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Solving Europe's energy crisis with Norway's power
Europe's energy security hinges on Norway and its transition from fossil fuels to renewable sources. That has big geopolitical implications for Ukraine and NATO.
On GZERO World, Ian Bremmer delves into Europe's urgent quest for energy independence and the broader geopolitical shifts that could redefine the continent's future. With the specter of reduced US support for Ukraine after November’s election, Europe's resilience, particularly in energy security and military capabilities, takes center stage. Norwegian Prime Minister Jonas Støre joins Ian to discuss Norway's critical role in this transition, emphasizing the need for a swift move from oil and gas to renewables, a monumental task that Europe and Norway are determined to undertake in a remarkably short timeframe. “Norway will transition out of oil and gas. When we pass 2030, there will be declining production, and then we want to see renewables transition upwards,” Prime Minister Jonas Støre tells Ian.
Their conversation delves into the ramifications of the US election outcome on NATO and Ukraine, underscoring Europe's precarious position should American support wane. The discussion reveals the continent's vulnerability to fuel crises and the imperative for a robust energy strategy that lessens dependency on external forces, notably by severing ties with Russian fossil fuels in response to the invasion of Ukraine. “Europe's ability to assist Kyiv on the battlefield will hinge not just on military capabilities but also Europe's own energy security,” Ian explains.
This is a moment of transformation for Europe as it navigates the complexities of energy transition and geopolitical uncertainties, highlighting the interconnectedness of sustainability, security, and solidarity in facing the challenges of the 21st century.
Catch GZERO World with Ian Bremmer every week online and on US public television. Check local listings.
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Why is Julian Assange in the news again?
Ian Bremmer shares his insights on global politics this week on World In :60.
What's left to sanction with Russia and have existing sanctions been effective?
There's very little left to sanction with Russia that the Americans and their allies want to sanction. I mean, you could try to cut off Russian oil exports to, say, India, but no one wants to do that because that would cause a global recession. Food, fertilizer, same thing. At the end of the day, the sanctions that the West can put on Russia without a massive impact to themselves and the world they've already put. But because Biden said there'd be hell to pay if anything happened to Navalny in jail and he's dead now, and it's pretty clear the Russians, the Kremlin killed him. That means they have to sound tough. But ultimately, the only thing that is changing Russian behavior is the provision of significant military support to the Ukrainians, and that is determined by US Congress going forward.
Is Israel preventing humanitarian aid from reaching Gaza?
Certainly that is the case, and they've been very reluctant to allow significant humanitarian aid to get into Gaza. Their view is that a lot of that aid would be taken by Hamas, and there's very limited capacity to stop Hamas from doing it. It's terrorist organization. Most of the rest of the world says, yeah, even if that's the case, you've got a couple of million civilians in Gaza whose homes have been destroyed, who've been displaced, that have no other way to live unless you provide them with support. And in very short order, the principal danger to civilians in Gaza will be humanitarian and will not be the war. That's how bad the humanitarian crisis is getting, even though the war fighting continues to go on.
Why is Julian Assange in the news today?
Well, because he is facing one of his last opportunities to avoid extradition to the United States. He is in the UK right now. He's wanted on almost two dozen criminal charges by the United States in regard to he and his organization putting out classified material and diplomatic cables over ten years ago. Those are serious crimes from the United States. But supporters of Assange are all about, look, this is, you know, putting truth to power and shining a light on massive human rights abuses. And if it wasn't for Assange, people wouldn't know about those abuses. It's kind of the same thing people have been saying about Snowden. There is a massive political debate that we can't finish in 180 seconds, but that's why Assange is in the news. We will see what the high court rules.
That’s it for me and I'll talk to you all real soon.
A worker walks atop a oil tanker wagon
The “yes but” behind Russian oil exports
The International Energy Agency reported Tuesday that Russia’s oil exports hit a post-invasion high in April of 8.3 million barrels per day. That’s up from the monthly average of 7.7 million in 2022. Those with the bad habit of reading only the headlines might think this is good news for Vladimir Putin and his war on Ukraine. Not quite.
