[Salon] EUROPE'S LAST SUMMER BEFORE THE RUSSIAN WINTER



https://www.politico.eu/article/europe-braces-for-a-russian-winter/

July 15, 2022

EUROPE'S LAST SUMMER BEFORE THE RUSSIAN WINTER

Soak up the summer rays while you can — a full-blown Russian winter is heading toward Europe.

Even as fighting continues to rage in Ukraine, the war is already making itself felt across the Continent, in the form of rising food prices, fears of gas shortages and worries about the economy.

And with Russian President Vladimir Putin showing readiness to use food, fuel and fertilizers as weapons of war against Western democracies who are arming Ukraine and sanctioning Moscow, things could get rapidly worse.

“It was the severe Russian winters that stopped Napoleon,” said the political scientist Ivan Krastev. “It was the severe Russian winters that in 1941 stopped Hitler. Now [Putin’s] idea is to make the winter harsh within Europe.”

As the war drags on — or even escalates in ferocity — experts predict that European governments will come under pressure from poorer, hungrier, colder voters. 

Add to that a possible sharp influx of refugees from a global food crisis, heat waves desiccating swaths of Europe’s farmland, and the risk of new COVID infections and disrupted supply chains this winter — and it’s little wonder that some are asking how long Western governments will be able to maintain their unity and resolve.

Volunteers put together food parcels at the Bradford Central Foodbank | Oli Scarff/AFP via Getty Images

“You’re going to see much more pressure for Europeans to say, ‘Let’s stop the war now,’” said Krastev, who chairs the Centre for Liberal Strategies think tank.

A survey this spring commissioned by the European Parliament found that nearly 60 percent of EU citizens said they were not ready to face hikes in the cost of food or energy. Some 59 percent agreed that “European values such as freedom and democracy must be a priority, even if this impacts prices and the cost of living.” But the report noted that support was highest among the more economically secure — and dropped below 50 percent among those who sometimes or regularly had difficulty paying the bills.

“You could end up with a lot of people disadvantaged in a serious way plus a certain amount of people on the streets protesting against job losses or chucking stones at politicians in gilet jaune [and] Extinction Rebellion-type protests,” said Tim Benton, director of the society and environment program at Chatham House.

The question is, to what extent are European governments ready to withstand a Russian economic assault?

‘Energy as a weapon’

As a huge exporter of food, fertilizers, oil and gas, Russia enjoys significant leverage over the European economy. That will only grow more pronounced, as temperatures drop and freezing households start to compete with manufacturers for natural gas.

Already, 12 EU countries have suffered complete or partial shutoffs from Russian gas. And this week, Russia shut down the Nord Stream 1 pipeline that feeds gas to Germany — as well as France, Italy and Austria — frustrating European efforts to build up stocks for the winter. 

The scheduled maintenance is supposed to last until July 21, but there’s mounting concern in national capitals that Moscow will find an excuse to extend the shutdown, perhaps indefinitely.

Robert Habeck, Germany’s economy minister, warned this month of a “political nightmare” that would threaten social cohesion if gas supplies are so scarce that they need to be rationed by the government. And on Sunday, France’s Economy Minister Bruno Le Maire said he believes that a “total cutoff of Russian gas” is “the most likely option.”

In Germany, politicians have readied emergency gas contingency plans that could dictate which companies should be cut off first. Local authorities are dimming streetlights and reducing temperatures in open-air swimming pools. Berlin is also considering an eye-watering €9 billion bailout of utility giant Uniper, Germany’s biggest gas importer.

Some EU politicians have struck a defiant note. “Putin uses energy as a weapon, and he will try to divide us, unsuccessfully so,” said the bloc’s Internal Market Commissioner Thierry Breton.

The EU has passed new rules, urging countries to load up on gas in time for winter, with reserves currently at 62 percent. But with alternative pipelines already full and liquefied natural gas imports crimped by limited port facilities, there’s little capacity for making up a potential shortfall — meaning governments will be forced to ask consumers to bring down demand or make drastic sectoral cuts.

In the event of a Russian cutoff, politicians would likely start by cutting off nonessential sectors such as the automotive sector, followed by other industries, then social services and finally residential heating, according to Simone Tagliapietra, a senior energy analyst at the Bruegel think tank. “This will be a very difficult political triage,” he says. “I think it would be very challenging for our governments.”

In Ukraine, harvesting near a crater in Kramatosk and burnt fields in the east of the country. In Hungary, a farmer in Pusztamarot | Miguel Medina and Janos Kummer/Getty Images

Those who will be in the toughest spot to pay their energy bills will inevitably be the “most vulnerable,” said Kieran Pradeep, co-coordinator at the Right to Energy coalition advocacy group. But many middle-class Europeans could also be pushed into energy poverty for the first time. 

At best, spending a disproportionate amount of income on utilities can cause severe “mental anguish,” Pradeep said. But it can also lead to people self-disconnecting from meters in some countries like the U.K. — and putting themselves in danger of freezing to death.

The risk that Putin will shut off the gas completely to the EU is “pretty likely,” according to Alexander Gabuev, a senior fellow at the Carnegie think tank. “[Putin’s] hope is that there will be more political protests, and then unity around support for Ukraine will disintegrate.”

‘Putin’s hunger plan’

On the food front, prices rose sharply following Russia’s blockade of Ukraine — a major supplier of grain and sunflower oil. Global food prices have been coming down slightly but are still extremely high compared with this time last year. And the worst could be yet to come if the price of fertilizers — linked to the cost of natural gas — stays sky-high in coming seasons.

Global agricultural prices have risen by 30 percent since Russia’s invasion, with inflation of the price of food and non-alcoholic drinks running at 10 percent in May, according to an EU market report. Higher fertilizer costs mean farmers around the world will use them more sparingly, and will therefore generate lower yields, potentially escalating an affordability crisis into a full-blown supply emergency. 

A protest against rising oil prices blocks off the exit of Ferrybridge service station in Leeds, England | Cameron Smith/Getty Images

Food prices are not expected to drop from their current high levels until December 2023, said Beata Javorcik, chief economist of the European Bank for Reconstruction and Development.

As a net food exporter, Europe is better insulated than poorer countries in Africa and the Middle East, where governments are more dependent on Russian and Ukrainian imports of staples like wheat, and consumers spend a far higher proportion of their salaries on staying fed.

“Certainly I wouldn’t forecast or argue that we’re going to see starvation [in Europe] but certainly prices could go even higher,” said John Baffes, a senior economist at the World Bank.

Globally, the food system is teetering on a knife-edge: Recent U.N. numbers showthat the number of people suffering from hunger increased by 50 million in 2021 compared with 2020, and that number will only grow due to the outbreak of war between two breadbaskets.  

Left, a gas compressor station in Ihtiman, Bulgaria | Nicolay Doychinov and Christophe Verhaegen/AFP via Getty Images

Some 17 percent of the world’s traded calories have been blocked because of export controls placed by fearful or opportunistic governments, said the EBRD’s Javorcik. If Russia follows suit and imposes a strict export ban on wheat in a year when it’s expecting a bumper harvest, that could worsen things considerably. According to some reports, Russia has deliberately destroyed fields of wheat in Ukraine this month as the harvest gets underway.

The worst-case scenario from a European perspective is if the food crisis triggers a fresh wave of mass migration, putting further pressure on political systems. Analysts, including the head of the World Food Programme, David Beasley, have drawn parallels between now and the riots over bread prices that preceded the Arab Spring in 2011. 

“Putin’s hunger plan is … meant to generate refugees from North Africa and the Middle East, areas usually fed by Ukraine,” the Yale historian Timothy Snyder wroteearlier this month. “This would generate instability in the EU.”

‘Multi-year crisis’

The Russian pressure couldn’t come at a worse time for the Continent. 

Europe is still reeling from the effects of the pandemic, when economic shutdowns wreaked havoc on the global economy. After two years of turmoil, the bounceback — to the extent there was one — has been nipped in the bud by supply-chain disruptions and concerns over the effects of the war. Another dampening effect is expected from the European Central Bank, which is preparing to raise interest rates next week — the first hike in more than a decade — to combat the eurozone’s raging inflation.

Signs of an economic slowdown are already apparent, with manufacturing output contracting for the first time in two years in June, and the service sector also slowing down, according to a leading business survey. “Eurozone economic growth is showing signs of faltering as the tailwind of pent-up demand from the pandemic is already fading,” economist Chris Williamson at S&P Global said.

For now, the European Commission insists the EU can avoid a recession, but it acknowledges that the growth is fragile and largely driven by inertia from 2021. A total gas shutoff would likely push the bloc into a recession, the Commission acknowledges. 

Altogether, Russia’s food and fuel offensive spells tough times ahead for politicians looking to hold the line on Ukraine, even as their challengers blame them for the suffering of their constituents.

Even before inflation and shortages started to bite, a poll across 10 countries by the European Council on Foreign Relations earlier this month suggested Europeans are divided over the preferred course of action, with 35 percent favoring peace as soon as possible even at the cost of Ukrainian concessions, and 22 percent believing that Russia’s defeat is the only path to peace.

The challenge for those seeking to maintain the present course will be to do what they can to blunt Putin’s pressure, while explaining to voters that there’s only so much they can do.

As a net food exporter, Europe is better insulated than poorer countries in Africa and the Middle East | Jim Watson/AFP via Getty Images

The European Commission has stressed the importance of saving energy “in all aspects of daily life,” but points out that the onus is on national governments to communicate this to their citizens.

“You won’t hear the European Commission telling people how long to spend in the shower, that would be a challenge for our enforcement,” said EU spokesperson Tim McPhie this week.

For many Europeans, cutting back on consumption won’t be a choice, as rising prices force them to choose between food and heating their homes. In Belgium, utility bills rose among the fastest in the EU — by 65.5 percent — compared with May 2021. Partly as a result of this, people are resorting to food banks at “unprecedented” levels, said Jozef Mottar, a coordinator of the Belgian Federation of Foodbanks. 

Javorcik from the EBRD said it’s imperative for policymakers to “cushion the blow for the least well off,” rather than simply firing out blanket measures that help everyone equally — like slashing VAT on food or fuel — because that could pile on more government debt in the long run.

That means few will get through the coming months and years without making some sort of alterations to their lifestyles. “The big issue, whether for food or for fuel, in the European sphere is that no one is putting enough thought into demand-side changes,” or adjustments in consumer behavior, said Tim Benton of Chatham House, adding that he expected this to be a “multi-year crisis.”

If Putin’s assault is to be endured, Europeans will likely have to learn to travel less, eat more frugally and put on an extra sweater instead of twiddling with the thermostat. The Russian winter, when it comes, is likely to last.



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