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23082010102526 Norberg (Library).Pdf Impact of Russia’s foreign energy policy on small European states’ security Case study: the Baltic States Liene Norberg A dissertation presented to the Faculty of Arts in the University of Malta for the degree of Master in Contemporary Diplomacy July 2009 Declaration I hereby declare that this dissertation is my own original work. Liene Norberg 31 July 2009, Riga, Latvia 2 Abstract Russia is the main energy supplier for Europe and Europe is the biggest market for Russian energy sources. This interdependency is the main cause for complicated energy relations between the EU, that is struggling to merge divergent interests of its 27 unequal members on one side, and Russia, that has gained new confidence in its energy power, on the other. It is particularly difficult for small, economically and politically weak European states that are heavily dependent on Russian energy sources, like the Baltic countries, to face the global energy challenges and increasing Russian energy leverage. During the last years Russia has been using its energy as political weapon and applied coercive approach towards the countries of the ex-Soviet block, causing threat to their national security. These assertive actions have urged them and the European Union to reform their Energy Strategies and come up with several projects and activities aimed at decreasing Russia’s growing influence in the region. 3 Table of Contents List of abbreviations and acronyms ............................................................................. 6 List of Tables, Figures and Illustrations ....................................................................... 7 Introduction ................................................................................................................. 8 1. Chapter- Energy Markets, Policies and Energy relations. ..................................... 12 1.1 Baltic- Russian relations ............................................................................................. 13 1.2 Baltic Energy System ................................................................................................. 13 1.2.1 Energy Import and Production .............................................................................................. 14 1.2.2 Energy consumption ............................................................................................................. 17 1.3 Russian energy market and role in the Baltic region ................................................... 18 1.3.1 Russian Energy Market and Policy ...................................................................................... 19 1.3.2 Presence in the Baltic region ................................................................................................ 21 1.4 Energy Policies ........................................................................................................ 22 1.4.1 European Energy Policy ...................................................................................... 23 1.4.2 National energy policies ....................................................................................... 24 1.4.3 Baltic regional energy policy ................................................................................ 26 1.5 Energy relationships of Baltic States, European Union and Russia ............................ 28 Key Findings .................................................................................................................... 29 2. Chapter- The Nord Stream pipeline and other major projects in the area of energy supply for Europe. ..................................................................................................... 31 2.1 The Nord Stream pipeline ........................................................................................... 32 2.1.1 Project development and ownership .................................................................................... 32 2.1.2 Project specifics, costs and investors ................................................................................... 34 2.1.3 Controversial aspects and countries’ positions .................................................................... 35 4 2.1.4 Latest developments ............................................................................................................ 43 2.2 Other major energy initiatives ..................................................................................... 44 2.2.1 The Amber Pipeline .............................................................................................................. 44 2.2.2 South Stream and Nabucco pipeline .................................................................................... 45 Key Findings .................................................................................................................... 46 3. Chapter- Towards decreasing the threat of energy dependency. .......................... 47 3.1 Dependency- generated security threat ...................................................................... 48 3.2. Russia’s assertive actions and motives ..................................................................... 50 3.3. Diversification of energy sources ............................................................................... 52 3.3.1. Renewable energy ............................................................................................................... 52 3.3.2. Liquefied Natural Gas .......................................................................................................... 55 3.4 Energy Efficiency ........................................................................................................ 55 3.5 Future domestic projects ............................................................................................ 56 3.5.1 Nuclear power plant .............................................................................................................. 57 3.5.2 Coal or gas, or both? ............................................................................................................ 58 3.6 Energy Partnerships ................................................................................................... 59 3.6.1 Baltic- Swedish partnership .................................................................................................. 59 3.6.2 Partnership with Finland ....................................................................................................... 60 3.6.3 Partnership with Poland........................................................................................................ 60 3.6.4 Partnership with Russia ........................................................................................................ 60 Key Findings .................................................................................................................... 61 Conclusion ................................................................................................................ 62 Reference List ........................................................................................................... 67 5 List of abbreviations and acronyms AES- alternative energy sources Bcm- billion cubic meters BPS- Baltic Pipeline System CEE- Central and Eastern Europe CIS- Commonwealth of Independent States CO2- carbon dioxide EC- European Commission EEA- European Economic Area EIA- Environmental Impact Assessment EU- the European Union EBRD- European Bank of Reconstruction and Development GHG- green house gas GDP- Gross Domestic Product HELCOM- the governing body of Helsinki Convention IEA- International Energy Agency KGB- transliteration of Russian abbreviation of Committee for State Security KPI- Key Performance Indicator Ml- million NATO- North Atlantic Treaty Organization NEGP- North European Gas Pipeline NGO- Non Governmental Organization OPEC- Organization for Petroleum Exporting Countries RES- renewable energy sources TEN- Trans European Networks Toe- Tonne of oil equivalent UN- United Nations UNFCCC- UN Framework Convention on Climate Change WTO- World Trade Organization WWII- World War II WWF- World Wide Fund for Nature 6 List of Tables, Figures and Illustrations Figure 1.1 European energy dependency, all products Illustration 1.1 Primary Russian Oil and Gas Pipelines to Europe Figure 1.3 Primary Energy Production by Fuel Figure 1.4 Gross inland consumption per capita Figure 1.5 Gross inland consumption by fuel Figure 1.6 Production of natural gas in Russian Federation Figure 1.7 Annual gas production growth rates Figure 1.8 Gazprom’s investment program 2007 Figure 1.9 Natural gas prices in households and industry Illustration 2.1 Nord Stream route Table 3.1 Share of renewables to final energy consumption 7 Introduction The modern society of today relies on energy in its existence, energy is the driving force for economy and energy sector is the main responsible for climate change. Mainly because of these important reasons energy plays a major role also in the political arena and is treated as a strategic political issue reaching the top of political agendas. Today the global energy market is facing numerous challenges: rising demand for energy, depletion of natural energy sources, fluctuant prices and climate change issues being among the most serious ones. The correlation between energy and economic development is tight, and as the level of global welfare rises, the demand for energy increases. This trend is particularly obvious in developed countries that
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