Now, as we approach the one-year anniversary of Putin’s invasion, it is apparent that Russia has permanently forfeited its erstwhile economic might in the global marketplace.
Thanks to an unseasonably warm winter in Europe, Putin’s moment of maximum leverage has passed uneventfully, and, as we correctly forecast last October, the biggest victim of Putin’s gas gambit was Russia itself. Putin’s natural gas leverage is now nonexistent, as the world—and, most importantly, Europe—no longer needs Russian gas.
Far from freezing to death, Europe quickly secured alternative gas supplies by pivoting to global liquefied natural gas (LNG). This included an estimated 55 bcm from the United States, two-and-a-half times more than prewar U.S. exports of LNG to Europe. Coupled with increases in supply from renewable sources, nuclear, and, in the interim, coal, these alternative supplies have reduced Europe’s dependence on Russian gas to 9 percent of its total gas imports. In fact, Europe now purchases more LNG than it ever purchased Russian gas.
Furthermore, Europe’s unseasonably warm winter means that not only have the worst-case scenarios been avoided, but Europe’s full storage tanks have barely been drawn down and can carry over into next winter. In January, German storage tanks were a record 91 percent full, up from 54 percent last year, meaning that Europe will need to buy significantly less gas in 2023 than in 2022.
The implications are tremendous.
[The headline may overstate the argument. It’s arguably true that *Europe’s* economy may no longer need Russia, although it would be healthier with it. Russia is currently selling its supply of cheap energy to places like India and China, and that will set up new dependencies in the global economy. The strongest argument that can be made right now is that Moscow’s economy has suffered catastrophic damage that may take decades to reverse, and which may not be fully felt for a couple of years at least, as investment dries up. — Ed]
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