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Julian Grinschgl FOKUS | 3/2019 Pipeline Politics, A Single Market, and the Rise of Renewable Energy: Challenges and Pathways for European Energy Security Introduction (CEE) are highly dependent on Russian The Pipeline Legacy gas supplies. Bulgaria, the Czech Republic, At the end of 2018, Gazprom reported Estonia, Latvia, Hungary, Austria, Poland, The collapse of the Soviet Union meant a record high in natural gas exports to Romania, Slovenia, Slovakia, and Finland that the immense network of pipelines Europe, exceeding 200 billion cubic meters import more than 75% of their gas from linking the Siberian gas fields and Europe (bcm) for the first time.1 As of early January Russia.8 Furthermore, gas was used for as are now crossing numerous countries wit- 2019, the United States (US) ambassa- much as a quarter of total primary energy hout an overarching regulator. This creates dor to Germany threatened to sanction consumption in the EU and by looking at tensions between destination, transit, German companies that will continue broader and more long-term scenarios of and supplier countries due to problems to be engaged in the controversial Nord future energy demands it is expected that of governance because these pipelines Stream 2 (NS2) project, aiming to build the share of natural gas in the EU’s energy can be abused as a political tool. Ukra- another direct pipeline from Russia to mix might even further increase.9 The dec- ine, which has been the transit land for Germany circumventing transit states.2 line of domestic gas production in Europe 43% of Russian gas supplies, is of utmost Just a few months earlier President Trump and its relatively mild environmental im- importance in that regard.15 The high sunk boldly announced that Europe would buy pact compared to coal and oil ensures con- costs from Soviet investments in pipelines “vast amounts” of US liquefied natural gas tinued demand, making it an intermediary also mean that Russian gas is comparably (LNG) and criticized Germany as being commodity in the transition towards a less cheap considering the large distances held captive by Russian energy exports.3 carbon-intensive economy.10 At the same between the Russian heartland and EU Moreover, Turkey threatened Cyprus over time, expected decreases in exports from customers. Hence, under current market the exploitation of newly discovered Norway and Algeria would further increase conditions, Russian natural gas remains gas on disputed territory, and Saudi dependence on Russian supply of gas.11 the most competitive commodity.16 Arabi a, the world’s largest exporter of oil, This requires the EU to find about 120 bcm announced another $2 billion investment of gas imports a year by 2035.12 Russia also Russia’s use of energy as a political weapon in solar and carbon complex facilities as provides 30% of oil imports to the EU.13 to influence the domestic policies of states part of 12 large renewable energy projects However, the fact that the oil market is a is no secret.17 The interrupted gas supplies in the country.4 These headlines illustrate truly global one, due to easier shipment for Europe during the “gas wars” between the continuing dependence of Europe on and storage possibilities, also results in a Ukraine and Russia in 2006 and 2009 as Russian natural gas, the ongoing shift in unified global price for oil. A global market well as the 2014 Russian annexation of global energy markets due to the shale gas means that imports from only a few coun- Crimea were a wakeup call for European revolution, new technologies, renewable tries are not detrimental to energy security states. It highlighted the need to find alter- energy, as well as, competition over custo- since many more sellers exist which could native suppliers and thus led to the adop- mers and suppliers. This article will focus step in, in case of interrupted supply. Gas, tion of the EU Energy Security Strategy on energy security, commonly defined as however, is mostly traded regionally, not (ESS). The ESS from 2014 rests on several “the uninterrupted availability of energy internationally, which results in fragmen- key pillars: The creation of a single energy sources at an affordable price”5, for the EU, ted markets with different prices. In the market, diversification of suppliers, the use but will also consider geopolitical aspects European case, gas is commonly supplied of new technologies alongside increased and aims at identifying challenges and through pipelines making buyer-seller energy efficiency, the coordination of nati- pathways forward. relationships highly inflexible and adding onal energy policies and strengthening of the layer of geopolitical considerations.14 solidarity among member states, as well as The EU imports more than half of all the The abundance and decreasing impor- speaking with one voice in external energy energy it consumes. More specifically, tance of coal in Europe combined with the matters.18 