Eliana Svilik, Stanford University
Global energy markets have transformed since Russia’s full-scale invasion of Ukraine shifted key resource flows, creating new winners and losers. Prior to Russia’s invasion of Ukraine, the former was the world’s second largest producer of natural gas and third largest producer of crude oil. EU member states relied on this supply for the majority of its oil and gas as part of a developed, seemingly mutual partnership. As the third anniversary of Russia’s invasion nears, changes in energy supply chains demonstrate that the U.S. and EU have largely won the concurrent energy war. The U.S. has largely filled the energy gap left by Russia, enjoying the economic benefits of a rise in demand for its liquified natural gas, although it remains to be seen if these gains will outlast the conflict itself. Russia has sustained economic and political losses as a result of the resulting energy crisis, although domestic political considerations in the U.S. and the EU have prevented the complete ruination of the Russian energy sector. Meanwhile, countries in the European Union have proven more resilient than expected, even as they have hesitated to fully sever its ties with Russia.
Russia invaded Ukraine believing that the ensuing conflict would be short and relatively painless, severely underestimating the associated energy war. In 2022, Russia’s energy sector could be divided evenly between crude oil and natural gas; together, they composed nearly 80% of Russia’s energy production. Crucially, profits from those exports comprised between 30-50% of Russia’s federal revenues over the last decade, cementing the oil and gas industry as the “most important single source of cash for the Kremlin.” The nature of gas infrastructure makes it difficult to simply pivot services from Europe to Asia, so Russia has had limited success in reviving its imports of natural gas since it cut gas exports to the EU in 2022.
Russian liquid natural gas (LNG) and natural gas exports to the EU andChina
The demand for natural gas has largely been replaced with demand for LNG, although Russia has had some success participating in the market. Furthermore, the European Commission is resisting a ban on Russian LNG, although the organization is searching for alternative supplies. Despite seeing small gains in the LNG sector, Russia has struggled on the oil front after the EU and G7, led by the U.S., established a $60-per-barrel oil cap in February of 2022. Russia has forfeited an enormous source of revenue and become more dependent on the diplomatic and economic cover of China, a country with its own ambitions and strategy.
With American support, the EU has weathered the energy war with surprising resilience and significantly reduced its dependence on Russian energy. Before the war, the EU relied on Russia for over 40% of its imported natural gas. Germany, the EU’s largest economy, was the largest consumer of Russian energy, relying on the latter for over half of its gas and a third of its oil. Russia has long used its energy partnership with the EU to act as a carrot and a stick, and the pattern repeated itself again in 2022, when Russia began severely curtailing the flow of natural gas to countries within the EU as punishment. Despite worries about a harsh, gas-free winter in 2022 and later 2023, support for Ukraine held steady, even in Germany, which was about to unveil a new Russo-German gas pipeline. Within a year, the EU had embargoed crude oil imports and oil products, mostly shifting its energy reliance from Russia to the U.S., Norway, and a mix of smaller players.
EU natural gas imports by supplier and route, 2021-2023
Reductions in Russian gas exports allowed the U.S. to become the largest exporter of LNG to the European Union. Such sales have served as an upside in a war that many Americans have grown pessimistic about. In 2024, 55% of American LNG was exported to Europe and higher levels are expected in 2025. Under the new Trump administration, negotiations to end the war have begun, and Trump’s friendlier attitude towards Russia might entail a sanctions rollback once the war concludes. However, the President is committed to maintaining high levels of LNG exports to EU member-states instead of ceding a now-important client to Russia. For the U.S., it is politically and economically advantageous to have the EU dependent on America for energy instead of Russia. President Trump has threatened the EU with tariffs if the EU refuses to buy more gas, but the threat is unnecessary considering that the EU is already considering increasing its imports of American-produced LNG. Countries within the EU need to fill their storage facilities, and two new LNG plants are expected to open in 2025. The increase in production on the U.S. side will potentially lead to lower–and more attractive–prices. The European reliance on American LNG will likely outlast the Russo-Ukrainian war.
As negotiations over a ceasefire continue, the lasting impacts of these seismic shifts in energy supply chains remain uncertain. The U.S. and EU appear to have secured a lasting victory in the energy war, positioning themselves as long-term energy partners while Russia grapples with economic losses and strategic isolation. However, if Russian energy is sufficiently cheap post-war, portions of the EU might be persuaded to abandon their geopolitical strategy in favor of economic convenience. Furthermore, if President Trump’s threats of tariffs against EU member states materialize, American energy will lose some of its appeal. The ongoing development of renewable energy alternatives adds another dimension to the kinetic energy landscape. As policymakers shape the future, they must strike a balance between domestic needs, geopolitical interests, and economic realities. Ultimately, the U.S. and the E.U. may have won this round, but only the future will determine whether their victory will be sustained.