Transcript Energy_and_Foreign_Policy.ppt

EU-Russia energy dynamics



Energy represents-who control and capable
to access and sell it
Energy security-security for both suppliers
and buyers
Energy-as a foreign policy tool, it has
capability to maintain stability and generate
interdependence between exporting and
importing states


In developing countries; Sierra Leone and
Nigeria: access to natural resources
(oil/diamond) produced scarcity and
bloodshed.
In developed countries; Canada and US
energy resources increased level of political
and economic progress but also cause
vulnerability and dependence to natural gas
and oil



Energy dependence: political and economic
vulnerabilities of resource dependent
Energy a strategic resource- vulnerability and
sensibility political access
Energy as foreign policy actor: inherently
sovereign attributes of energy/energy’s
ability to transform the future of states.
•
•
•
Energy resources: strategic national asses
(territorialized); ownership, access, transport
and sale.
Natural energy resources provides internal
order and external influence, it is used in
pursuit of national interests.
National revenue ; if energy resources are
well managed (exporter states such as Qatar,
Norway, Canada) significant revenue raised
from their sale can be reinvested for the
benefit of the state.


However poor management of energy
resources can produce damaging trends
(radical privatization or nationalization part of
energy industry) such as in Russia and
Venezuela
Or corruption of government or extortion by
local militia can provoke violence such as in
Nigeria, Sudan and Colombia.


Responsibility for energy; public (includes
government/energy enterprises owned or
controlled by company) and private sector
(companies)
Foreign energy policies of states; mix of
national interest of public sector and
business interest within the national goals of
states.


Authority over energy issues divided between
the European Commission and EU member
states
Union; Lack of cohesion and competence
(authority) in energy matters , 2006 gas
stoppage compelled European states
reconsider this situation and in 2011
Commission declare new “EU energy policy”
•
•
•
January 2006 “gas spat” between Russia and
Ukraine and role of energy to generate
insecurities between sovereign and
commercial actors (Russia stop to flow of
natural gas to the Ukraine and its impacts on
Europe)
Energy security- new in foreign policy agenda
but natural resources always play important
role in Europe
‘resources war’, geopolitical structure of
power and trade.


Energy indicates national prosperity
(domestic policy) and national security
(foreign policy)
Energy security: “assurance of the ability to
access the energy resources required for the
continued development of national
power…and adequate infrastructure to deliver
these supplies to market” (Kalicki and
Goldwyn, 2009: 9)
•
•
•
Energy security: for importer state (European)
it means security to supply (delivery of
affordable energy)
for exporter states (Russia) it means security
of demand (access to developed and reliable
market for the long term sale of energy
products)
Energy assurance can be undermined by
unexpected stoppage of supplies or price
shocks
•
•
•
Transit states: countries across whose
territory energy is transported.
Political and economic concerns about supply
and demand of energy resources strongly
connected. States use economic instruments
(energy) to pursue political objectives/energy
resources as political leverage
Energy as foreign policy tool/power (coercion
or diplomacy/state can use these tools to
achieve its desired ends)
•
•
As foreign policy tool for exporter it takes the
shape of diplomacy or embargos (OPEC,
Organization for Arab Petroleum Exporting
countries in 1973), in some cases coercion
(Russia)
For importers: lack of leverage but they
posses large markets, energy is used to
achieve soft power objectives (EU) but also
impose embargo (Iraq) and sanction (Iran)
•
•
•
Role of military: when market incentives are
threatened energy can be caused military
presence (US historic and recent activism in
Middle East and Persian Gulf)
Russia stop to flow of natural gas to the
Ukraine and its impacts on Europe
Stoppage of gas is example for hard power
(coercion) or soft power (diplomatic
compellence)





