Russia’s Energy Politics: How Does It Impact the EU’s Energy (In)Security

Written by | Monday, October 21st, 2019
@Eubulletin

Since Vladimir Putin has been in power in Moscow, oil and gas have been an integral part of Russia’s strategy to regain influence on the world stage. Mastering gas supplies to the European Union and thwarting EU diversification efforts have long been key components of this strategy. Other policy elements have gained importance over the years, such as setting foot in the Middle East and North African (MENA) region and catering for new customers such as China. In addition, in the medium term, the surge of the United States as a major liquefied natural gas (LNG) supplier to the EU will create a new challenge for Moscow.

To achieve its objectives related to the energy field, Russia’s activities covering both oil and gas have focused on: investing in production in the MENA region; building transit pipelines; mastering supplies to the EU; increasing supplies to Asia; and weighing on prices. Overall, Russia has continuously made energy politics an instrument of its foreign policy, against the background of the major share that energy products have in global trade.

In 2018, analysts at the Jamestown Foundation argued that Russia’s strategy pursues both a global power objective and a domestic economic objective: “an overarching goal is to maintain or expand its energy markets in neighbouring western Europe and China, two of the world’s largest oil and gas consumers. By doing so, Russia appears to believe it will stabilize its economy, maximize its budget revenues and continue to re-establish itself as a global power.” To that end, Russia’s international energy policy can be seen as a three-pronged affair, consisting in thwarting the EU’s diversification strategy, setting foot in the Middle East oil and gas sector and establishing itself as a major supplier of energy to China.

A major driver of the European Union’s diversification strategy was the cut-off of gas supplies via Ukraine in January 2006: in the midst of winter, Moscow had decided to stop using Ukraine as the major gateway for Russian gas exports to the EU. The cut-off was intended to prod Europe into forcing Ukraine to capitulate in the dispute. With this abrupt development, Europe felt Russia was engaging in energy blackmail, compelling it to take steps to reduce its dependence on oil and gas, both in the short term and more importantly over the long haul. It began working on a security strategy, including the so-called “stress tests,” simulating two energy supply disruption scenarios for a period of one or six months. As a result, the “European Energy Security Strategy” was adopted in 2014.

Yet, despite the existence of a network of pipelines from the Baltic Sea and Belarus, Ukraine remains an important transit country for Russian gas. In addition, keeping some Russian gas transiting through Ukraine is a way to maintain pressure on the Kiev leadership. In an April 2018 assessment, a European Parliament study stated that “transit states are expected to behave like clients of Moscow, particularly if they are not a member of the EU or NATO. These states are the most vulnerable to energy blackmail […]. This policy of using energy exports to intimidate or bully is a demonstration of Russian realpolitik and reverberates across the European continent.”

A direct illustration of this situation is the contentious debate around the Nord Stream 2 gas pipeline linking Russia directly with Germany by bypassing Ukraine. Russia has been able to play on internal Western divisions regarding Nord Stream 2, as it is supported by Germany but opposed by the United States and Poland, for whom the pipeline could “turn Germany into a captive of Russia.” In May, a bill was introduced in the US Senate with a view to sanctioning individuals and entities involved in Nord Stream 2, while Denmark asked Gazprom to reroute the pipeline due to environmental concerns.

Similarly, with the completion of a first phase of the Turkish Stream gas pipeline (supplying Turkey via a pipeline running under the Black Sea) and the active planning of second-phase extensions to central and southeastern Europe from the European part of its territory, Turkey is seen as playing a Russian game. This project is a vivid illustration of Moscow’s strategy to strengthen its position in supplying gas to the Balkans while reducing its reliance on the Ukrainian transit corridor. However, uncertainties persist as the Turkish Stream faces the same European reluctance as the aborted South Stream gas pipeline. From the European standpoint, the project is deemed to be in violation of the EU’s third energy package, aimed at increasing competition within gas markets. Despite this warning, Serbia, Bulgaria and Hungary received the project and its 30 billion cubic metres of Russian gas with open arms.

Beyond these ambitious projects, Russia is also penetrating the energy sector in the Western Balkans by investing in energy companies (the sole oil and gas company in Serbia, Nafta Industrija Srbike, is owned by Gazprom) and supporting energy projects (new storage capacity in Croatia, exploration and production in Romania, Gazprom-branded filling station in Bulgaria). Overall, Russia is pursuing the goal of making the expansion of the Southern Gas Corridor and the realization of proposed Trans-Caspian pipeline projects less commercially viable. In short, Moscow’s aim is to counter as much as possible the export of additional volumes of non-Russian natural gas to the European Union.

However, Russia’s strategy is in no way limited to selling its gas on the European continent. On the complex and oft-changing chessboard of energy politics, Russia has shown a high degree of consistency as regards the Middle East and North Africa region. Instead of solely considering regional actors as competitors (which they indeed are, because some of the major oil and gas producers are located there), Moscow decided to undertake a policy of cooperation through a series of agreements and investment decisions in Egypt, Lebanon, Iraq, Syria, Libya and Algeria.

There is only an apparent inconsistency in Russia’s policy toward a rapprochement with Middle East oil and gas producers and exporters. It is true that Saudi Arabia is the biggest oil producer and Qatar is Russia’s largest competitor for gas exports. But seen in a global perspective, energy politics is a core component of Russia’s actions: energy being a key component of domestic and foreign policy, Moscow indeed has a crucial interest in developing better relations with a region sitting on half the world’s oil and gas reserves and is its major competitor in supplying both Europe and Asia’s major markets. Russia’s “energy politics” will likely remain a crucial component of the country’s presence on the world stage, but it will have to keep evolving in response to a fast-changing environment.

‚Russia’s Energy Politics and Its Relevance for the European Union‘ – Research Paper by Marc Pierini – Carnegie Europe.
The Research Paper can be downloaded here

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