Has Russian Energy Influence in Europe Waned?

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In light of Turkey’s recent downing of a Russian fighter jet, Russian President Vladimir Putin announced last week the possibility of killing the multibillion-dollar TurkStream pipeline, in addition to the imposition of many new economic sanctions. The pipeline would carry cheap Gazprom gas into Turkey and Europe and could be in jeopardy as Putin and Erdogan continue to bitterly condemn one another’s government, despite Turkey’s need for cheap gas and foreign investment to expand its power production.

In previous years, Russian threats to restrict petroleum flows were both feasible and extremely influential in pushing countries closer to Moscow and long-term Gazprom contracts. However, Russia’s ability to withhold natural gas as a retaliatory tactic could be far less realistic in Turkey’s case as oil prices continue to fall and OPEC shows no sign of cutting production. The Russian economy desperately needs new revenue sources in the face of a recession, and Moscow has long dominated the European market for natural gas. While it is unclear if Putin will continue to sacrifice bolstering a faltering economy in the name of foreign policy (his annexation of Crimea and his hostility towards Erdogan hint that he still may), Europe finally has the opportunity to distance itself from Moscow’s energy influence. The question is, does the EU actually want to?

Perfectly situated between Europe and Asia, Russia used its geographical luck and status as the world’s second largest producer of natural gas to position itself as a critical supplier of the European Union to the west and China to the east. The EU lacks the substantial petroleum reserves required to feed their energy needs and as such imports as much as 40% of their natural gas from Russia through Eastern European pipelines. The EU’s reliance on Russian natural gas remains a controversial issue, as many countries rightly fear that their dependency gives the Kremlin too much influence in European politics. Nevertheless, others prefer to benefit from high pipeline transport fees and low energy costs regardless of Russian influence.

Putin’s hardline policies have pushed some European nations to diversify their energy imports. European contempt towards Russia’s dominance in the natural gas market certainly increased with the outbreak of the crisis in Ukraine and the annexation of Crimea. For EU members like Poland, a vocal opponent to Gazprom’s stranglehold on European gas imports, Russian aggression in Ukraine is just another example of the resurgence of Cold War politics and demonstrates the need to distance Eastern Europe from Soviet Bloc-style influence. Ukraine relies heavily on Russian gas and has seen its energy supply shut off multiple times in retaliation for forcing its previous, pro-Russian president out of office, fighting separatists in the eastern region of the country, and refusing to restructure long-term Gazprom contracts.

In some cases Europe has tried to push back against Russia, such as when the EU scrapped plans for a massive Gazprom pipeline that would run underneath the Black Sea into Bulgaria. However, the EU has yet to form a united front against Russian energy imports. If Europe’s relationship with Russia is so lopsided, why hasn’t it instituted more drastic anti-Russian energy policies?

Paradoxically, the same Eastern European countries that strive to diversify their energy imports still need the millions of dollars they make annually from pipeline transit fees to subsidize domestic petroleum prices (a political necessity in countries spoiled with low gas prices). For example, with more than 30% of Russian gas exports flowing through Ukraine, Kiev still has a financial incentive to maintain some of its pipeline network with Gazprom.

Complicating matters further, Germany has lobbied surprisingly hard for increasing Russian natural gas imports with the construction of a Trans-Baltic pipeline called the Nord Stream II. Politics notwithstanding, Germany asserts that the pipeline constitutes a smart financial move as more countries switch from dirtier coal-fired plants to cleaner gas-fired plants in electric production (Poland would like to do the opposite). The geopolitics of the pipeline, however, are impossible to ignore. Berlin can use this pipeline as another way to improve their relationship with Moscow and to cement Germany’s central role in Europe’s natural gas supply chain. Consequently, most Eastern European leaders have slammed Germany for advocating a pipeline that would give more Moscow more control over the market and leave a struggling Ukraine without the 2 billion dollars in transit fees it desperately needs to stay afloat.

The EU’s contradictory policies toward Russian gas have made it impossible for Europe to make more significant strides away from Moscow’s petroleum grip. While it is true that historically low petroleum prices have weakened Russia’s hegemony over the European gas market, the reality is that Russia will continue to enjoy their position of power until Europe can decide what it wants its energy future to look like.

Refusing to build new pipelines like the NordStream II should be the EU’s first priority. Furthermore, the EU should take advantage of the US shale boom and import more American liquefied natural gas (LNG). This would not only improve the continent’s energy security but also offer potential savings worth billions of euros. Lithuania and others have already begun to do this by constructing a new LNG port and natural gas infrastructure, allowing the diversification and expansion of energy imports. This strategy forced Gazprom to restructure its long-term contracts with Lithuania, thus bringing down static gas prices across the country.

As the United States continues to pour billions of dollars into constructing advanced LNG transportation systems and refitting old ports, Europe should look to incentivize similar projects with EU subsidies and other intra-EU policies that support cooperation between member states. Though significantly reducing imports of Russian natural gas may be financially difficult for some countries in the short term, the long-term upside of improved EU energy security in a time of Russian aggression will benefit all of Europe.




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