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The Politics of Energy: EU-Russian Energy Relations

Kevin Shaabi breaks down the convoluted issues pertaining to European energy and its reliance on Russian gas.

Bilfinger - Natural gas pipeline USA. [Bilfinger SE, Flickr.com]

Energy is a question of the security of nations, and in the current geopolitical climate of Eurasia, the EU finds itself misplaced to defend against those who threaten its ideals. At present, Putin’s increasingly emboldened Neo-Soviet agenda has brought war to the EU’s very doorstep. With military intervention in Ukraine and further afield in Syria, the propagation of oppression and authoritarianism continues to clash directly with the European aspiration to uphold values of democracy, pluralism, and free speech. However, when Russia forged its post-Cold War identity as the leading global supplier of natural gas, the EU became a dependent and vulnerable energy actor, relying heavily on Russian pipelines for much of its energy requirements. A third of its oil and natural gas imports are Russian1, accounting for 36% of domestic gas consumption in Germany2 and 100% in the Baltic states and Finland3. The twelve pipelines that connect Russian supply to the EU market grant Putin an enormous political advantage. Owned by Gazprom, Russia’s state-run gas company with a monopoly on gas exports, they are physical extensions of Moscow’s power into Europe, and in the words of Dick Cheney, “tools for intimidation and blackmail”4.

2006 and 2009 saw cutoffs in Gazprom’s supply lines to Lithuania and to Ukraine respectively, after price disagreements. As 80% of Gazprom’s EU traffic runs through the Ukrainian pipeline5, the latter incident affected 16 countries, creating a humanitarian emergency in the Balkans as homes endured three weeks of winter without heating. The pipeline shutdowns of 2006 and 2009 were glimpses into the power Russia may exert over Europe if and when it chooses to do so. They revealed that, for all its bluster about sanctions, the EU cannot adequately challenge, or meaningfully impose any economic punishment on Russia while it powers its cities with Russian energy. This centralisation of Russia’s oil and gas industry highlights Putin’s understanding of the importance of the politicisation of energy, and perhaps more importantly, the EU’s tardiness in doing so. It also proves that Russia is, in the long-term, an unreliable energy partner.

Signing of a deal (20-01-2009) which ended a month long dispute over gas prices and shut of half of Europe of vital natural gas for almost 2 weeks during mid-winter [http://www.tymoshenko.com.ua/eng/photo/]

Signing of a deal (20-01-2009) which ended a month long dispute over gas prices and shut of half of Europe of vital natural gas for almost 2 weeks during mid-winter [http://www.tymoshenko.com.ua/eng/photo/]

In response to a 1999 paper published by the EU titled The Common Strategy on Russia (CS), Russia issued a Medium Term Strategy (MTS) for the first decade of the century, simultaneously enumerating a contribution of Russia’s energy sources to “the strengthening of Europe’s common positions in the world” and aiming to create a “joint long-term energy policy in order to create a common European, and in the long run, Eurasian energy space”6. The EU’s responsibility in this partnership is simply to continue to guarantee security of demand and to assist in the gradual regeneration of Russia’s energy sector in a way acceptable to Russia. It was surprisingly unshaken by this unambiguous call for a shift in the geopolitical structure of power away from Western Europe and towards Moscow, and has only recently awoken to its potential bargaining power as Russia’s nearest and largest energy market.

With the accelerating threat of climate change, there is an emerging environmental incentive to diversify sources of energy away from Russian non-renewables and towards an internal renewables market. Although not immediately followed by the necessary changes, a 2006 Green Paper entitled ‘A European Strategy for Sustainable, Competitive and Secure Energy’ suggested that if “the EU backs up a new common policy with a common voice on energy questions, Europe can lead the global search for energy solutions”7. The EU’s €80 billion Horizon research programme, aimed at funding innovation in several fields including energy is certainly a step in this direction. More recently, the Paris Agreement of 2015 called for an Energy Union; that is, a single market enabling the free movement of energy across EU28 member nations. The Agreement draws on the 2009 Renewable Energy Directive that aims at obtaining 20% of the EU’s energy from renewable sources by 20208. Most participants are on track for this target, and indeed there is data to support the notion that a coordinated large-scale shift to renewables is possible — and wise.

Since 1990, there has been a tripling of production of renewables in the EU, which at present derives 30% of its electricity and 15% of its total energy from renewables. Sweden, for example, uses a combination of solar, wind, hydro, and biofuels for over 50% of its energy needs9. Swedish businesses are obligated to use and produce renewables through an ‘electricity certificate’ scheme shared with Norway, replacing subsidies and creating a common market for green energy production that may well be extended across the EU as part of the Energy Union. Sweden’s example is one that showcases the potential for government-induced incentives to catalyse the private sector acceleration of the development of renewables in a way that achieves a broader geopolitical goal.

Heads of delegations at the 2015 United Nations Climate Change Conference in Paris. [Presidencia de la República Mexicana, Flickr.com]

Heads of delegations at the 2015 United Nations Climate Change Conference in Paris. [Presidencia de la República Mexicana, Flickr.com]

Although there has been some shift in dialogue towards a more collective, interdependent energy policy, much of the talk has still remained that: talk. The frameworks for actionable development exist, but the conviction to act upon them is lacking. The Paris Agreement is a non-binding agreement with voluntary national targets, and — in the absence of a legislatively authoritative international body — without enforcement. After being ideated in a hypothetical framework, the Energy Union is far from a reality, and requires much infrastructural development before it becomes a functional integrated single market for energy. The EU is instead preoccupied with other leaky solutions, such as sourcing oil and gas from the Middle East, North Africa, and Central Asia, where political instability, poor infrastructure, and once more the use of external agents are all factors that threaten the long-term security of an energy supply.