Break-up of Soviet Union and reconstruction
of European energy policy
Deep engagement with Russia
Political reforms, aid packages and
multilateral projects during 1990s (by EU)
PHARE in 1989(Pologne, Hongrie Assistance
a la Reconstruction Economique)
TACIS in 1991 (Technical Assistance to the
CIS-Commonwealth of Independent statesformer Soviet countries)
•
•
•
INOGATE energy initiatives (Interstate Oil and Gas
Transport to Europe)
European Energy Charter (EEC) signed in 1991 to
help set the political context of tackling EastWest energy issues, establish closer relation with
Russia and former Soviet energy suppliers
/creating reliable hydrocarbon trade transit
across Europe
Energy Charter Treaty (ECT, 1994), multilateral
treaty established binding obligations on the
trade, transit, resting on liberal markets. It
underlines free-market principles and guarantee
security of supply), aim to establish stability and
clarity to all aspects of European energy industry
•
•
Political significance of Energy Charter Treaty
(ECT); recognizing energy as a key feature of
national infrastructure of every European
country.
Bolster the economic efficiency and
competitiveness of post-Soviet economies,
making Russia and Eastern European states
spread of political reforms and integrating
with Europe
•
•
Russia and Ukraine key strategic actors in the
impetus of East-West reforms, establishment
of common strategy in 1999.
EU-Russia Energy Dialogue was launched in
2000, aim to increase long-term reform and
promote reliability in Russia’s public and
private sector but has not solved energy
security issues still plaguing the EU-Russia
relationship
•
•
•
Differing views of Gazprom (the largest gas
extractor company in Russia) of the liberalization
process of European and Russian energy markets
Gazprom believed that ECT would diminish its
monopolistic position in Russian energy markets
and oblige Russia to open its pipeline network to
transport cheaper gas and oil from Central Asia.
So Russia terminated its provisional application
of the ECT in 2009, Russia stand oppose to what
it perceives as an imposition of EU-style model of
liberalization.
•
•
•
Russian foreign energy policy has developed
mix of political revanchism (policies directed
at the recovery of territory and power) and
quasi-liberal adjustments.
So the recent gas war between Ukraine and
Russia does not reflect a policy change in
Moscow because this was not something new.
Russia had used its energy power in an
attempt to influence foreign and security
policies of its neighbors since 1990s.

There was lack of progress in energy security
dialogue between EU and Russia and during
this period EU’s dependence on imported
Russian gas has increased.



EU-Russian division on energy issues in 2005
Russia sees ECT as counter to its interests
Russian energy power are threefold; First;
ownership and access to its vast energy
resources by state owned company Gazprom
(world largest gas producer and exporter)
Second; pipeline ownership, pipelines owned
by another state-owned company, Transneft.
•
•
•
Third; long term contracts with Russian
exports to guaranteed set of European
importers
gas spat was outcome of differing
perceptions on the long-term Ukraine-Russia
gas contract
Russian energy monopolistic challenge to
European perspective, Gazprom and
Transneft influential agents of government oil
and gas policy
•
•
•
•
Russian energy dominance, external political
goals
Russian energy; as foreign policy component
Russia’s coercive use of energy dominance to
force political compliance in its immediate
neighborhood
Lack of energy reserve of most of European
states, Europe pipeline project “Nabucco”
designed to reach from Black Sea to Austria


Europe-reliable buyers of Russian exports
and even 2004 enlargement included states
heavily dependent on Russian gas.
Non-EU countries between Moscow and
Brussels; Ukraine, Georgia, Belarus-pipeline
transits –in the middle of external dimensions
of EU integration and Russian revanchism.
•
•
•
•
Majority of EU countries dependent upon energy
import specifically Russian gas, EU also depends
on key transit countries
Ukraine as transit state connect Russia to
markets in Germany, Austria, Italy, Slovenia, and
Croatia.
Ukraine dependent on Russia for the revenues
Ukraine also dependent on European market to
keep its transit relationship with Russia healthy
and dependent on Russia for its domestic gas
import




Ukraine is the most important transit country in
the energy trade relationship between Russia
and Europe.
Europe as a whole receives roughly 30 percent
of its natural gas supplies from Russia.
The dependency is mutual;
more than 90 percent of Russian gas exports
go to Europe

