Energy diplomacy:

Introduction

It took the shock of war for Europeans to realize that the stable flow of affordable energy we have all become accustomed to is not a natural right. Plugging your phone into the wall socket to charge, filling up your car at the petrol station, the sight of power stations with their steam clouds: these are things most Europeans took for granted (even if the bills remind us that none of this comes for free). The collective effort to secure a sufficient supply of fossil fuels and electricity to meet the needs of households and industry was an abstract notion to most of us, all but invisible. This changed dramatically when Russia invaded Ukraine. Gas pipelines were shut off and even blown up. The flow of energy and power was no longer a given. Factories faced with huge energy bills feared closure. Securing affordable heating for homes rapidly became the number one political priority. It sparked a European energy panic, and a domestic cost-of-living crisis that plunged many into poverty.

Two years later the initial shock is behind us. But Europe cannot afford to forget that in the years and decades ahead, achieving energy security – whether through fossil fuels, nuclear or renewables – will require planning, diligence, diplomatic skill and a real sense of mission.

Powered from abroad

Observing a similar lack of appreciation for those whose labour provides the energy sources for our modern lives, George Orwell wrote in 1937, ‘In the metabolism of the Western world, the coal-miner is second only in importance to the man who ploughs the soil … on whose shoulders nearly everything that is not grimy is supported.’¹ Much has changed since then, but not our fundamental need for energy. New energy workers are now required: solar panel installers, wind turbine engineers and battery technicians working to green the energy on which Europe’s economy is based. These new skills and trades follow on from those of the nuclear engineers, dam constructors, oil rig workers and gas explorers who entered the field in the early post-war decades.

Furthermore, with the arrival of new technologies and resources, our energy supply has acquired new geographic origins. Since 1945, the European continent has no longer been able to power itself and has become a massive energy importer. This dependence on foreign supplies of fossil fuels (coal, oil and gas) created unprecedented strategic and economic vulnerabilities (which renewable resources will mitigate but not fully eradicate in the years ahead). Today, the 27 EU states produce only just above 40 per cent of their energy domestically.²

Enter the traders, politicians and diplomats, who secure our energy supply from abroad. Buyers, shippers, insurers, bankers and brokers obtain oil and gas from the Middle East, Africa, Russia and the Americas and deliver it via ports, pipelines and lorries to Europe. These businesses, however, do not act alone. The foreign endeavours of big European and US oil and gas companies are almost always backed by their home governments and administrations and, not least, by military power. Energy interests continue as ever to shape foreign policies. Energy diplomacy, the government-led effort to facilitate and guarantee the supply of affordable energy from abroad, is raison d’état.

No dreams of green autarky

Although Europe has weaned itself off cheap Russian gas, fossil fuels will continue to play a prominent role in the continent’s energy system for years to come. The flurry of new long-term supply deals with gas powers such as Qatar, Norway and the US, some of which reach beyond 2050, is no cause for surprise. Setting bold renewables targets is relatively easy for EU climate politicians. It makes them popular. But meeting those targets is much harder. It is then that constraints and costs make themselves felt, as well as disgruntled farmers, furious homeowners and squeezed businesses. Missionary climate zeal, however necessary to change habits, must not blind us to the reality that for technical or political reasons hydrocarbon dependency will be with us for longer than is desirable.

As this report will show, green energy technology comes with its own foreign dependencies, necessitating its own brand of energy diplomacy. How pervasive and problematic will those dependencies be? As always, the answer hinges on the political choices the continent makes in the coming years. Not least, it depends on policy efforts to attract investment and lure green energy industries to European shores. If successful, those efforts may leave Europe significantly less reliant on energy imports than it has been since 1945, which would be a major achievement. That said, industrial policy aimed at reshoring has its own limitations.

One such constraint results from the decisions made in the last 35 years to promote global markets and international trade. Much of European manufacturing moved to China, where production costs were lower and regulations less stringent. It made economic sense in a post-political world, in which major conflicts had supposedly been settled. However, reversing the strategy of outsourcing production is hard. Decades of industrial decline have altered Europe’s landscape. Where once factories stood, residential areas and shopping malls have been built. Attitudes have changed, too. Minerals and rare earths can, in principle, be found and mined in Europe. But will societies tolerate the return of mining activity and the costs it imposes on the landscape and local residents? Will voters stomach the construction of nuclear power plants, wind turbines, solar farms and hydrogen storage facilities on a massive scale?

Another constraint is price. Certainly, cheap is not always good. One of the benefits of local production with local supply chains is the greater resilience, security and control it brings. If this adds a premium to the price of energy, it may well be worth paying, especially when international supply chains are at risk of disruption by war or strategic blackmail. However, there are inevitably limitations and complicated trade-offs. Relying on foreign imports of energy will often prove the more expedient choice, particularly when multiple suppliers are available and outright dependency can be avoided. Carbon neutrality and energy autonomy do not always make easy bedfellows. Without affordable solar panels, heat pumps, batteries and EVs from abroad, getting voters to scrap their combustion engines and other polluting habits will take much longer.

The need for energy diplomacy

Energy diplomacy has returned to Europe, following its apparent demise after 1989, as the pursuit of energy is now increasingly shaped by great power competition. In a world of state actors playing hardball with energy, the deployment of a new energy diplomacy is sorely needed.

This effort can succeed only if it brings together the clout and resources of classic diplomacy (traditionally the domain of national governments) with the regulatory and financial means of Europe’s industrial and energy policy (a Brussels prerogative). While these two worlds have long been apart, geopolitical shifts and technological changes are welding them together. Consequently, for the first time ever, energy diplomacy is becoming a focus of collective EU action.

After some years of gas panic, political crisis management and improvisation, now is the moment to face up to long-term trends and tough trade-offs. Setting Europe on a path towards secure and affordable energy supplies is one of the Union’s crucial strategic missions. Achieving it requires more than just setting goals. There must be a productive interplay between all political actors, underpinned by broad public consent.

Chapter I of this report describes how modern energy diplomacy was born in the age of oil, only to be superseded by the post-Cold War conviction that energy security could be guaranteed by exporting market regulation (‘History’).

Chapter III charts the worldwide energy geographies and value chains that are rapidly shifting as wind and solar power take over from fossil fuels (‘Transition’).

Chapters III and IV then zoom in on Europe’s energy situation. The former looks at the geography and past choices that have shaped the continent’s layered landscape (‘Geography’), while the latter examines how longstanding energy policy tensions within the EU have been partly overcome in a newly found consensus favouring active industrial policy at home (‘Politics’).

Chapter V brings all the above aspects together in laying out the principles of a new energy diplomacy (‘Strategy’). It concludes that this will be hard work, demanding geopolitical vision and situational awareness, expertise and coordination, and in many circumstances strength and diplomatic tact.

The Conclusion to the full report observes how energy's return into the public debate – its renewed material and political visibility – makes the moment opportune for such an endeavour, and sets out that the fundamental reorientation on energy issues will require politicians, market actors and the broader public to come to terms with at least seven new strategic and political realities.

I. History: origins, demise and return of energy diplomacy

Introduction

Ever since coal was superseded by oil and Europe lost the ability to supply itself sufficiently with fuel, the continent has faced one pressing question: how to source energy from abroad affordably. Various solutions were found, from colonial imperialism in the first half of the twentieth century through Cold-War pipeline diplomacy with the Soviet Union to the export of the EU’s free-market regulations after 1989. These were answers that enabled Europe’s economy – its energy-intensive industries in particular – to survive and flourish despite it not being an energy power itself. However, none of the solutions Europe deployed in the last hundred years have stood the test of time. Technological development, geopolitical crises and historical events have, at moments, forced policymakers to radically rethink their assumptions and fashion new approaches to energy security. Europe is now at such a juncture once again. New answers are needed to Europe’s energy problem. However, to understand what they might be, we need to appreciate how we came to find ourselves in this position.

