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EU-Russia Energy Relations Dilemmas and Delusions
March 22, 2007
Europe in the World Centre University of Liverpool
Amelia Hadfield
Lecturer, European International Relations Director, Energy Analysis Group
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Conceptualising energy
A source of power and Power
Multi-sectoral; multiple actors
Post-Cold War environment ( cross-border flows)
Rogue-like behaviour
Increased European dependence upon imports
EU vs Russia energy approaches
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Plan of Attack
I. EU Energy
Security of Supply issues
Energy in EU policy
II. Russian Energy
Security of Demand issues
Energy in Russian policy
III. EU-Russia Bridge-building
From Gas Spats to Solutions
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Introduction
Energy Security: reciprocity between importers, transit & exporters
Security of Supply and Security of Demand
Percepttions: lack of info; us vs. them
Energy Security hinges on:
1. Dependency
2. State Involvement
3. Foreign Policy
Foreign policies now need to integrate energy security
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Europe’s Energy Needs EU: second largest energy consumer in the world, & the largest energy importer
Market, population growth & EU enlargement = produced a surge in demand
Transport – 98% dependent upon oil; Households: 63% dependent on oil & gas
Huge demand in electricity (generated largely by nuclear, coal & natural gas)
Strongest energy producers: Germany (solid fuels), France (nuclear), Britain (gas & oil), Italy (oil) and Spain (solid fuels)
Highest energy consumers: Bulgaria, Romania, 2004-10 accession states, Finland, Med states
Overall: conventional energy reserves in Europe are limited & expensive to extract
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EU-27 Energy Supply (2004)
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EU Energy: Declining Supplies
Oil: 4% of world reserves; North Sea (UK) reduced by 2025
Natural Gas: 2% of world reserves (Netherlands & UK), depleted by 2020
Solid fuel (coal, lignite, peat, shale) 5%, or 200 years, but a costly pollutant
Uranium: 2% of world’s reserves, most mines now closed
Renewable sources (wind, solar, biofuels) remain undeveloped
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EU-27 Import Dependency
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EU-27 Origins of Coal (2004)
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EU-27 Origins of Natural Gas (2004)
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EU-27 Origins of Oil (2004)
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EU-27 Net Imports of Fossil Fuels
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EU Energy 2007 Supply
Current EU import dependence = 50%
By 2030: 70%
Current EU gas dependence = 57%
By 2030: 84%
Current EU oil dependence = 82%
By 2030: 93%
Major Oil & Gas Suppliers: Norway, Russia, Algeria, Middle East
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EU Energy as a Security Issue
Security of demand difficulties arising from Europe’s own complex energy
market: electricity, oil & gas markets
Security of supply problems with Russia and the Middle East
2003 European Security Strategy Energy security as ‘global challenge’
Energy dependence: European concern
Nuclear proliferation; enhanced provisions
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EU Energy Policy Papers 2001 Green Paper Towards a European strategy for the security of energy supply’ Brussels, we have a dependency problem
2004 Study on Energy Supply Security and Geopolitics EU foreign and security policy and external trade
policy are crucial energy policy tools to achieve future security of supply
2006 Green Paper A European Strategy for Sustainable, Competitive and Secure Energy the EU needs a common voice on energy issues
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EU Energy Innovations Unbundling (separating ownership of energy infrastructures from the sources energy generation): cross-border ownership
Swift cross-border investment in EU energy infrastructure
Solidarity between EU members states regarding security of supply (no more North Sea Pipelines)
Set binding renewable energy targets (biofuels for transport)
Decide on Nuclear Power: less vulnerable to price changes; cheap source of low carbon energy; EU’s technological lead vs safety & proliferation
Invest in clean coal technology; and R&D to promote CO2 capture and storage
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2007: ‘An Energy Policy for Europe’
Grounding the Innovations
Climate change + increasing import dependence + growth of Europe
1. Sustainability: EU committed to reducing EU & global greenhouse gas emissions (20% by 2020)
2. Security of Supply: weaning Europe off oil & gas dependence
Increasing external supply failures
3. Competition
Complete Internal Energy Market for fair & competitive energy prices
Invest in low carbon energy technologies
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EU Energy Features : Common & External
1. ‘The challenges of security of supply & climate
change cannot be overcome by the EU or its Member States acting individually.’
2. Energy ‘must become a central part of all
external EU relations, it is crucial to our geopolitical security, economic stability, social development and climate change goals’. ‘We cannot separate the external from the internal’.
