Europe's Energy Policy Is A Strategic Issue
Central Europe Digest
Posted: 15 January 2008
Overdependence on Russian energy is the price of European disunity. On no other issue is it more important that EU member states cooperate, and on no other issue are they more divided. As Brussels attempts to place itself at the vanguard of sustainable, environmentally-friendly energy thinking, Moscow's divide-and-conquer policy of exclusive deals with particular states goes unchallenged. This reticence not only undercuts EU aspirations for supply diversification, but sabotages plans for a better-regulated, greener energy sector.
It is important that decision-makers understand the nature of Russian energy policies, which effectively pit the interests of European states against one another. In 2007, Gazprom concluded bilateral gas deals with Austria, Hungary and Italy, making a mockery of attempts to construct a unified approach to Moscow in the energy sphere. One Russian project that divides the EU is the planned Nord Stream natural gas pipeline under the Baltic Sea. Part of a deal between Moscow and Berlin negotiated by Chancellor Gerhard Schröder and President Vladimir Putin, the pipeline deliberately bypasses the Baltic countries and Poland, which have complained that Berlin is ignoring their interests and undermining EU solidarity.
Signs of patronage and clientelism are visible in Nord Stream’s management. A few weeks before Schröder stepped down as chancellor in 2005, the German government agreed to guarantee $1 billion of Nord Stream's construction costs. Schröder then went on to become chairman of the board at Nord Stream AG, the pipeline's construction consortium. Nord Stream's managing director is Matthias Warnig, a former Stasi officer who cooperated with Putin while he was a KGB agent in Dresden in the 1980s.
Nord Stream is just the tip of the iceberg. Through Gazprom, the Kremlin is directing an attempted takeover of Hungary's MOL energy company through Austrian proxies. In 2006, Moscow suspended energy supplies to Ukraine and Georgia. As you read this, the Kremlin continues to withhold oil deliveries to Lithuania, an EU member, in an effort to pressure Vilnius into selling the Baltic States’ only refinery to Russian firms.
Yet the EU is still unwilling or unable to do anything about Russia’s assertiveness. European capitals still debate whether Russian companies should be allowed to control Europe’s downstream energy infrastructure, even as Gazprom consolidates its control of Austria's gas market, and plans to use Vienna as a base from which to penetrate deeper into the continent.
While Gazprom is not entirely state-owned, it is troubling that some of its more prominent individual investors have close ties with the Putin administration. Take Suleyman Kerimov, Gazprom's largest private stakeholder, a Duma deputy in the Kremlin-controlled United Russia Party. Other party members also own Gazprom stakes and have been involved in suspect bank loan deals to obtain them, according to Russian news reports. Dmitry Medvedev, Putin’s pick for Russia’s next President, has been Chairman of the Board at the Russian gas giant since 2001.
It is in the interests of individual EU member states and the European project as a whole that the continent's energy sector be devoid of corruption, de-politicized and properly regulated. Neither Gazprom nor any other Russian energy company meets these criteria. Moreover, Russia's hand in Europe's energy industry will not lead to a greener energy sector, as Gazprom and its subsidiaries have some of the worst environmental records among the world's extraction companies.
The solution is for the EU to tap non-Russian sources of energy through alternative supply routes. There are currently three prospective pipeline options on the table, none of which have received sufficient backing by Brussels. The Nabucco pipeline would transport gas from Turkey to Austria and Western Europe via Bulgaria, Romania and Hungary. Extending Nabucco's route into Eurasia, the Trans-Caspian Gas Pipeline project would connect European markets with the vast gas reserves of Central Asia. Finally, the proposed White Stream pipeline could provide a route for gas from Georgia across the Black Sea, directly to Romania and beyond.
Moscow currently buys cheap Central Asian gas, selling it for almost three times the price in Europe. European countries would do better to go to the source, cultivating better relations with the EU's new neighbors and opening up new investment opportunities for European businesses in the Caspian region.
It is time for Europe as a whole to view energy as a strategic issue, and develop a proactive, collective approach to defending its interests. This means banding together, diversifying energy imports, cutting out the middle man and continuing the quest for a cleaner, greener energy sector. Should the status quo persist, Gazprom will continue its march into the continent, and Europe will continue to splinter.
Alexandros Petersen is an Adjunct Fellow with the Russia and Eurasia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
The views expressed in this article are those of the author and do not necessarily reflect the opinions of the Center for European Policy Analysis.