Imperial oil diplomacy and the turn to Soviet gas

The roots of Europe’s oil diplomacy go back to the early twentieth century. When Europe’s armies went to war in the summer of 1914, a new fuel – oil – had gained strategic dominance. Oil’s derivatives (petrol and diesel) powered the machines of war, including planes, submarines and tanks. Ensuring unchecked and cheap supplies of crude oil became a strategic imperative during the fighting but also once peace was restored. Oil was found in eastern Europe, in Romania and in Galicia, the region that straddles today’s Polish-Ukrainian border. This was supplemented by reserves in colonial possessions in the East Indies. But these resources were no match for the abundance of reserves in the US and Russia. Europe found itself heavily dependent on oil imports from the Western Hemisphere, particularly from the US, Mexico and Venezuela. With Germany out of the race, hobbled by its 1918 defeat, this strategic dependency ignited a period of intense competition between Britain and France to establish spheres of influence in the former Ottoman empire, today’s Middle East, where promising oil prospects beckoned. Italy also expanded its influence into Libya.^I-1 When there was little domestic oil to be found, Europeans turned automatically to their overseas empires to guarantee supplies, if necessary by extending their dominion to where oil was plentiful.

Securing affordable energy supplies became a matter of national security and a foreign policy goal, pursued in collaboration with gigantic national oil companies, many of which are household names today. In the interwar period, this small club of companies tapped Middle Eastern oil supplies through imperial concessions. British Petrol (BP), originally the Anglo-Iranian Oil Company (AIOC), Total (Compagnie française des pétroles), Royal Dutch Shell and others were simultaneously commercial and strategic actors, vital cogs in Europe’s economy, and in the vanguard of its imperial energy diplomacy. Together with Standard Oil in the US, this cartel of Western oil companies, sometimes referred to as the ‘Seven Sisters’, operated to safeguard European energy security and kept prices artificially low, which served the broader industrial interests of the West.^I-2

However, this cartel began to unravel from the late 1950s as Europe’s colonial empires came to an end and with the emergence of Arab nationalism. A series of events painfully exposed Western Europe’s oil predicament, including the 1956 Suez crisis and the 1973 Arab oil embargo. Britain, the leading Western power in the Middle East, was in decline and forced to step away from its role as guarantor of regional stability. Its responsibility for securing vital shipping lanes in the Gulf was gradually taken over by the US. In the postwar era Washington significantly grew its regional influence, including in Iran. Together with the UK it staged a coup d’état, helping the Shah to power in 1953 and effectively ending Tehran’s plans for nationalizing the British oil industry in the country. But sitting on large oil reserves itself, and unwilling to prop up Europe’s old colonial empires, the US would act more reluctantly than Europe had done to keep oil prices in check.

The founding of the Organization of Petroleum Exporting Countries (OPEC) by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, in Baghdad in 1960, signalled that elites and populations in the Middle East had had enough of Western suzerainty. Demanding a bigger share of profits, national governments gradually assumed control over upstream oil production, weakening the grip of the Western oil majors. The rise of colossal national oil companies, such as Saudi Aramco and the Abu Dhabi National Oil Company, eventually brought the era of cheap oil to an end. Washington’s continued involvement in the region made Western oil dependency manageable, for example by preserving the regional balance of power in the 1990 Gulf War. But no longer in control of oil prices, and with hardly any oil reserves itself, Europe remained vulnerable to OPEC’s pricing and production decisions.

In response, Western Europe looked to diversify its energy suppliers and turned to the Soviet Union for oil and gas, as well as to domestic nuclear power generation. Extensive oil and gas fields had been discovered in the North Sea and in the Netherlands in the 1960s. However, it was the focus on trading with the Soviet Union that changed the diplomatic dynamics. In the 1960s, various European energy companies, backed by their governments, engaged in talks with the Soviets about potential gas exports. Key players included Italy’s ENI and Austria’s ÖMV, two sizable gas producers facing declining production at home. Austria, still a neutral state, signed the first gas contract with the Soviet Union in 1968, taking advantage of its proximity to the newly finished ‘Bratstvo’ (brotherhood) pipeline to Czechoslovakia. In the years that followed, France, West Germany and Finland concluded agreements. These initial contracts involved a ‘pipes-for-gas’ exchange, with the Soviet Union receiving large-diameter steel pipes in return for gas.^I-3 This led to the construction of a vast network of cross-border pipelines, channelling natural gas into and across Europe from Siberia in the north and from Algeria in the south, where gas fields had been discovered in 1956.

Politically, Europe’s pipeline diplomacy with the Soviet Union was not uncontroversial. In the early 1980s, Europe’s growing gas ties with the USSR caused a transatlantic rift, as the Reagan administration unsuccessfully urged Europeans to abandon plans for a major Siberian gas pipeline.^I-4 However, Europe needed cheap energy from abroad to keep its industrial economy competitive. Gas from Russia represented a lifeline.

Early European integration

The European Union itself might be said to be a product of postwar energy diplomacy. Coal shortages in the aftermath of the Second World War – during which the coal industry had been the target of massive military bombardment – gave rise to a number of international initiatives. Ending Europe’s ‘coal famine’ was a driver of the Marshall Plan.^I-5 Most famously, the French plan for a European Coal and Steel Community (1951) brought the coal industry in six key European states (France, West Germany, Italy, Belgium, Luxembourg, and the Netherlands) under a joint authority. This administrative innovation marked a strategic breakthrough in the reorganization of the European continent as a whole. (One reason the UK did not join was that it produced more coal than all six put together.^I-6)

In 1957, the same six Western European states launched the European Atomic Energy Community (EURATOM) in an effort to advance the energy source of the future, nuclear. Both the ECSC and EURATOM followed the interventionist spirit of their inventor, French civil servant Jean Monnet, former head of the national planning bureau. Some even considered EURATOM a more important breakthrough than the European Economic Community (EEC), which was launched at the same time.^I-7 In hindsight, however, the latter proved much more consequential. It laid the foundations for market integration and trade liberalization, which over time also came to affect the politics of energy. The EEC treaty did not contain a dedicated energy chapter. With coal and nuclear being covered by separate treaty arrangements, it was believed that horizontal market provisions would suffice for any problems that might arise concerning oil, natural gas and electricity. This approach had two consequences. First, leaving coal and nuclear aside, Brussels principally viewed energy through the prism of the market. Second, securing oil and gas supplies remained the business of the member states individually.

Unsurprisingly, the 1973 oil shock proved too much to handle for the young European Community. The Arab oil embargo, targeted at supporters of Israel in the Yom Kippur War, hit only one of the nine EEC member states directly, the Netherlands – and hence also the major port for oil supplies reaching continental Europe, Rotterdam. Although the UK, which had just joined the EEC, was not embargoed, the Arab-Israeli conflict posed a threat to British oil supplies from the Middle East.^I-8 With the US and other countries also affected, panic led to the uncoordinated stockpiling of oil. A Copenhagen summit in December of that year, meant to convey a message of European unity, was disrupted by the unexpected arrival of four oil-selling Arab ministers at the venue. Solidarity was quickly displaced by opportunistic bilateral deal-making in the corridors. Not for the last time, Europe’s fragmented response to a crisis allowed the US to take the lead in forging a collaborative response across the Atlantic. This led to the establishment of the International Energy Agency (IEA) in Paris in 1974. Paris, not Brussels, then became the central hub for energy-security policy coordination for most Western European nations. Some argued European energy policy had been ‘captured’ by Atlanticism.^I-9 Ironically, France opted not to join the new agency it hosted, preferring to pursue its own oil diplomacy towards the Arab world.

The push to build a single market in the late 1980s gave the European Community a chance to develop further activities in the energy field, despite the absence of specific treaty provisions. Starting in the mid-1990s, a number of directives were adopted to liberalize internal electricity and gas markets. However, these initiatives did not amount to a fully-fledged Europe-wide energy policy. They were predominantly viewed as a means of bringing prices down for consumers. Tellingly, the external dimension remained absent.

For all its achievements, early European integration did not contribute significantly to ending its members’ oil predicament, nor did it reduce their collective energy dependence on both superpowers. Western Europe needed the US to secure stability in the Middle East, while it relied on Russia to continue exporting its oil and gas westwards. It was an uncomfortable position. Only when the Cold War ended did the inherent tension in this double dependency relax, allowing a moment of European self-confidence.

After 1989: from energy diplomacy to exporting free market rules

With the Soviet empire in tatters, new opportunities arose, the ‘end of history’ supposedly signalling the demise of great power politics and the dawning of an era of international cooperation, for which European integration itself served as a model. The classic art of energy diplomacy seemed consigned to the history books too. The security of energy supplies, the reasoning went, was best served by the market and the market alone. Governments were to take a backseat and become regulatory agencies, whose job was to ensure markets worked without distorting subsidies, price agreements, or any other business conduct illegal under European competition law.

Within official EU parlance, the very notion of energy diplomacy became taboo. It was the hour of the economist, bureaucrat and antitrust lawyer. European officials – both in Brussels and in EU capitals – were convinced that external energy security could be achieved by expanding the EU’s rules-based, liberal policies abroad. A start was to be made by integrating the EU’s neighbours into initiatives such as the Energy Charter Treaty (1994), the Third Energy Package (providing third party access to energy infrastructure), and the Energy Community with members including Albania, Serbia and Moldova.

In so far as there was energy diplomacy at the European level, it was primarily aimed at bringing Russia and other hydrocarbon-rich post-Soviet states, such as Azerbaijan, into the free market, along with transit countries such as Ukraine. Europe’s objectives proved harder to achieve than had been hoped, however. From 2000 onwards, a bullish Russia led by Vladimir Putin stubbornly refused to fall into line. The issue assumed major importance during the 2005–06 gas pricing dispute between Russia and Ukraine, which led Gazprom, an energy corporation under Kremlin control, to resort to turning off gas supplies destined for the Ukrainian market. Unfolding in the dead of winter, the Europeans were shocked by the Kremlin’s display of raw power, which, coming hot on the heels of Ukraine’s Orange Revolution, appeared politically motivated. They also fretted over the knock-on effects to their own gas supplies from Russia, which were in part delivered through Ukrainian pipelines.

European Commission president José Manuel Barroso decided Putin needed to be put straight. He warned Russia’s president that EU antitrust rules allowed Brussels to intervene directly in Gazprom’s business, much as the Commission had done with US technology giant Microsoft. His message did not go down well in the Kremlin. For Russia, energy and technology remained two very different businesses. At a dinner with Putin, at which energy relations were discussed, the Commission president ‘had his head taken off’, according to an EU official. Russia had liberalized its energy markets to some degree. But there were still red lines, and Barroso, whom Putin was said to regard as a ‘glorified international civil servant’, had trampled all over them.^I-10

When it came to energy, and gas in particular, the Russian state wanted to remain firmly in the driver’s seat, refusing to bow to EU market regulators. Outwardly Gazprom acquired the trappings of a commercial business, but in the Kremlin’s eyes the company’s supply agreements in Europe’s downstream markets were never contracts between private entities, even if that was their legal status. For Putin, Russia’s gas relations with Europe were built on intergovernmental understandings, the outcome of old-style energy diplomacy, as they had been in Soviet times. Applying antitrust laws to Russian gas exports made no more sense than applying those rules to OPEC or any other bilateral arrangement between governments.

In spite of the EU’s efforts to put its energy relations with Russia on a market footing, geopolitics continued to creep back in. In a second Russo-Ukrainian dispute over gas pricing, in the winter of 2009, the European Commission took on the role of neutral arbiter and mediator, keen to minimize the impact on downstream markets in Europe of Russia’s decision to cut gas supplies to Ukraine. Slovakia, highly dependent on Russian gas, was hit particularly hard by the interruptions, which forced it to shut down parts of its industry. Opinions differed on who was to blame, however. Robert Fico, in his first stint as Slovak prime minister, travelled to Kyiv to urge it to strike a deal with Moscow, only to find himself berated and humiliated by his counterpart Yulia Timoshenko in front of the press. The encounter left him ‘red with anger’, according to a Slovak diplomat, and with a distrust of Ukrainian politicians that appears to have endured to this day.^I-11

Germany also continued to put its faith in Russia and free-market rules. To mitigate transit risks, and to the annoyance of the US, Berlin threw its weight behind Baltic pipeline projects Nord Stream 1 and 2, which bypassed Ukraine altogether and could therefore not be affected by further gas disputes. Barroso’s Commission set out to explore more radical alternatives, chiefly by supporting the development of a Southern Gas Corridor to access Caspian reserves, a move Moscow regarded as bluff. It also launched ambitious plans for the Nabucco gas pipeline, linking Turkey to Austria with Azerbaijan and Turkmenistan acting as suppliers.

Despite such ambitions to find alternatives, Europe’s dependency on Russian gas only increased. ‘Nabucco’ never materialized and the pipelines that have since been built along southern routes have limited capacity.^I-12 In 2014, Europe acquired approximately one third of its gas supplies from Russia, of which some 40 per cent came via pipelines crossing Ukraine.^I-13

After 2014: the need for energy diplomacy returns

Three developments, largely overlapping in time, demonstrated to the EU that its gambit of exporting its ‘post-historical’ market regulation had run its course. Governments now needed to assume a bigger and more assertive role in securing the continent’s energy interests, including the Union itself. On the one hand, this involves the resurgence of state-led industrial policy, aimed at strengthening and developing green industrial and energy ecosystems on European shores. On the other, it demands a renaissance of energy diplomacy, a profound reorientation towards the wider world with a new focus on the regions and countries that can supply Europe with affordable energy in the future. In the meantime, with the Lisbon Treaty (2009) the European Union had finally given itself a firmer legal basis for joint political action on energy. Leaving aside the early arrangements for coal and nuclear power, the basic charter now for the first time contained a dedicated energy chapter, including the geostrategically crucial notion of ‘energy solidarity’ among member states.

