If Russian President Vladimir Putin continues to starve the EU of gas, millions of people could be looking at a bitter winter, when demand for gas is at its highest, and economic catastrophe.
Natural gas spot prices are now almost 10 times higher than they were two years ago. Across the EU, this is fuelling record inflation—currently close to 9%, the highest ever in the history of the Eurozone, squeezing people’s spending power, plunging thousands into poverty, and placing a huge burden on industry. Germany, the dominant economic and political force in the EU, is almost entirely dependent on Russian gas imports. As much as 16% of German manufacturing firms have reduced production or partially stopped work due to rising energy prices. The European economy is staring at stagflation and recession.
Several countries across Europe are considering dimming or switching off public lights, and even adopting “energy curfews", with early closures for businesses and offices. The city of Hanover in Germany has already begun cutting off hot water in public buildings, swimming pools and gyms. Mobile air conditioners, fan heaters and radiators are being banned. Public fountains have been switched off and major buildings such as the town hall are no longer lit up at night. These measures are part of an EU-wide plan to reduce gas usage by 15% until next spring.
What happens if Putin turns off Russia’s gas supplies to Europe tomorrow? Overall, the EU’s underground gas storage facilities are now at 67% of capacity. At this level, the EU will have just enough gas to get to the end of November, as estimated. Some countries like Spain, Portugal and Bulgaria will run out by December even at full capacity. Germany’s foreign minister Annalena Baerbock admitted last fortnight that shortages of natural gas this winter “could spark popular uprisings".
There may also be a deep divide in the public mood. A recent YouGov opinion poll in Britain found that 65% of people over 65 years of age supported further sanctions on Russia even if it has a negative impact on the British economy, compared to just 22% of 18–24 year-olds. In the US, 83% of over-65s supported the sanctions, while only 48% of under-30s felt the same.
The obvious conclusion that can be drawn from these figures is that the older people remember the Cold War, when the Soviet Union was the West’s worst enemy. But all that ended 30 years ago; younger people have no such memories. They may dislike Putin intensely, but most of them don’t see why they should undergo hardships for a war taking place in a faraway land. And austerity measures imposed by governments and an economic recession would hit younger people in the workforce harder than the over-65s.
Meanwhile, over the last two months, Europe has seen widespread farmer protests. It began in the Netherlands in early June, where a government directive to slash nitrogen-based pollutants could force cultivators to reduce their livestock herds or quit farming. Within days, protests spread to Germany, Spain, Italy and Poland, though the demands were different from their brethren in Holland, and more directly related to the war in Ukraine.
German farmer groups are protesting against a renewable energy law amendment, claiming that it does not provide enough support for biogas production even as the country is headed towards an energy crisis. Polish farmers are upset over the rising cost of fertilizer. In Spain and Italy, they are agitating over high fuel and essential product prices.
In a bid to curb inflation, the European Central Bank has hiked interest rates for the first time since 2011. But some economists believe that this may not have been a smart move. The current inflationary pressure is due to supply-side factors, after all. Higher interest rates may further depress economic activity, making it harder for governments to mobilize resources needed to cushion the effects of an energy crisis. The euro has been falling against the dollar, too, making imports costlier. The euro is currently trading at a 20-year low against the American currency.
It is increasingly beginning to seem that EU leaders overplayed their hand in declaring an unprecedented economic and financial war with Russia. Of course, the Russian economy is hurting, but European economies will possibly end up hurting more. A freezing winter can lead to serious public unrest. Governments can fall.
In another month or two, cracks may begin to appear within the EU. Hungary has said that it will not back further sanctions against Russia. Spain, Portugal and Greece had objected to the 15% gas usage cut proposal. But the EU’s strident rhetoric since the war began may have made it difficult for it to back down. It has till now refused to negotiate with Putin. Yet, the people of Europe may soon get fed up of the costs imposed by the war. And the West could then be facing a crisis of its own making.
Sandipan Deb is a former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines
