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Europe Must Break Russia's Energy Blackmail

A pipeline operator in Portovaya bay, northwestern Russia,
A pipeline operator in Portovaya bay, northwestern Russia,
Florian Eder

BRUSSELS — There is no shortage of good advice for Europe. The United States recommends becoming independent of Russian gas supplies — Vice President Joe Biden, on a recent visit to Romania, passed that tip on to Prime Minister Victor Ponta.

"We have to make certain that Russia can no longer use its energy resources as a weapon against the region," Biden said. EU countries should coordinate their energy markets more closely to create a "secure and interlinked" market that would bring the EU one step closer to integration.

And the message has been received EU leaders intend at their next regular meeting in June to begin redesigning the way Europe gets its energy supplies. The group of the seven largest industrial countries will also meet in Brussels to discuss the subject. The European Commission is currently preparing various talking points that should be published on June 6.

Russia meanwhile has just inked a huge gas deal with China. The agreement is the result of decades of negotiation, and implementation is scheduled over the coming months and years.

The "historic deal," as President Vladimir Putin characterized the agreement, is worth at least 290 billion euros, according to Gazprom. Gas should be flowing to China from 2018 after the pipelines have been built. Meanwhile, the European Union is working on a strategy to become increasingly less dependent on Moscow within the limited possibilities of their countries, which depend on energy imports.

While Biden was in Romania, in Brussels Commission President José Manuel Barroso and Energy Commissioner Günther Oettinger met with Polish Prime Minister Donald Tusk to discuss a European energy security strategy. By freeing itself from dependence on Russian gas, the EU wants to limit Russia's potential for blackmail.

"We refuse to accept that the price of gas is a political instrument being used against Ukraine," Oettinger said after the meeting.

The same goes for Georgia and southeastern European countries such as Romania and Bulgaria that get 100% of their gas supply needs from Russian sources — a monopolistic situation that even without political implications tends to keep prices high.

But politics alone won't keep apartments warm during the cold winter months.

"Under no circumstances do we want energy products to be political instruments, but rather goods, services," said Oettinger who also sketched out some ideas for the June meeting. The Commissioner wants to create a functioning market, and "when you have a working market using energy as a political instrument that is hardly feasible."

The more competition there is, the more supply and demand determines prices, and politics steps aside. This is the case for oil, Oettinger said. "There is a world market price for crude oil." The "completion of an interior market for gas" thus has to be a first priority with an eye of extending that beyond the EU in the longer term, he added.

Oettinger said diversifying sources, pipeline routes, and suppliers are all part of the strategy. "With gas, that’s the most important thing."

Solutions, north and south

EU countries want to increase business with suppliers in Norway and Algeria and bring the gas in not via Russian pipelines as they presently do but, for example, from the Caucasus across a southern route through the Black Sea to southern Europe.

The China deal extends Russia’s customer base by one huge client, and it is a client that can and did negotiate the price of future deliveries until shortly before the agreement was signed.

In April, Tusk presented some ideas for an "energy union" that in many respects resembles Oettinger’s and Barroso’s ideas. However the Pole wants additionally to use European market power to create a joint purchase platform for Europeans an idea that has overtones of set state prices which run counter to Oettinger’s market credo and also met with opposition from member states including Poland’s neighbor, the Czech Republic.

Instead Oettinger recommends that the EU build new pipelines within its borders so that gas can also flow from West to East and so that there are no more energy islands in Europe. There would be new terminals for liquid gas, storage possibilities, and a different focus for public and partially EU-co-financed member state investments away from transportation infrastructure towards energy infrastructure.

Europe has no dearth of roads and railway lines, Oettinger said, but "too few pipelines and electricity grids and this can easily lead to dependence as well as vulnerability to blackmail."

Oettinger also mentioned that renewable energies were losing some of their appeal, in part because they're proving to not be "cost efficient."

But for the time being the priority is avoiding further escalation with Russia. The EU warned Putin about discontinuing gas deliveries to and through Ukraine. As long as the talks that have been going on for weeks continue between the EU, Ukraine and Russia, "the flow of gas should not be interrupted," wrote Commission President Barroso to Russian President Putin. "I am counting on the Russian Federation to honor this commitment." Energy giant Gazprom is responsible for ensuring that European clients get the volumes agreed on.

Energy should not be a political instrument that is the EU credo. And Oettinger notes that Europe tries to adheres to that credo, which helps explain why energy is not one of the main sectors in the list of sanctions against Moscow.

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FOCUS: Russia-Ukraine War

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