Dr. Mehmet Uluğ (Roskilde University) and Dr. Roxana Andrei (University Institute of Lisbon) mehmetu@ruc.dk, Roxana.Andrei@iscte-iul.pt Geopolitical Shocks and Financial Strains: Stress-Testing the Green Transition in the Greater North European Energy Corridor Abstract The Greater North European Energy Corridor, encompassing Finland, Sweden, Denmark, Norway, the United Kingdom, Germany, Belgium and the Netherlands, plays a critical role in the global and European renewable energy landscape. The North Sea alone contains at present the world’s largest deployed capacity and expertise in offshore wind (European Commission, 20201), where the United Kingdom and Germany together account for over two-thirds of the total offshore wind power installed worldwide (Kõrts, 20232). This strategic corridor is, however, not only a green energy powerhouse but also a frontier of geopolitical vulnerability. This paper investigates the dual impact of geopolitical risk and high interest rates on the pace of the green energy transition in this region. Following Russia’s full-scale invasion of Ukraine, the European countries have been forced to accelerate energy decoupling from Russian fossil fuels. While this geopolitical rupture has catalysed a surge in political ambition and projects for renewables, emerging evidence suggests a more fragmented reality. On one hand, we observe increased investments in offshore wind and hydrogen hubs; on the other, rising geopolitical tensions - marked by hybrid threats, cyber attacks, and physical sabotage risks - have elevated investor uncertainty and raised the cost of capital. Moreover, elevated interest rates, driven by global inflationary pressures, have begun to constrain access to long-term financing for capital-intensive green energy infrastructure. This is especially evident in offshore projects, where financing costs now threaten the viability of new developments. 1 European Commission (2020). COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS An EU Strategy to harness the potential of offshore renewable energy for a climate neutral future. Brussels, 19.11.2020 COM(2020) 741 final 2 Kõrts, Marju (2023). Offshore wind farms – challenges, risks and opportunities for building more resilient national energy systems. Energy Highlights. NATO Energy Security Centre of Excellence | NATO ENSEC COE [online]. Available at: https://enseccoe.org/en/studies-and-publications/225/journals/energy-highlights-10 Drawing on empirical data and policy analysis this study explores whether geopolitical disruption serves as an accelerant or, on the contrary, as an inhibitor of the green transition in Europe’s energy Northern heartland. The findings offer critical insights for policymakers seeking to balance energy resilience, security, and financial sustainability in a time of systemic flux. Key words: energy transition; geopolitical risks; hybrid threats; inflation; interest rates

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Energy Security,Energy Transition,Geopolitics,Macroeconomics

• Ciências Políticas - Ciências Sociais