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EU: The Energy Dilemma -- With Or Without Russia?

  • Ahto Lobjakas --> (epa) The EU summit opening in Brussels on March 23 has energy security as its key topic. Relations with Russia are center stage. Russia is the EU's most important energy supplier, and also controls key transit routes from Central Asia. However, its reliability is increasingly being called into question.

BRUSSELS, March 22, 2006 (RFE/RL) -- To say that the EU summit is preoccupied with energy is another way of saying it is preoccupied with Russia.

The Russian-Ukrainian standoff in January, which led to shortfalls in gas deliveries further west, was a rude awakening for the EU. It imports half of its gas from Russia -- and while the bloc's oil consumption is stable, the need for gas keeps increasing.

Underlining Russia's key place in EU energy security plans, European Commission President Jose Manuel Barroso met Russian President Vladimir Putin in Moscow on March 17.

On March 21, Barroso said he had received assurances from Putin that Russia wants to be a "credible and stable" partner for the EU. But Barroso was forced to concede that there was no progress on two key issues for the EU.

"I cannot say that we agree on everything," Barroso said. "As regards the European Energy Charter, President Putin maintains the familiar Russian position to not ratify the charter. As to the 'third-party access' -- the access to networks inside Russia -- President Putin believes that cannot be granted for the time being."

These two issues exemplify the EU's problem.
"We observe Gazprom trying to multiply both its diversified routes on either side of Ukraine and its attempts to establish footholds or more than footholds in the gas-distribution networks in as many European countries as possible." -- analyst

Brussels is trying -- so far unsuccessfully -- to get Russia to ratify its Energy Charter setting specific international legal standards that Moscow must meet to make it possible for EU companies to invest in Russia.

Equally unsuccessfully, Brussels is trying to get Moscow to include a protocol in the Energy Charter that would allow EU companies access to Russian pipelines in order to use them to buy oil and gas directly from Central Asia.

In Search Of Realistic Alternatives

An increasing number of politicians and analysts in the EU hold the view that if Russia is an obstacle, the EU should look elsewhere. Michael Emerson, an analyst with the Center for European Policy Studies, wrote in a recent opinion piece in the weekly "European Voice" that Russia seeks to "exercise unconstrained monopoly power where it can," and has grossly abused it.

Speaking to RFE/RL, Emerson said Russian authorities make no secret of pursuing Russia's national interest in running the state-owned gas giant Gazprom. He said the only way for the EU to force Russia to respect multilateral, market rules is to show "credible" intent to look for alternatives.

"The main leverage is the credibility of [the EU's] diversification options elsewhere, which concerns the gas supplies by pipeline [from] the Caspian and the Middle East, it concerns gas -- LNG [liquid natural gas] -- reception facilities, and it goes on then into the broader agenda of energy diversification, clean coal, nuclear [energy], renewables, and so on and so forth," he said.

Emerson said the EU must make some key decisions soon. He said one such is whether to build the mooted "Nabucco" pipeline from Turkey to Southeastern Europe. A linked decision will be from where to draw the gas supplies -- whether from Central Asia across the Caspian Sea and via the Caucasus, or from Russia through its Blue Stream pipeline to Turkey. However, Emerson noted that the capacity of Nabucco would come nowhere close to rivaling the trunk lines entering Europe via Ukraine.

Just Business

Julia Montanaro-Jankovski, a researcher with the European Policy Center, told RFE/RL that the fear of Russia is exaggerated and there is no evidence of a malicious political intent in recent Russian energy decisions.

"I think there's two different types of things, in the sense that it's clear that Putin effectively wants to use energy, or is using energy, as a tool to place Russia more clearly on an international stage of politics," she said. "This is why in the [Group of Eight] G8 summit that's the major priority, this is why Putin [on the] whole through energy and through other things has really tried to regain the prestige of Russia on the international arena."

Montanaro-Jankovski said the spat with Ukraine was a business conflict and that Moscow was not trying to use energy to achieve political ends. She argues that Gazprom is no different from the majority state-owned energy companies in France or Norway.

Both Emerson and Montanaro-Jankovski acknowledge the huge potential of Kazakhstan, Turkmenistan, and Uzbekistan as alternative gas suppliers. But, Emerson said, Kazakhstan and Uzbekistan are being actively courted by Russia and have yet to decide whether to invest in a trans-Caspian pipeline, aiming for an independent link-up with Europe via Nabucco.

Montanaro-Jankovski noted that the region currently remains "dependent" on Russia, adding that Kazakhstan would be the only viable partner for the EU, as the two others are run by unreformed dictatorships.

Emerson argues that the EU must diversify its energy supplies to counteract Russia's strong-arm tactics. He said Russia must be made to understand its future as Europe's preeminent energy supplier is at risk.

He said Gazprom -- and by extension the Russian government -- is involved in "very lively strategic diplomacy," trying to bypass Ukraine by means of building a pipeline under the Baltic Sea and augmenting the one heading for Turkey.

"We observe Gazprom trying to multiply both its diversified routes on either side of Ukraine and its attempts to establish footholds or more than footholds in the gas-distribution networks in as many European countries as possible," Emerson said.

Montanaro-Jankovski disagrees. She said the EU should not view the Gazprom moves as politically threatening. Instead, she said, the EU is much more threatened by the possibility that insufficient investment could lead to a sudden collapse of Russian deliveries.
Russia's Gas Strategy

RUNNING HOT AND COLD The crisis over Russian supplies of natural gas to Ukraine that erupted on New Year's Day has implications that spread well beyond these two countries and will impact both economic and political policymaking throughout Europe. On January 19, RFE/RL's Washington, D.C., office hosted a briefing the examined the ramifications of the natural-gas conflict.

CLIFFORD GADDY, a senior fellow at the Brookings Institution, outlined Russia's "grand energy strategy," in which Ukraine is perceived as merely an obstacle frustrating Russia's energy ambitions in Western Europe and therefore a nonentity in Russia's broader strategic planning. According to Gaddy, Russia's strategic goal regarding energy is to maximize the role of its own energy resources in the world energy markets, so as to increase its geopolitical influence. To do this, it must reduce competition and maximize dependency on its own energy resources, as well as ensure a stable supply.

TARAS KUZIO, a visiting assistant professor at George Washington University, rebutted Gaddy's argument, claiming that Russia's actions evidenced a complete lack of geopolitical strategy and resulted in strong denunciations by Western countries and a loss of political allies in Ukraine. According to Kuzio, Russian President Vladimir Putin's desire to have a deal signed by the January 4 European Union energy summit outweighed his hope of reinforcing opposition to Ukrainian President Viktor Yushchenko during the run-up to Ukraine's March 26 parliamentary elections.

RFE/RL Coordinator of Corruption Studies ROMAN KUPCHINSKY did not fully agree with Kuzio's assessments of Yushchenko or Ukraine. He outlined three major problems that are feeding the conflict between Russia and Ukraine. The biggest, he argues, is that the state-controlled Russian gas giant Gazprom holds a monopoly on natural-gas sales outside the CIS. Kupchinsky also decried Ukraine's consumption of natural gas, terming it "out of control." Corruption is also a major factor in the conflict, Kupchinsky said, although the extent to which it taints the deal struck between Russia and Ukraine remains unknown.


Listen to the complete panel discussion (about 90 minutes):
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Moscow's New Energy Strategy

Moscow And Energy Leverage

Russia's New Imperialism

Who's Afraid Of Gazprom? Controlling Gas Pipelines