The Impact of the Ukraine Conflict on Norwegian Energy Dynamics

"Norway's role as an energy supplier to the European market was significantly strengthened by the war in Ukraine, but at the same time, one must expect that the green transition that Europe is heavily investing in could at some point undermine Norway's role as a supplier of fossil fuels," says Research Professor Jakub Godzimirski.

He is the author of the NUPI report "The Ukraine War, the New Geopolitics of Energy, and Norway". Here, he has examined how Russia's invasion of Ukraine in 2022 has changed the dynamics in the energy field both regionally and globally. He has also examined how these changes affect Norway. One of the report´s conclusions is that since the Ukraine war has accelerated Europe's green energy ambitions, Norway should prepare for this by implementing energy policies that make this transition less painful.

But while the EU is eager to expedite the transition to green energy, some factors indicate things may take a different turn. Sanctions against oil and gas from Russia, for example, have led to the UK slowing down the transition, while Germany has opened coal-fired power plants.

Godzimirski's main conclusion is therefore that the green transition will definitely happen, but it will occur at a slower pace than previously assumed, thereby giving Norway more time to adapt.

Why Norwegian gas is so important now

Before the war in Ukraine, Norway, along with Russia, was among the most important energy suppliers to Europe. 41.1 percent of the gas and 26.6 percent of the oil imported by the EU came from Russia. Correspondingly, Norwegian gas accounted for 16.2 percent, and Norwegian oil for 7 percent.

When the war broke out in February 2022, all European countries aimed to become independent of energy imports from Russia. Russia also introduced measures resulting in limited access to Russian gas and oil in Europe. When Russian energy supplies were restricted, it meant that other actors, including Norway, had to fill this energy gap.

This makes Norwegian energy very important for the rest of Europe.

"Firstly, Europe needs all the gas it can get - and Norway has a lot of it," says Godzimirski, continuing:

"Secondly, Norway is close to the rest of Europe, which means that transport-related costs and risks are very limited. Thirdly, Norway is allied with most energy customers in Europe through NATO. And fourthly, through the EEA agreement, Norway is part of the EU's regulatory regime, which defines rules for energy cooperation. But due to limitations related to resources and available transport infrastructure, Norway also has few opportunities to increase its production and exports of gas to Europe." 

A series of energy consequences of the Ukraine war

When it comes to energy, it's not just the wallets of Europeans that are affected by the war in Ukraine.

"It has resulted in Russia being forced to leave the European market and having to find other markets for its energy supplies. In addition, the war has led the EU to invest even more in the green transition, both to become less dependent on external energy suppliers and to address the climate challenge. The war has also revealed the importance of critical energy infrastructure and the increased need to protect this infrastructure both in peacetime and during a potential conflict," explains Godzimirski.

In hindsight, many politicians in Europe would probably have chosen differently when they initially initiated energy cooperation with Russia. So why did they do it in the first place?

"There were forces in Europe, such as in Germany, who believed that building strong economic ties with Russia would create a situation of mutual dependence," says the NUPI researcher.

The goal was a win-win situation.

"This was supposed to give Europe access to relatively cheap energy from Russia and also have a positive effect on political relations between the EU and Russia because it was believed that it would make Russia less interested in causing problems for their most important economic partner and undermine Russia's ability to earn a lot of money.”

This did not turn out as planned.

Energy revenues were used to modernize the military.

"Russia chose to go to war against its neighbor and apparently was willing to accept the economic and political losses this would entail.”

In recent years, the energy sector has contributed up to 50 percent of the revenues to the Russian state.

"These revenues were used, among other things, to finance the modernization of Russia's armed forces, which were sent across the border to Ukraine on February 24, 2022," explains Godzimirski, concluding:

"When the war became a reality in 2022, many in Europe understood that becoming dependent on Russia when it comes to energy supply was not very wise."