Meeting the external challenge posed by Russia requires a major re-orientation of EU energy policy and a robust approach to security of supply, writes Dieter Helm in a 3 September paper.
The professor of energy policy at the University of Oxford describes Europe’s growing dependency on imported gas from Russia as “a striking feature” of its energy mix and says “it is against this background that European energy policy should be assessed”.
Helm claims that the EU’s “internal focus” has had “limited success”, as it has attempted to liberalise “without first ensuring the physical European networks are in place through which competition might flow”, while “the Commission has presided over, and at times even encouraged […] mergers which have reduced scope for an effective competitive market”.
The author believes that the EU should have focused on developing a coherent response to Russia and Gazprom, instead of allowing Putin “to run rings around” it, nationalising reserves, monopolising pipelines, building up a bilateral relationship with Germany and undermining competitive pipelines from the Caspian.
He gives three reasons why gas dependency is a key issue for the EU to address:
- Gas is a regional rather than global commodity;
- gas is essential for electricity, and electricity cannot easily be stored; and;
- its dependency is with Russia, bringing “all the historical baggage” that entails.
The reluctance of member states to allow security of supply matters to be negotiated at EU level “has already had real costs” to the Union, claims Helm – adding that “the choice is now between the national interests of the dominant countries [citing Germany and France] and the wider EU interest”.
Moreover, he argues that Russia’s strategy – to maximise the economic and political leverage of its energy assets and limit the EU diversification options – is rational, coherent and successful and “unlikely to change any time soon”.
Helm concludes that “there is not much of a European energy market” and that the ‘unbundling’ agenda, too centred on competition issues, should focus on the creation of a truly European grid and an EU-wide policy of ‘strategic storage’.
The components of an EU energy policy framework which addresses the Russian question are “relatively simple and straightforward”, but “the solutions are political and will require EU members to subsume their immediate interests to the greater good”, he adds.