40 percent of Ukrainian energy consumption
is natural gas, and 60 percent of domestically
consumed natural gas is supplied by Russia.
•
•
•
•
2004 tension between Russia and Ukraine
because Ukraine’s inability to pay for Russian
gas, Ukraine’s rising debt to Russia
Energy relations between Ukraine and Russia
worsened in 2005
Russia acknowledged the risk that a shortfall
would cause to European costumers
Ukraine was aware of its strategic location
between Russian suppliers and European
buyers

Ukraine cut itself deal by charging Russia
European level transit tariff level for gas
bound to Europe (to increase its national
revenue) Russia accepted the agreement if
only Ukraine agreed to pay these same higher
prices for its own domestic imports!!!! Which
could have negative impact on Ukraine
national revanue
•
•
•
Russia announced that it was prepared to shut
down gas to Ukraine provoked alarm in Western
Europe and anger in Kiev.
Who would blink first?/tit-for-tat retaliations
Three option of Ukraine; 1-Ukraine would have
to weigh up the value of retaining pipeline
ownership versus the revenue gained by keeping
prices low, 2-it could continue to demand
increase transit tariffs but faced increased cost of
its own import, 3-Ukraine could consider illegally
tapping into Russian exports to feeds its own
market.

Russia’s options; 1-Russia negotiate with
Ukraine in an exchange for lower subsidizer.
2- it could insists that Ukraine operate at the
higher European market prices, 3- Gazprom
could shut off the gas supply to Ukraine with
consequence of dramatic reduction of
Russian gas to key European markets and
also damaged reputation as a reliable
supplier.
•
•
•
Two events caused security of supply crisis;
1-Remote cause: political cause, extension of
East-West tension of ideas-Orange
Revolution (2004-2005)
EU’s increased bilateral relations with Ukraine
and its inclusion to ENP in 2004-EU
membership as the ultimate goal/EU led
transformation and rejection of Russian
leadership


Orange revolution outcome of Kremlin
backed President Victor Yanukovich as the
chosen heir of outgoing president Leonid
Kuchma and the pro-western incumbent,
Victor Yushchenko
Victor Yushchenko leader of Our Ukraine
Block (color orange) campaign for
independence from Russia but Yanukovich
won the election in 21 November 2004.



Allegation's of corruptions during elections
Popular reaction to Kremlin’s interference
turned to the street protests and recount (of
votes) ordered by Supreme Court on 26
December 2004 and Victor Yushchenko won
the voting.
Kiev now leaned close to Brussels and further
from Moscow
•
•
•
•
•
2-Proximate cause: commercial
Gazprom in a televised broadcast showed
Gazprom technicians shutting down key
pipelines/stop gas supply to Ukraine on
January 1, 2006.
Gazprom strategy of using energy leverage as
a form of foreign policy to bring about
change in behavior of another actor (Ukraine)
Use of energy for political dominance!!
Coercive diplomacy!!!


However Russia claimed that European gas
was still running through Ukrainian pipeline
and shortfall was due illegal taking by
Ukrainian gas company Naftogaz (so
Gazprom shut down Ukraine’s domestic
import?)
On January 2, Russia pumped additional gas
to avoid any damage as reliable gas supplier
•
•
•
Three major outcome of gas spat:
1- increased concern about Gazprom’s
reliability and Russia’s use of energy leverage
over European markets couples with proWestern changes in Ukraine (shift away pro
Kremlin) gas stoppage as retaliatory tactics!!
2-European states realize that they have lack
of external energy policy to deal both
economically and politically/interdependence
/energy policies of Kremlin danger to Europe



3-need for more collective and cohesive
policy on security of energy supply
Developed common foreign and trade policy
approach in support of energy policy
objectives: relations with Russia-pursue it to
ratify ECT
Newest form of EU foreign policy-external
energy relations




New foreign policy objectives in the wake of
gas crisis
focus on security of supply issues
sustainability and competitiveness (new
pillars of EU energy policy)
Increased awareness of energy security and
its importance