Buried among the details and data points in many press reports is the reality that despite the export record, Russia’s monthly oil revenues were down 27% from last year, according to the IEA. And the Russian government’s tax receipts from the oil and gas sector have fallen 64% over the past year. Why is that? In response to Russia’s invasion of Ukraine, Europe has stopped buying Russian oil exports, some 80% of which now go to China and India. But the Asian giants can buy Russian oil at steeply discounted prices.
That’s good news for all the world’s oil consumers because the complete elimination of Russian oil from global markets would send prices everywhere soaring. Instead, oil buyers avoid a price shock, China and India get cheap crude, Europe gets independence from Russian energy, and the Kremlin gets less revenue. You won’t get that from headlines about export records.
OPEC+ vs. the US
Oil prices soared Monday — and continued rising Tuesday — after a group of OPEC+ members (unexpectedly) announced that they'd slash production voluntarily by more than 1 million barrels per day. It’s the crude cartel’s response to expected sluggish demand for crude triggered by the recent financial turmoil in the US and Europe as well as China’s weak economic recovery.
The lion’s share of the slash — which follows a bigger cut of 2 million bpd in October — will come from Saudi Arabia, which pledged a 500,000-bpd reduction until the end of the year, matching an earlier promise by Russia.
Why are the Saudis doing this? Officially, Riyadh says it aims to balance markets, but it clearly wants to stop the price of crude from plunging further as the global economic slowdown hurts oil demand, says Eurasia Group expert Raad Alkadiri.
Saudi Crown Prince Mohammed bin Salman has ambitious spending plans, and he wants to get ahead of the curve before prices drop too much. (Indeed, the price of benchmark Brent oil hit just $73 per barrel last month compared to over $120 in the summer of 2022.)
But there's also a US angle. The Saudis resent the Americans for dragging their feet on replenishing the US Strategic Petroleum Reserve, which the Biden administration has tapped into several times since late 2021 to bring down domestic gasoline prices from a whopping $5 a gallon to today's average $3.50.
Russia’s President Vladimir Putin, for his part, has been itching for a chance to get back at the US for leading the charge to enforce a $60 per barrel price cap on Russian oil among G-7 and EU nations. The cap is finally starting to hurt Russia's economy, although perhaps not as much as the West expected.
Japan's recent move to carve out an exemption to buy some Russian crude above the $60 limit is the first semblance of a crack in Western unity against Moscow. And the more expensive oil gets, the harder it’ll become to enforce the price cap — not to mention that US Republicans will jump at the chance to blame high gas prices on President Joe Biden.
Are the OPEC+ cuts a good or bad thing? As usual, that depends.
If you're in the US, you're probably thinking: Yikes, that’s pretty awful now that gas prices have stabilized. Even though they likely won’t reach last year’s levels, high energy costs are the last thing that Western central banks need as they fight to bring down inflation, which is extremely sensitive to wild swings in energy prices.
Yet, if you're MBS or Putin, you must keep prices above a certain level to keep your oil-dependent economy humming. We all know that the Russians will do whatever they can to push back against the $60 price cap, but Alkadiri says that "the Saudis are now showing that they are determined to keep prices up too — Washington be damned."
Russian President Vladimir Putin shakes hands with Pakistani PM Shehbaz Sharif during a meeting on the sidelines of the Shanghai Cooperation Organization summit in Samarkand, Uzbekistan.
Russia and Pakistan might cut unprecedented oil deal
Cold War rivals Russia and Pakistan are negotiating an agreement for the Russians to start selling cheap oil to energy-starved Pakistan in March.
This will make Islamabad yet another Asian customer of Russian crude at a time when Moscow’s cash inflows are limited by a G7/EU oil cap and sanctions. Also, considering Pakistan is dead broke, payments might be made through a “friendly” country, presumably China – a power play for Beijing, whose yuan will be used for the transactions, giving the currency more sway as an alternative to the US dollar.
