Winter Is Coming For European Gas

The debate over whether to cut Russian oil and gas has focused on issues of moral obligations and economic costs. These discussions are predicated on the assumption that Europe will have continued access to gas supplies so long as it walks a delicate line between supporting Ukraine and provoking Russian President Vladimir Putin.

What is missing is the recognition that Russia has been quietly engineering an energy checkmate that will culminate in the coming winter. The question is not whether the gas will be cut, but on whose terms? In recognizing this dynamic it becomes clear that Europe must cut the gas now—not to punish Putin, but to defend itself.

Putin has worked methodically to develop gas supplies as a strategic weapon, first buying up storage assets in Europe over the last decades, then leaving them empty this past winter. At the start of the invasion, Russian-backed hackers attacked US-based LNG facilities who might provide alternative supplies. Taken together, Russia engineered a position of maximum leverage to deter European support for Ukraine. Only a mild winter and a late invasion prevented Russia from pressing its advantage.

In the past weeks Putin demonstrated his willingness to wield this weapon against Europe, first cutting supplies to Poland and Bulgaria, and most recently Finland, ostensibly over demands to pay for gas in rubles. We should see this gambit for what it is—a test of EU resolve to hold the line—and recognize that Europe’s failure to present a united front over such a petty demand can only embolden Putin in the months ahead.

Putin has been preparing for this moment, and we have every reason to believe he would rather let Europe freeze than back down. It may be counterintuitive, but the best action Europe can take to defend itself against Putin’s threat is to pre-emptively cut the gas now.

Cutting Russian gas now gives the European economy almost six months to reconfigure its supply chains before tradeoffs involve competing demand for home heating. When investment is costly, uncertainty favors delay. This is especially true for firms who are too big to fail. At the same time, groups arguing that an embargo would be too costly have an incentive to prove their point by sitting on their hands. European vulnerability becomes self-fulfilling.

What would happen if Europe imposed a gas embargo? It would be especially costly for firms lacking immediate substitution possibilities. Take for example, industries that rely on intermediate goods whose main feedstock is gas, such as fertilizer, plastics, or various chemicals. These are commodities with systemic importance to the economy.

At first, downstream industries may be hamstrung: the availability of European fertilizer will be limited by reduced gas supplies. While there are hard constraints on the infrastructure for importing gas, fertilizer and other gas-derived commodities are easy to ship. Importing more of these intermediate commodities circumvents the LNG bottleneck, and mitigates wider economic damage. The US has significant production and export capacity for these goods, and natural gas feedstocks are 75 percent cheaper than in Europe.

A gas embargo is certainly bad news for the European fertilizer industry (its second largest firm, EuroChem also happens to be controlled by the sanctioned Russian oligarch Andrei Melnichenko). But the impact on downstream industries is limited by the availability of imports. Such a reconfiguration takes time—existing contracts require a legal basis for suspension, new suppliers need to ramp production and secure transportation. It will not be possible to make these changes on a dime in the dead of winter when Putin closes the pipelines.

Shutting the gas off now would also provide sufficient lead time to adjust to new political trade-offs. The Groningen gas field in the Netherlands and nuclear power plants in Germany are both assets that could help alleviate the coming supply crisis, given sufficient lead time. They are also political non-starters at the moment.

But suppose it’s December, Russian gas has just been cut, and Europe is facing three long, cold months ahead. How many Germans will say, “I’m freezing and unemployed, but at least those nuclear plants are sitting idle.” The only way to prevent such a scenario is to begin preparations now, with the urgency of a war-time mobilization. This has proven to be impossible so long as supply restrictions remain a distant risk instead of an immediate certainty.

Currently half of the French nuclear power fleet is down for maintenance, hobbled by a widespread corrosion issue. State-controlled EDF has warned it could be years of maintenance before the fleet is back to full strength. Yet Ukraine and the EU managed to complete a year’s worth of work in two weeks to synchronize their electricity grids at the outset of the invasion. Only an emergency prompted by a certain winter without Russian gas can inspire the French to work 24/7—even, God forbid, in August—to bring these units online by the end of the year.

It is also worth noting that among the fuels Europe imports from Russia, gas is the most difficult for Putin to turn around and sell to less scrupulous buyers. Ships and tankers loaded with coal and oil can be redirected, while the ability to resell natural gas is constrained by liquefaction terminals, which are sparse in Russia and take years to build. Reducing Putin’s war chest over this summer puts Europe in a better position to negotiate this winter.

The modest preparations and reassurances to date simply do not rise to the scale of the emergency Europe will face when Putin decides it is at his maximum advantage. We should be under no illusions that Russia will use the threat of Europeans freezing in their homes to exact devastating concessions. Cutting gas now is the best defensive strategy, providing months of complete mobilization to prepare to keep homes warm and factories running through the cold.