The Russo-Ukrainian war

Russia’s annexation of Crimea in March 2014, in what today could be described as the first act of the Russo-Ukrainian war, made clear that the potential for great power conflict had not vanished from the continent. The idea that Europe’s energy relations with Russia could be insulated from a broader clash of strategic interests, or be reduced to questions of supply and demand, began to evaporate. On 10 April, Putin drove home the point, warning eighteen European leaders in a typically frank letter that Gazprom might again be forced to cut gas supplies to Ukraine, which allegedly owed Russia’s gas giant some $2 billion in unpaid debt.^I-14 The move could not be detached from the Maidan revolution, which was abhorred by Putin but egged on by EU politicians. Never had the Kremlin looked so menacing. The letter required a unified response. Stunned by Russia’s intrusion into Ukraine, European leaders empowered Commission president Barroso to respond to Putin with one voice.^I-15 Usually protective of their bilateral gas ties with Moscow, they were growing wary of being picked off, a Russian tactic the Europeans had long endured.

Something was stirring. In the spring of 2014, the Commission presented an ‘Energy Diplomacy Action Plan’, promptly endorsed by the member states.^I-16 At around the same time, Polish Prime Minister Donald Tusk launched the idea of an ‘Energy Union’, calling for diversification to other gas suppliers, a strategy his own country pursued.^I-17 However, to say that the 2014 crisis initiated a full-blown revival of energy diplomacy would be an overstatement. After Merkel and Putin brokered the Minsk accords in 2015, the pressure diminished, and business as usual resumed. Work on Nord Stream 2 moved ahead. Brussels officials continued looking for answers through the Union’s market prism. In 2018, Margrethe Vestager, EU Commissioner for Competition Policy, brought an antitrust investigation into Gazprom to a negotiated conclusion, announcing with pride that she had provided ‘a tailor-made rulebook for Gazprom’s future conduct’ that paved the way to ‘a true internal market for energy’.^I-18 It took the all-out invasion of Ukraine in February 2022 for the EU to realize that no market-based rule book would protect it against the full force of great power politics. In the end, the decision to supply or not to supply – and to make or break Europe’s industrial economy – was the Kremlin’s, as it made brutally clear in the course of the same year.

In hindsight, the years between 2014 and 2022 should have been used to diversify away from Russian gas, a strategy Poland pursued. It would have cushioned the blow, had others done the same. However, such diversification required state intervention of a more strategic kind, the sort of energy diplomacy that had been out of vogue since 1989. As things stood, Russian gas remained cheap and plentiful. In its competition with Chinese state capitalism, it was precisely what Europe needed, particularly in its industrial heartlands of Germany. In 2021, Russian gas accounted for roughly 45 per cent of EU gas imports and some 40 per cent of its total gas consumption, more even than in 2014.^I-19 Then Putin detonated his energy bomb. For decades, cheap Russian gas had been Europe’s solution to keeping its economy afloat. With the flip of a switch, that era was over.

New green energy dependency on China

While decoupling from Russian gas was crucial, other developments were awakening the European need for state-led energy diplomacy. Initially, Europe had hoped to become a global leader in green tech and much less reliant on energy imports. By setting ambitious climate targets and introducing rigorous regulation, politicians intended to force Europe’s industry to innovate and invest more than elsewhere in the world. However, the renewables revolution came with its own dependencies, notably on China. In 2018, the Commission decided to let its tariffs on the import of inexpensive Chinese solar technology lapse, acknowledging that Europe had lost this battle. Green sectors such as the manufacture of wind turbines, batteries and EVs were at risk of going down the same road. The future of the car industry might not be Volkswagen and Mercedes, but BYD and Xpeng Motors. What made matters worse was Europe’s reliance on China for minerals, such as lithium and rare earths, that are indispensable for the energy transition. Hopes that Europe could, in the short term, become self-sufficient in energy quickly began to fade. At the same time, the consensus grew that the continent needed to limit its exposure to China and build ties with other suppliers.

The emergence of the US as an energy power

Finally, four years of Donald Trump – and the possibility of another four years – made clear that the US, while still an essential power in many ways, cannot be counted on to guarantee global stability and the freedom of the seas indefinitely. By relinquishing some of its influence in the Middle East, the US has increasingly left space for Russia, Iran, Turkey and China to expand into. Moreover, as a net exporter of petroleum products and natural gas, its energy interests do not always run parallel to those of Europe, which is now the world’s biggest buyer of US liquefied natural gas (LNG). In 2021 and 2022, as a consequence of the pandemic and Putin’s war, European gas prices shot through the roof. More insulated against external shocks by its domestic supply, the US was able to keep price levels largely stable. When prices peaked, Europe paid eight times more for its gas than the US. This gap remains considerable today, putting Europe’s industry at a disadvantage.^I-20 Concerns also arose over the US Inflation Reduction Act (IRA), which introduced subsidies for private investment in green energy technology such as hydrogen and batteries. That those subsidies might undercut energy investment in Europe appeared not to perturb Joe Biden. The race for green tech leadership has turned Europe and the US into competitors, as well as partners. More than ever, Europe will need to find answers on its own.

Conclusion

As the era of free-market rules and Russian gas recedes, a strategic question has returned, but this time to an increasingly carbon neutral world: How can Europe prevent its industrial economy from moving to places where energy is cheaper and critical minerals more accessible than on the continent itself? The need for new solutions to this problem, and for novel forms of energy diplomacy, are acute and among the most pressing issues for the EU in its next five-year legislature. If no answers are found, Europe’s industrial base is at risk of further erosion. Strategic dependencies on foreign powers like China are likely to deepen and increase. But where and on what should Europe focus its new energy diplomacy? Who should take the lead in developing it? And what economic and strategic impact might the global energy transition away from fossil fuels have? To answer these questions, the first step must be to chart the new world of energy (Chapter II), and Europe’s position in it (Chapter III).

II. Transition: the geopolitics of renewables

Introduction

The world is in the midst of a fundamental energy transition, away from fossil fuels and towards renewable energy sources. Although the fight against climate change has been the primary impulse behind this shift for decades, current economic and strategic considerations have ratcheted it up, changing the pace and nature of the movement.

Not so long ago, renewable energy was still referred to as being ‘alternative’ – too expensive to expand beyond niche markets. Today, renewables have become the cheapest source of electricity for most places in the world, and they are growing, according to oil company BP, ‘more quickly than any fuel ever seen in history’.^II-1 The International Energy Agency reckons that the exceptional growth of renewables has become the ‘new normal’ and describes solar as the ‘cheapest source of electricity in history’.^II-2 A trend that should make it easier to achieve the climate goal of full decarbonization.

Of course the world has seen energy-source shifts before. This one is different in a key aspect, however. Even if we tend to speak, for instance, about the twentieth-century transition ‘from coal to oil’, one did not entirely replace the other, rather it was added to the energy mix (so we went from coal to coal-plus-oil). The green transition started in much the same way, progressively adding solar and wind energy to existing sources. What makes the current transition unique is that it requires a rapid and large-scale shift to clean energy and a simultaneous phasing out of fossil fuels, which have been the primary source of energy for over a century. Inevitably, numerous vested interests of all kinds are at stake and consequently the ultimate ‘net zero’ outcome is far from a given.

This chapter examines some strategic consequences of the clean energy transition. After looking at the political battle over the pace of decarbonization, it charts the new cartography of clean energy, zooming in on the emerging maps of green hydrogen, critical minerals and clean tech. It concludes with a brief section on nuclear power.

The battle over the future

It is in the nature of a ‘transition’ that we know the starting point but not the end point, nor even how long it will take to get there. While technological innovation in clean energy may well happen more quickly than predicted, a number of crucial ‘promising’ technologies still need to prove their mettle. The rationale of industry and business for sticking with the fuel they know or for betting on green newcomers depends on many factors. Electoral moods may change too, with some voters advocating urgency and green ambition, others protesting against the cost or constraints of climate measures.