How is this deal going to affect American interests in the region? And why is Pakistan, which wants to balance its ties with Washington, giving business to the Russians perhaps through China?
First, some history. Although the agreement isn’t finalized, it’ll be geopolitically novel when it is because Pakistan is an unlikely destination for Russian business. Unlike India, Islamabad and Moscow have had no commercial ties for decades.
Considering Pakistan spent the Cold War spying on the USSR and/or attacking its troops in Afghanistan (the Soviet Union paid back in kind by arming India, Pakistan’s arch-rival), the two sides haven’t exactly behaved like partner-material.
Enter China. Pakistan and China have been “Iron Brothers” for decades. Even though Islamabad was a non-treaty US ally until not too long ago, the Pakistanis and the Chinese have always remained “all-weather friends.”
However, as India settled into the role of becoming America’s strategic partner in the region, displacing Pakistan as the preferred South Asian ally over the last two decades, the Chinese encouraged Pakistan to open up to the Russians, and vice versa. Now, a once hesitant Islamabad doesn’t just want Russian oil, but also natural gas, weapons and more. Still, Islamabad wants to stay aligned with the American camp.
Why is Pakistan doing this? Islamabad’s energy bills make the biggest chunk of its imports. Cheaper oil from Russia will obviously help its escalating balance of payments crisis and ballooning trade deficit.
But the biggest issue is with dwindling foreign exchange reserves. A year ago, Pakistan had $17 billion in the bank. Today, foreign reserves have dwindled to $4.3 billion, which will pay for less than a month of imports.
To manage the dollar crunch, Pakistan could use the Chinese yuan in a swap with China to pay Russia once the oil flows in (it expects to get 35% of its annual crude oil imports from 70 million barrels of Russian crude), putting its import-regime firmly in the China-Russia camp.
Pakistan thus finds itself between a rock and a hard place: It needs the cheap Russian oil but also wants to avoid antagonizing the US and its friends in the Gulf, Pakistan’s main energy suppliers — especially considering that Islamabad has been negotiating bailouts with the Washington-backed IMF and deferred oil payments from the Saudis and the Emiratis.
While the Pakistanis defend their position by citing neighboring India as an example of a country that buys Russian oil even as it tilts towards the US and deals with the Gulf states, Islamabad is in a very different position compared to New Delhi because Pakistan is crawling toward default.
But that’s exactly how Washington and Beijing might find confluence to stop Pakistan from failing. “The US view on this is that countries like Pakistan may at times be strategically important, but in the great power competition between China and US, it doesn’t matter a whole lot,” says Uzair Younus, director of the Pakistan Initiative at the Atlantic Council.
Beyond Pakistan’s limited importance as a partner for counterterrorism in Afghanistan, he assesses that the view from Washington is that if others want to share the burden of propping up Pakistan and stabilizing its economy, so be it.
“The US remains a strategic market for Pakistan and that is not going away any time soon. So there will be a relationship there,” says Younus, with the caveat that Washington is likely to prioritize its strategic interests elsewhere for the time being.
Or maybe the Russia-Pakistan oil deal won’t matter that much to the US and its Gulf buddies. For Tamanna Salikuddin, director of South Asia programs at the US Institute of Peace, although the deal will be watched with much interest in Washington, it is going to reinforce the views of American policymakers who already believe that Pakistan is on the Chinese side versus the US camp.
“That Pakistan is now on the ‘China-Russia side’ versus the ‘US-India side’ will be further evident,” she explains. “Even if we're not trying to create political blocs, they emerge sometimes without any effort on our part.”
Russia's weapon: blocking Ukraine grain exports
Carl Bildt, former prime minister of Sweden shares his view from Bratislava, Slovakia.
What's going to be the effect of the EU sanctions on Russian oil exports?