How? Via effective energy relations with international partners; through bilateral, multilateral and regional agreements in which there are deeper energy provisions
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Energy in European Foreign Policy ‘Deepen relations with key energy producers & transit
countries’
Euro-Med region (North Africa & Middle East): An Africa-Europe Energy Partnership
New Neighbourhood: Ukraine, Georgia, Azerbaijan, possibly the Caspian (Azerbaijan)? EU-ENP Energy Treaty
Energy Community Treaty (legal framework for an integrated Balkan energy market) pushed East to the Caspian, North to Norway, South to the Med & M. East
Complete the Nabucco gas pipeline (from Caspian to Austria), possibly with US-Russia cooperation?
Stronger dialogue with OPEC, GCC, IEA & G8
Re-visiting the Energy Charter Treaty (& Transit Protocol) as a framework for enhanced East-West energy relations (Russia applies the ECT provisionally)
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II. Features of Russian energy Russia is a ‘triple hatted’ energy actor: major producer, consumer & transit state.
State control over all of gas sector and most of oil: Gazprom (gas) Rosneft (oil) Transneft (pipelines)
Extensive east-west network of gas and oil pipelines drawing reserves from the Black & Caspian seas, from Western Siberia to Austria and Finland
Energy = national revenue; shield against global fluctuations; foreign policy leverage
Energy = symbolic of economic development, reserves, public/private overlap, re-centralisation
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Cumulative Energy Investment Needs in Russia, 2003 - 2030
Source: World Energy Outlook (2004) International Energy Agency, p.326.
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Russian Oil Pipelines
Source: World Energy Outlook (2004) International Energy Agency, p.302.
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Russian Gas Reserves & Pipelines
Source: World Energy Outlook (2004) International Energy Agency, p.310.
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Russian Gas Balance
Source: World Energy Outlook (2004) International Energy Agency, p.308.
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Russian Fossil-Fuel Exports as Share of World Trade
Source: World Energy Outlook (2004) International Energy Agency, p.324.
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Energy & Russian foreign policy
2000-2010 Middle Term Strategy: energy as key to Russian national security & foreign policy
Reclaiming super-power status based on natural energy resources
EU role: security of demand
Eurasian energy space
Pan-European transport corridors
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Russia-Europe Oil & Gas Pipeline Projects
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28 Source: U.S. Energy Information Administration, Country Analysis Briefs. March 2005.
Major Russian Natural Gas Pipeline Projects
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Russian forays 2002: Yukos break-up for unpaid taxes; followed by investor legal action
January 2006: Ukraine & Moldova gas spat
March 2006: North Sea Pipeline deal signed with Germany (Putin & Schroeder)
April 2006: Gazprom market declaration
Summer 2006: Russian Presidency of G8: security of supply prioritised
Sept 2006: Finnish Presidency: punchy Putin
December 2006: BP ‘bought out’ of Sakhalin fields by Gazprom
January 2007: Belarus gas spat
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Current Trends
Energy as a source of national greatness AND an instrument of foreign policy.
Gas Spats:
undermined Russia’s reliability & reputation as an energy supplier;
reduced European consumer confidence;
highlighted the risks of relying on foreign sources and the vulnerability of transit methods;
show energy security to be an issue of Russian foreign policy and a foreign policy problem for the EU.
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EU-Russia energy relations
1994 Energy Charter Treaty
1997 Partnership & Cooperation Agreement
1999 Common Strategy
2000 EU-Russia Energy Dialogue
True partnership or narrowed interests?
Annual Reviews by both sides
2004 Energy Dialogue: 2000-2004
2005: Permanent Partnership Council
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EU concerns
Rising European dependence on Russia
Moscow’s unilateral cutting of energy
supplies without warning
Persistent Russian reluctance to agree to the ECT (promoting the liberalisation of Russian energy markets)
Energy imports as a foreign policy lever
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EU: Dealing with Russia Enhancing EU-Russia relations via a robust framework agreement (renewed PCA, ratified ECT, a new tool?)
Both sides must benefit (common interests rather than common values)
Creating conditions for European investment in Russia (no more Sakhalins) and Russian investment in more open European energy market (more liberal European market)
Security of supply/demand based on market principles (not statist retaliation), preferably those of the ECT
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European Responses
Blair to Russia (13.03.07): ‘one of the
reasons why Europe has been busy setting out its new energy policies is Moscow’s behaviour.’
‘I do hope that Russia understands…
that its best prospect of playing a full part in the international community and becoming a strong economy is if it plays by the same rules as everybody else… in Europe and with America too.’
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Conclusion
there are significant uncertainties from where Europe will receive substantial additional oil & gas supplies post-2020
Europe is increasing obsessed with “unreliable and nasty foreigner” theories of energy security but the urgent problems are:
political relationships between Europe and major gas exporters – particularly Russia, North Africa, the Middle East and the Caspian, some of which are in decline