Another Wake-Up Call? Europe Remains Divided Over Energy Security Policy

BRUSSELS -- January's two-week gas shutoff following a pricing spat between supplier Russia and transit country Ukraine could not have taken Europeans by surprise.

In January 2006, a similar conflict between the two countries led to a similar disruption.

After that crisis, it was said time and again that Europe must become serious about energy security, by developing and implementing a strategy of diversification. But not very much happened -- in large part because European countries remain divided over the lessons to be learned from the cutoff.

For one camp, the lesson of the gas crisis of 2006 was that Europe had to decrease its dependency on Russia.

According to this view, the disruption of natural-gas supplies did more than show the risks of overdependency on one supplier. It also demonstrated that the Kremlin was ready to use energy as a political weapon to regain influence in its "near abroad" and to limit Europe's political clout. For economic as well as for political reasons, Europe therefore urgently needed to diversify its suppliers and become less dependent on Russia.

One way to do that would be to build a transit route that would bypass Russia -- the Nabucco pipeline. The Nabucco pipeline is supposed to stretch from Turkey to Austria -- crossing Bulgaria, Romania, and Hungary -- and it has, in fact, the potential to significantly lessen Southeastern Europe's dependency on Russian gas.

A consortium of European energy companies is involved: Botas of Turkey, BEH EAD of Bulgaria, Transgaz of Romania, MOL of Hungary, OMV of Austria, and RWE of Germany.

Different Lesson Taken

But other European countries took a different lesson from the gas crisis in 2006. For them, the problem of energy security was one not of source countries but of transit routes. Hence, the solution would be to make the big European customers of Russian gas less dependent on Eastern European transit countries, namely Ukraine. The priority for this group of countries was to build new transit routes that would bypass Ukraine and deliver gas as directly as possible to the center and the west of Europe.

These countries -- among them Germany and Italy -- supported two projects that have been developed in close cooperation with Russian state-owned gas company Gazprom: Nord Stream and South Stream.

Nord Stream, the most advanced of the three projects, is supposed to cross the Baltic Sea, directly linking Russia with Germany. South Stream, still in a very early phase, would cross the Black Sea and end in Italy and Greece.

The majority partner in Nord Stream is Russia's Gazprom (51 percent), with the German companies BASF/Wintershall and EON both owning 20 percent. The remaining 9 percent is owned by Gasunie of the Netherlands. The chairman of Nord Stream is Gerhard Schroeder, the former German chancellor. South Stream is equally owned by Gazprom and Italy's Eni.

Nord Stream is a controversial project. Poland, Lithuania, and Estonia have voiced their opposition, and many other Eastern and Central European states are equally critical. Many critics see Nord Stream as a Russian attempt to splinter Europe. Russia would gain the ability to divide old and new members of the EU by selectively turning off the tap. Other critics question whether Nord Stream makes sense economically.

Potential Obstacles

Whether the pipeline will be built is still an open question. There are more potential obstacles: Sweden is currently conducting an environmental review of the pipeline project, as the planned route of Nord Stream would go through its waters. Finland has announced its intention to do the same next year. In view of all the obstacles, Russian Prime Minister Vladimir Putin has declared that "Europe must decide whether it needs this pipeline or not."

Other lessons from the 2006 gas crisis remain -- namely, the view that Europe is vulnerable to political pressure as long as gas markets in the European states remain insufficiently interconnected. The more European gas markets are connected, the reasoning goes, the less individual countries would be threatened by supply disruptions, because neighboring countries could immediately help out when shortages occur. A single, competitive gas market would, as Pierre Noel from the European Council on Foreign Relations has argued, help to depoliticize gas.

There are, however, "very strong vested interests" that have to be overcome. Big energy companies are usually opposed to liberalizing the national energy markets, as Katinka Barysch from the Center for European Reform in London explains. Nevertheless, the European Commission makes slow, quiet, but steady progress in pushing the European governments to open up their national markets.

All in all, 2006 was a wake-up call in the sense that the questions of energy security were set on the European agenda. The reactions, however, were shaped according to national views and interests. A common, single European energy policy did not emerge.

So, will it be different this time? Will the renewed disruption of European gas supplies, which left millions of European citizens in the cold for more than two weeks in one of the frostiest winters in the last decades, lead to a new push toward a unified European energy policy? Will the European governments unite and come to a single approach to energy, speaking with one voice to actual and potential gas suppliers and put its political weight behind specific pipeline projects?

'Completely Unwise'

The president of the European Commission, Jose Manuel Barroso, has said it is time to get serious.

"This crisis has confirmed what we have said when we were proposing this diversification strategy to our member states," Barroso said. "It is completely unwise for one country to rely only on one supplier."

In his approach, Barroso is trying to build bridges between the different European camps. Diversification means both new transit routes and new suppliers.

"By definition, diversification is part of an energy security strategy. Diversification of countries of origin of energy, diversification of transit routes, and, of course, diversification of the sources of energy," he said.

At the same time, however, the fight between the different camps continues.

Czech Prime Minister Mirek Topolanek, whose country currently holds the EU's six-month rotating presidency, has recently made clear that it is now the time to become less dependent on Russia. Europe should put its weight behind Nabucco, because this project is "a strategic project crucial for the economic prosperity and political independence of the whole of Europe."

The European Commission has declared that it would support the project. It has proposed to invest 250 million euros to the European Investment Bank to help it secure loans for the Nabucco pipeline. But this would cover about 3 percent of the huge building costs, and does not represent the direct investment the project needs.

'Better Diversify'

In order to get off the ground, analysts stress, Nabucco would need stronger support from key EU member states, such as France and Germany.

In a recent letter to Barroso, German Chancellor Angela Merkel declared that the EU "needs to better diversify its gas supply and transit routes." Europe, Merkel said, should support all three pipeline projects -- Nord Stream, South Stream, and Nabucco.

"It is of great significance," Merkel wrote, "that these projects are politically desired and supported by all EU member states."

While Germany understandably remains focused on Nord Stream, Merkel's letter can be seen as an offer of compromise -- a step toward a unified European position.

Jan Techau, the director of the Alfred von Oppenheim Center for European Policy Studies in Berlin, sees Merkel's letter as an attempt to take the lead on European energy policy by building common ground.

"All Europeans should support all three pipeline projects, as all three are useful for Europe," Techau says in summarizing Merkel's position.

"That she puts all three projects on the same level indicates a new approach, a new commitment. Before they have been arranged in a hierarchy, especially by Germany," Techau adds.

Good Chance For Broad Support

With this formula -- equal political support for all three pipeline projects -- the German chancellor offers a compromise that all parties might agree on. The formula has a good chance to get broad support at the March council, the next meeting of the European Union's heads of state, which will see energy security high on his agenda.

What follows from such a verbal consensus is, however, an open question.

For the time being, Nord Stream, South Stream, and Nabucco are no more than largely unrealized projects. The pipeline game has yet to be resolved, and whether the European summit in March will come to bold conclusions is rather questionable, given the fact that the recent gas disruption has not led to an end to differences of views and interests among the European member states.

At the moment at least, is looks as if Europe remains divided over its energy policy.