AN already tense European gas market was further shaken this week with the ratcheting up of sanctions against Russia over its incursion into Ukraine, including Germany's halt of the Nord Stream 2 gas pipeline certification. "Well," sniffed former Russian president Dmitry Medvedev on social media. "Welcome to the brave new world where Europeans are very soon going to pay €2000 for 1000 cubic metres of natural gas!" Whether or not that comes to pass, steeply rising energy prices threaten to fuel inflation for longer than hoped and derail post-pandemic economic recoveries, not just in Europe but around the world. The crisis has heightened the European Union's vulnerability to gas supply disruption. The EU relies on Russia for about 40% of its imported gas, a proportion that cannot be easily sourced elsewhere, despite European Commission President Ursula von der Leyen's assurances last week that it could withstand a full cut-off. The US and other countries are holding fire on the most punishing sanctions for now, but any further moves that push energy prices higher will also increase calls for Europe to shake off its dependence on Russian gas. Interestingly, those calls are coming from both the oil and gas industry - which wants to see a more friendly regulatory climate in the UK North Sea - and environmentalists, who are calling for a much faster shift from fossil fuels to renewables.
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