Europe finally breaks free of Russian oil

Western Europe has now broken free of Russian oil imports permanently, dealing a blow to Vladimir Putin, according to research by the European energy consultancy Rystad.

Analysts discovered that the UK and much of Europe have reversed a years-long trend of dependence on Russian oil and gas before the Ukraine conflict, opting instead for other suppliers such as the US and Canada.

Jorge Leon, Rystad’s senior vice president for oil markets, stated: “I think people underestimated how adaptable the energy system is.

“Just before the war, people would have considered the idea of stopping the direct purchase of oil and gas from Russia absurd.” However, it has largely materialized.”

Europe’s reliance on Russian gas over the years

According to Eurostat, in 2020 imports from Russia comprised 39pc of the gas used in the European Union, 23pc of oil imports, and 46pc of coal imports.

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The UK relied on Russia for approximately 30pc of its diesel, 27pc of its coal, and up to 10pc of its gas – which arrived partly via ships as liquid natural gas (LNG) and partly through trans-European pipelines.

Based on official figures, this dependency has now plummeted to virtually zero.

People believe that quantities of Russian fossil fuel are still arriving via refineries in other countries, although Mr. Leon – who will be speaking at International Energy Week in London this week – noted that the overall amounts are diminishing.

Factors undermining Russian dominance in Europe’s energy supply

Mr Leon highlighted that the surge in supply from other sources outside Opec, the cartel of mainly Middle Eastern countries that control supply and prices, was key to breaking Russian dominance.

He said: “Non-Opec supplies do not usually grow that much but 2023 was a massive year.”

“The stars aligned, and you had new projects coming in from Brazil, Argentina, Canada, Norway, and so on. So that saved us in a sense.

“And then you look at the US, growth has continued very, very strongly through 2023.”

The economic downturn that hit the UK and Europe since 2022 also played a role by decreasing overall energy demand.

Mr Leon remarked: “Demand in the OECD [a group of rich developed countries] has actually decreased last year and likely in 2024. So in a sense, we were kind of lucky that our economic growth in 2023 was lower.”

However, cutting off Russian supplies has proven to be a slow task. Mr Leon cautioned that some of the apparent decline in trade with Russia could be deceptive – because the Kremlin was selling more crude oil to countries like India.

There, it could be processed into products like diesel that could be sold on to the UK and Europe.

He explained: “Oil that was initially flowing from Russia into Europe is now going to China and India, from where suppliers are shipping to Europe.”

Assessing Russia’s fossil fuel earnings

The Centre for Research on Energy and Clean Air, which monitors Russian energy exports by value and destination, estimates that Russia has earned €605bn (£517bn) from fossil fuel exports since February 2022 when it invaded Ukraine. About €188bn of that money came directly from EU countries.

Ashley Kelty, director of oil and gas research at Panmure Gordon investment bank, noted that the UK had halted direct imports of oil from Russia but the reality was more complex.

He said: “The UK was dependent on Russia for diesel fuel – 30pc came from Russia pre sanctions. Russian diesel, refined in India and China, has replaced this, thus evading sanctions.

“The EU was very reliant on Russian gas – about 40pc of all gas used came from Russia. US LNG has replaced this, along with decreased demand caused by two mild winters and the collapse of German industrial demand.

“So the reliance on Russia is largely broken but they still remain important to global supply, as China and India buy much of their products now – albeit at large discounts. If they were forced to exclude Russia, then there would be another energy crisis with huge shortfalls in crude and LNG supplies.”