Energy Crisis: European Security and International Impacts

This briefing examines the emerging energy crisis through giving an overview of the EU's position with Russia following the War in Ukraine and sanctions imposed, and analyses how the evolving US-Israeli War with Iran could impact the EU's strategy going forward. This article was written by Martin Makelov and edited by Frankie Finch.

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Background

Vladimir Putin’s ongoing invasion of Ukraine since February 2022 started not only the largest war in Europe since WW2, but also a global energy crisis. Before the war, Europe was heavily dependent on Russian fossil fuel energy. 50% of coal, 45% of gas and 27% of crude oil imports came from Russia. Levels of trade varied, with Germany and Italy being more reliant, while Poland and the Baltic states tried to limit their reliance due to historical tensions with Russia. Germany, the EU’s largest economy, had a particularly extensive commercial relationship with Russia, relying on it for more than half of its gas imports. The foundations for this relationship were laid during the Cold War, with West Germany’s ‘Ostpolitik’, which normalised relations with the Soviet Union through economic cooperation. After the collapse of the Eastern Bloc in 1989-1991, commercial links with Moscow were increased, under the assumption that economic interdependence would encourage Russia to democratise and integrate into the European order. Even after Russia’s annexation of Crimea, and its meddling in the Donbas region in 2014, Germany’s government under Angela Merkel further increased the country’s energy dependence on Russia, most famously through the planned Nord Stream 2 gas pipeline, which was designed to double Russian gas exports to Germany but faced opposition by Poland, the Baltic countries and the US. Furthermore, Germany’s aversion to nuclear energy also increased its need to rely on Russian gas.

Germany and the EU’s approach towards Russia, however, would change dramatically after Putin’s full-scale invasion of Ukraine on February 24^th, 2022. Overnight, for many EU members, the energy trade with Russia turned from a way to ensure peaceful coexistence into an enabler of Putin’s expansionist foreign policy. The European Union and the US put into place extensive sanctions designed to isolate Russia from the global economy. In response to the sharp rise in energy and electricity prices, the European Commission adopted the REPowerEU plan in May 2022. The plan is designed to improve energy savings, accelerate the deployment of renewable energy and reduce reliance on Russian fossil fuels. Since then, Russian gas imports have fallen to 12% in 2025 (making it the EU’s fourth largest gas supplier), oil imports to 2%, and coal imports have been completely banned. And this January, all EU member states adopted legislation to completely phase out Russian gas and oil imports in 2027, to fully break away from reliance on Russian fossil fuels. The EU continues to be the largest global buyer of Russian natural gas (both pipeline gas and LNG - liquified natural gas) – with France, Hungary, Belgium, Slovakia and Spain accounting for 85% of these imports – so this newest ban will have significant consequences. 

While the implementation of these sanctions has had mixed effectiveness (with Russia often bypassing them through its shadow fleet), they have dealt a significant blow to the Russian economy, which draws most of its revenue from energy exports. EU sanctions, as well as the Trump administration’s restrictions on Russian oil companies, have eroded Russian energy revenues, which fell by a fifth in 2025 compared to 2024. Falling contributions from oil and gas sales have created large budget deficits, impacting  Putin’s ability to sustain his military campaign in Ukraine, and forcing him to raise taxes.

International stakes

Following the loss of Russian exports, European countries have started diversifying their energy sources in two main ways - by seeking out new suppliers and investing in more green energy. Both of these channels, however, still have structural risks and may lead to new dependencies.

Crude oil, which makes up the majority of energy imports, is currently supplied by a wide variety of countries - with Norway and the United States being slightly ahead with around a 14% share each, followed by Kazakhstan, Libya and Saudi Arabia. As this was the sector in which Russia had the lowest prewar dominance (only 27%), it has not been difficult for Europe to diversify its partners, and currently there isn’t a dependency on a single country. But Europe is exposed to global shocks in the oil supply. Prices were on a downward trend following the shock from Russia’s invasion in 2022. However, the recent US-Israeli war with Iran and the closure of the strait of Hormuz are causing a sharp rise in crude oil prices.

