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Sanctioning Russia could spark (another) energy crisis in Europe

December 8, 2021, 9:51 AM UTC

U.S. intelligence agencies have warned the White House that Russia is preparing to invade Ukraine, amid reports that Moscow, seven years after it annexed Crimea, is amassing troops at the Ukrainian border. On Tuesday, the White House said it told the Kremlin that the U.S. was prepared to respond with “strong economic and other measures” if Russia invades its neighbor.

White House staffers said Washington had rallied the support of allies in Europe to pile sanctions and blockades on Russia, too, in the event of a Russian land grab. But sanctioning Russia could spark another energy crisis for Europe, fresh from an unprecedented crunch in natural gas prices over the summer spurred, in part, by low supplies from Russia.

“The subject of the future of Nord Stream 2 in the context of an invasion of Ukraine by Russia in the coming weeks is a topic of utmost priority. It has been discussed thoroughly,” White House national security adviser Jake Sullivan told reporters on Tuesday, referring to a controversial gas pipeline that connects Russia to Germany.

Sanctions have long dogged the development of the Nord Steam 2 pipeline, which runs under the Baltic Sea. Russia’s state-owned Gazprom conceived the pipeline in 2011 but postponed development in 2015 after U.S.-led sanctions, imposed in response to Russia annexing Crimea, restricted the country’s exports to Europe.

Poland and Ukraine have consistently opposed the plans for the pipeline, too, because it threatens to replace pipelines that run from Russia, through their own countries, and pump billions of dollars of revenue into national coffers.

“If Vladimir Putin wants to see gas flow through that pipeline, he may not want to take the risk of invading Ukraine,” Sullivan said.

While sealing the Nord Stream 2 pipeline would be an economic blow to Russia’s state-owned Gazprom, which has shelled out roughly $10 billion to build the pipe, it could also create a new squeeze on energy supply for Europe. Russia is the bloc’s largest supplier for all gas and fossil fuel imports—a fact flagged by opponents of Nord Stream 2 as a reason to not give Moscow any greater leverage over European energy lines.

Gas isn’t flowing through the pipeline yet since it’s still awaiting final approval from Germany, the terminus for the project. That means Europe technically wouldn’t lose any gas supply as a direct result of stalling approval, but Russia could easily retaliate by limiting gas supplies along its other active pipelines.

That the project remains stalled is “leverage” for the U.S. and its allies, Sullivan says, but Germany might not be ready to transition from gas quite so quickly—as it might have to if Russia retaliates by throttling supply. Former German Chancellor Angela Merkel historically resisted pressure from the U.S. to use Nord Stream 2 as political leverage against Russia. After 16 years at the helm, however, Merkel has stepped down and a new government is sworn in today.

Germany’s incoming three-party coalition government has a more ambiguous stance on Nord Stream 2. While incoming chancellor, Olaf Scholz, is pro-pipeline, the coalition’s vice-chancellor, Robert Habeck of the Green Party, is opposed. Yet, the U.S. claims it has already received assurances from Germany’s new government that it will turn off the Nord Stream 2 pipeline if Russia invades Ukraine.

Hopefully, it won’t come to that.

Eamon Barrett
eamon.barrett@fortune.com
@eamonbarrett49

CARBON COPY

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PG&E under fire

California regulators fined grid operator Pacific Gas & Electric (PG&E) $125 million for its role in causing the 2019 Kincade wildfire, which investigators determined was sparked by a downed power line. Investigators are still pursuing the company’s role in three other fires that ravaged the state that year, including one that was the second-largest fire in California’s history. The Californian grid operator was forced into bankruptcy in 2019, under pressure from amassing $30 billion worth of liabilities related to wildfires but emerged again in 2020. NYT

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CLOSING NUMBER

650 petabytes

The world is accumulating a daunting volume of climate data that scientists are struggling to parse. Officials managing the federal collection of climate data in U.S. alone predict their database will swell from 83 petabytes of information today to over 650 petabytes in the next ten years. Just one petabyte can store thousands of feature length films. According to the Wall Street Journal, 650 petabytes could record the entire content of the Library of Congress 30 times over. Better data helps produce better models and predictions for climate change—and climate solutions—but researchers now have to devise whole new means of analyzing the clouds of climate data before it can be useful.

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