The stakes are high – from the future of the planet to the international distribution of wealth and power, and the cost of living. It is no surprise, then, that defining the timeframe and pathway to decarbonization is part of a global political battle – fought at UN conferences, within national governments, within energy company boardrooms, and increasingly on the streets, in courtrooms and at the ballot box.

In late 2023, at the COP28 in Dubai, the world’s states jointly declared by their intention to ’transition away' from fossil fuels. But while some 150 countries have committed to reaching net-zero emissions around the middle of this century, there is a huge implementation gap, and a divergence in interpretations of the scope and pace needed to reach the target. Consequently, fossil fuels are likely to remain with us for decades to come, probably well beyond 2050.

Various institutions and companies are building scenarios or making predictions as to how the energy system will evolve in the near future. The inconvenient truth, however, is that there are as many scenarios as there are modellers and they might all be wrong. Unforeseen technological, political and macro-economic shifts often cause energy systems to evolve in less linear ways than the projections suggest. No energy scenario from before 2020, for example, anticipated shocks such as the Covid-19 pandemic or Russia’s invasion of Ukraine. Indeed, a common pitfall in scenario development is a failure to grasp political and geopolitical dynamics.

However, even if such shocks were somehow better integrated into the scientific models, there remains an irreducible political element in any such exercise aiming for scientific objectivity. Who sets the standards? What technological avenue is most actively explored? For instance, while the EU sponsors clean energy research, with a focus on alternatives to fossil fuels, there are also scientists who work on mitigation solutions such as ‘carbon capture and storage’, a prospect supported by gas exporters like Norway and the Gulf states.

To illustrate the contentious nature of energy scenarios, take the work of the International Energy Agency, the self-proclaimed ‘gold standard in the energy world’.^II-3 The IEA’s climate models were long criticized as too ‘fossil-fuel friendly,’ prompting some dissatisfied member states, including Germany, Spain and Denmark, to set up the rival International Renewable Energy Agency (IRENA). However, in recent years, the IEA has adapted, and in 2021 it released its inaugural ‘Net Zero Roadmap’. The report was dismissed by the Saudi energy minister as a ‘La La Land sequel’.^II-4 Similarly, the IEA’s recent prediction that fossil-fuel demand would peak before 2030 garnered a backlash from OPEC, which denounced the IEA’s narrative as ‘extremely risky and impractical’.^II-5 Even if there is more convergence ahead regarding the time horizon, such tensions will remain.

A new cartography

Uncertainties about pace and timing notwithstanding, the overall trend clearly points to the emergence of a clean energy economy. A world map of renewable energy sources is taking shape, which for now overlays the old fossil fuel map and perhaps in due course will replace it entirely.

The contrast between the two cartographies is striking. The fossil fuel map was and is characterized by a geographic concentration of reserves, huge cross-border trade and investment flows, and monumental risks and rewards for actors in these value chains. Think of the ‘black gold’ of Texas, the affluence of the Gulf, or the gas power of the Kremlin. The emerging renewables cartography looks entirely different. There is no single strategic region or zone that concentrates renewable energy sources. Solar and wind power can be harnessed almost anywhere on the planet; they take the form of inexhaustible flows rather than finite stocks and lend themselves to deployment at any scale—from rooftop solar panels to utility-scale wind farms. This fundamental distinction between the concentrated nature of fossil fuels and the widespread availability of renewables will redefine the dynamics of energy geopolitics in the coming era.

Consequently, the nature of energy dependencies will evolve. As the net-zero transition moves ahead, international trade in fossil fuels will progressively give way to trade in low-carbon technologies, critical materials, renewable electricity and green fuels. Geo-economically, this results in a dual movement: increased energy independence for many countries and residual dependencies for almost all. Both are bound to impact energy diplomacy.

To start with, we need to bear in mind that a decarbonized world might be a less globalized one. Countries that currently import oil and gas from abroad have an incentive to develop renewables at home. In 2019, petroleum was the top import product for no fewer than 128 countries.^II-6 By tapping into domestic sources of energy, such as solar and wind, states can improve their trade balance and gain greater strategic autonomy, as they may be less beholden to the geopolitical whims of distant fuel suppliers. In Africa and elsewhere, enhanced access to energy, via rooftop solar panels and mini-grids, could reduce energy poverty. Some developing nations might even leapfrog fossil fuels and centralized grids – just as many of them skipped landlines and moved straight to mobile phones.

On the sellers’ side of the balance sheet, fossil fuel exporters may lose geopolitical standing and influence. To offset the shock, some, such as the United Arab Emirates and other Gulf states, are investing massively in the transition and may be well placed to keep a leading position in the new cartography. Others, such as Venezuela or Libya, may be less well prepared to ride out a loss of revenues, with as yet unpredictable domestic and strategic consequences.

The deglobalizing effect of the energy transition is visible at various levels. Firstly, moving away from fossil fuels will result in less maritime trade overall, since around 40 per cent of maritime cargo is fossil fuels.^II-7 In addition, getting to net zero requires the use of more electricity, which is likely to be produced locally or regionally. Electricity is simply harder and more expensive to transport over long distances than oil or gas. In 2018, less than 3 per cent of electricity produced globally was transported across borders.^II-8 Finally, the green technology race between China, the US and Europe triggered by the transition has led to an increasing recourse to defensive industrial and trade measures. So although the fight against climate change must be a global effort, it will result in fewer global trade and economic links.

This being said, even as countries become less dependent on fossil fuel imports, they will remain entangled in global interdependencies. Whereas the fossil fuel map simply connected oil and gas fields to markets, the geopolitics of the energy transition will play out across three overlapping maps.^II-9

First, there is the map of trade in green hydrogen, a clean fuel made from renewables that could help to decarbonize heavy industry, machinery and some forms of transportation. Second, there is the map of critical minerals, such as lithium, copper and cobalt, which are needed to manufacture batteries, solar panels and other renewable energy technologies. The third map consists of trade in finished low-carbon products and technologies. It covers not only solar panels, batteries, wind turbines, electrolysers and so on, but also a much broader set of industrial activities (the manufacture of steel and automotive vehicles, for example).

These three clean energy maps, together with the fossil map, define the theatre within which Europe’s new energy diplomacy must be deployed.

Map 1: Solar, wind and green hydrogen

Although every country in the world has access to renewable energy sources, the technical potential and costs vary widely across regions. Over the span of a year, for example, southern Algeria receives more than twice the amount of solar energy compared to central Germany.^II-10 Globally, a total of 148 countries are positioned within the ‘Sunbelt’ region, spanning an approximate latitude range of 35 degrees either side of the equator.

Other types of renewable energy are more concentrated. Some of the planet’s premier wind resources are located on the southern tip of South America, in Patagonia, as well as in northern Japan and the United Kingdom. The biggest hydropower potential is found in large countries such as China, Russia, Canada, Brazil and the US, although in per capita terms, countries such as Nepal and Tajikistan are hydropower giants too.^II-11 The world’s geothermal resources are highly concentrated in a select few countries, including Iceland, Indonesia and the Philippines.^II-12

Some countries are blessed with so much renewable potential that they can aspire to be more than self-sufficient. They could become exporters of surplus renewable electricity to neighbouring countries via high-voltage transmission cables. For example, some 75 per cent of Bhutan’s hydroelectricity is already exported to India, and there are plans to expand both its hydropower capacity and the cross-border electricity trade.^II-13 Yet exporting electricity through wires only gets you so far. The longest subsea electricity interconnector that currently exists is the North Sea Link, a 720-kilometre connection between the UK and Norway.

