Europe’s Hunger for Gas Leaves Poor Countries High and Dry

Almost one year after Russian forces invaded Ukraine, Moscow’s natural gas exports to Europe have declined by well over half due to sabotage of the Nord Stream pipelines, lower European purchases, and Moscow’s throttling of deliveries in retaliation for Western support of Ukraine. Natural gas is a key energy source for home and industrial heating, and it serves as a feedstock for chemical production. This makes it critical for the manufacture of fertilizer, cement, steel, glass, and many other products. It is also widely used to generate electricity—gas-fired power plants account for 34 percent of electricity generation in Europe in 2021 (compared to 38 percent in the United States).

In response to the loss of Russian supply, European countries have binged on every available source of natural gas, amassing large stockpiles. With supplies by pipeline from Russia down sharply, Europe shifted much of its demand to liquefied natural gas (LNG) transported by ships from around the world. As a result, by the middle of 2022—the peak of the gas storage filling season—the global price of LNG had increased by 1,900 percent from a low during the pandemic two years prior.

Although the price spike was damaging for European industry, it was absolutely devastating for hundreds of millions of people in poor countries. India and Brazil have not been able to afford enough natural gas to fully power their economies and have cut back on imports. Bangladesh and Pakistan, together home to almost half a billion people, have been unable to meet industrial consumption and power generation needs—and suffered blackouts. LNG suppliers have preferred to shift trade to richer countries paying higher prices. Cargoes destined for poor countries have been diverted to Europe or simply not delivered at all despite contractual agreements signed months or years ago.

Blackouts are no mere inconvenience. In a country like Pakistan, where annual heat waves can reach more than 45 degrees Celsius (113 degrees Fahrenheit) and which is struggling to recover from floods that left one-third of the country under water, power is a matter of life and death. Every day for the past several months, businesses, homes, schools, and hospitals have suffered without electricity for several hours because the government cannot import enough natural gas to fuel the country’s power plants, a quarter of which are gas-fired. According to the Pakistani government, major LNG suppliers have not fulfilled their contracts, preferring to pay the penalty for non-delivery and sending supplies to richer countries for higher profits.

Europe’s rush to secure its own energy security lays bare a hypocrisy that hasn’t gone unnoticed by leaders in Africa, South Asia, and elsewhere.

In July 2022, a Pakistani government tender for 72 shipments of LNG worth $1 billion attracted no supplier bids at all. A delay in cash payments from an International Monetary Fund program has left Pakistan struggling to buy gas on spot markets, forcing workers in factories, restaurants, and other businesses to work fewer hours and for less pay. Government departments have been ordered to reduce electricity consumption by 30 percent, and half of the country’s street lights have been turned off.

There are no signs that the situation will improve for poor countries. Even though a mild winter in much of the Northern Hemisphere has led to receding gas prices, there are already concerns about shortages next year. The sabotaged Nord Stream pipelines will likely remain inoperable in 2023, making European nations even more reliant on LNG to refill critical storage facilities this summer. In addition, European Union members are already signaling strong interest in signing longer-term contracts to gobble up any new supplies of gas that may come online in the next few years. Germany and other European countries are investing in additional floating storage and regasification units over the next several years, enabling them to absorb even more LNG. Meanwhile, Australia—one of the largest LNG exporters in the world—is worried about potential shortages and is taking measures to keep more of its gas supply at home.

To bring their populations out of poverty—and to be resilient to droughts, floods, storms, and heat waves—poor countries need the same kind of reliable, plentiful energy resources rich countries enjoy. Many of these countries have invested in renewables and are planning for even more. But gas will still be needed for energy security in the medium term, just as in rich countries. Beyond electricity generation, gas is indispensable for industrial production, such as making fertilizer to raise agricultural yields and producing concrete and steel for resilient buildings and any kind of infrastructure. Gas is also necessary for heating and cooking—and as backup power for wind and solar energy, which remains dependent on sunlight and weather.

Europe’s rush to secure its own energy security lays bare a hypocrisy that hasn’t gone unnoticed by leaders in Africa, South Asia, and elsewhere. Several European countries have pledged to end all public support for international fossil fuel projects. These European countries insist that poor countries must not be provided with financing to build downstream gas infrastructure that could provide reliable power and economic growth. At the same time, nothing has stopped U.S.- and EU-based multinationals from using their own capital to develop poor countries’ gas reserves for export to richer nations in East Asia and Europe.

The bottom line of this hypocrisy should be clear: EU countries continue to push an insidious form of green colonialism that imposes strict restrictions on the financial support that might help poor countries increase vital energy supplies to bring their populations out of poverty and misery while giving themselves maximum flexibility to use fossil fuels for their own energy security. (Just ask Germany about its rising emissions due to skyrocketing use of coal.) This means that poor countries must go without adequate fuel for their homes, schools, hospitals, and factories while rich countries congratulate themselves on their gas stockpiles and multiyear purchase agreements with producers around the world. European policies to block the financing of gas projects neither alleviate poverty nor address climate change.

This isn’t to chastise European governments for utilizing natural gas as a bridge fuel in the energy transition—which makes eminent sense, especially when it is replacing coal or backing up renewables. But they should recognize, as they clearly do where their own populations are concerned, that energy security and reliability are just as paramount for poorer countries in Africa and Asia as in their own. Rather than obsess over the meager emissions of basic infrastructure investments in Africa (which is rich in natural gas deposits), wealthy countries should adopt a strategy that enables poor countries to grow their economies—which, by the way, is also by far the most important way they can adapt to climate change.

Countries like Pakistan and Bangladesh have been priced out of the market and left to pray that Europe has another warm winter next year. European governments will likely refuse to help poor countries pay for expensive gas because this would count as a fossil fuel subsidy, even as they have no compunction about shielding their own consumers from expensive gas and gasoline. But European countries can probably do more to deploy fuel-saving renewables and electrify heating. And they should consider more emergency extensions to keep existing nuclear power plants running instead of shuttering them in the midst of a global energy crisis. Belgium, for example, is on track to use more natural gas because it is shutting down its nuclear plants, and it will be poor countries paying the price.

Most importantly, European countries should stop objecting to poor countries’ downstream gas projects that are vital to energy security, economic growth, poverty alleviation, and healthier livelihoods.