How Europe Is Muddling Through Putin’s Energy War

If Vladimir Putin intended to paralyze Europe’s energy system by slashing exports of Russian gas to the continent, it hasn’t worked for now. The doomsday scenario of rolling blackouts failed to materialize thanks to an unusually mild winter, power rationing and a shift to other energy sources. Yet the region’s economies aren’t out of the woods: The crisis left households and businesses grappling with record-high electricity prices that sparked runaway inflation and higher interest rates. And as war rumbles on in Ukraine and Russian gas supplies slow to a trickle, Europe’s energy security appears more vulnerable than ever to unpredictable global events.

Even before the Russian president launched his invasion of Ukraine in February 2022, Europe’s energy system was under strain. Demand for power had soared as economies bounced back from pandemic lockdowns and a long, harsh winter boosted demand for heating. Electricity producers struggled to respond as the natural gas that feeds many power stations was in short supply and unusually low wind speeds cut output from the wind turbines that had become a vital part of the continent’s energy mix. The result: power prices more than tripled in the second half of 2021. Then Russia’s military campaign triggered sanctions against Moscow and Putin hit back by weaponizing gas. By September 2022, Russia had halted all supplies through a key pipeline to Germany. The euro tumbled as investors priced in the expected hit to Europe’s economy.