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Waltzing in the dark. Will Russia shut off gas supplies to Europe?Published by Resilience on 2014-03-02
by Christopher Stakhovsky
With the successful Ukrainian uprising underway, Europe must start thinking about coping strategies if the conflict were to escalate. What would happen if Russia decides to up the ante and retaliate with higher gas prices or even a cutoff of supplies, in an effort to strong-arm the new administration in Kiev? What is the status of Europe’s energy security strategy?
Map of the major existing and proposed Russian natural gas transportation pipelines to Europe (15 November 2009). Source: Samuel Bailey via Wikiimedia Commons. [Added by Resilience editor.]
It takes two to tango. But what about when there are 28 dance partners, each trying to show off their own dance moves, while pretending to follow the same tune? This is how one can begin to interpret the uncoordinated steps coming from the principal dance hall of Europe, Brussels.
Take energy security for example. Since the start of 2014, Gazprom has been having a field day, running circles around the EU’s long vaunted goal of achieving energy independence from Russian gas. In a series of carefully orchestrated moves, Gazprom managed to make major headway into Europe’s energy market under the droopy eyes of the European Commission.
Last year the Russian company managed to capture its largest ever share of the European market, at 30%, an increase of over 20% from last year. This figure even surprised Gazprom officials, who even though had forecast growth, were not expecting to reach this threshold before 2020. The increase was driven by lower gas production in Europe, coupled with high consumption in Italy, the UK and Germany.
Meanwhile, Nord Stream continues to pump gas directly to the thirsty German market while South Stream isplowing ahead, with first commercial deliveries being expected in late 2015 before reaching its full design capacity by 2018.
And when Gazprom isn’t slowly dashing hopes of EU independence, Vladimir Putin is taking matters into his own hands. In Hungary, the government of Viktor Orbán closed a deal with the Russian president to invest €10 billion in the development of its lone nuclear power plant in Paks. Hungary’s defiant move comes after intense criticism handed down from Brussels over its democratic credentials, proving the limited clout the European elite is able to muster in its own backyard.
To make matters worse, the grand geopolitical project that was supposed to solve part of the supply problem, the Nabucco pipeline, fell through in June. Also known as the Southern Corridor, it was one of the most visible European initiatives to achieve energy independence by transporting gas from the Caspian via Turkey. The Azeri consortium responsible for the development of the Shah Deniz gas field chose to support the competing TAP pipeline, shelving European ambitions. By the time it will become operational, the pipeline will pump some 350 billion cubic feet per year, or about 5.5 times less than South Stream.
All these developments showcase the absence of a strategic and coherent EU policy on energy security, especially in Eastern Europe. Hindered by Brussels’ conditionalities and attracted by less strict regulatory environments, Eastern countries have chosen to pursue their strategic interests by looking East. Waltzing with the Russian bear has never been a feat Europe was able to handle. Fortunately, despite Moscow’s ambitious and often successful attempts to hold the upper hand in bilateral negotiations, its entire strategy has relied on energy exports. This is the weak link in Russia’s power chain that should be targeted if Europe hopes to remain one step ahead in the game.
Firstly, European leaders should stop being so skittish about shale gas and seize the opportunity, either by buying US gas as soon as possible or by allowing hydraulic fracturing on its own territory. The safety guidelines recently published by the European Commission, setting minimum standards of environmental protection that have to be applied by all EU member states, are a step in the right direction. According to Roland Festor, “domestic EU development (of shale gas) could create as many as 1.1 million jobs by 2050, while reducing the region's dependence on energy imports and relatively lowering prices”.
Secondly, EU policies should be more active in making gas markets more open and competitive. The antitrust caselaunched against Gazprom over its pricing practices in Europe is another move that has the potential to significantly reduce Moscow’s leverage, as the company seeks to find a mutually acceptable solution with the Commission. Another policy that should be pursued with greater focus is achieving interconnectivity among national energy markets, especially in Central and Eastern Europe.
These two alternatives concern the better allocation and diversification in the supply of fossil fuels. One shouldn’t dismiss the importance that renewable energies could play in the Union’s energy mix. Its climate policy is one of the most ambitious in the developed world, including both a reduction of 20% in CO2 emissions and a binding target of having 20% clean energy by 2020. This commitment should be pursued and enforced by the incoming European leadership because of its double-edged nature: sidelining Russian gas and fighting climate change at the same time.
Unfortunately, these alternatives are achievable only in the medium term. If Russia were to retaliate now through economic sanctions or by cutting off the gas supplies going to Europe via Ukraine, it can be assumed that most Member States will be affected. For the time being though, Moscow is more concerned with securing its strategic interests in Crimea, where it maintains its principal Black Sea military port.
Speaking with one voice will sound more and more like whispering with 28 different ones unless Europe shakes off its apathy and abandons its rigidity. Even if the goal of having a common energy security strategy is still far off, the Commission must champion the countless other measures that will stop the Union from becoming a political also-ran. Because as the music continues to flow in the background, the member states will keep at their stumbling dance, drifting further and further apart.
"Chris Stakhovsky is a Ukrainian-born and American-educated oil professional currently living in Kiev". (Source: American Thinker, November 16, 2013)
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