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EU energy crisis intensifies with no end in sight for Ukraine war

The war in Ukraine rages on as Kyiv's forces mount a counteroffensive in the south. Meanwhile, the war is being felt across the European Union as energy prices soar and threaten to make winter extremely difficult for businesses, governments and households.

(CN) — With the war in Ukraine intensifying and the colder months approaching, European politicians are scrambling to deal with the shock of an energy crisis that threatens to only get worse and plunge Europe into an extremely harsh winter.

Across the European Union and United Kingdom, businesses, governments and households are struggling to pay soaring prices for power and natural gas. Energy has become extremely expensive since the EU and U.K. joined the United States and other allies in launching unprecedented sanctions on Russia.

In the EU, natural gas costs 10 times more than it does in the United States and it is 10 times pricier than the average cost over the last decade. Western sanctions and Russian counter-moves to cut off gas exports have driven up prices.

It's so bad officials across the 27-member EU bloc are warning that millions of households may not be able to pay for heating, schools face closing down and businesses are going broke. Britain, which is no longer part of the EU, is struggling with soaring prices too. Higher energy prices are turbocharging inflation and dragging economies down.

“A recession is drawing closer as businesses are becoming more pessimistic about economic activity at this point,” said Bert Colijn, a senior economist at the Dutch ING Bank, in a briefing note on Tuesday.

“Things are [at] a crisis point,” Alex Munton, an expert on global gas markets at Rapidan Energy Group, told Foreign Policy magazine. “There’s genuine uncertainty whether there will be sufficient gas to meet demand throughout the winter.”

As an immediate response to the energy crisis, EU policymakers are looking at decoupling the price of electricity from the price of natural gas and offering bailouts, tax credits and other forms of help such as price caps.

But government aid can only go so far as national treasuries buckle: Last Friday, Britain's energy regulator announced an 80% hike in the cap for household energy costs and Germans were told they will pay almost 500 euros (about $500) more a year on their gas bills as part of a measure to help German utilities move away from Russian gas supplies.

In July, the European Commission laid out a plan to force EU nations to reduce their gas consumption by 15% if necessary, a move that has raised fears of gas rationing and blackouts. The EU says gas stockpiles are nearly full, but still during the winter months Europe relies on imports and demand may exceed supply as stockpiles dwindle.

In the longer term, European politicians are examining other ways of both cutting off Russian energy supplies and meeting energy needs, for instance by building new nuclear power plants, natural gas ports and pipelines.

In Moscow, meanwhile, Europe's agony is being monitored very closely as Russia seeks retribution by squeezing off gas supplies to the EU. Before the war, the EU got about 40% of its gas from Russia. The Kremlin's strategy is to use the energy crisis to force the EU to rethink its support for Ukraine and cause divisions inside the bloc.

“Step by step, unfortunately, both Brussels and individual European countries are demonstrating their absolute lack of reason,” Dmitry Peskov, the Kremlin spokesman, told reporters on Tuesday.

Peskov said such “anti-Russian impulses” are hurting European households while boosting the profits of American energy companies. As an alternative to Russian gas, the EU aims to increase American liquefied natural gas shipments.

With the war in Ukraine raging on and energy prices on the rise globally, Europe's energy crisis is set to only worsen as autumn and winter approach. For now, though, the EU remains steadfast in its support for Ukraine with German Chancellor Olaf Scholz declaring on Monday in a major speech that Germany will provide Kyiv with economic and military help “for as long as it takes.”

The fighting in Ukraine looks like it will continue for many more months, if not years.

On Monday, Ukraine began a long-awaited offensive to retake southern territories captured by Moscow since Russian President Vladimir Putin launched the invasion on Feb. 24.

Ukrainian President Volodymyr Zelenskyy has vowed that he will not sit down for negotiations until Russia is pushed out of all the lands it now occupies. At the start of the invasion, Russia and its Ukrainian allies controlled about 7% of Ukraine's territory, including Crimea, and now Moscow's forces are in possession of about 20%.

By Tuesday, fighting continued to rage on the front lines near the southern city of Kherson. It remained unclear how successful the counteroffensive was going, though Russia's defense ministry claimed more than 1,200 Ukrainian soldiers were killed. It appears that Ukrainian forces may be vulnerable as they try to cross extensive open fields in their attempts to launch attacks against Russian forces in the grain-growing southern region.

In Kherson, there were reports of gunfire on the streets Tuesday morning and explosions. Russian media outlets claimed a group of Ukrainian militants was linked to the fighting inside the city. The alleged the fighters were “neutralized,” according to RIA Novosti, a Russian state news agency.

Fighting and shelling continued in Donbas, the eastern region of Ukraine where combat has been fierce for months. The front line in this area has not changed much in recent weeks, though Russian forces continue to make small advances.

Courthouse News reporter Cain Burdeau is based in the European Union.

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