In Ukraine, energy is an instrument of both war and peace

Floor. The offensive war launched by Russia in 2022 was based on an “energy war”, in which Russia limited gas supplies to Europe from the summer of 2021. Especially in Central Europe, this caused widespread price increases and political unrest.

With the war, the energy crisis deepened: sanctions and other measures reduced trade with Russia. Imports of coal stopped, and trade in petroleum products was severely restricted. The import of natural gas was not banned, but it was affected by other measures.

Finland adapted quickly. Due to the requirement to trade in the ruble and restrictions on money circulation, the import of pipeline gas and electricity from Russia was cut off in the spring of 2022. Oil trade ended later that year. In order to secure the supply of gas, we promptly arranged a liquefied natural gas (lng) terminal in Inkoosee.

Europe’s adaptation has required more time and consideration of means, but the EU’s sanctions on Russian energy have tightened step by step. Oil can now only be imported to Hungary and Slovakia, and the G7 countries and the EU have set global price ceilings for Russian oil. October US sanctions For Lukoil and for Rosneft have already reduced Russia’s oil revenues significantly. Shadow tankers in poor condition still transport oil in the Gulf of Finland.

Get rid of addiction

Before the war of aggression in 2021, about 45 percent of the EU’s imported gas came from Russia. That share has now shrunk to 10 percent. Investments in clean energy and gas infrastructure have been important. The growth of lng trade between the EU and the US illustrates the development.

In December, the EU decided to gradually stop the import of Russian LNG during this year and the import of pipeline gas by the fall of 2027. The step is historic. Up until now, energy trade has been limited by sanctions requiring consensus and semiannual confirmation. The new bans have been decided by a qualified majority of the member states and are valid until further notice.

The Commission also plans to propose a complete ban on Russian oil by the end of next year. We are also waiting for a proposal that would ban Russian nuclear fuel.

War eats up resources

It is ultimately about the resources of the economy and warfare. The war in Ukraine consumes enormous resources on both sides. Europe is constantly better able to cover its energy needs, for example by means of clean energy, and the burden on the economy is lightened. In Russia, on the other hand, energy revenues, which are central to the state, are shrinking as exports and export prices fall.

At the same time, the war has resulted in large-scale damage to the energy infrastructure. Russia has been destroying Ukraine’s energy capacity for a long time. Interruptions in electricity and gas distribution are commonplace in Ukraine.

Now the attacks in Ukraine are also targeting oil refineries, for example, which has a direct impact on Russia’s fuel supply and citizens. These effects may still intensify.

From war to peace?

It has come a long way from the days when trade between the EU and Russia was seen as a factor promoting European peace. The question right now is whether it is possible to promote peace in Ukraine by influencing the Russian energy sector.

Of course, Russia trades extensively with China and India, among others. Bottlenecks in the energy infrastructure, the oil price ceiling, sanctions from different countries and the general geopolitical effort to avoid dependencies still limit its revenue collection.

It is also certain that Europe will no longer return to its former relationship with Russian energy. This is a clear consequence of the war: the EU takes care of its security by developing its own energy sources and building new partnerships. Controlling energy sources brings both freedom and power. That is why it also causes conflicts, as recently in Venezuela.

The lessons of war must be used

Energy can also play a big role in the Ukrainian peace process. At worst, it can lead to harmful “deals” for Ukraine and Europe regarding the utilization of Russia’s energy resources or, for example, Ukraine’s critical minerals. They are of great interest to the United States, because it is also currently dependent on China. It’s still good to hope for a better outcome.

Not only natural resources but also infrastructure can be pawns in difficult negotiations. The proposal to transfer control of the Zaporizhia nuclear power plant to the United States is an example of this. The sale of Lukoil’s extensive holdings is also currently being negotiated.

The reconstruction of Ukraine will in time be a great joint effort. What was learned in the war should be widely used throughout Europe as well. Energy systems must be built to be sustainable in all respects, including crisis-proof. This means clean, decentralized and typically also flexible and intelligent solutions. Energy security is a basic condition of modern society that cannot be compromised.

Riku Huttunen

Director General of the Energy Department, Ministry of Labor and the Economy