Mix and complex outcomes; cheaper
Turkmenistan gas as new source in domestic
market but with higher rates.
Yuliya Timoshenko (leader of Ukraine’s
parliamentary opposition) believes that
Ukraine’s future lies with the EU and EU needs
common policy to handle foreign policy
challenges posed by Russia


Russia’s perspective; gas stoppage as result
of politically motivated punishment of
Ukraine by Gazprom (surrogate of Russia)
Gas spat incident was result of Ukrainian
illegal taking of transit gas bound for Europe
and damage Russia’s reputation as reliable
supplier.


After the new deal/new price with Ukraine
Gazprom used set prices and guaranteed
agreement with all other CIS countries
(Commonwealth of Independent statesformer Soviet countries)
Concern of security of demand by Gazprom
and concern of security of supply European
countries



European Perspective: lost political battle in
Ukraine. Russia/Gazprom used energy to
coerce/force Ukraine back into the fold of
Russian influence
Russia used its energy as “weapon” in
relations with other countries
Russia’s use of energy as coercive element to
increase prices in countries that were
perceived to move in pro-European direction
(Armenia, Azerbaijan, Georgia, Moldova in
2007)



Forceful statement by Gazprom in 2006 that
“it could easily afford to switch its supplies to
Asian markets further EU member states”
Russia’s use of energy dominance to pursue
both economic and political objectives
Lack of agreement with former soviet state on
gas price-accusation “Russia is using energy
exports as political weapon” to immediate
neighbor and dependent EU countries

Ukraine: Ukrainians believe that agreement
on January 10, 2006 was not result of
leverage of Russia but result of poor
negotiation skills of President Yushchenko



need for more comprehensive agreement on
energy issues between Russia and EU as
policy issue not foreign policy tool!!!
Otherwise both side will look for alternatives
to replace each others “energy security
dilemma”
Neither side can afford to lose the other as a
key element of its overall security



Energy is symptomatic of the broader
geopolitical issues at the heart of this current
crisis.
Russia uses gas debt and pricing to gain
leverage over Ukraine

This debt is a significant point of leverage for
Russia.

In December 2013, the deal reached between
Vladimir Putin and Viktor Yanukovych partly
around gas debts touched off broader protests.

Gazprom has been seeking payment since
January, but Naftogaz is broke


There have been no threats by the Russian
authorities or by the Russian gas giant Gazprom
that they are planning to cut off the gas because
of geopolitical tensions.
That does not mean that the situation is static. A
significant escalation of the military dimension of
the crisis could incite the Russians or the
Ukrainians to change their calculus.

But it is impossible to divorce the geopolitical
tensions from the issue of debt payments.
European and Ukrainian gas may be threatened
if the Ukrainian government fails to pay Russia
for its imports in a timely manner (non-payment
of debts was the immediate trigger for the 2006
and 2009 cut-offs).

Europe and Ukraine have limited tools at their
disposal to reduce their energy vulnerability.

The most obvious and immediate solution would
be to provide the Ukrainian government with
cash to pay down its debts





In the medium to long term, however, there are
a variety of options for Europe and Ukraine to
increase their energy security.
Seeking alternative supply options: using U.S.
liquefied natural gas (LNG) exports to aid the
Europeans and Ukrainians
U.S. does not have any LNG export facilities at
present
Ukraine does not have an LNG import facility as
well



in the short term the United States has no ability
to supply gas to Europe since it does not have
any export facilities and in the long term
The only way to extract Ukraine from the
immediate payments crisis is to provide money
for Ukraine to pay down its debts.
However, that does not address the fundamental
problems that resulted in Naftogaz
indebtedness in the first place: massive
corruption, opaque markets, and poor
pricing.


The best way to put pressure on Russia in the
long term and reduce European vulnerability is
by encouraging significant structural reforms
in Ukraine
transparent, and market-oriented energy
sector. Pricing reform is a key element of
these structural reforms