This is where the promise of ‘green hydrogen’ comes in, a transportable zero-carbon fuel. It is as yet untraded at industrial scale. As so often happens with technologies with ‘revolutionary’ potential, it has its share of devotees and proselytisers as well as sceptics.^II-14 Since the future role of hydrogen already shapes energy diplomacy assessments and initiatives across the globe, a brief technical explanation follows.

Hydrogen is a manufactured product, not an extracted commodity.^II-15 It can be made anywhere, including in Europe (you just need a chemical compound containing hydrogen plus electricity). It is considered ‘green’ if the compound is water and the electricity used for electrolysis to release the hydrogen gas is entirely from renewable sources. It is considered ‘blue’ or ‘grey’ when the compound the hydrogen is derived from is a hydrocarbon fossil fuel, depending on whether or not the carbon released in the process is captured (blue) or not (grey).

Just like electricity, hydrogen is strictly speaking a carrier and not a source of energy. It ‘carries’ energy, acting as storage, not unlike a battery. While releasing this energy can be achieved in many different ways, hydrogen’s clean energy potential mostly lies in three sorts of use. First, the hydrogen molecule can be used as industrial feedstock, a substance or reactant utilized in the construction of other products, in refineries, chemical plants and steelmaking. Here, green hydrogen could replace the grey variant currently used. Second, hydrogen can serve as a green fuel, for long-distance shipping or aviation for instance. In those cases, hydrogen is combusted in place of a fossil fuel, which enables the decarbonizing of sectors that are difficult to electrify. Third, hydrogen can be used to generate electricity in power stations replacing fossil fuels. You start with (green) electricity to produce hydrogen, which is then transported to be turned into electricity again. While the first two uses make perfect sense, the third is more contentious because of the substantial energy loss incurred along the way.

So here lies the appeal of green hydrogen: it can connect regions in the world that produce a surplus of renewable electricity (often in the global South) with regions that could use clean feedstock, green fuel or green electricity (often in the global North). In the language of its promotors, hydrogen allows you ‘to ship the sunshine’, to move the energy of sunlight or wind around the world. It can be transported in gas or liquid form or as liquefied derivatives, such as ammonia or methanol. The future hydrogen market may therefore resemble the natural gas market, with regional systems connected by pipelines and some liquefied forms being shipped globally.

Projections show that large parts of the world could become self-sufficient in hydrogen, including the US, China, India and Brazil. However, Europe, Japan and South Korea will remain dependent on imports. A large number of nations are gearing up to serve those markets, including current fossil fuel exporters such as Saudi Arabia, the United Arab Emirates and Australia, which aim to offer both the blue and the green variants. But a new class of solar-based exporters may also arise, including the likes of Chile, Morocco and Namibia.

While the promises of hydrogen are clear, so are its downsides. In its gas form, it is unstable and explosive. Safely shipping large quantities of hydrogen, for instance in ammonium tankers, is not easy either. Whereas oil spills have contributed their share of ecological disaster, its ‘green’ successors pose similar risks that must be avoided. The shipping industry is currently taking up the challenge.^II-16 The other major complication concerns climate efficiency. For instance, to drive the same distance in a hydrogen-powered car, you need two to three times the number of wind turbines as for a battery EV. Inefficiency obviously raises costs. In its first auction, launched in late 2023, the European Hydrogen Bank provided subsidies of up to €4.50 per kilogram of green hydrogen; this subsidy alone is about four times the current natural gas price in Europe (and more than twelve times what US industry pays).^II-17 Given this cost, using hydrogen widely across electrifiable sectors would risk slowing down the energy transition. It could even lead to de facto de-industrialization.

Finally, rather than exporting their renewable energy surplus, sunny and windswept nations may also consider using their renewable endowment to attract energy-intensive industries instead. There is currently a mismatch between the ‘hot spots’ of heavy industrial activity and the ‘sweet spots’ of abundant renewable energy. Certain industries – such as steelmaking – may relocate to these sweet spots, an aspect of the new cartography taken up below.

Map 2: Critical minerals

In the emerging geopolitics of energy, despite a nation’s power no longer being tied to its oil or gas wealth, it will undoubtedly still be linked to whether it possesses the metals and minerals needed for the manufacture of low-carbon technologies. This interdependence creates our second renewables map, that of critical materials.

Although the key locations of these mineral deposits differ from those of fossil fuel reserves, the dynamics will look familiar. Minerals and metals are extracted, then moved to refineries and processing plants, before being turned into final products. Many of the fossil fuel supply-chain concerns operate – concentration, bottlenecks and cartels – albeit with different specifics.

The trade-off for achieving net zero appears to be the substantial mining and extraction of metals from the earth’s crust, rare or otherwise. From copper for electric wiring and iron to make steel for wind turbine towers, to lithium for batteries and silicon for photovoltaic solar panels, global demand for a wide range of raw materials is set to grow dramatically – and it could transform the economic fortunes of countries that produce them.

What characterizes most of these mineral markets is the very high geographic concentration of production and processing. The Democratic Republic of the Congo (DRC) produces 70 per cent of the world’s supply of cobalt, while nearly 74 per cent of the world’s platinum is mined in South Africa. Around two-thirds of all nickel is extracted in just three countries: Indonesia, the Philippines and Russia. Similarly, for lithium, the top three producers (Australia, Chile and China) command a share of more than 90 per cent.^II-18 By way of comparison, in 2022 the combined market share of all thirteen OPEC members in global oil production was only 36 per cent.^II-19

The refining and processing of metals is even more geographically concentrated, with China accounting for over half of the global refined supply of natural graphite, as well as the rare earths, cobalt, lithium and manganese. For some of these materials, China’s market share is close to 100 per cent.^II-20 Besides, over the past ten to fifteen years, Chinese firms have made huge investments overseas,^II-21 into cobalt and copper mines in the DRC,^II-22 lithium extraction in South and Central America,^II-23 and nickel smelters in Indonesia.^II-24

After decades of outsourcing industrial production to Asia, today the US and its allies fret over China’s dominance in metallurgy. For one thing, certainly after the global trade breakdown during the Covid-19 pandemic, governments now realize that concentrated supply chains are prone to ‘single points of failure’. In late 2021, for example, Chinese magnesium plants were partially closed due to nationwide energy rationing, dealing a blow to Europe’s industry, which depends on China for 95 per cent of its magnesium supply. For another, some of these metals have become caught up in the rivalry between China and the US. As early as 2010, China restricted exports of rare earths, a move some observers interpret as the first instance of minerals being used for geopolitical leverage.^II-25 The US, for its part, banned imports of solar panels from China’s Xinjiang Uygur Autonomous Region in 2021, in response to alleged human rights abuses. The fact that some metals are crucial for strategic products such as microchips and military weapons systems adds to their geopolitical importance.^II-26

The geographic concentration of the mining and processing of raw materials needed for the energy transition is a fact of life, at least for the decades to come. More countries could decide to exploit their geological resources than currently do. However, new mine development takes time, preventing the quick redrawing of the global map of metal extraction. On average, it takes twelve to seventeen years from resource discovery to the opening of a productive mine.^II-27 When it comes to new refining capacity, the timescales are much shorter. Growing global demand, environmental risks and local opposition may nonetheless hinder efforts to diversify refining capacity away from China. It will therefore be next to impossible for Europe, Japan and the US to meet their net-zero goals without maintaining a deep relationship with Beijing – a fact that is presumably not lost on the Chinese.