The EU’s greatest weakness in energy policy has been that it has no unified voice as an energy actor; each member state ranks energy differently in its foreign policy priorities, and there is no pan-European security policy. Furthermore, the prevalence of profit-seeking corporations who place private interests above political ones undermines the strength of the Union. As a result, member states have failed to secure their access to energy by engaging politically with producer states, or by investing in Russian energy infrastructure. Problematically, the Union is also tied up in a series of contracts that oblige it to import 180-200 billion cubic meters of Gazprom gas up until 203010, making it less immediately appealing to seek alternatives.

The Renewable Energy Directive provides an insight into some of the causes for EU inertia, citing a lack of cooperation between governments, a need for further decentralisation in the energy sector as Germany has achieved, more transparency, and the need for a one-stop shop system for Small and Medium Enterprises to de-bureaucratise the process of becoming greener such as the ones implemented in the Netherlands and Belgium11. If the environmental incentives are not sufficient, then the geopolitical ones ought to be. A successful implementation of these reforms in the near future would severely hinder Russia’s capacity to be an aggressor.

Currently the largest exporter of oil and natural gas to the EU, whose business accounts for 68% of export revenue12, 16% of GDP and 52% of federal budgets revenue13, Russia is also dependent on the EU’s vast and constant external energy requirements. If these were to dwindle, Putin would find himself with significantly smaller pockets, standing against a strong, united Europe. Although the global fall in oil prices has removed Russia from the world’s top three defence spenders, it still spends 5.4% of its GDP on its military at $66.4 billion (for reference, the US and China spend 3.3% and 1.9% of GDP respectively)14.

A large reduction in — or eventual termination of — Russian-EU oil and gas exports would hamper Russia’s federal budget revenues and allow Europe to take control of pipeline traffic as it varies its demand according to its foreign policy requirements. A concentrated shift towards renewables shared across a single market is in Europe’s best interest, making it self-sufficient and self-reliant. This would have a much greater effect on limiting the funding, power and incentives that Putin has for military interventions like the ones in Ukraine and Syria, and provide the EU with a credible and effective economic tool to challenge Russian expansionism and advances on democracy. At a time of divisive populism and Brexit, when Eastern Europe’s future in the EU is threatened by euroscepticism and an anti-immigration sentiment, it is unclear whether the EU will be able to pull together over a matter as overlooked as energy — but it must try.

 

Kevin Shaabi is a first year Philosophy, Politics and Economics student with an interest in geopolitics and development.

Notes:

  1. “Energy Production and Imports.” Eurostat – Statistics Explained. N.p., 21 Sept. 2016. Web. 26 Oct. 2016. <http://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_production_and_imports>.
  2. Federal Ministry for Economic Affairs and Energy, Department ‘ “Natural Gas Supply in Germany.” BMWi – Federal Ministry for Economic Affairs and Energy. N.p., n.d. Web. 26 Oct. 2016. <http://www.bmwi.de/EN/Topics/Energy/Conventional-energy-sources/gas.html>.
  3. “Assessment Report of Directive 2004/67/EC on Security of Gas Supply.” European Commission, 16 July 2009. Web. 26 Oct. 2016. <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2009:0978:FIN:EN:PDF>
  4. Kramer, Andrew E. “Lithuania Suspects Russian Oil Grab.” The New York Times. International Herald Tribune, 27 Oct. 2006. Web. 26 Oct. 2016.
  5. Pirani, Simon, Jonathan Stern, and Katja Yafimava. “The Russo-Ukrainian Gas Dispute of January 2009: A Comprehensive Assessment.” Oxford Institute for Energy Studies 15.1 (2009): 59-66. Feb. 2009. Web. 26 Oct. 2016.
  6. Hadfield, Amelia. “EU–Russia Energy Relations: Aggregation and Aggravation.” Journal of Contemporary European Studies 16.2 (2008): 231-48. Web. 26 Oct. 2016.
  7. Hadfield, Amelia. “EU–Russia Energy Relations: Aggregation and Aggravation.” Journal of Contemporary European Studies 16.2 (2008): 231-48. Web. 26 Oct. 2016.
  8. “Renewable Energy Progress Report.” European Commission. European Commission, 15 June 2015. Web. 11 Nov. 2016. <http://eur-lex.europa.eu/resource.html?uri=cellar:4f8722ce-1347-11e5-8817-01aa75ed71a1.0001.02/DOC_1&format=PDF>
  9. “Renewable Energy Statistics.” Eurostat. N.p., n.d. Web. 10 Nov. 2016. <http://ec.europa.eu/eurostat/statistics-explained/index.php/Renewable_energy_statistics>.
  10. Pirani, Simon, Jonathan Stern, and Katja Yafimava. “The Russo-Ukrainian Gas Dispute of January 2009: A Comprehensive Assessment.” Oxford Institute for Energy Studies 15.1 (2009): 59-66. Feb. 2009. Web. 26 Oct. 2016.
  11. Hadfield, Amelia. “EU–Russia Energy Relations: Aggregation and Aggravation.” Journal of Contemporary European Studies 16.2 (2008): 231-48. Web. 26 Oct. 2016.
  12. “Russia Gross Export Sales, 2013.” EIA. U.S. Energy Information Administration, 23 July 2014. Web. 26 Oct. 2016. <http://www.eia.gov/todayinenergy/detail.php?id=17231>.
  13. “Russia.” EIA. U.S. Energy Information Administration, 12 Mar. 2014. Web. 26 Oct. 2016. <https://web.archive.org/web/20140324135804/http://www.eia.gov/countries/cab.cfm?fips=rs>.
  14. Kazak, Sergey. “Russia to Up Nuclear Weapons Spending 50% by 2016”. RIA Novosti.

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