For natural gas, the structure of imports has changed significantly - with the closure of projects like Nordstream, Europe’s consumption of pipeline gas has been reduced almost by half, and imports of LNG have risen significantly. There is a growing reliance on the United States, which currently supplies roughly 60% of LNG imports, as well as more than 25% of overall gas imports (compared to 6% in 2021); new long-term contracts with American companies could increase this share to 40% by 2030, a figure not too far off from Russia’s before the war in Ukraine. This new dependency could weaken Europe’s energy security and bargaining power in trade disputes, as the second Trump administration views its dominance in the sector as a way to project national power. At the same time, however, this liquified natural gas is supplied by private US companies, (unlike Gazprom, which is mostly owned by the Kremlin) so they are less susceptible to political pressure from the US government. It is unlikely that the US could halt its LNG exports to Europe. Nevertheless, this over-reliance on the US still carries risks and global gas prices have a similar geopolitical premium to oil - the war in Iran is disrupting the LNG market just as much, if not more, than oil, as one fifth of global supply goes through the strait of Hormuz.

Renewable energy offers a potential solution to the problem, since it does not carry the price volatility of fossil fuels and is environmentally sustainable. In recent years, EU countries have made significant progress in transitioning to renewable energy, driven mostly by the growth of wind and solar power - which, for the first time, generated more electricity than fossil fuels in 2025, with nearly a third of the total share. However, the technologies needed for the green transition (wind turbines, EVs, solar panels) require raw materials such as lithium, cobalt, nickel, gallium and various other rare earth minerals. The EU is almost completely reliant on China for the import of most of these materials, since Beijing practically has a monopoly on the global rare earth supply chain. What is more, China has recently started to weaponise this dependency in trade negotiations with Europe and the US - its temporary export controls in April last year, for example, heavily disrupted the European automobile industry. While the EU has policies to reduce this dependence on China, developing new mining projects is a costly and time-consuming process, and it is very likely that there will not be a diversification in the near future. China is also the dominant force in global production of solar panels and wind turbines, adding a further element of dependency. Lastly, nuclear power could aid Europe’s long-term move away from fossil fuels, but it cannot solve its immediate energy needs.

Conclusion

The EU’s relationship with Russia has reached a strategic turning point, with the plans to completely phase out the remaining Russian energy imports in the next two years. A continent which just a few years ago heavily relied on its commercial relationship with the Kremlin to fuel its economy, is now standing in solidarity with Ukraine and trying to deplete the Russian war machine, while at the same time diversifying its energy supplies. However, diversification is not straightforward. Even the meaning Brussels has applied to ‘diversification’ is questionable, stressing only reduced reliance on Russian imports. This does not account for the similar dependencies emerging on American LNG and Chinese renewable energy imports, which fail to adequately address the EU’s vulnerability to global supply shocks. Furthermore, while Europe is a global leader in green technology and decarbonisation is a key component of its plan to achieve energy security, accelerating its development will make European energy more and more reliant on Chinese rare earths imports, at a level much higher than the previous dependence on Russia. In this context, Europe should try not to put all of its eggs into one basket - pushing too strongly for green energy development, while not having alternative supply routes for critical minerals, reduces its leverage towards China, which may disrupt Europe’s economy much more than banning Russian energy. In the near future, EU policymakers should try to keep a balanced mix of energy sources - including LNG, wind and solar power, and in the long-term there should be a realistic strategy to develop new rare earths supply chains and diversify fossil fuel imports; this can be supplemented with more investments in nuclear energy.

In the very near future, Europe’s energy security hinges on the outcome of the Iran war. Prolonged military action in the Gulf could lead to a new global energy crisis as oil and gas prices spike. Europe’s current gas reserves are currently about a third below the average level for this time of the year, having been depleted by an unusually cold winter and it will be expensive to fill them if the current prices don’t recover to their initial level. If, in a worst case scenario, the Strait of Hormuz remains closed for several weeks or even months, Europe will find it difficult to go through the winter. The energy crisis could be exacerbated further by the likely global recession resulting from high energy prices. In an emergency scenario, Europe might have to relax its sanctions on Russia, although this would be a controversial choice, and likely done as a last resort, and through intermediaries. Imports of American LNG are likely to increase, along with emergency measures to preserve power, like substituting gas with coal in power plants.

The outcome of the war in Ukraine, while consequential, is not likely to overturn Europe’s approach to energy security. EU policymakers have said that a return to trade with Putin’s Russia would be a mistake. It could help Russia recover its losses and embolden it to restart its war. So, in any case, Europe will have to navigate a much different energy landscape compared to before 2022. In order to ensure itself against blackmail, the EU should balance its trading relationships with China, the US and smaller oil and gas producers, while accelerating the deployment of green technology and diversifying its supply of rare earth minerals - through seeking new trade partnerships, as well as developing its domestic capabilities, although the latter will take significant time and effort. Such a strategy, if successfully implemented, will leave Europe much less exposed to geopolitical pressure. The timeframe, however, will be long, and for now Europe’s energy security remains in a state of uncertainty.