Mineral-rich countries stand to gain from the energy transition, but they are unlikely to attain the enduring influence that has been enjoyed by oil and gas producers.^II-28 Mineral markets are many orders of magnitude smaller than those for fossil fuels. Export revenues will never match the immense rents generated by oil and gas exports, a staggering $2 trillion in 2021. Whereas petroleum has long been unrivalled as a transport fuel, energy transition metals have a much higher risk of substitution, effectively curtailing any effort to weaponize or cartelize the metals trade. Moreover, disruptions in the supply chains of these metals do not lead to immediate energy shocks. Finally, while the bulk of fossil fuels are burned, metals and minerals can be reused and recycled. Thus, over time, regions that currently depend on imports could cultivate a steady supply of reclaimed metals.

While the dream of fossil riches may be unattainable, states that sit on mineral resources are increasingly aware of their advantage. Despite what the term ‘rare’ earth might suggest, these minerals, although dispersed, are abundantly present in the earth’s crust. Moreover, surging demand for energy transition technology is creating tighter market conditions, favourable for sellers. Against this backdrop, governments of nations endowed with such resources are seizing the moment to assert control over their mining industries. For example, Namibia and Zimbabwe have banned exports of raw lithium, the DRC is renegotiating foreign access to cobalt reserves, Peru has reformed its copper royalty regime, and the Chilean government plans to create a state-owned company for lithium. Indonesia’s recent ban on nickel exports has helped it in turn to attract investments in midstream (i.e. nickel smelters) and even downstream industries (i.e. battery plants and EV factories). In any case, the intricate tensions between mineral-rich nations and the countries that depend on them are poised to become an inescapable facet of the new geopolitics of energy.

Map 3: Clean technologies

Getting to net zero requires nothing short of a green industrial revolution, so the economic stakes are sky-high. This is why our third renewable energy map is that of clean technologies. Its contours are not yet set, as countries find themselves increasingly locked in a green technology race, whether aiming to become less dependent on geopolitical rivals, or to create domestic jobs and export industries. Regardless of its final shape, this is a map of economic and great power competition.

It is also a different kind of map, in view of the fact that this energy transition is not like previous ones. As mentioned, whereas the world has shifted in the past from one fuel to another, adding each new fuel to the mix, this time we are slowly but unmistakably moving away from fuels and towards the infinite flows of wind, water and sun, and heat from the earth’s core. Harnessing these energy flows requires technologies such as turbines, panels, batteries, heat pumps and electrolysers. In other words, we are transitioning away from fuels and towards technology.

In this emerging landscape, geopolitical influence will be less about control of finite resources in specific regions and more about deploying knowledge and technology to drive sustainable energy solutions. Nations with advanced technological capabilities and a capacity to innovate in the field of renewable energy will become the new powerhouses. Mass-manufactured clean energy technologies will be worth around €600 billion a year by 2030 – more than three times today’s level.^II-29 In this huge market, countries want to be technology makers, not technology takers.

All major powers are positioning themselves for the rapidly emerging green economy. Globally, governments spent some €40 billion on energy research and development in 2022, 80 per cent of it devoted to clean energy topics.^II-30 The largest public spender on energy R&D is China, trailed closely by Europe and the United States – each spending more than €10 billion per year.^II-31 In terms of innovation, Europe at large, Japan and the United States together accounted for more than 75 per cent of all clean energy patent families (patents filed in more than one country) between 2000 and 2019.^II-32 China follows at some distance, accounting for only 8 per cent.

In actual renewable energy deployment domestically, however, China is the undisputed world leader. For all the talk about its coal dependence, the country is installing renewables at a breakneck pace. Each year since 2020, China has added about 140 GW of renewable electricity capacity to its network, more than the US, EU and India combined.^II-33 In 2023 alone, it installed more new solar capacity than the US had done over the past half-century.^II-34 And China’s lead is growing. This year it is expected to deliver almost 70 per cent of all new offshore wind projects globally, as well as over 60 per cent of onshore wind and 50 per cent of solar PV projects.^II-35

When it comes to the manufacture of clean energy technologies and the international trade in them, China is likewise the undisputed leader. It produces around 75 per cent of the world’s solar panels and more than 60 per cent of parts for wind turbines. It dominates the global supply of components, producing 80 per cent of the world’s solar-grade polysilicon, 85 per cent of all solar cells, and 97 per cent of the silicon ingots and wafers that form the core of solar cells. Or consider battery electric vehicles: China is dominant at almost every stage of the supply chain. Shenzhen-based BYD recently took over from Tesla as the world’s leading EV company in units sold.^II-36

Three factors explain why the other major economies find it very difficult to compete with China in green tech manufacturing. First, it benefits from economies of scale: with a population of 1.4 billion, the country’s domestic market is many times larger than that of the US or the EU. Second, the Chinese have succeeded in securing a dominant position at every stage of supply chains. This is where the maps for critical minerals and clean tech interact and overlap. Third, its state subsidies create a considerable competitive advantage. Understandably, state intervention in the market is eyed with suspicion by Washington, Brussels, Paris, Berlin and London. However, given the comparative advantages conferred by the first two factors, lavish state aid for Western green tech firms will not unseat their Chinese competitors.

Nuclear ties

Nuclear power deserves specific consideration; although it is not a renewable energy source, it is largely carbon-free.^II-37 Consequently interest in its potential role in the transition is increasing globally.^II-38 At the same time, security concerns and the disposal of radioactive waste make nuclear power a politically divisive topic, especially in Europe.

A dozen states in the world rely on nuclear power for a third or more of their electricity. This includes France and Slovakia (ca. 60 per cent), Czechia and Switzerland (ca. 35 per cent) and Sweden and South Korea (ca. 30 per cent). In Russia and the US, nuclear contributes close to 20 per cent of electricity supply, whereas in China, Germany and Japan it is just below 5 per cent. However, in terms of the amount of electricity generated, the US is by far the world’s number one producer (with over 750 TWh), followed by China (close to 400 Twh).^II-39

As in the case of renewables, nuclear power gives rise to two types of trade and strategic dependencies: mining and enrichment of uranium; and nuclear reactor design and technology. The reactors require a huge initial investment, enjoy a multi-decade lifespan, but rely on non-substitutable fuel. This makes the nuclear sector more prone to supply chain dependencies than for instance solar.

Fewer than ten countries play a significant role in global uranium extraction. After 1945, most Western uranium supplies originated from the Belgian Congo and were reserved for the Americans and their British allies through covert agreements. Later, the UK and the US secured resources in Canada and Australia, whereas France relied heavily on deposits in its former colony Niger. On the other side of the Iron Curtain, uranium was mined in Kazakhstan, Uzbekistan and Russia. The same group of countries still control global production today, except that Congo stopped mining and has been replaced by Namibia and South Africa.^II-40

Uranium enrichment is dominated by Russia (46 per cent of global capacity), followed by Europe (30 per cent), the US (12 per cent) and China (11 per cent). Together they account for a worldwide enrichment capacity surplus. However, concerns in the US and Europe have been growing, given that they depend on Russia for a fifth of their enriched uranium.^II-41 Five EU states still rely on nineteen Russian-designed reactors built during the Soviet era, which are entirely dependent on Russian nuclear fuel. One such power plant supplies Hungary with 50 per cent of its national electricity. In August 2022, after Russia’s invasion of Ukraine, it went on to invest in two more.

