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When the dust settles, how Africa will help the EU energy crisis

July 22, 2022 at 5:27 pm

A view from a Shell gas station in Moscow, Russia on March 08, 2022. [Pavel Pavlov – Anadolu Agency]

Europe is grappling with an unprecedented energy crisis. And its options are few and far between. However, Africa has emerged as, perhaps, the most viable alternative source of energy. But just how did Europe get here? It started with the crippling economic sanctions it imposed on Russia over Moscow’s military adventure in Ukraine. Hugely dependent on Russian oil and gas, this quickly began to look like a bad miscalculation. In retaliation, Russia has slowly been turning off the taps, in addition to imposing its own conditions for the resumption of supplies. Europe has been left staring at potential economic ruin. Walking a tight rope, it has opted to explore alternative energy supply options. So Africa, which has some of the world’s biggest suppliers of crude, has the potential to come to the rescue. Now, Western capitals are moving in for a quick kill to save themselves from economic ruin, but at what cost for Africa?

According to Bloomberg’s Energy Policies Expert, Javier Blas, “It’s a falling chain of energy dominoes.”  He says, when the dust settles, the total bill for rescuing the European energy market this winter will easily top $200 billion. This figure is admittedly a rough estimate by the International Energy Agency.

In February, London announced a multi-billion-pound bailout to cushion the impact of a 54 per cent increase in the country’s retail energy cap. Currently, the nearly 70 per cent increase is set to be announced in early August. These are the figures of the government energy regulation institute, OFGEM.

READ: As the West commits energy suicide in its green transition, it exploits the Gulf 

Germany has found itself in a similar situation. Russian President, Vladimir Putin, has cut gas supply to Germany by about 60 per cent. Uniper (Frankfurt-based energy company) is losing about 30 million Euros every day from having to buy the same gas in the spot market, Blas added in his report.

One of the biggest investment banking companies, Goldman Sachs reports that European households will have to pay 470 Euros per month for electricity and gas, up 290 per cent from the typical cost in mid-2020. 

After the Ukraine war started, European gas prices rocketed to all-time highs on strong winter demand and simmering geopolitical tensions between the key supplier, Russia, and consumer nations.

Europe’s gas price jumped nearly 20 per cent, to hit 175 Euros per megawatt hour.  The European economy will start contracting over the course of the second half of 2022, with the recession continuing until the summer of 2023, with a total decline of 1.7 per cent of GDP.

Russian oil - Cartoon [Sabaaneh/Middle East Monitor]

Russian oil – Cartoon [Sabaaneh/Middle East Monitor]

European countries that are dependent on Russian gas are racing to find alternative supplies. European Commission President, Ursula von der Leyen, signed a supply deal with Azerbaijan last Monday. According to Financial Times, this deal will increase deliveries to Europe by 48 per cent this year, and aims to double them by 2025. But Azeri imports make up only a sliver of the EU’s total. Of course, the country in the Caucasus is one of several, including Africa being courted by the EU as it tries to secure alternatives to Russian supplies.

Meanwhile, Europe and North African nations can significantly reduce CO2-equivalent emissions without delaying the energy transition and greatly benefit from new revenue streams to reinvest in clean energy sources.

Last year, during COP26, the governments of South Africa, France, Germany, the United Kingdom and the United States of America, along with the European Union, announced a new ambitious, long-term Just Energy Transition Partnership to support South Africa’s decarbonisation efforts.

Today, for Africa’s biggest gas energy project, Nigeria and Morocco Gas Pipeline, Nigerian President has been calling on Europe to help fund $25 billion for this gas pipeline by highlighting its potential to solve Europe’s energy crisis.

This pipeline is crescent shaped, including 11 African nations. It is called the Golden Crescent. It starts from Nigeria through Ghana, Guinea, Senegal, Mauritania and ends up in Morocco, Africa’s Europe border country. Financing this project will be a powerful saviour for European Energy security.

READ: The Middle East can help resolve Europe’s energy crisis with green energy investments

Italy is also on the cusp of boosting supplies from Algeria, with the Italian energy company, Eni, and France’s Total Energies. Last week, a deal with Algeria’s Sonatrach for a new $4bn gas development project was signed, which will eventually bring new supplies on stream.

In Africa, the regional experts point out the danger for Africa from European corporations of large-scale oil and gas explorations. Looking back at past experiences, there are clear indications of what Africa must do to protect communities and the environment.

Related with this, Africa needs to up its game. All oil and gas producing countries, as well as those with untapped reserves must clear the way for investment. By attracting green investment, Africa will surely achieve its socio-economic developmental goals. Furthermore, Africa can partner with those countries where there are significant demands.

To sum up, it would be strategically more prudent to partner with countries that have demand for oil and gas more than to partner with countries that are already oil and gas producers. With its vast energy resources, Africa’s oil and gas producers are well positioned to play a mediating role in this global conflict, instead of choosing to become proxies.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.