Why Europe needs Ukraine to win

 

 

Why Europe needs Ukraine to win

 

Energy independence is key to the EU’s future

 

It is not often said outright, but the latest Gulf conflict underlines a simple point. Europe is still a long way from replacing oil and gas with renewable energy. The first effects can already be seen in the UK, where spot gas prices have started to rise. They are nowhere near the peaks of 2022, but if the conflict continues, the pressure is likely to build.

Ed Miliband has argued that extracting more gas from the North Sea would not change market prices. That is true in a narrow sense. But it misses a wider point. Producing more at home reduces the need for imports, which affects the balance of payments and, in turn, the public finances.

Renewables face a similar reality. Capacity is growing, but the system cannot yet provide reliable supply at a competitive price. Periods of low wind have exposed this clearly. Nuclear power is often seen as a solution, yet progress is slow. New technologies such as small modular reactors are still some way off, while older plants are closing without replacement. The gap between supply and demand is widening.

Until now, the UK has managed this largely by reducing consumption. Higher prices have forced lower demand. That approach is becoming harder to sustain. Government plans to expand artificial intelligence will increase energy use significantly. Data centres require constant and large amounts of power. In some cases, planning permission is already being refused because the grid cannot support additional demand.

As a result, Europe is likely to remain dependent on imported gas for some time. The choices are limited. Russian supply is politically unacceptable due to the war in Ukraine, even if some argue for its return. Liquefied natural gas is available, but it is more expensive, and demand from Asia is rising quickly.

Ukraine could, in time, change this picture. It is estimated to hold around 1.1 trillion cubic metres of gas reserves, much of it undeveloped. If fully exploited, it could become one of Europe’s main suppliers. The difficulty is that much of this gas lies in hard to reach or contested areas, including near Crimea. In a stable environment, however, Ukraine could play a central role in European energy security.

There is also a wider strategic dimension. Ukraine has developed advanced drone technology during the war and is open to working with European partners. This offers both military and industrial advantages, while strengthening Europe’s eastern defences.

The cost of supporting Ukraine is significant. Estimates suggest around €80 billion a year. Political divisions remain, with Hungary opposing some funding plans. Even so, many expect the war to continue for several years.

For Europe, the potential benefits are clear. A stronger defensive position, access to new military technology, and a new source of energy supply all carry weight. German industry for example has been in recession ever since the war began, due to the cost of energy now.

With that, in a more uncertain global environment, Europe may have little choice. Supporting Ukraine and bringing it closer into the western system could prove essential, not just for security, but for long term energy stability and to boost industry and the economy as a result.

These issues and more will be explored at our forthcoming Finance Forum breakfast event. Registration details are available here:

https://vacancysoft.com/events/finance-forum-march-2026/

Subscribe to our weekly newsletter for clear, timely insights on the political and economic trends shaping the UK labour market: