4.2.1 Russia as a Fossil Fuel-Based Economy

Natural gas, oil and coal amount to around 90% of domestic energy supply in Russia, with renewables, mostly based on hydropower, only scoring around 4%.Footnote ¹⁶ No major economy depends on fossil fuel more than Russia, which is considered unprepared for the global transition from hydrocarbons to green energy.Footnote ¹⁷ According to the International Energy Agency (IEA), the Russian Federation accounts for a huge portion of global oil output and is thus the world third largest oil producer after the United States and Saudi Arabia. In 2021, Russian crude and condensate output reached 10.5 million barrels per day, that is, 14% of the world total supply. Russia is also responsible for 17% of global gas production, as the second largest producer after the United States. Russia also has an extensive pipeline network for gas export, with transit routes reaching the EU directly or via Belarus and Ukraine. In 2021, Russia exported 40 billion cubic metres (bcm) of liquefied natural gas (LNG), accounting for approximately 8% of global LNG supply and making it the fourth largest LNG exporter globally. In 2021, the government developed a long-term LNG plan to compete with growing export from the Unites States, Australia and Qatar, aiming to achieve 110–190 bcm in annual LNG exports by 2025. Oil and gas production facilities are spread throughout the country, with their bulk located in western and eastern Siberia.Footnote ¹⁸

Historically, Russia is the third major carbon emitter in the world, accounting for around 7% of total cumulative global emissions since 1850. It follows the People’s Republic of China (PRC), which is responsible for around 11% of global emissions, and the United States, which has reportedly released more than 509 gigatons of carbon dioxide (CO₂) since 1850, comprising some 20% of the global total. Most greenhouse gas emissions are production-based, whereby most of the country emissions, that is, around 80%, come from the energy sector burning fossil fuel. Russia also ranks very high in terms of per-capita emissions, as it emits 11 CO₂ tons per person per year, that is, twice the world average, which places it fifth in the world ranking, behind the United States, Estonia, Australia and Trinidad and Tobago.Footnote ¹⁹

Russia is also one of the States most affected by climate change, so much so that it is predicted that global warming will exert the strongest impact on Russia’s strategic future for decades to come, more than any other political conjuncture – indeed, warming in Russia is reportedly progressing two and a half times faster than in the rest of the world. As a consequence, permafrost – permanently frozen subsoil which covers nearly two-thirds of Russia’s landmass – is quickly thawing. In 2020, regions across the country experienced the hottest temperatures on record, triggering flash floods that destroyed entire villages in Siberia and forest fires that burned through acreage the size of Greece, emitting one-third more CO₂ into the atmosphere than in 2019, while Arctic Sea ice coverage shrank to its second-lowest extent in over 40 years.Footnote ²⁰

Legally, Russia has ratified both the UNFCCC and the Paris Agreement, but, for a long time, public discourse has denied the scientific reality of climate change, with the country deploying only limited efforts to decarbonise and incentivise the green economy.Footnote ²¹ After ratifying the Paris Agreement on 15 October 2019, Russian President Vladimir Putin still expressed doubts on the possibility of a global shift to renewable energy.Footnote ²² In November 2020, the country announced an updated emission reduction target of at least 30% below 1990 levels by 2030. In 2021, for the first time, Putin mentioned the mitigation of climate change as a key State priority, which resulted in the adoption of national legislation setting limitations on greenhouse emissions.Footnote ²³

4.2.2 Spheres of Influence and Deficient Climate Policies

In October 2021, the Russian government approved a long-term climate strategy, establishing a net zero emission target by 2060, with an 80% reduction below 1990 levels envisioned by 2050. However, it has been noted that there is a lack of detail on how and when targeted measures will be implemented, and their projected impact.Footnote ²⁴ The country aims to achieve the objective by doubling the level of negative emissions from land use, land use change and forestry (LULUCF) between 2030 and 2050. In this respect, it is worth noting that Russia’s forests account for one-fifth of the world’s total. At the same time, the Ministry for the Environment announced the intention of calculating emissions by including negative emissions from unmanaged forests, which nonetheless violates United Nations (UN) guidelines for national inventories and excludes deep cuts in emissions from fossil fuel combustion. This is within a context whereby Russia’s LULUCF capacity as a carbon sink has declined from 723 megatons of carbon dioxide equivalent (CO_2-e) in 2010 to 535 megatons of CO_2-e in 2019 and is expected to continue declining to 246 megatons of CO_2-e in 2030 under the current climate policy. Moreover, given that in 1990 Russia (as the then-Russian Soviet Federative Socialist Republic) was still part of the Union of Soviet Socialist Republics (USSR) and emitted nearly 2.4 billion tons of CO₂, as the USSR’s successor State at international law the country can effectively increase its emissions over the next decades. Russia’s 2021 Energy Strategy has thus been criticised for largely focusing on promoting fossil fuel extraction, consumption and export to foreign countries, threatening the future of the Paris Agreement.Footnote ²⁵

In 2021, Russia introduced a federal law, ‘On Limiting Greenhouse Gas Emissions’, which establishes a national cap-and-trade system.Footnote ²⁶ Fundamentally, that law determines greenhouse gas reduction targets, compels businesses emitting large amounts of greenhouse gases to report on emissions and introduces ‘carbon units’ as tradable property rights. It also establishes the right of natural and legal persons to take part in climate projects aimed at reducing greenhouse gas emissions or improving carbon sinks. The law outlines reporting and monitoring procedures for greenhouse gas targets and tradable units to be spelled out in detail via further regulations, including liability under the Code of Administrative Offences of the Russian Federation for late, inaccurate or omitted reporting. These measures have nonetheless been criticised in many respects, as they do not directly establish quotas or penalties for large greenhouse gas emitters, but only require enterprises to report on emissions starting in 2023. Similarly, it has been noted that Russia’s renewable energy sector has no targets in place, except for a very modest renewable electricity generation target of 4.5% – excluding hydropower – by 2024, which it is unlikely to achieve. Therefore, it is considered that if Russia does not set more ambitious targets for emission reductions and provide additional financial input, instead of rapidly declining, its emissions are predicted to either flat-line or increase by 2030.Footnote ²⁷ Additionally, in 2020 Russia abolished mandatory energy-efficiency standards for new buildings and replaced them with mandatory automated heating controls and prohibitions on inefficient heating systems. Furthermore, measures in the transport sector remain very limited, with next to no electric vehicles sold in the country in 2020 and no programmes to reduce emissions from heavy-duty vehicles. In the light of these data, Russia’s climate action is rated as ‘critically’ or ‘highly’ insufficient with respect to the 1.5°C increase threshold envisaged in the Paris Agreement, in terms of policy and action, domestic targets, fair-share targets and climate finance.Footnote ²⁸ Russia’s current emission trend is indeed predicted to lead to an average temperature increase of 3–4°C.

Developments in the area of investment confirm that the Russian system is not geared towards the implementation of an effective green transition. Foreign investment in Russia is regulated by federal legislation that protects investors in fossil fuel from expropriation on the same footing as investors in renewables.Footnote ²⁹ International investment agreements are underpinned by the same logic and lag behind recent proposals to align international investment treaties with climate-friendly policies,Footnote ³⁰ in contrast with the approach promoted by the EU.Footnote ³¹ It has thus been suggested that Russia urgently increase its financial contribution to the implementation of the Paris Agreement and stop funding fossil fuel abroad.Footnote ³² However, the recent announcement of a gas deal worth around US$117.5 billion, including a 30-year gas contract boosting Russia’s gas supply to the PRC by ‘a quarter’, does not seems to be primarily rooted in the logic of climate sustainability.Footnote ³³

Rather than pursuing an effective climate policy, it has been convincingly asserted that Russia uses its energy resources, particularly oil and gas, as a ‘weapon’ to increase its ‘spheres of influence’.Footnote ³⁴ The doctrine is still largely rooted in Cold War thinking, which purports that only powerful nations have a right to full sovereignty and can maintain it by establishing a degree of control over neighbouring countries.Footnote ³⁵ In this context, market opportunities and security challenges merge, as dependence on Russian gas makes Central and Eastern European markets vulnerable to supply cuts and allows Russia to leverage energy as a tool to implement its foreign policy.Footnote ³⁶ Thus, for instance, in 2006 Russia shut down the Druzhba pipeline, allegedly for repairs, disrupting oil supply to Lithuania for several years, after Mazeikiu, a Lithuanian oil refinery, had been sold to PKN Orlen, a Polish company.Footnote ³⁷ In July 2008, Russia significantly reduced oil supplies to Czechia for several weeks, alleging technical problems, after Czechia signed an agreement for the provision of missile defence systems with the United States.Footnote ³⁸ When in 2009 Putin approved the interruption of gas supply to the EU following a dispute with Ukraine over gas transit fees and other payments concerning a pipeline connecting Russia, Ukraine and the EU, the fact that Ukraine abandoned plans to alternatively import gas from Turkmenistan resolved the crisis and the gas flow resumed.Footnote ³⁹ Along these lines, the fact that Russia is extending its sovereign claims and military presence in the Arctic have prompted scholars to speak of a ‘path dependency’ caused by a ‘hydrocarbon culture’, which would accentuate large-scale and State-led projects supported by authoritarian rules.Footnote ⁴⁰

4.4.1 Implications of War in Ukraine

The necessary premise for the EU and its Member States to accelerate the Green Deal is the possibility of relinquishing their current ties with, and therefore their dependence on energy supply from, Russia. It is indeed imperative to cut off long-term production and transportation agreements with State-controlled multinational energy corporations, which have been used as a foreign policy tool to establish commercial relationships that perpetuate Russia’s influence over the EU.Footnote ⁶³ It thus bears asking – can the EU, its Member States, and companies operating in the energy sector abandon current contracts with Russia and Russian companies?

With specific regard to the conflict in Ukraine, war de facto limits trade between hostile countries, but does not preclude it out of hand.Footnote ⁶⁴ Within this context, unless they are justified by specific exceptions, measures such as restrictions on energy export and import do not exclude responsibility under conventional obligations, such as those embedded in agreements under the World Trade Organisation (WTO), bilateral investment treaties and multilateral investment agreements. Thus, the aggressor should be held liable to compensation vis-à-vis foreign investors as well as importers and exporters affected by a disruption of economic relations. By contrast, the victims should be able to invoke justifications such as necessity under Article 25 of the International Law Commission’s (ILC) Draft Articles on State Responsibility (DASR) and on the Responsibility of International Organisations (DARIO), or specific provisions such as Article XXI(b)(iii) of the General Agreement on Tariffs and Trade (GATT) and Article 13 and 24(3)(a)(ii) of the Energy Charter Treaty (ECT), which provide that war excuses measures in derogation from the fundamental tenet of free cross-border trade and investment. It is also worth noting that public property, including energy and energy infrastructure, must be administered by the occupying power, which is in fact only considered an administrator of public buildings and real estate belonging to the hostile State situated in the occupied country. Therefore, the occupying power must safeguard the occupied country’s properties and administer them in accordance with the rules of usufruct (Hague Regulations on Land Warfare Articles 53 and 55). Along these lines, under both Article 23(g) of the Hague Regulations on Land Warfare and Article 53 of the Geneva Convention IV on the Law of War, the occupying power cannot destroy enemy public and private property, unless this is imperatively justified by the necessity of war.

As concerns private economic relations, war affects contracts between individuals and companies related to the parties to a conflict, or contracts between companies and States involved in war. Thus, Shell, TotalEnergy and Exxonmobil have already divested their engagement in energy operations in Russia to varying extents. Shell, for instance, has entirely pulled out, in a move that could cost the company between around 3.5 and 18 billion pounds sterling.Footnote ⁶⁵ The EU and its Member States also have a clear interest in limiting relationships with Gazprom, as the policies of the company ‘are shaped by both commercial considerations as well as Russia’s foreign policy objectives’.Footnote ⁶⁶ Fundamentally, the object of a contract may perish and its execution may become problematic owing to the dangers related to combat operations. In principle, the obligation of performance is discharged if it becomes unexpectedly burdensome or otherwise impossible.Footnote ⁶⁷ This approach is codified in Article 79 of the Vienna Convention on Contracts for the International Sale of Goods,Footnote ⁶⁸ which provides that a debtor is not liable for failing to perform contractual obligations owing to an impediment beyond control which was reasonably unexpected at the time of the conclusion of the contract. Moreover, in common law countries the outbreak of war prohibits trading with the enemy, rendering unlawful any performance of a contract with any individuals residing on enemy territory, regardless of nationality.Footnote ⁶⁹ At the end of a war, peace treaties often apply the principle that pre-war contractual obligations resume, save different provisions and arrangements such as those establishing the UN Compensation Commission and a corresponding Compensation Fund to meet liabilities after the First Gulf War of 1991.Footnote ⁷⁰

4.4.2 Energy Supply Crisis and Necessity as a Circumstance Precluding Wrongfulness

Given the above outlined framework, prima facie, measures in derogation from free trade and investment should be allowed for Ukraine, at least pending hostilities, as the aggressed State in the ongoing war with Russia.Footnote ⁷¹ However, the question is different for the EU and its Member States, which are not (legally speaking) ‘aggressed’ countries in a state of war with Russia. Fundamentally, neutral powers are not restricted in their economic relationships with States at war, except in the provision of war material, which is subject to equal treatment – a sort of ‘most-favoured-nation’ clause – vis-à-vis belligerent States, which is an intrinsic element of neutrality that applies via a customary extension of Article 6 of the 1907 Hague Convention (XIII) Concerning the Rights and Duties of Neutral Powers in Naval War. A State may pre-emptively derogate from neutrality under particular treaty regimes,Footnote ⁷² such as Chapter VII of the UN Charter, thus qualifying as an entity not being a party to the conflict, instead of a neutral one, according to article 2(c) of the 1977 Protocol I Additional to the Geneva Conventions on the Law of War. On these terms, and in the light of their repeatedly reiterated support for, and provision of arms to, Ukraine,Footnote ⁷³ it is not easy for the EU and its Member States to argue true legal neutrality. On this basis, their classification as ‘belligerents’ in support of Ukraine would certainly allow the interruption of economic relations under provisions such as DASR and DARIO 25, Article XXI(b)(iii) of the GATT and ECT Articles 13 and 24(3)(a)(ii). However, the EU and its Member States have constantly refused a direct engagement in hostilities exactly to avoid taking on the status of belligerent powers.Footnote ⁷⁴

Given this framework, in all likelihood it can be supposed that the EU and its Member States should properly be considered ‘non-belligerent’ countries, rather than ‘neutral’ ones. For instance, prior to engaging in World War II, the United States declared their ‘non-belligerency’ vis-à-vis the UK, so as to avoid the duties of neutrality and be entitled to aid the belligerent, save armed intervention at its side. During the 2003 intervention in Iraq under the guidance of the United States, Italy also issued a proclamation of ‘non-belligerency’, while Germany did not make such a declaration but supported the actions of the ‘Coalition’ nonetheless.Footnote ⁷⁵ In the light of such precedents, the concept of ‘non-belligerency’ is not firmly established in international law and thus it is doubtful whether a declaration of non-belligerency is apt to exclude responsibility for breaching the duties imposed by neutrality.Footnote ⁷⁶ However, tertium non datur. Assuming that they are to be implicitly considered ‘non-belligerent’ vis-à-vis Ukraine and Russia, are the EU, its Member States and natural and legal persons based in their territories able to suspend contracts for the provision of energy with Russia and natural and legal persons operating there? The answer might be positive, at least for the duration of hostilities. After that, absent a specific treaty regulating the matter at the end of hostilities, the EU and its Member States might need to resort to broader arguments.

Prospectively, the EU and its Member States might claim, for instance, that war in Ukraine has triggered a situation of force majeure (DASR and DARIO article 22) or necessity (DASR and DARIO article 25) that extends beyond the conflict, particularly in the light of security of supply and conflicting obligations contracted under the UNFCCC regime. Necessity and force majeure are indeed classified either as justifications, thus precluding wrongfulness, or as excuses, thus precluding the legal consequences of wrongfulness, that is, sanctions.Footnote ⁷⁷ The Permanent Court of International Justice – forerunner to the modern International Court of Justice – did not in principle exclude that war may trigger the impossibility of performance, and thus force majeure, in the cases of the Serbian Loans and Brazilian Loans.Footnote ⁷⁸ More specifically, the EU and its Member States might invoke necessity under DASR and DARIO article 25,Footnote ⁷⁹ arguing that war in Ukraine has undermined the security of energy supply and that the sole means by which they can safeguard such an essential interest from grave and imminent peril is for them and their businesses to abandon contracts with Russian energy suppliers and move to alternative energy sources, with the green option as the preferred one.Footnote ⁸⁰ It would thus be the energy crisis triggered by war, rather than war itself, that could be relied upon as a justification to switch from (unsustainable) Russian energy supply to diversified (sustainable) sources of energy for the EU. Along these lines, in a letter to the French Ecological Transition Minister Barbara Pompili, the Greek energy minister Kostas Skrekas commented that the energy crisis caused by war in Ukraine has a ‘destructive impact’ on the life of European industries and citizens and industries, triggering a ‘crisis situation’ to be addressed by ‘an extraordinary meeting of the Council of Energy Ministers as soon as possible’.Footnote ⁸¹ Similarly, if Russia’s policies are not aligned with the standards of the European Green Deal and importing energy from Russia entails the impossibility of fulfilling clean energy obligations under the UNFCCC and the Paris Agreement, it could be argued that the conflict of obligations imposes on the EU and its Member States the necessity of abandoning existing contractual obligations vis-à-vis Russian exporters.