Energy Policy Between War and Peace

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Guaranteeing Europe’s energy supply has become a security challenge since the start of Russia’s full-scale war against Ukraine. The dependence of many EU member states, especially Germany, on cheap Russian gas has proven to be a major strategic mistake. With the US recently turning away from Europe under President Donald Trump, the import of US liquefied natural gas (LNG) is also becoming a risk that is difficult to calculate. The considerable price fluctuations on the international LNG market are another reason to reconsider natural gas imports. 

The solution to Europe’s energy security lies in domestic energy sources such as solar and wind power and the creation of an integrated European energy market. The electrification of mobility, heat supply and numerous industrial processes offers the opportunity for greater independence as gas becomes less important for energy supply. However, precautions must also be taken to secure the supply of strategic and critical raw materials and to ensure the protection of critical energy infrastructure in a national and European context. 

This paper aims to give impetus to the current debate on the revision of the European Energy Security Strategy from 2014, which is being driven forward by the European Commission and the Polish EU Council Presidency. It is in Germany’s national interest to participate constructively in this process, taking into account the interests of its European neighbors. The new EU Energy Security Strategy must consider both the geopolitical context and the changed threat situation for critical energy infrastructure as well as the necessary value chains for a more sovereign energy supply. In future, Europe must define energy security systemically, and not just from the supply side, in order to reflect new threat scenarios for energy infrastructure and the supply chains for renewable energy production facilities. 

De-risking as a guideline in energy policy

European and, in particular, German energy policy must face up to the new geopolitical realities. Before Russia invaded Ukraine, the EU relied on imports for 62.5 percent of its energy consumption, and was particularly dependent on imports for oil (97.7 percent) and gas (97.6 percent). The cost of fossil fuel imports amounted to €448.8 billion in 2023, a significant reduction from €685.2 billion in 2022, thanks to the energy transition, reduced demand, and price stabilization.

In 2021, Germany covered 52 percent of its natural gas demand through imports of relatively cheap pipeline gas from Russia – despite criticism from neighboring countries and allies such as Poland and the US. Until mid-June 2022, around 1.7 TWh were still being supplied daily. This only came to an end when Russia halted deliveries via the Nord Stream 1 pipeline. The importance of natural gas for industry, especially for the generation of process heat, but also for heating in private households, had risen to a relatively high level over the years. There was also a high dependency on Russia for oil and coal imports, at 30 and 50 percent, respectively. This made Germany extremely vulnerable to the weaponization of energy supplies. The German decision to build a second Nord Stream pipeline to provide cheap energy for key German sectors had already led to alienation from some of its most important European partners in 2015. The speed with which the German federal government was able to make Germany independent of Russian gas after the start of the Russian war of aggression against Ukraine is therefore all the more remarkable. 

From a European foreign and security policy perspective, the current considerations of individual US investors to include Nord Stream 2 - and thus the purchase of Russian natural gas - in negotiations on ending the war in Ukraine are worrying. Instead, the EU member states must pursue a consistent de-risking approach to energy supply and become completely independent of Russian gas. By decoupling from the Russian electricity grid in February 2025, the Baltic states have taken account of the risks to their energy supply and gained additional sovereignty. 

Although Germany has quickly become independent of Russian pipeline gas, it continues to purchase a small proportion of its natural gas demand in the form of LNG from Russian sources via the integrated European gas network. The Netherlands, Belgium, and France also continue to import liquefied natural gas from Russia. Overall, Russian LNG deliveries accounted for more than 20 percent of LNG imports into the EU in 2024. In landlocked Central European countries without access to the sea, such as Hungary and Slovakia, alternative ways of supplying gas via other pipelines or LNG are challenging and costly, and long-term supply contracts tie these countries to natural gas imports from Russia. A great deal of political will is required here to change their energy supply. Nevertheless, further risk minimization is required - even if Russia has so far refrained from further weaponizing LNG supplies to Europe.

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In 2024, Germany covered over 80 percent of the gap created by the end of Russian natural gas supplies via pipelines with LNG from the US, which corresponded to 13.5 percent of German natural gas demand. Overall, the EU’s dependence on the US has grown even stronger. In 2023, the US was the EU’s largest LNG supplier with a share of 50 percent, which corresponds to a tripling compared to 2021. The Trump administration’s pressure on the EU to import even more American LNG can be explained by US aspirations for dominance on energy markets. US support for a “deal” with Russia regarding the Nord Stream 2 pipeline also reflects the desire to control the natural gas market. From a European perspective, however, an even greater dependence on LNG supplies from the US entails numerous uncertainties regarding the reliability of contracts and commitments.

Stricter EU climate policy also implies uncertainty about future fossil fuel imports: the EU Methane Regulation stipulates that from January 2027, new import contracts for oil, gas, and coal can only be concluded if the foreign suppliers fulfill the same monitoring, reporting, and verification obligations as EU producers. This will not be very realistic in the case of US imports, given that Trump wants to repeal the regulation of methane leaks that occur during the production and transportation of LNG. As Europe must fear that Trump will use European dependencies as political and economic leverage, in addition to de-risking endeavors, Germany and other EU members should strive for a general reduction in dependencies on imported fossil fuels in the medium to long term.

