Division Grows Within G7 as UK Twisting EU's Arm to Get It to Ban Russian Gas, Economists Say
13:35 GMT 07.04.2022 (Updated: 15:18 GMT 28.05.2023)
The G7 member states scheduled a meeting for 7 April, prior to the summit of NATO foreign ministers on the Ukraine crisis. Division is brewing among the G7 ranks as Brussels has failed to set a "clear timetable" for boycotting Russian natural gas, much to the UK's dissatisfaction.
"The UK and the European Union (EU) will indeed be on a collision course this week over sanctioning Russian gas supplies after Brussels ignored a plea to set a clear timetable to eliminate supplies," says Dr Mamdouh G. Salameh, an international oil economist and visiting professor of energy economics at the ESCP Europe Business School in London. "This clash will come to a head at this week’s G7 meeting, when Liz Russ, the UK’s Foreign Secretary, will confront fellow foreign ministers with a demand for much tougher sanctions against Russia."
Previously, the US announced an oil embargo against Russia over the latter's special operation to "demilitarise and de-Nazify" Ukraine, with the UK quickly jumping on Washington's bandwagon. On 8 March, Britain signalled that it would phase out imports of Russian energy imports by the end of 2022. For its part, Brussels pledged to abandon Russian oil, gas and coal.
On 5 April, the European Commission proposed a new package of anti-Russia sanctions prohibiting coal imports, "stopping short of an embargo" on Russia's oil and gas, according to Politico. This prompted the UK to double down on persuading the EU and G7 to ban Russian ships from their ports, agree a timetable to phase out oil and gas imports from Russia, and further tighten sanctions on banks and key industries.
The difference in attitudes between the UK and the EU over banning Russia's natural gas supplies revolves around two major aspects, according to Salameh:
· First, the EU is dependent on Russian gas supplies for more than 40% of its needs whilst the UK gets just 3% of its gas imports from Russia in a liquefied natural gas (LNG) form; 50% of UK’s gas needs comes from the North Sea, a third from Norway and few shipments of LNG are supplied by Qatar.
· Second, the EU "despises" the UK’s interference in its domestic affairs having exited the EU.
Even if the G7 reaches a compromise on gradual reduction of dependence on Russian energy supplies, the EU dependence on Russian natural gas "will continue well into the future," according to the economist.
"While the EU talks big about ditching Russian gas supplies, the problem it will face is that there is no one single gas producer in the world or even a group of producers that can replace Russian gas supplies now or for the foreseeable future," stresses Salameh. "The combined LNG exports of the United States, Qatar and Australia could barely replace Russian gas supplies estimated at 200 billion cubic metres (bcm) annually and 15-16 million tonnes of LNG."
This situation has a clear geo-economic explanation, according to the energy expert. First, US, Qatari and Australian LNG producers have long-term contractual arrangements with customers in the Asia-Pacific region. Second, there is a lack of enough LNG terminals and storage space in the EU to even receive modest volumes of LNG. Third, both Norway and Algeria can’t increase their production above the current levels for the next five years if ever. And, finally, the South Gas Corridor (SGC) bringing gas from Azerbaijan to the EU via Turkey could hardly fill its capacity of 20 bcm because of limited production.
The UK is Shooting Itself in the Foot
Still, it appears that the UK is not inclined to take the EU's energy problems into account amid its sanctions spree against Russia, according to Rodney Atkinson, a British academic as well as political and economic commentator.
"The UK’s words and actions against Russia have been the most fanatical and aggressive," Atkinson says. "No country which depends to such a large extent on Russian exports could support them. The average EU dependence on Russian gas is about 40% but Germany depends on Russia for 55% of its gas. Slovakia depends to the extent of 85% and has already agreed to pay in rubles. Italy is 45% dependent - a big increase in recent years."
The UK thinks it can afford to be aggressive as it buys little Russian gas and has a large non industrial service industry, especially in London, unlike Germany, according to the British academic.
However, Western energy sanctions appear to be backfiring on the post-COVID UK, which is already struggling with inflation and soaring energy prices, remarks Salameh.
"UK consumers are now faced with an approximate 54% increase in the domestic price of gas," the energy expert says. "The surge in gas prices is feeding into a rapid increase in the cost of living, that reduces households’ purchasing power at a time when real income growth is being eroded by higher inflation set to hit 7% in 2022 Q2 and a scheduled rise in payroll taxes."
Even though the Chancellor of the Exchequer on 3 February announced a package of measures worth £9 billion to reduce the impact of higher gas prices on UK households amounting to £350 rebate, this "will still leave households on average some £1,000 per annum worse off," according to Salameh.
6 April 2022, 22:52 GMT
It seems that the people of Europe are not willing to be sacrificed in the West's sanctions war against Russia, notes Atkinson, referring to "strong election wins for pro-Russian leaders in Serbia and Hungary, very bad polling for Macron as he approaches the Presidential election and a cost of living crisis in the UK."
"Their leaders are not the 'strong war leaders' they think they are," says Atkinson. "The British government has not received a bounce in support as is usual in wartime. They are still well behind the opposition Labour Party in the polls. There are in any case no credible alternatives to Russian gas [for the EU] and certainly not in the short term. As a result I don’t think there will be a strong agreement to apply more sanctions."