The Geopolitical Dynamics of the European Energy Crisis

Since the outbreak of war in Ukraine in early 2022, Europe has grappled with a major energy crisis, seeking ways to navigate its way out of the challenging situation. The European energy crisis reached a peak when the natural gas demand in the EU experienced its steepest historical drop of 13%. While the EU has been steadily shifting away from its dependency on Russian gas, achieving a recent milestone of around 12% level of dependency. Nevertheless, another challenge emerged with the Israel-Hamas war at the beginning of October 2023. The conflict not only triggered waves of protests, support and heightened awareness among European populations, but also introduced a potential for energy crisis excavation.

The abrupt shutdown of the Israeli Tamar field has raised concerns about potential shrinkage in gas exports in Europe. The Tamar field contributes around 70% of Israel’s total energy and therefore not only does it impact the internal energy distribution but also exports. Since Israel exports a large proportion of its gas to Egypt which then reexports it to the European market, such a situation may appear alarming for Europe. Additionally, the vulnerability and uncertainty surrounding European pipeline infrastructure have only further complicated the situation, although European gas capacities are currently relatively high.

The Situation in Europe

The global gas disruption continues to cause considerable spikes in gas prices for most European countries, notably affecting Austria, the Netherlands, Romania, and Latvia. In these countries, the prices have surged by almost or over 100% in national currencies. Such rising energy prices can be detrimental to the well-being of vulnerable populations, creating another potential economic challenge for Europe. 

Beyond the gas crisis, Europe has faced another challenge in the face of surging electricity prices that have recently increased in 22 out of 27 EU countries by the end of 2023. The Netherlands experienced a shocking 953% increase in electricity rates, and has witnessed major disruption and dissatisfaction among its population.

Geopolitical Dynamics

Geopolitical circumstances have always played a decisive role in shaping European energy supply chains. European political leaders are now challenged with a difficult task of maintaining normative EU diplomacy and deescalating any tensions that can potentially further disrupt the region’s stability.

Iran’s indirect and political involvement in the Israel-Hamas conflict, actively supporting the Palestinian people, has drawn a lot of attention and caused numerous concerns. Iran was confronted by the international community of its involvement in the initial Hamas-led attack that officially started the war. If drawn into the conflict, Iran could face significant economic and civil costs. On the flip side, its involvement into the conflict would rapidly increase tensions in the oil market, another crucial energy source.

 With two major and devastating wars unfolding in Europe and in the Middle East, the European community finds itself in a critical role of a rightful mediator and a significant geopolitical actor. Any disruption in both roles could have severe negative implications for Europe. The risks for the European energy market remain remarkably high. Despite the previous winter contributing to the market’s stability by its relative mildness, there is no guarantee that the odds will favor Europe again this year.