The Government faces a growing clamour from industry and the public to set out how it would deal with the rationing of gas and oil if Russian supplies in Europe are cut because of Vladimir Putin’s war on Ukraine. The risk is real and rising. Now is the time to put contingencies in place to secure the supply of food, medicine and electricity and keep vital health services running.
This is a daunting task, necessitating tough trade-offs and a clear-eyed assessment of Ireland’s many vulnerabilities. More than 70 per cent of the energy we use is imported, including all our oil and three-quarters of the natural gas supply, delivered via UK interconnection. The fact that UK gas comes from its own North Sea production and Norway may offer some protection. But a Russian shutdown would precipitate a crisis, spurring European demands for alternative supplies with inevitable price impacts.
If Norwegian gas goes elsewhere a British crunch would put supply agreements to the test, including the principle that Irish interconnector flows “would be curtailed equally” with any UK grid restrictions. One argument suggests UK storage could mitigate some loss of Russian supply, initially at least. Another says Britain might lean on its role as supplier to Ireland in any energy row with the EU, an unwelcome prospect.
The latest wave of anxiety follows moves by Gazprom, the Russian energy giant, to cut gas flow into Germany via the Nord Stream 1 pipeline to 20 per cent of capacity. Gazprom blamed technical problems, an argument the German company rejected as “politically motivated”. The mid-summer manoeuvre spurred concern that Moscow might sever gas supply for war leverage just as Europe tries to boost winter storage. Brussels warned EU member states that a total shutdown was possible at any time. Member states were told to cut consumption by 15 per cent, yet there were exemptions for Ireland and fellow island states Cyprus and Malta because of the lack of connectivity to the European grid.
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There is small comfort in that. Although Ireland has a low direct import dependency on Russia, there is no protection from accelerating global prices. The surge in the price of electricity, heating and motor fuel pushed annual energy inflation to 40.7 per cent in May in OECD countries. Such trends are all too familiar here in Ireland.
Economist Seamus Coffey has noted how the monthly cost of net energy imports rose to some €1 billion after the Russian invasion from €400 million before it – and prices pre-war were already advancing sharply in the rebound after Covid. The lag in passing on wholesale prices means the full impact is still to be borne, so the Government will face increasing pressure to lessen the pain. Big challenges indeed.