Well, that's going to be somewhat dependent on what happens primarily with oil price. If the oil price were to go up, then in spite of exporting less quantities, Russia will probably earn more money. If the oil price goes down or stays stable, they will be able to gain less, especially since they will have to export at significant discount prices to the people that are ready to buy their oil. So remains to be seen, but a significant step.
Is there any prospect for really releasing all of the grain for the world markets from Ukraine, that Russia is blocking?
It doesn't look very good. Russia is saying "well, well, well, we can lift the blockage of the Black Sea, but that's only if you lift all of the sanctions on us", so they're playing hardball. But effectively, they are now using the restrictions on grain and other products coming out of Ukraine as a weapon against the rest of the world. And that is of course affecting a lot of people. Different studies say that we have perhaps up to 400 million people, in the poorer part of the world, that's going to be very hardly hit by these particular aspects of the brutal Russian aggression.
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A guide to the EU’s lukewarm Russian oil embargo
After months of diplomatic wrangling, it seemed this week like the European Union had finally made a big breakthrough in its effort to punish President Vladimir Putin for attacking Ukraine. Oil prices soared, and gas hit new highs after Brussels announced that it had reached an agreement to phase out Russian oil imports by the end of the year.
But the agreement also includes a slate of carve-outs and caveats that could dilute the bloc’s effort to decapitate the Kremlin’s war machine.
What’s in the deal?
The agreement includes a ban on all seaborne Russian oil imports by the end of the year. That covers about two-thirds of the bloc’s total crude imports from Russia – the remaining third comes via pipeline. And since Germany and Poland have pledged to voluntarily ditch oil brought in by pipeline as well, some 90% of Russian imports to Europe would be shut off by the end of the year.
Moreover, it also appears that the EU is set to ban insurance providers from covering tankers carrying Russian oil anywhere in the world. Given that British and other European companies dominate the marine insurance industry, this move will significantly undercut Russia’s ability to offset its losses by selling more oil to Asia.
What’s not in the package?
Part of the reason it’s been so hard to reach a deal is because of opposition from three landlocked EU member states: Hungary, Slovakia, and the Czech Republic. (Slovakia, for instance, gets almost 100% of its oil from Russia.) Hungary's PM Viktor Orbán, who is buddies with Putin, drove the hardest bargain and was most vocal in his refusal to sign onto a Russian oil embargo. He argued that such a move would be economically catastrophic for his country, which depends on Russian pipelines for 65% of its oil. Because the sanctions package requires unanimous approval from EU member states, the holdout would have killed the entire project.
To save face and avoid an embarrassing admission that it couldn’t strike a deal, Brussels capitulated to Budapest’s demands this week, saying that it will continue to allow imports via pipelines and will work out the precise end date for that exemption later.
Despite the obvious disconnect, both Brussels and Budapest are claiming victory. The EU has touted the deal as a triumph for European unity and the maximum pressure campaign against Moscow. Orbán, on the other hand, wrote on Facebook that “an agreement was reached. Hungary is exempt from the oil embargo!” This carve-out only accounts for 10% of Russian exports to the EU. Still, it means that Moscow will be able to continue shipping at least some exports to Europe.
Deferring thorny decision-making never works out well for the sprawling EU. “Agreeing on ending the exclusion of Russian oil delivered via pipelines will not be easy,” says Emre Peker, a Europe Director at Eurasia Group.
“It could take a few months, and even when a deal is done the extended phase-outs as proposed are likely to survive,” he says. So, can the EU still inflict significant pain on Russia if pipelines remain online? Peker says that will only be possible if “Brussels can forge consensus on curtailing Russia’s ability to export crude elsewhere” around the world.
Will Russia feel the pain?
The ban will undoubtedly hurt Russia. Losing two of its biggest crude importers – Germany and the Netherlands – is a big loss. Still, Asia continues to guzzle Russian oil, with China, the largest single purchaser, accounting for almost a third of all Russian crude exports, and South Korea accounting for roughly 7%. What’s more, Europe had already paid Russia 21 billion euros ($22.3 billion) for oil in the first few months since Putin invaded Ukraine. That’s a lot of money for Moscow’s ongoing war machine.