The EU Commission’s Action Plan for Affordable Energy from February 2025 is an initial response to these challenges. It foresees the extensive electrification of energy systems and industry, among other things. At the same time, it aims to aggregate the remaining European demand for natural gas in order to negotiate better purchasing conditions. However, pooling demand is challenging because most gas contracts are concluded between private actors. Given this, European clients should only enter gas contracts with suppliers that comply with the EU Methane Regulation. The Action Plan also proposes promotional loans for direct investments in foreign export infrastructure to service European demand. Yet, this remains contested in terms of necessity as European demand has been declining since 2022 and existing policies project this trend will continue.

A European Energy Transition as an Element of Greater European Sovereignty

In view of the new foreign, geopolitical, and energy policy challenges, the EU should closely coordinate its strategies for the epochal shifts in security and defense policy (encapsulated in Germany by the term “Zeitenwende”) and the energy transition. In this regard, the EU Action Plan for Affordable Energy offers pioneering approaches for a European Energy Union. The central element of a European Energy Security Strategy is the improvement of energy sovereignty through the expansion of renewable energies and the gradual electrification of all sectors (buildings, transportation, industry). Moving away from fossil fuels would also make the EU independent of the price volatility of oil and gas markets. High natural gas prices are currently having a massive impact on electricity markets. Despite its relatively small share in the electricity mix, natural gas sets the price disproportionately often in the European merit order. The merit order ties electricity prices to the producer with the highest costs that is active on the market at a given time in order to meet demand. This means that comparatively expensive electricity from gas-fired power plants often sets the price for the electricity market as a whole. In 2022, for example, electricity prices were determined by natural gas almost two thirds of the time. This will remain the case for the foreseeable future.

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With a growing share of renewable energy in the electricity mix, industry and households can increasingly benefit from low-cost renewable energies, as the production cost of renewable electricity in Europe is two to four times cheaper than gas, coal, or nuclear power. System costs for grids, storage and flexibility solutions must still be added in order to make optimum use of volatile renewable energies. However, two central arguments justify these investments. First, the investments are a sensible and necessary resilience premium for achieving a more independent energy supply by 2045 (see also infobox). This means that energy security cannot be limited to security of supply, but requires a systemic approach, with a view to creating a resilient energy system. Second, the additional investments are offset over time by direct savings in fuel costs and are spread over a much larger amount of electricity. Revenues from the electricity market and grid fees offset 90 percent of costs. 

There is great potential for savings through closer European cooperation in energy policy. European market integration – alongside electricity storage (stationary batteries, pumped-storage power plants) and the increasingly battery-powered electric vehicle fleet - creates more flexibility on the electricity market, as they help balance out fluctuations in the generation of renewable electricity. An integrated energy market is therefore one of the prerequisites for a higher share of low-cost renewable energies in the energy mix. This could result in annual savings of around €40 billion for EU member states by 2030. The EU Action Plan for Affordable Energy outlines three elements for the implementation of the Energy Union: a fully integrated European energy market with a common transmission system and uniform regulation; a decarbonized energy system that also creates resilience vis-à-vis market volatility; and a transparent and competitive gas market.

The integration of the energy market and the physical interconnection of energy systems, especially through new interconnectors, also create redundancies and backup capacities. As climate change leads to more frequent and more severe storms and flooding that can damage energy infrastructure, additional capacity will become particularly important. In an energy system based primarily on renewables, European cooperation therefore offers opportunities for efficiency gains and energy security.

A new European Energy Security Strategy must also address issues that go beyond energy policy. Among them are the expansion and simplified application and processing of Important Projects of Common European Interest (IPCEI), close coordination on relevant industrial policy issues (for example, renewable energy supply chains), and viable solutions for the joint financing of infrastructure. 

Resilient Supply Chains and the Role of New Raw Materials Partnerships

The second pillar of a European Energy Security Strategy is the strengthening of strategic raw materials partnerships. The increasing dependence on raw materials, components and intermediate products from third countries for generation and storage capacities (wind turbines, solar panels, batteries, etc.) calls for de-risking and new foreign, trade, and industrial policy approaches. A European Energy 
Security Strategy must therefore integrate raw materials policy. 

China controls a large part of the upstream (mining) and downstream (refining and processing) supply chains that are necessary for renewable energies and clean tech. Relevant critical or medium-critical raw materials include, for instance, cobalt, lithium, and nickel, required for battery production, gallium for solar panels, and boron for wind turbines. 
Many of these raw materials are also essential for the defense industry and the aerospace sector. Chinese dominance is the result of decades of strategic investments and public subsidies that have secured competitive advantages for Chinese companies. Weaker environmental and labor standards also allow Chinese companies to push down prices internationally. It can be assumed that China is aiming to expand its dominant market position in key technologies. 

