Emptying the Tank
Russia's invasion of Ukraine is accelerating Europe's search for alternatives to Moscow's energy.
Russia’s plans to increase its energy hold over Europe through new gas pipelines, including one that is a pet project of President Vladimir Putin, could be the latest casualty in the fallout over Moscow’s invasion of Ukraine’s Crimean peninsula.
The top energy official of the European Union, Gunther Oettinger, said that due to the situation in Ukraine, the E.U. will hit the brakes on further negotiations to bring the planned South Stream pipeline into compliance with E.U. regulations. Conversations over the pipeline "will be delayed," the E.U. energy commissioner told German newspaper Die Welt.
That veiled threat comes at the same time that European officials are pushing back against Russian plans to get greater access to other gas pipelines that reach into the heart of Europe, such the Baltic Sea link known as OPAL. The European Commission was meant to have finalized negotiations over increased Russian access to the pipeline by Monday.
Taken together, the European signals don’t suggest Russia’s energy dominance is in danger just yet. But they do underscore just how much Russia’s heavy-handed approach to Ukraine, including its expanding occupation of the Crimean peninsula, may be backfiring by accelerating Europe’s search for non-Russian sources of energy.
"I think Oettinger’s statement is a valuable diplomatic signal that Russia’s actions in Ukraine cannot pass unnoticed," said Tim Boersma, an energy analyst at the Brookings Institution. But he said that Russia would remain Europe’s dominant supplier in any event.
In the past week, top European officials have stressed the importance of reducing their dependence on Russian energy sources, with many looking, perhaps in vain, for help from the United States and its abundant supplies of natural gas. British Foreign Secretary William Hague, Lithuania’s energy minister, and Poland’s prime minister have all pleaded for American gas though the United States lacks the capacity to help out in the short term. On Tuesday, European officials suggested buying gas from the Eastern Mediterranean to help move away from a reliance on Russian energy.
In the past, conflicts between Moscow and Kiev led to several high-profile physical disruptions of gas shipped to Europe, most notably in 2006 and 2009. That hasn’t happened yet, although officials from Gazprom have warned they could cut gas supplies to Ukraine if the country doesn’t pay nearly $2 billion in back fees.
In those earlier crises, Europe tended to blame Ukraine for being an unreliable middleman more than it did Russia for being an unreliable supplier. While Europe sought to find new sources of energy, diversification meant to a certain extent importing Russian gas while bypassing Ukraine. And Russia was happy to oblige.
Upon leaving office, former German Chancellor Gerhard Schroeder became the champion of Nord Stream, a pipeline under the Baltic that carries Russian gas directly to Europe while bypassing Ukraine. Putin also championed another route to cut Ukraine out of its role as a transit country, the $46-billion South Stream pipeline meant to carry gas from Russia, across the Black Sea and into Bulgaria and beyond.
South Stream was a direct Russian riposte to an ill-fated European pipeline project named Nabucco, after the Verdi opera. The idea was to diversify energy supplies by tapping Central Asia for gas and shipping it to Europe. But plagued with uncertainties from its inception almost a decade ago, including who would pay for it and who exactly would supply it with gas, Nabucco finally died last summer when gas suppliers in Central Asia chose an alternate route.
But South Stream has had its own problems. Cost estimates have soared, in part because of the need to overhaul and expand part of Russia’s domestic gas network. Some doubt whether the pipeline is really needed, given sluggish growth in demand for gas in Europe. "South Stream from a commercial standpoint makes no sense," said Mihaela Carstei, the acting director of the energy and environment program at the Atlantic Council. She said it is more a way for Moscow to increase its energy hold over Europe without being hostage to a sometimes-unreliable go-between country such as Ukraine.
Additionally, Russia’s bilateral deals with Bulgaria, Austria, Serbia, and neighboring countries to build the pipeline fell afoul of E.U. rules. Just as the tug-of-war between Russia and Brussels over Ukraine was heating up late last year, European Union officials said that the South Stream project was illegal because it didn’t comply with European competition rules. Those include giving access to other gas suppliers and ensuring transparent pricing for all gas customers.
Oettinger’s remarks this week that European officials will slam the brakes on discussions meant to resolve the impasse over South Stream casts a cloud over the timing and future of the pipeline, even though Gazprom officials insist the project remains on track.
Gazprom and the South Stream consortium said Tuesday that they expect to reach an agreement to build the first leg of the pipeline this month, and stressed, despite construction delays and uncertainty over the pipeline’s legality, that it is still on schedule to deliver gas starting in late 2015 and be fully operational by 2018.
Bulgaria, a key player in the future of South Stream, is also optimistic about the project, though the Bulgarian government has sent mixed signals in recent days. Some ministers said the project should be temporarily suspended in light of the Ukraine crisis, while other ministers called the pipeline crucial for the country’s energy security.
In any event, whatever the outcome of the back-and-forth between Brussels and Moscow over South Stream, one thing seems clear. As Europe sets out this year to chart its energy and climate policy through 2030, energy security will loom larger than ever. And that, more than quotas, mandates, and expensive subsidies, could be what ends up accelerating clean energy’s adoption across the continent. In other words, Russia may indeed have decisive influence over Europe’s energy — but not the kind of influence Putin probably had in mind.