Pipeline politics? Russia and the EU's battle for energy

  
Pipe in the sky

While Russian gas giant Gazprom is drawing up long-term plans to strengthen its grip on Europe with pipeline projects backed by the Kremlin, the EU's response strategies are only in the early stages of development.

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Overview

Russian ambitions

Recent developments have shown that using energy as a tool, Russia is increasingly able to influence EU decision-making, primarily through "divide and rule" tactics. 

Emboldened by the flow of petrodollars (and euros) in recent years, Russia has revealed ambitions to block plans to bring gas from Central Asia into the EU, bypassing Russian territory. 

In addition, Russia is devising plans to avoid unfriendly transit countries. The Nord Stream and South Stream pipelines under the Baltic and the Black Sea are part of this strategy. The policy would also allow Moscow to keep traditional transit countries under pressure, as supplies to those states could be cut without affecting deliveries to the West. 

Russia: Friends and foes in Europe

recent study by Stefano Braghiroli and Caterina Carta has categorised EU countries according to their level of loyalty towards Russia. 

  • On one extreme are the "Eastern divorced" countries of the former Soviet bloc, which nowadays are for the most part hostile to Moscow (Estonia, Lithuania, Poland, Latvia, the Czech Republic and Slovakia).
  • On the other are the "loyal wives", which maintain good relations with Russia (Italy, Austria and Greece).
  • In between are the "vigilant critics" (Romania, Slovenia, Sweden, Bulgaria, Hungary and the United Kingdom)
  • and the larger group, the "acquiescent partners" (Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Portugal and Spain). 

Sympathy with or antipathy towards Russia may not represent the main disruptive force within the EU. But there is obvious readiness on Russia's part to engage in pipeline projects with countries such as Italy, Austria, Bulgaria, Greece, Hungary, Germany and Slovenia. Conversely, Moscow clearly intends to isolate critics such as Poland, the Czech Republic, Slovakia and the three Baltic states. 

The Georgian crisis of August 2008 revealed that Russian leaders did not fear the imposition of EU sanctions on their country. The Kremlin would expect "friendly" countries like Italy, which is central to the Gazprom jigsaw, to veto all hard-hitting decisions. 

Yet the EU's moderate criticism of Russia for its "disproportionate" response to an "irresponsible" Georgian attack on its breakaway regions of Abkhazia and South Ossetia was probably the right decision, as the alternative appeared to be a return to Cold War rhetoric. Nevertheless, the influence of energy dependence over decisions made by individual EU countries cannot be ignored, despite being difficult to measure. 

Perhaps the most visible indication that Russia has regained influence in Europe came from NATO members' opposition to giving Georgia and Ukraine clear membership perspectives in April 2008 (EurActiv 02/04/08). According to observers, it was the first time that a non-NATO member – Russia – had been able to veto an American proposal to expand the alliance. 

EU response: Towards a European energy security agenda

The European Commission's Second Strategic Energy Review, unveiled on 13 November 2008, warns that Europe will continue to rely on oil and gas imports until 2020, despite efforts to switch to a low-carbon economy (EurActiv 14/11/08). 

Europe has a strong interest in a well-functioning global oil market based on transparency and reasonable, predictable prices. For gas, however, reliance on pipelines creates interdependence along the supply chain, the review warns. 

In response, the EU is seeking a balanced energy partnership with Russia and is pushing for the renewal of a wide-ranging Partnership and Cooperation Agreement (PCA), which includes energy relations as part of a broader trade arrangement. 

The EU is concerned that Russian companies are limiting their investment in developing new oil and gas fields. It is also worried about the legal difficulties encountered by European companies investing in Russia, such as Shell and BP, which have been forced to sell key assets to Gazprom to keep their operations going. 

However, the Georgia crisis of August 2008 showed that friendly European countries were unwilling to go too far in imposing economic sanctions and freezing negotiations over the new EU-Russia basic treaty (EurActiv 02/09/08). 

Should Russia fall short of its export commitments in the next few years, not only would gas prices soar, but Moscow would be able to cherry-pick individual European countries to which to sell its gas, leaving others in the dark. This is why the Commission's second strategic energy review uses the term "resilience", meaning the capacity to resist supply disruptions. 

The document also admits that there is currently no definitive emergency plan at EU level to deal with short-term supply shortfalls or disruptions. The Gas Coordination Group, a body which advises the Commission on gas supply security issues, should become a forum for this kind of work, the strategy argues. 

In addition, should the Lisbon Treaty be ratified, a mechanism would be introduced to increase solidarity among EU members "if severe difficulties arise in the supply of certain products, notably in the area of energy". Also, it was recently confirmed (EurActiv 13/05/08) that consensus has been reached in the European Parliament to create another top EU job, that of high official for foreign policy on energy security. The new office would be part of a future 'Foreign Minister's Office' created under the Lisbon Treaty. 

The January 2009 gas crisis

On 31 December 2008, Russia stopped supplying gas to Ukraine over a payment dispute. Russia said Ukraine was stealing natural gas destined for Europe for its own needs. Ukraine denied the charges, but said it needed "technical gas" to pump fuel through the pipeline system (EurActiv 05/01/09).

On 6 January, supplies to Romania, Bulgaria, Greece, Macedonia, Serbia and Croatia were completely halted (First story; EurActiv 06/01/09). It also emerged that several countries, including Bulgaria, did not have enough reserves to make up for a supply cut.

Next, the conflict left Europe with no supply of Ukrainian gas at all (Second story; EurActiv 06/01/09). Bulgaria signalled that it could restart one of the nuclear reactors at its Kozloduy nuclear power plant, the closure of which was one of the conditions of the country's EU accession (EurActiv 07/01/09). Slovakia followed suit a few days later (EurActiv 12/01/09).

At this point, the EU agreed to send observers to monitor the supply of gas earmarked for Europe (EurActiv 08/01/09). A few days of hectic telephone diplomacy followed, breakthroughs were announced, but no gas flowed. The political aspects of the stalemate began to surface amid signs that it was weakening the positions of pro-Western President Victor Yushchenko, support for whom fell to an appalling 2% (EurActiv 14/01/09).

On 17 January, at a Moscow 'summit' that wasa almost boycotted by the EU (EurActiv 19/01/09), Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Timoshenko struck a deal, saying the crisis was over. The EU reacted cautiously.

According to the deal, Kiev will pay 20% less for Russian gas than the European market price, or around $450 per 1,000 cubic metres. Meanwhile, Russia said it will continue to pay $1.7 per 1,000 cubic metres for each 100 kilometres of gas transited via the Ukrainian pipeline system. Many observers decided that Russia "won" the conflict, as the new terms appeared to be worse than those agreed a year earlier.

On 20 January, supplies to Europe began to flow again. Commission President José Manuel Barroso welcomed the resumption of deliveries, after a two-week standoff that left millions of East Europeans without heating in the middle of winter (EurActiv 22/01/09). But he also warned that long-term lessons should be drawn from the crisis.

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