European energy sources

Horizons article
February 24, 2023

Europe is making big strides in its attempt to replace oil and gas deliveries from Russia. In doing so, however, it is confronted with the energy trilemma. In addition, Europe’s dependence on Russia in other aspects still exists.

The Energy Trilemma

Dropping energy prices offer some relief to Europe. Yet, rising geopolitical tension and climate change imply that energy costs are likely to increase in the long term. That is, the energy system is subject to a trilemma of trade-offs between three challenges: security, sustainability and affordability. As with any trilemma, you can solve two, but never three. Oil and gas proved affordable and secure sources of energy for most of recent history, but were never sustainable and security is increasingly under threat. Some argue that nuclear energy meets all three challenges, but its sustainability and affordability remain questionable. Renewable alternatives are sustainable and more or less affordable, but still face issues of reliability. To fix that, countries need to invest in additional capacity to generate and store energy, which shall come at the expense of affordability and create additional demand for scarce resources. Assuming that energy security and sustainability are non-negotiable imperatives for the future energy system, the question is whether innovation and economies of scale can lead to lower costs of renewables and solve the energy trilemma once and for all.

Broaden your horizons
  • While European imports to Russia decreased substantially due to sanctions, Russian exports boomed in 2022.
  • Since February 5, the EU has banned seaborne deliveries of diesel from Russia in an attempt to punish Moscow for the war in Ukraine. This article raises the question who may replace Russia as supplier and what the role of China will be.
  • Europe is not the only region struggling with its energy supply. South Africa has declared a state of disaster with immediate effect to deal with the country’s severe electricity crisis including prolonged daily power blackouts.
How dependent are we on Russia?

For decades, the EU has profited from cheap Russian energy. However, overreliance came at a high cost. Russia has a long history of using its oil, gas and mineral reserves as coercive ‘petro-sticks’ and co-optative ‘petro-carrots’ to achieve its foreign policy goals. Its decision to weaponize oil and gas in a retaliatory move against Western sanctions was no exception. Whilst the general feeling agrees that Europe has secured alternative energy sources and is no longer reliant on Russia, analysts have pointed alternatives to Russia are limited, largely ineffective, and unsustainable. What is more, Europe still depends on other Russian commodities, such as cereal and wheat, metals, machinery, and chemical products, as well as facilities: Russia hosts key ports, corridors for freight traffic, and rail cargo routes that connect European markets to Asia. Beyond physical supply chain disruptions, Russia could exploit this dependence to control one of Europe’s most pressing concerns – inflation. In short, Europe and Russia are still interdependent, and there is little reason to believe Russia would not weaponize these dependencies too.


Explore more Horizons, our insights on the issues that matter most in business and finance.

Newsletter sign-up