EU Energy Deficit Surges Ahead of Ukraine Crisis

Following Russian attacks on several Ukrainian cities early Thursday morning, a major escalation of a crisis that has been building for months, European leaders have strongly condemned Russia’s aggression and threatened wide-ranging consequences. As a military intervention still seems unlikely, Western allies will most likely target Russia’s economic lifeblood, i.e. its oil and gas exports.

While a wide-ranging embargo of Russian energy exports would certainly hurt the country, which has been overly reliant on its natural resources for a long time, it wouldn’t be without consequences for the rest of Europe either. By cutting off oil and gas imports from Russia, the European Union would be cutting into its own flesh, as many EU members are heavily reliant on Russian fossil fuels.

As the following chart shows, the EU’s energy trade deficit was already near record highs at the end of 2021, as oil and gas prices surged back from their historical pandemic lows. Considering that the crude oil price averaged $74 in December, hit $100 following the Russian attack and will likely rise further as the crisis unfolds, it looks all but certain that the EU’s energy deficit will grow further, weighing heavily on the bloc’s economic growth prospects.