And even when things get rough, Russia can still sell oil for a discount. Notably, two mammoth economies – China and India – have opted not to join the West’s sanctions campaign against Russia. India, for its part, received more than 24 million barrels of Russian oil last month, up from about 3 million in March. China is also trying to make the most of a crude bargain.
What’s at stake for the West?
Indeed, while the insurer ban will make it much harder for Russia to sell its oil, it will also likely keep prices higher, revealing the extent to which Western states are willing to inflict pain on their own constituencies – even as inflation reaches record highs throughout the Eurozone – to punish Russia.
In adopting a hardline anti-Russia stance, EU member states also risk backlash at home where not everyone is on board with the plan: 62% of Slovaks, for instance, oppose ditching Russian oil. As energy prices continue to rise – and a deepening cost of living crisis sweeps the continent – European governments could be risking the revival of a fiery populist wave.
This comes to you from the Signal newsletter team of GZERO Media. Subscribe for your free daily Signal today.
Europe’s oil sanctions and a shifting Russian war narrative to come
Ian Bremmer's Quick Take: Hi everybody. Ian Bremmer here and I am back in New York City with a Quick Take to kick off the week. And the big news, a hundred days in just about continues to be, yes, the Russian war in Ukraine. And most importantly, in the last 24 hours, the sixth round of sanctions agreement coming from the Europeans, most importantly, essentially an oil boycott.
Now there's a lot of back and forth on what exactly this means because the Hungarians, with Viktor Orban, much more aligned with the Russian president and also very dependent on energy from Russia, was extremely obstreperous and basically refused to participate in the deal. So they got an extension and that extension is temporary but undefined.
What that basically means is that the boycott is on oil that's transferred through ships as opposed to by pipe. And that means that a bunch of the East Europeans will be excluded from it, will still be buying Russian oil. But the reality is, two thirds of all the oil that Europe gets from Russia is already going to be cut out. And if you add to that, what the Germans and the Poles are doing, their pledges to wind down their own pipeline imports by the end of the year, you're talking about 90% of Russian crude to Europe is now going to be boycotted. That's a very big deal. That's a very big cost, billions and billions of dollars, to the Russians every year. Some of that they'll be able to sell at a discount to other countries around the world. Some of it they won't because there's going to be a challenge when most of the ships that they can get the oil out come from Europe and they need to be insured as well. And all of that is under direct sanction. It means the Russians are going to have a very hard time.
And on the back of that, crude prices, and for Brent shooting up to 124 bucks a barrel. Gas prices, which are already record levels in the United States are going to continue to go up. There's going to be more pressure on Biden to lean into additional forms, additional sources of fossil fuel production, both in the United States, as well as a deal from the Saudis. And of course the progressives in the Democratic Party don't like that, but Biden doesn't like even more the fact that his approval rates are down around 40%, the lowest of his administration to date. Not looking great for the midterms.
Anyway, all of that is to be seen in the context of the United States and Europe that for the last three plus months has been trying to increase the costs to the Russians of this invasion and improve the support that the Ukrainians have been getting. That has been the story for the first three months. Increasingly that's not the story. Increasingly the story is going to be that the Americans and Europeans are doing close to the maximum of what you're going to see. It's going to be harder for the Europeans to get to a seventh round of sanctions, and it's also going to take a lot longer before the gas is cut off, and everything else is pretty marginal. Most of that gas we're talking about really next year, the year after, not talking about this year. Unless of course it gets blown up through Ukraine or the Russians themselves decide they're going to do this on their timeline. There's an economic cost to that.
