Many are worried about an energy crisis after Nord Stream 2 was shut down. But Europe says Russian troops arrived too late

At a time when Europe’s gas supplies are at a five-year low and energy bills are peaking, some economic experts and (Russian) politicians argue that the decision to halt the opening of the new pipeline will lead to uncontrollable gas prices in Europe and a possible energy crisis. 

But others argue that Russia’s geopolitical gas wager came a little too late. While Gazprom, a Russian energy company, was busy building the pipeline that would eventually send Russian gas through Ukraine to Germany, the EU, fearing that the completed pipeline would give Russia an outsize level of influence in the bloc, has been steadily reducing its dependency on Russian gas. 

Instead, the EU has been building up liquefied natural gas (LNG) import facilities on Western Europe’s coast over the past few years and increasing imports of LNG from Qatar and the U.S. to wean itself off Russian energy. 

And so far, it seems to have worked. The plants transforming imported LNG to gas form have gone from 50% usage on average over the past five years to nearly 100% today, according to energy research firm Rystad Energy, while an analysis by European energy consultancy firm Wood Mackenzie also found that between January and February of this year, there was more imported LNG from the Middle East and the U.S. in Europe’s gas system than Russian gas.  

A record usage of LNG plants, alongside a relatively mild winter, has led Europe to have a more dominant energy position against Russia than it would have otherwise.  

“We are able to make it through this winter without Russian gas but with supply from others,” European Commission President Ursula von der Leyen said on Feb. 19. 

Holger Schmieding, chief economist at Berenberg bank, agrees.

“In this sense, the EU has become less vulnerable—and continues to do so week by week,” he said in an analyst note.  

Cutting Nord Stream 2

Gas accounts for 20% of the EU’s power generation, and Russia supplies 30% to 35% of total EU gas consumption. 

But when Putin ordered more troops into two Russian-backed separatist regions of Ukraine—Donetsk and Luhansk—after recognizing their independence, German Chancellor Olaf Scholz ordered the suspension of Nord Stream 2’s certification process on Tuesday. 

Nord Stream 2, the second phase of an existing and operational Nord Stream gas pipeline that runs under the Baltic Sea, has long been criticized by the U.S. and many EU countries, as it would increase the EU’s reliance on Russian natural gas.

On Feb. 8, U.S. President Joe Biden threatened to cancel Nord Stream 2 if Russia invaded Ukraine, though it’s unclear if he would be able to do that. 

Even though Nord Stream 2 isn’t up and running yet, delaying or halting its opening entirely means that Russia could retaliate by reducing or stopping the gas flows to Europe through Nord Stream 1, Rystad Energy said in an analysis on Wednesday.

Dmitry Medvedev, deputy chairman of Russia’s Security Council, warned Europe of the dire effects of Scholz canceling the Nord Stream 2 pipeline, tweeting in English, German, and Russian, the same message: “Welcome to the brave new world where Europeans are very soon going to pay 2.000 euros for 1,000 cubic meters of natural gas!”

Saved by the LNG

But while the situation looks bleak, Europe seems to have a comfortable amount of LNG to ride out the rest of the winter. Kateryna Filippenko, a principal analyst at WoodMac, said in an analysis on Wednesday that the mild weather and increased LNG supplies have softened the impact of low Russian flows and will help Europe get through the winter. 

“Overall, the current supply and storage situation means Europe is in a better position both to navigate 2022 without Nord Stream 2 and to prepare for the next winter,” Filippenko said.  

However, Europe has imported so much LNG already there is a lack of gas storage left, and brimming European LNG terminals lack the capacity to absorb extra supply from the U.S. or other major producers. 

“Definitely LNG has been used as the way of flexible supply, but also this means that there is very limited upside in how much additional LNG can be taken,” Carlos Torres Diaz, head of gas and power markets at Rystad Energy, told Fortune. 

Marco Alverà, chief executive of Italian gas infrastructure company Snam, said on Bloomberg TV Wednesday that had Europe made an extra investment of €2 billion in more gas storage facilities, it would have dramatically cut its energy bill this past winter. He estimated that Europe paid an extra €200 billion because of energy price spikes.

Schmieding from Berenberg notes that balancing gas supply across Europe would alleviate some of the major price hikes seen across Europe. 

“After strengthening the distribution networks within the EU in recent years, big regional disparities could likely be smoothed somewhat by redistributing the available gas within the region,” he said. 

But in the geopolitical gas match, Russia’s outsize influence on Europe may soon come to an end. 

“There is a big risk for the Russian position,” says Diaz. “With the current situation Europe will want to move away from their dependency on gas imports faster than before.”

This story was updated to provide more detail on Marco Alverà‘s comments about Europe’s energy spend over the past winter.