The EU has already taken important steps to secure the supply of critical raw materials; however, it must accelerate this effort. For example, the European Critical Raw Materials Act (CRMA) stipulates that certain proportions of raw materials production and processing should come from domestic production and that used materials should flow back into the raw materials cycle. This requires, among other things, the expansion of European mining capacities, which also means getting buy-in from the people and institutions in the affected regions to ensure the legitimacy of the projects. In addition, environmental, social, and transparency standards must be adhered to. 

The European Commission’s Clean Industrial Plan foresees the establishment of a center for critical raw materials, which could also constitute a step forward. This aims for the joint purchasing of raw materials, strategic stockpiling, monitoring of supply chains, and financing solutions for investments in upstream activities in the value chain. 

To reduce dependence on China in particular, the EU should expand raw materials partnerships in Africa, Latin America, and Asia and establish new ones. African countries are particularly important, as they have around 30 percent of the world’s mineral resources. To date, investment in the extraction of raw materials in African countries has been comparatively low, and here too, China dominates. This calls for special efforts in EU diplomacy, combined with realistic offers and programs for financing the extraction of raw materials. In view of the current geopolitical upheavals, Germany should work toward a joint EU approach to pool demand and create attractive purchasing conditions, but also to offer development policy support to partner countries. 

A systemic approach and a variety of national and European instruments are needed to strengthen energy security

Raw materials partnerships must be linked to clear economic incentives and provide opportunities for local value creation and raw materials processing in the partner countries. Mutually agreed market access could substantially improve the partners’ economic development opportunities. This makes the partnerships sustainable in the long term. More and more commodity-exporting countries are interested in reducing their own dependence on China and entering mutually beneficial partnerships in order to diversify their trade relations. However, it will be difficult for Germany and other EU countries to fulfill all desirable criteria - geopolitical and strategic advantages, industrial policy considerations, and social and environmental standards - in equal measure. This requires a balancing of interests.

Protection of Critical infrastructure As Key Element for Energy Security

A European Energy Security Strategy must improve the protection of critical energy infrastructure as its third pillar. Physical, cyber, and hybrid attacks on European energy infrastructure are on the rise. In addition, energy infrastructure is threatened by climate impacts, both by extreme weather events (i.e., strong winds, droughts, and floods) and by gradual climatic changes (“slow-onset events”). If several risks come to pass simultaneously - for example, if a cyber-attack on energy grids coincides with an extreme weather event - the negative effects are likely to be magnified. If climatic and non-climatic disruptions in the energy system interact, systemic risks can arise. This is defined as “complex hazards or threats that affect not only certain individual parts of an infrastructure system, but the entire system. In addition, they often endanger different infrastructure systems simultaneously, due to multi-causal interactions and cascading effects.”

Any newly constructed energy infrastructure must therefore be designed from the outset to be resilient (e.g., regarding climate damage); cyber security must also be increased. The EU should therefore pursue a “security by design” approach, which includes cyber security measures for smart grids and submarine cables, for example. The creation of redundancies and parallel systems is also necessary. In public procurement processes, including the armaments sector, the security of energy supply should be given even greater consideration. Stress tests should be carried out at the national level and their results should be brought together in a European context. This can contribute to a report on the current situation at the European level showing protection requirements for energy systems, which can serve as a basis for investment planning.

The rising sabotage of energy infrastructure requires new protection strategies. For example, the recent series of attacks damaging cables in the Baltic Sea is often associated with methods of hybrid warfare. Even if attribution is difficult in individual cases, Russia’s so-called shadow fleet (i.e., ships Russia uses to circumvent Western sanctions) is suspected of being responsible for some of the damage. However, Chinese ships are also suspected of deliberately damaging underwater infrastructure. Offshore wind capacities are particularly vulnerable due to their centralized control systems. The use of Chinese technology in wind turbines also harbors risks of espionage and sabotage.

In view of the risks to offshore infrastructure, the groundbreaking European-led NATO operation Baltic Sentry, which involves the deployment of the Baltic states to protect critical infrastructure, should serve as a model for other European approaches. At EU level, the stringent implementation by all member states of regulatory measures such as the European NIS 2 Directive for cyber security and the Critical Entities Resilience Directive (CER) is urgent. Efficient and effective cross-border cooperation agreements for the protection of critical infrastructure are still largely lacking and must be concluded quickly. In view of the importance of Europe’s offshore wind industry for security of supply, EU members must also strengthen industrial policy to eliminate financing bottlenecks and shorten approval procedures.

Outlook

In sum, a systemic approach and a variety of national and European instruments are necessary to strengthen energy security. The new German government must face up to the complex security and supply situation. The discussions on natural gas dependencies in recent years are only the beginning (and not the end) of a broader debate that considers the economic, industrial, and security policy dimensions of energy policy. An active shaping of the European Energy Security Strategy by Germany and close cross-border cooperation with European partners is urgently required.