For the Americans, you already see these missile systems that are being provided. There's a lot of debate. You provide the systems, but you don't want long range artillery because you don't want the Ukrainians to be hitting the Russians inside Russia and then expanding the war more significantly. The Americans are trying to thread the needle here. They want to be seen as doing everything they can to ensure that the Ukrainians can retake their land, but not to expand the war. And the Europeans want to do everything they can to show that they're punishing the Russians, but not to hurt their own civilians in a way that would lead to backlash domestically, politically. And if you put that, if you combine that with the fact that for the first few months, the Russians have largely been all about military losses, all about sort of not being able to take Kyiv, having to push back, to pull back, not being able to take Kharkiv in the north and having to give up some of those territorial gains.
More recently, we're starting to see the focus, of course, on the Southeast of Ukraine and the Russians, albeit very slowly, taking more land, about a kilometer every day, as they get closer to occupying all of Luhansk. They're very close to 100% of that. And the majority of Donetsk. Put together, that's the Donbas. That is what the Russians claim the war is now all about. They also have this land bridge to Crimea and so having occupied most or all of that, they start probably annexing it. They start integrating it into Russia. Do we then have the potential for a frozen conflict with Ukraine? And also are the Russians able to say, "We've outlasted the toughest of what the Americans and the Europeans can do, and now we're playing our long game where we're going to squeeze the Ukrainians economically. They won't get as much support from the West. We've killed their economy by 50% in one year when the West contracted the Russians by only 10%. And they can't export any food, any fertilizer."
They maintain the blockade, ad infinitum, unless the West is prepared to reduce some of their sanctions, which they're not willing to do. In other words, Putin has looked on the back foot for the last three months, and certainly he's not in any way going to be happy about where Russia stands in terms of its global geostrategic positioning, in terms of vis-a-vis NATO and expanded NATO and expanded defense spending and being cut off from the West economically. But the narrow perspective of how the war on Ukraine is going, that narrative for Putin is likely to look a little bit better in coming months than it has for the last three.
And if you saw that Washington Post piece over the weekend that focused on Ukrainian troops not doing so well on the ground in Southeast Ukraine, where of course there are a lot more Russian speakers, a lot more ethnic Russians, they aren't quite as welcome. And also a number of them deserting. That's the first really big public story that's been quite negative for the Ukrainian military that I've seen since the war started. You're going to see more of that too. So the information war is going to be a little bit harder for the Ukrainians to continue to win the way they have.
There's also just general question of war fatigue. This has dominated not just my feed, but frankly, a lot of the international news in the West. A lot of the coverage in the West has been about Russia-Ukraine. Can that continue? For the Americans, certainly a big question as we get closer to midterms. But even for some of the Europeans, I'm thinking here, those that are a little more removed from the front and also where the economy is going to be an open question for them. Italy, France in particular, a bit of Germany too. That's something we're going to have to watch very carefully over the coming weeks and months.
One other thing I would mention is just how little the rest of the world cares about the Western narrative on the war. As I've mentioned before, this war matters a hell of a lot more to the rest of the world than Afghanistan or Syria or Libya or Iraq, because of the impact on food prices, on fertilizer prices, because of how many people will starve on the back of this war. But that doesn't mean that the rest of the world blames Russia for it. In fact, increasingly I'd say the rest of the world, the developing world, is angrier at the West for the sanctions that they put on than the Russians who invaded Ukraine, which in turn precipitated the sanctions. Some of that is a communications challenge that just needs more work from the West, more outreach from the West, but some of it is a lack of alignment between poorer countries who don't think the United States care very much about them, except for when it is immediate and expedient.
And that's something that has been a problem growing for decades now on the back of global inequality, and on the back of climate change, on the back of the pandemic and the Russia-Ukraine crisis. In that regard, fits nicely for them into that broader narrative. Something I heard a lot when I was at Davos last week from Indian participants, Middle Eastern participants, Brazilian participants, and the rest. In that regard, closer to the China perspective than they are to the United States. It's something you don't hear a lot about from Washington. Well, I'm there next week, I'll be talking a lot about that.
Anyway, that's it for me. I hope everyone's doing well. And I'll talk to you all real soon.
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