The export of nuclear technology, while a considerable commercial activity, also represents a potential tool of geopolitical influence – something the US and Soviet Russia soon realised. Engaging in a nuclear project with a foreign partner establishes a commitment spanning almost a century, from plant construction to operation and decommissioning. Today, Russia exports its expertise and technology to more than 20 countries in Africa, including Egypt and Rwanda. China has growing export ambitions, despite losing the contract for the construction of the Hinkley Point reactor in Somerset over the UK’s belated security concerns; it is now primarily engaged in Pakistan and Bangladesh, countries over which it has stronger leverage.^II-42 The US Congress, realizing the country was losing ground to its rivals, is currently discussing an ‘International Nuclear Energy Act’ to step up its action overseas. In late 2023, the Americans struck a deal to construct Poland’s first nuclear power plant, which should be operational by 2033.

Finally, Saudi Arabia, the fossil fuel behemoth, is betting not only on solar energy investments but also planning to build its first nuclear plants. For the kingdom this is not just about energy supply, since the regional nuclear balance is at stake: nuclear weapons in Israel, a nuclear programme in Iran and new nuclear power stations in the United Arab Emirates (provided by South Korea). Mindful of its global strategy as well, Riyadh seems to be soliciting bids for reactors from both Washington and Beijing^II-43 – a nuclear aspect of the Saudi balancing act between its long-time (American) security guarantor and its new (Chinese) fossil fuel customer.

Conclusion

A worldwide clean energy economy is rapidly emerging, thanks to exponential growth in solar, wind and battery capacity. The transition could prove a blessing for the many nations currently reliant on expensive and insecure fossil fuel imports. At the same time, the energy shift will create new trade dependencies and vulnerabilities. As the maps in this chapter show, we cannot simply transpose old thinking about the geopolitics of oil and gas onto the new geopolitics of renewables. For one thing, the resources for renewables are much less concentrated than fossil energy: there is no green equivalent to the fossil wealth and power of the Gulf. There is also a big difference between being dependent on Russia for gas and being dependent on China for solar panels, as industrial supply-chain ruptures do not translate into acute or immediate blackouts or power cuts.

The exact pace and nature of the clean energy transition are impossible to predict. Leaving aside the uncertainties of technological change, the outcome will depend to a significant extent on the clash between those economic and political forces that will either accelerate or decelerate the process. After a period of relatively quiet policymaking, in which ambitious targets such as those of the EU’s ‘Green Deal’ were laid out, this clash is rapidly entering domestic electoral politics. It is evidenced by the Yellow Vest protests in France in 2018, by the 2023 heat-pump uproar in Germany and by US presidential candidate Donald Trump’s pledge to drill unabashedly for oil and take his country out of the Paris Agreement (again). The public opinion backlash, which overrides a simultaneously sharpening climate activism, may well slow down the transition to net zero.

Moreover, strategic considerations increasingly play a role. While Russia’s invasion of Ukraine boosted Europe’s net-zero ambitions (as will be seen in the next chapter), the ensuing 2022 gas panic also showed how deeply dependent the continent remains on fossil fuel imports. The current crisis in the Middle East, with its smell of ‘1973’ and potentially another Arab oil embargo, underlines this vulnerability. Such crisis moments go to show that, when security of supply clashes with the green transition, the former wins. Ultimately, having energy is more important than having clean energy.

This being said, two other forces are pulling in the direction of green acceleration: industrial competitiveness and geostrategy. Economically, the rapidly decreasing cost of solar and other renewable energy technologies is already having an impact on industrial investment decisions across the globe. Geopolitically, the deep-seated strategic rivalry between China and the United States will continue to work as a green technology accelerator. It is to these two forces that Europe needs to respond, not least by deploying a more strategic energy diplomacy. To assess the urgency, the next chapters will turn to the geography of Europe’s own energy landscape (Chapter III) and its changing policy debates (Chapter IV).

III. Geography: Europe’s energy landscape

Introduction

For over two centuries, Europe’s energy map was delineated by fossil fuels. First came coal, transported from mines near or far to any coal shed. Then followed gas and oil, for which networks and transport systems were progressively established, just as for electricity. Underground pipelines were drilled, cables laid, power stations complete with their cooling towers built, while pylons bestrode the European countryside.

As the continent moves from fossil fuels to carbon-neutral energy, a new layer is being added to this energy landscape. Renewables require new energy production spots, ranging from the windswept North Sea basin to the sun-drenched plains of western Spain. Battery and electric vehicle factories are sprouting up in Poland, Germany and elsewhere across Europe. Meanwhile, one or two generations after the shutdown of most coal mines, from Portugal to Finland and Serbia to France, companies are now opening new pits and shafts, actively exploring for lithium and other minerals to propel the energy transition.

Although the precise contours of this evolving energy landscape remain uncertain, one thing is clear: the new cartography will not only reshape industrial prospects and the balance of power within Europe but also determine the continent’s need of foreign supplies and hence its energy diplomacy outlook.

This chapter takes a look at the geographic and material aspects of Europe’s energy position today. Chapter IV will then focus on the policy preferences and initiatives of the Union’s 27 states and the EU institutions.

Domestic coal and industrialization

Setting aside all the local wood, peat and other biomass fuels that have been burnt since humans discovered how to make fire, Europe’s first decisive energy layer is that of its coalfields. Cheap and plentiful coal enabled Western European countries to become the wealthiest economies in the modern world. As an economic historian put it, ‘The map of the British Industrial Revolution ... is simply the map of the coalfields.’^III-1 On the continent, the coal belts of Belgium, northern France, Germany and, later, Poland and Ukraine became major centres of heavy industry. Other industrial centres were able to thrive only if they had access via waterways to a good source of coal.^III-2 To this day, the location of iron and steel factories in Europe still closely mirrors that of either active coal mines or major rivers, canals and ports, with one notable exception: factories close to hydropower stations in Northern Italy.^III-3

Up until the Second World War, Europe managed to meet its coal demands from within its own borders. However, following the destruction of mines during the war, coal production in Western Europe struggled to regain its pre-war levels, necessitating imports, primarily from the United States, to fill the gap.^III-4 Concurrently, once Poland became part of the Soviet sphere, its coal supplies went east. As mentioned in Chapter I, coal led to the first major Western European collaboration in the form of the European Coal and Steel Community (1951), which quickly became a means to manage the sector’s challenging decline.^III-5 From the 1960s onwards, coal was outcompeted and displaced by oil. However, notwithstanding the closing of mines in Lancashire, the Ruhr or Wallonia, coal still powers European heavy industries. In Germany, some 20 per cent of primary energy came from coal-fired power stations in 2022.^III-6 In Poland, it was as much as 42 per cent.^III-7 Although coal power is supposed to be phased out by the EU (and other industrial nations) by 2030,^III-8 the continent’s last coal miners are still digging seams in Silesia, the Donbass and the Western Balkans.

Oil and gas: new flows and import dependencies

By the early 1960s, oil had firmly established itself as the predominant energy source across many European states. The German Federal Republic, for example, rapidly converted to an oil-based economy in the early post-war decades. Cheap oil from the Middle East fuelled consumer society, with the automobile, made in Germany, at its heart.^III-9 Alongside the coal industries of the Ruhr (and steel companies such as ThyssenKrupp), major automotive manufacturers developed in southern Germany around Stuttgart, Ingolstadt and Munich (with household names like Mercedes, Audi and BMW).