As a result of the crisis in Ukraine, the EU has been struggling to balance the need for energy security with its political views on Ukraine.
An engineer of a Hungarian natural gas transporting company turns a gas pipeline valve. Photo: AP
The Ukrainian crisis and the resulting rise in tension between Russia and the West have caused another surge of attention to the issue of energy security in Europe. Not only the Western media, but also many European leaders have become increasingly vocal in calling for less dependence on Russian energy.
There has even been serious talk of possible European sanctions on the import of Russian oil and gas to the continent. All these debates are a telling reminder that the main threat to global energy security comes from politicizing the issue — the confrontational rhetoric, finger-pointing, and unwillingness to sort out the situation threaten to harm international economic development.
The Ukrainian problem
In order to make sense of the situation, one must first understand that there are two distinct issues: Europe’s energy security and Ukraine’s political future. These issues are so difficult to resolve because the second problem is a hindrance to solving the first.
Ukraine's geographic location, and the fact that pipelines for oil and gas exports to Europe were built (in Soviet times) through Ukrainian territory, makes Europe dependent on agreements between Moscow and Kiev. These agreements, in turn, hinge on the rapidly changing political situation in Ukraine.
As a result, the European Union is faced with the need to harmonize its policies in respect of Ukraine with its interests to ensure energy security. In recent years, this has been a difficult balancing act: “Euromaidan” led to political instability in Ukraine, with detrimental repercussions for relations between Moscow and Kiev.
One consequence of this was a deterioration of the economic situation in Ukraine and the inability of the transitional government to pay for gas from Russia. This in turn reignited the risk that if supplies of Russian gas were again suspended, Ukraine would, as before, start dipping into reserves of Russian gas intended for Europe.
The whole situation is one of the most striking examples of the ineptitude of modern energy security policy: Europe clearly failed to distinguish it from other areas of foreign policy (in this case, foreign policy issues pertaining to Ukraine).
However, the international media accuse Moscow of attempting to exploit the difficult nuances of energy cooperation in order to exert pressure on Europe, despite the fact that it would be irrational for Russia to do so. A significant proportion of the country’s revenue, and hence its economic development, depends on successful energy cooperation with Europe.
Can the EU simply do without Russia?
The outcome of this development was a new campaign in support of reducing Europe’s energy procurements from Russia. However, Europe is unlikely to be able to find a source that can replace Russian energy in the near future.
At issue is the continent’s ability to increase oil and gas production to meet its own energy requirements. A few years ago, hopes were pinned on the search for economically viable deposits of shale gas in Europe, but today large-scale production in Europe looks impractical due to environmental concerns.
Can Europe replace Russian energy with renewables? Hardly. Despite the recent leaps and bounds in the development of such technologies, in terms of timeframe, scale, and economics they are unlikely to replace Russian energy in the foreseeable future.
According to a report by the U.S. Department of Energy, even in 2035 three-quarters of mankind’s energy needs will still be met by oil, gas and coal. The EU is presently committed to ensuring that just 20 percent of European energy will come from renewable sources by 2020.
Perhaps the only area of the European energy sector expected to see major changes is nuclear. Governments of individual European countries are now recovering from the shock of the Fukushima accident and dusting off plans for nuclear power plants.
But these plans will have absolutely no effect on Europe's dependence on energy exports from Russia, since Russia today supplies the EU with 30 percent of its uranium requirements. If nuclear power becomes more widespread, this percentage could rise significantly.
Neither is there any prospect of replacing Russian energy through imports from other regions. Plans to hike production and then increase exports to Europe from West and East Africa remain on paper — which is not surprising, given the chronic instability of countries in these regions of Africa. No less complex is the ongoing political situation in the Middle East and North Africa, where the “Arab Spring” has seriously destabilized these regions.
A pipe with a sign reading 'Gazprom' is seen during the preparation work for welding the first section of the South Stream pipeline in Anapa, Russia. Photo: AP
America to the rescue?
Could the U.S. save Europe? After all, in recent years the country has seen a boom in hydrocarbon production from unconventional deposits. As a result, the U.S. is competing with Russia for supremacy in global oil and gas production: The U.S. has slashed oil imports, natural gas prices have fallen, and projects to export liquefied natural gas are on the table.
However, all these positives for global energy security have no real direct bearing on Europe.
First, U.S. domestic demand for natural gas and, in particular, oil, is so great that the U.S. market will hungrily consume any additional amounts of energy. Influential people representing entire sectors of American industry openly oppose gas exports — cheap gas aids national economic development, they say.
Second, that same gas is cheap only where it is produced. From this perspective, the main issue is how to deliver it to European consumers and how much will it cost. Any answers to these questions expose the extent of the risks and costs involved, and the burden will fall not only on the U.S., but also on Europe.
Given the policy of fiscal discipline that European countries are trying to adhere to (with varying degrees of success), the question arises as to where the funds for these expenses will be found. Even if all the necessary steps in this complex, expensive, and risky process are in fact taken, where is the assurance that U.S. liquefied gas, once mobile, will head for Europe, rather than, say, Japan, where the profit margins are far more attractive?
Time to talk
Hence, Moscow believes that today both sides have no real alternatives to the Russian-European energy partnership. The Kremlin is well aware of this fact: Russian leaders have never linked the future of this cooperation to any political decisions.
However, Brussels and other European capitals are reverberating with threats to “punish” Russia and wind down procurements of Russian energy. Given that these threats are at least a decade old, Europe has yet to take any steps towards a radical change in the balance of its energy imports.
Moreover, it is in Russia’s interests to develop partner relations with China, Japan and South Korea. The crisis in Ukraine has again caused European politicians to discuss the curtailment of Russian-European energy cooperation. It now remains to be seen whether these conversations will lead to serious measures against Russian energy. If so, not only are they unlikely to help resolve the Ukrainian crisis, but will have dire consequences for global energy security.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.