approximately 90% of its crude oil and domestic character of energy production 70% of its natural gas are imported, with when it comes to renewable and nuclear An Incomplete Energy Union Russia being the largest supplier of both.6 energy makes European energy securi- In 2016, roughly, 40 % of total gas imports ty mainly a question of security of gas The Energy Union is the attempt to cre- came from Russia, followed by Norway supplies. ate a single market for energy trade and with about 25%, Algeria, and Qatar with electricity by liberalizing heavily regulated 13% and 12% respectively.7 Looking at the industries and fostering the integration national level, one can see that in particu- of pipeline networks and power grids. lar central and eastern European countries Thereby, the EU is aiming to prevent pos- 1 Challenges and Pathways for European Energy Security FOKUS | 3/2019 sible price segmentation and the punish- Greece and Italy by connecting to the order to allegedly protect the pipeline.28 ment and reward of individual member Trans-Anatolian Gas Pipeline (TANAP) that German politicians and business, on the states through different energy prices. delivers gas from Azerbaijan to Turkey but other hand, are arguing that this project is Greater connectivity within the EU market would only meet 2% of EU demand.23 a purely commercial endeavor that would also means that once gas enters the EU foster European energy security by addres- market it can be sold and shared more The Russian south stream project was sing the gap of further supplies in future easily between the individual member canceled due to anti-trust investigations demand projections and that it would not states.19 The problem with this strategy is and non-compliance with EU legislation.24 entail the end of Ukraine as a transit coun- that implementation of the third energy The heir of this project is the ongoing Turk- try.29 The current Romanian EU presidency package is slow and incomplete and that Stream project that will connect Russian and the EC tried to extend EU legislation many states still have solid bilateral rela- gas through the Black Sea with Turkey and to NS2, which could cause a stop of the tions with Russia undermining a common end close to the entry point of TAP. Howe- project due to conflict with the “third ener- European energy policy.20 ver, Russian gas going through TurkStream gy package” since Gazprom would be the will compete with gas coming from Azer- owner of the pipeline and the sole supplier Moreover, even if Russia would not be baijan since under EU law it is allowed to at the same time. Since NS2 pipelines are able to discriminate between individual use the same pipeline (TAP) if connected, offshore, the question of whether EU law members, a full stop of gas deliveries thus it might even further increase Russia’s applies arose.30 However, constructions al- would still affect the EU market as a whole. position.25 Turkey, by hosting TANAP and ready started and should finish at the end Russia prefers keeping long-term contracts TurkStream, will likely become a major of 2019. After a short Franco-German dis- with individual member states, resists join- energy hub and thereby places itself in a pute, a compromise was reached leaving ing the European Energy Charter, which strong position vis-à-vis Europe. Against it to Germany to apply EU regulations, but would require it to open its own market the background of increasing authorita- extended EU oversight when it comes to to competition from EU companies, and rianism, antagonizing foreign policy, and transparency and shared usage.31 Besides sees its abundance of natural resources as a closer relationship with Russia, the EU possible security implications for countries a tool in its foreign policy repertoire.21 For should also consider, whether increased in Russia’s “near abroad” not having the these reasons, EU member states try to reliance on Turkey is a wise decision in the tools to block Russian gas supplies in their diversify their suppliers to reduce reliance long term.26 repertoire anymore, NS2 in combination on Russia. with TurkStream might also allow Russia At the same time, current plans to build an to selectively supply different regions in Escaping Russian Pipelines additional pipeline directly linking Russia Europe. By creating a Moscow-Ankara and to its single biggest customer in Europe, Moscow-Berlin axis with different hubs The “southern energy corridor” is an Germany, through the highly controversial and prices for the southern and northern initiative to establish new supply routes for Nord Steam 2 (NS2) project are in its final European gas market, Russia could increa- oil and gas from central Asia, the Caspian steps. NS2 would add a capacity of 55 bcm se its leverage even further.32 Sea region and the Middle East to the to the already existing pipeline leading EU market bypassing Russian controlled to an overall capacity of 110 bcm, which Moreover, the countries of the Middle pipelines.