The tensions in Belarus and Ukraine often challenged the EU-Russian relations. While Human-Rights violations have been publicly criticized by the EU, Russia remains one of Europe’s most important economic partners, particularly for the eastern countries. It can be argued that this special relationship between Russia and the EU derives from a context where political and economic interest are very much intertwined with each other. Central to this relationship is the European dependency on foreign energy resources
In 2013, over half of the energy, the EU consumed has been imported, whereas gas was with 24% central to this energy mix (Siddi, 2016: 108-110). As the main supplier, Russia is responsible for 40.2% of the gas imports in the European Union, while Norway (24.9) and Algeria (12.1) are the second and third largest supplier (Siddi, 2016: 109). In contrast, the export of Russias oil and petroleum accounts for 68% of its total export revenues with Europe as the most important export market (Siddi, 2016:108-110). One element of this energy-relationship is the connection through three main routes: the Ukrainian pipeline network, the yamal-europe pipeline and the nord-stream pipeline (Paillard, 2010: 66). The network is largely based on cold-war investments with a Unified Gas Supply System (UGSS), which centralized control over the entire Soviet gas industry (Austvik, 2016: 373). Gazprom derived from the restructuration of the gas sector after the cold war and manifested the dominance of the Russian state as a main shareholder of the company (Austvik, 2016: 373). While Russia has been a reliable supplier of gas since the late 1960’s current political issues and the 2009 gas crisis, when south-east Europe has been tremendously affected by gas shortages during the cold winter, display how dependent Europe is on Russian gas (Collins, 2017: 4). Thus, it is evident that the EU’s present energy supply depends dangerously on too few sources (Weisser, cited in Yegorov and Wirl, 2008: 310).
The European dependency is generally a doubled dependency based on the infrastructure of the massive pipeline system, as well as the gas resources itself. Even if further resources can be found in the middle east, transport and long-term contracts with Gazprom determine a central obstacle for the diversification of gas imports. Due to a declining supply and a massively increasing demand, European dependence on Russia will further increase in the following years. It can be assumed that by 2030, 84% of gas will be imported to Europe (Yegorov and Wirl, 2008: 302). While the EU still has its gas reserves in the Netherlands and Norway, these reserves are very limited (max 10 years) and even North African (3rd largest importer) resources will at most be exploited by 2030 (Yegorov and Wirl, 2008: 302).
It must be highlighted that the European dependency on Russia generally results from the lack of coherency in European energy policy and the variety of distinct structures. Due to geopolitical aspects and technical difficulties, East-central Europe (particularly Bulgaria and Slovakia) are much more vulnerable to disruption in the Russian gas flow than countries like France or Spain, which are much better interconnected (Siddi, 2017:109-11). In 2008 Lithuania, Estonia and Latvia imported 100% of their natural gas from Russia whereas France imported only 14.3%(Protasov, 2010). A structural disadvantage for the EU derives here from its federal structure, where contracts are negotiated between Russian and the distinct member states with its national interests. Moreover, the ‘destination clause’ in most contracts hinders here the cross-border-sale of imported gas and prevent a re-export and further distribution of gas in Europe (Siddi, 2015: 8). While the Russian economy is equally dependent on the EU export market, the dependency mostly derives from the asymmetry between the single European members and the Monopoly of state-owned concern Gazprom (Selei, 2017: 54-57).
Gazprom holds massive leverage to play off the individual interests against each other and to hinder the competition of a free market. Despite economic drawbacks, this fact is particularly problematic when Russia uses its economic power to enforce political interests. Ronald Tusk (cited in Schubert, Pollak, Brutschin, 2014: 52). criticized particularly the German position in 2014 and concluded that Germany`s reliance on Russian Gas can effectively limit European sovereignty. Based on the fragmentation of Europe, Russia exerts a political driven price change trough manipulation of price and physical volume of oil and gas to exert pressure on governments (Collins, 2017:4). Thus, Gazprom does tolerate debts of some customers but imposes sudden payments in the case of political interests (i.e. Ukraine) (Austvik, 2016: 374).
The only solution to this very dangerous situation is a common and binding energy strategy of all EU countries. The European Commission must take the lead in directly negotiating contracts with Russia to abandon different Pricing and conditionalities (concessions). Drawing on the concept of interdependence, long-term contracts provide stability and European supply security because they manifest mutual interests. Necessary for a common policy is also a new European Gas agency and better use of the European gas coordination group to have a higher authority, which can draft development plans, hold discussions with producers and supports EU interests in international organizations (Paillard, 2010: 81).
While the third energy package has already set the scene, the European Union must integrate and liberalize the internal gas market more consequently. To enable cross border distribution in the European Union, the Destination clauses in contracts must be abandoned and gas links as well as storage capacities, co-financed by Brussels, must be implemented (Siddi, 2015:8-10). This reduces the vulnerability of the Eastern European countries and avoids the politicisation of gas shortages. While Russia’s conceptual approach to the New Legal Framework for Energy Cooperation already delivered a proposal for new cooperation, the EU must engage more actively in the dialogue for the restructuring of a global energy market.
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About the Author
Marc Oliver Heim studied International Relations and History in Vienna, London, Paris, Buenos Aires and worked for the United Nations in New York City. His main focus is global economic relations, value chains, international development, and digital capitalism.