Harriett BALDWIN (United Kingdom) - DRAFT GENERAL REPORT
17 August 2023
Russia’s aggression against Ukraine and its willingness to deploy energy as a geopolitical weapon have destroyed its reliability as an energy supplier. A mass European exodus from Russian oil and gas markets has occurred. It is very unlikely that these energy markets will ever return to the status quo ante. Europe has collectively learned a hard lesson about the risks of doing business with Russia and is unlikely to repeat that mistake anytime soon.
Sanctions and embargoes on Russia, however, have not ended Russia’s war against Ukraine, and the damage to Russia’s economy has so far been limited. This could change as sanctions begin to bite and as bottlenecks begin to impede its defence and energy industries and the technological modernisation of the Russian economy more generally. Meanwhile, the energy price shock has accelerated the energy transition in Allied countries.
These changes are unfolding spontaneously as markets adjust to high carbon prices and emerging risks, but they are also a product of high-level policy decisions. The Biden Administration, for example, has set aside USD 370 billion to promote a transition to sustainable energy, while the European Union and a range of European countries are increasing non-carbon energy use for environmental, economic and strategic reasons. Subsidies to support this transition, however, have led to transatlantic trade tensions that should be resolved. There are other trade challenges linked to undertaking the energy transition. For example, China has explored the idea of limiting access to rare earth minerals and related technologies needed for sustainable electricity generation. Russia itself plays a key role in global markets for copper, platinum, nickel and a range of other commodities used in sustainable energy production. Western sanctions on Russia have only driven up the price of these commodities and opened the door for China to access sanctioned Russian metals and minerals.
These developments are driving governments and the private sector to diversify the supply base for these critical inputs. The defence and high technology sectors also require these minerals, and this could precipitate inter-sectoral tensions driven by the limited supply of these critical inputs.
This draft report concludes that the energy crisis has forged new linkages among national security, energy security, climate security and economic security in Allied thinking. These ostensibly different realms of economic and political activity are, in fact, highly interrelated. Policy makers need to ensure that policies in these areas are mutually reinforcing. Allies and partners should strive to deepen collaboration in the realm of sustainable energy development because progress here will reinforce collective security and contribute to global environmental health. Policy makers must also strike balances between easing price conditions for consumers and industries while maintaining viable market signals to encourage rational responses to underlying scarcity conditions including a society-wide embrace of conservation and a hastening of the transition to renewable and sustainable energies.
The quest for greater energy security and the fight against climate change will create new opportunities for transatlantic cooperation and solidarity. Any outstanding trade tensions related to the development and adoption of sustainable energy technologies should be quickly resolved and negotiators should focus on identifying ways to foster closer transatlantic cooperation engaging key partners aiming to develop these technologies, establish common standards for their use and commercialisation, and reinforce safe, dependable and strategically valuable energy supply chains.
