- Lithuania recently announced it no longer needs Russian gas imports.
- Many countries aim to cut energy ties with Russia after its invasion of Ukraine.
- This shift points to a new and uncertain reality for the global economy.
Europe in particular has struggled with its dependence on fossil fuels from the “aggressor nation” waging war in Ukraine. Yet, one European state recently managed to liberate itself from Russian gas. How?
In 2014, several days after a Russian spy plane reportedly committed the first serious violation of NATO airspace since the fall of the Berlin Wall, and seven months after Russia’s illegal annexation of Crimea, officials gathered at a Lithuanian port for the unveiling of a new liquefied natural gas terminal.
Nobody would be able to dictate the price of gas to Lithuania anymore, the country’s president said then, “or buy our political will.”
After the Cold War, a prevailing logic behind expanding economic ties was simple: the risk of cratering its own economy would serve as a check on Russia’s behavior. Russia has now obliterated that logic.
The current scramble to sever energy links is monumental. According to one measure, the EU has already paid more than €39 billion for Russian fossil fuels including gas since the start of the invasion in February.
Germany’s situation in particular has drawn scrutiny. It says it can’t wean itself from Russian gas “at least” until 2024, due to a close energy relationship solidified in the 1990s and underpinned by a pair of pipelines.
A country that had literally been cut into two parts by the Cold War opted to pursue an economic tie-up meant to help maintain peace and stability. But Lithuania had something else in mind, due to its own difficult history.
Finding different paths around Russian energy
Lithuania itself is evidence that hubs of economic influence can shift dramatically over time.
At one point in the 15th century, the Grand Duchy of Lithuania covered an area larger than modern France and Germany combined. A Polish-Lithuanian Commonwealth followed, which was divided up by 1795 and Lithuania fell under the control of the Russian Empire.
In 1940 the country was annexed by the Soviet Union, and it didn’t fully emerge again until 1991. These historical details are a key part of any story about Lithuania’s drive to forego Russian energy.
For Germany, doing the same thing is not so simple. Experts think it would lose about €220 billion in economic output by shutting off Russian gas now, and fall into a deep recession.
An abrupt shift away from importing Russian energy also promises to feed further discussion about the global economy becoming far less global.
Pundits have been pondering the potential for de-globalization at least since the 2008 financial crisis. COVID-19 and related supply chain glitches brought another round of speculation. Russia’s military onslaught has spurred more meditation on the theme.
Some argue the global economy was a lot less interconnected prior to the war in Ukraine than many people assume.
Anyone who attempted something as simple as buying a bicycle during the thick of the pandemic, or who has looked into the origins of the many parts necessary to assemble a typical iPhone, may have trouble believing that.
Much more will likely be written soon about where the global economy goes from here, now that it seems Russia will be further isolated – or at least realigned.
One thing seems certain: if more countries start limiting their commercial interaction with others to punish actual transgressions, or to protect against those presumed inevitable based on the historical record, the global economy will start to look very different indeed.
More reading on Lithuania and Russian gas
For more context, here are links to further reading from the World Economic Forum's Strategic Intelligence platform:
- As Lithuania celebrates a form of independence from Russia, it faces serious trade-related pressure from another global power that has implications for its fellow EU members, according to this piece. (The Diplomat)
- “Companies and countries need each other.” Many see the invasion of Ukraine forcing the pendulum of international affairs away from globalization, but this dissenting professor takes a more “boring” view. (Wharton School)
- Lithuania’s small size and generally limited resources incentivize specialization at the EU level, according to this analysis, which it’s pursued by focusing on Russia-related issues. (European Council on Foreign Relations)
- Instead of a full embargo on Russian oil and gas, this piece argues that the EU should hit them with import tariffs – to reduce Russia’s income while limiting collateral economic damage. (Social Europe)
- When cutting ties threatens public health – after Bangladesh abstained from a UN resolution condemning the Russian invasion, Lithuania reversed a decision to donate COVID-19 vaccines to the country, according to this piece. (The Diplomat)
- As Europe tries to wean itself from Russian fossil fuels Israel hopes to help fill the gap with gas from its offshore reserves, according to this report. (Al Monitor)
- Is fracking the answer for Germany? No, according a government minister cited in this report; while the northern lowlands sit on a large amount of gas, it’s likely to stay there due to groundwater protection legislation. (Clean Energy Wire)