.S. non-hydroelectric renewables combined. Imagine the total electricity consumption of New York City: all the heating and cooling, all the bright lights, all the subways and elevators. Before the pandemic, China consumed eight times that much electricity just to power its air conditioners. By 2030--two U.S. presidential elections from now--Chinese air-conditioning power consumption will likely double. India is even more coal-dependent than China: Three-quarters of all India's electricity use is powered by burning coal, and Indian demand, too, is rising.
Even as the developed world is reducing its coal consumption, global coal consumption is continuing to rise fast--up 9 percent just in 2021. How to slow, halt, reverse this trend? Hydropower is attractive, but the world's mightiest undammed rivers flow far from where their power is required. Even in China, nuclear is slow to come to market. China is planning to build 150 reactors over the next 15 years. Yet even that stunning expansion will take Chinese nuclear output only to about the level where the U.S. is now, despite the U.S. having built just one nuclear reactor in the past quarter century.
That leaves gas as the one fuel that can be delivered fast enough, and in quantities big enough, to replace coal as a supplement to renewables. And if Russia is to be redirected from its present path of aggression against Ukraine and NATO, North America will have to lead the way on gas production. Join U.S. production to that of the No. 5 producer, Canada, and the two together could soon account for nearly one-third of planetary gas production, and sharply curtail Russia's ability to use energy to intimidate.
Even if President Biden's diplomacy can find a peaceful resolution to Putin's invasion threats this winter, that welcome outcome will not prevent Russia from trying the same blackmail methods again. Only by integrating Europe into a better network of energy security can NATO truly protect its members. That integration will require more North American natural gas, at least until better alternatives become reliably and affordably available.
Developing North American gas capacity is security policy, because it will diminish the energy weapon with which Russia can threaten its neighbors. Developing North American gas capacity is trade policy, because it will enhance North American leverage over China's predatory trade practices. Developing North American gas capacity is prodemocracy policy, because it will protect energy buyers against the whims of authoritarian regimes such as Qatar and Russia. Developing North American gas capacity is green policy, because it will offer an immediate replacement to coal while the world awaits the slower arrival of zero-carbon energy sources.
Renewables plus nuclear is the promised land. North American natural gas is the route to get there. So let's go.