German Chancellor Olaf Scholz’s three-nation visit to Gulf states has come to an end but it had some significant outcomes as energy talks remained high on the agenda, especially in aftermath of Russia cutting off the gas supply to it.
Energy talks featured prominently during Scholz’s visit
During his two days trip to Saudi Arabia, United Arab Emirates, and Qatar, with an aim to diversify the sources of gas supply and stop reliance on Russian gas, Germany inked a deal with UAE
On September 25, German utility RWE and Abu Dhabi National Oil Company (ADNOC) signed a deal to deliver liquefied natural gas to Germany by the end of December.
Despite the initial amount to be delivered being relatively small Germany seeks to deepen ties with the Gulf and find alternative energy sources to stop dependence on gas supply from Russia. Before the Russian war with Ukraine, Germany was buying 55 percent of its natural gas from Russia.
Gulf states rich in energy resources
All three nations that Scholz visited have a rich basket of energy sources. While Saudi’s energy sources are very diversified, UAE and Qatar also have huge reserves of energy sources which can play a significant role in Germany’s efforts to look for gas supply outside of Russia. However, diversifying the sources of gas supply from the Gulf may take a couple of years to realize its full potential. But certainly, Germany has taken a step in the right direction. The United Arab Emirates has the seventh largest natural gas reserves in the world, and Qatar is one of the most important suppliers of liquefied gas.
A few of the advantages of gas supply from Gulf states is that they have significant experience in exporting gas, particularly LNG. While they have ample reserves of gases it is also quite cheap.
Many more European countries may follow in the footsteps of Germany which are suffering from severe shortages following Russia’s decision to cut gas supplies to them. Germans relies heavily on Russian gas to heat homes and fuel production processes.
There are several challenges to the energy deal as well. Firstly Germany is taking many concrete steps to transition from fossil fuels toward renewable energy. So how far Germany can go for making a long-term contract will be interesting to look out for.
Also, Saudi’s Human rights record especially in view of the ruling prince’s suspected involvement in the murder of journalist Jamaica shogi almost four years ago remains a bone of contention. The German arms export ban imposed on Saudi Arabia is another area of concern.