Energy security in Europe: Russia, Ukraine and the eu

ENERGY SECURITY IN EUROPE: THE EU, RUSSIA AND TRANSIT COUNTRIESUNC Chapel Hill

Center for Slavic, Eurasian and East European Studies

What is energy security?

Multiple definitions For the consumer (European Union): Access

to sufficient energy resources at reasonable prices, free from major risk of disruption

For the producer (Russia): Ensuring a future market and supply route for selling its energy resources and ensuring the supply is adequate to fulfill contracts

For the transit countries: Access to sufficient energy resources at reasonable prices and possibly obtaining transit-related revenue

Main arguments

Increasing EU dependence on Russian energy and breakdowns in energy security

Failed EU attempts to lessen dependence

Successful Russian attempts to weaken EU initiatives

Continued Russian dominance over energy supply

Outline

EU energy consumption and imports Types and sources

Getting from A to B Problems with the supply route

EU response to supply disruptions Solidarity, indigenous production and import

diversification Russian counter response

Develop new middlemen Concluding thoughts

Continued, if not growing, Russian influence

EU energy supply

Source: Second Strategic Energy Review, “An EU Security and Solidarity Action Plan,” Statistical Index

Import dependency

Source: Second Strategic Energy Review, “An EU Security and Solidarity Action Plan, Statistical Index

Sources of imports

Source: Second Strategic Energy Review, “An EU Security and Solidarity Action Plan,” Statistical Index

Particularities of natural gas

Growing demand Safer than nuclear Cleaner than coal Cheaper than oil

Growing importation Dwindling EU production

Gaseous state Difficult to transport

Increasing dependence on Russian supplies as well as Russia’s increasing dependence on transit pipelines

1991

1995

1999

2003

2007

0

100

200

300

400

500

ConsumptionProductionNet Imports

Source: Authors’ calculations, Second Strategic Energy Review, “An EU Security and Solidarity Action Plan”

How does it get to Europe?

Only two existing corridors

Source: The Economist, “Bear at the Throat”

Supply disruptions: 2009 Russia-Ukraine gas dispute

1 January: Gazprom cuts all supplies for Ukrainian consumption, while supplies to Europe continue

5 January: Gazprom alleges that 65.3 million cubic meters of gas has been ‘stolen’

7 January: deliveries to Europe completely cut off 19 January: ten-year supply and transit contracts

signed 20 January: gas flows to Ukraine and Europe

restart 22 January: gas flows to all European customers

returning to normal levels

EU Response

1. An External Policy for Energy Security

2. Promoting Indigenous Energy Supply

3. Diversification of Natural Gas Supply

Response 1: An external policy for energy security

“Energy Charter Treaty”

“EU-Russia Dialogue”

Possible outcomes of these two initiatives?

Challenges to these initiatives?

Response 2: Promoting indigenous energy supply

31%

30%

19%

15%

5%

EU Electricity Production by Source

NuclearCoalNatural GasOilRenewables

Source: CRS Report for Congress, “The European Union’s Energy Security Challenges”

Response 2: Promoting indigenous energy supply

Source: Second Strategic Energy Review, “An EU Security and Solidarity Action Plan,” Statistical Index

Types of indigenous energy

Coal

Nuclear

Renewable

Response 3: Diversification of natural gas supply

Arguably the most politicized and important attempt to diversify natural gas supply is the proposed Nabucco Pipeline

Nabucco Pipeline intended to cut dependence on Russian natural gas

Nabucco

EU-backed pipeline initially proposed in 2002 during talks between major energy companies in Austria, Hungary, Romania, Bulgaria, and Turkey.

Proposed Nabucco route would connect Turkey to Austria and transport Central Asian and Caspian gas.

Route would bypass Russia

Nabucco criticism and obstacles Delayed Construction

Securing Energy Source

EU’s relationship with Turkey

Gazprom’s South Stream

Russian response: Cut out the transit countries

Transit route diversification South Stream

Nord Stream

Gazprom’s South Stream

Proposed in 2006, Gazprom gas South Stream would transport natural gas from Black Sea to Italy.

Current route would involve Russia, Turkey, Bulgaria, Romania, Hungary, Serbia, Greece, and Italy.

Viewed by many as a more viable rival to the Nabucco pipeline

Comparing routes

Source: BBC News, “Deal to Boost EU Gas Project”

Russia’s regional strategy in East Europe to block Nabucco?

All of the countries that are part of the Nabucco pipeline have accepted invitations from Gazprom to join South Stream pipeline.

Gazprom construction of multiple storage facilities in East Europe

Gazprom purchase of 22% of Hungarian MOL in 2009

Nord Stream: Russia to Germany, no layovers

Source: Nord Stream AG, http://www.nord-stream.com/fileadmin/Dokumente/3__PNG_JPG/1__Charts/Nord_Stream_Pipeline_Route_ENG.JPG

Concluding remarks

Increasing dependency on Russian supplies Increasing European demand for natural gas

Decline of coal, nuclear and oil Failure to secure alternate supplier and route

Central Asian gas via Nabucco Strengthening of Russian position vis-à-vis transit

countries Nord Stream and South Stream lessen Russia’s

dependence on any one transit country Will Russia be able to increase production (or

secure Central Asian supplies) to meet rise in demand?

Energy security in Europe

Questions and comments?

Brandon Rice Isaac White

Center for Slavic, Eurasian and East European Studies Center for Slavic, Eurasian and East European Studies

UNC Chapel Hill UNC Chapel Hill

[email protected] [email protected]