Current Affairs: Crimea Crisis

  • 29-03-14: Western leaders’ decision to eject Russia from the Group of Eight (G8) is the most visible diplomatic response to date to Moscow’s annexation of Crimea from the Ukraine.
  • Russia’s Influence: Europe buys nearly 30 per cent of its natural gas from Russia. This has led to concern thatPresident Vladimir Putin might turn off a few taps to gain leverage in the confrontation with Ukraine. For now, these fears are overblown – among other things, Europe has a lot of natural gas in storage – but the fundamental worry is well founded. Yet US natural gas exports would do little to reduce Russian leverage. They cannot replace Russian gas in the current crisis since it will be more than a year until any US export terminals are built. Even once these facilities are up and running, the economics of sending shale gas to Europe are unlikely to make much sense. Once the cost of shipping is included, Russian gas is far cheaper; Europe’s politicians should instead put their energy into copying the successful US policies that laid the groundwork for a spectacular boom in natural gas production. This might allow Europeans to produce more gas at home instead of buying it from Russia.