Assessing Energy Dependency in the Age of Hybrid Threats

The European Centre of Excellence for Countering Hybrid Threats Assessing Energy Dependency in the Age of Hybrid Threats

Duane Verner, Agnia Grigas, and Frederic Pet, Energy and Global Security Directorate Argonne Naonal Laboratory

January 2019 This report reﬂects the views of the authors only, and does not necessarily represent the views of the U.S. government.

1 Assessing Energy Dependency in the Age of Hybrid Threats Contents

Introducon 3

Dependency-Related Policies and Iniaves 4

Geopolics of Energy Dependencies 9

Classes of Dependencies 11

Case Studies 12

Recommendaons 18

2 Assessing Energy Dependency in the Age of Hybrid Threats Introducon

Many naons including The European Centre of nologies, have increased the potenal vulnerabil- Excellence for Countering Hybrid Threats (Hy- ies to physical and cyber threats and potenal brid CoE) member naons face significant chal- consequences resulng from the compromise of lenges from hybrid threats involving the energy underlying systems or networks. In an increas- sector. The October 4, 2018, Federal Bureau of ingly interconnected world, where energy infras- Invesgaon (FBI) indictments of Russians in the tructure crosses naonal borders and global sup- hacking of Wesnghouse computer systems in ply chains, the potenal impacts increase with Pisburgh emphasizes the ongoing global nature these dependencies and the ability of adversaries of these challenges.1 Halng Russian gas supply to exploit them.4 In addion, the geopolics of to Ukraine, on mulple occasions, has affected energy, including global market and security con- the gas supplies of European Union (EU) states, sideraons, is becoming more complex, which including during a cold 2008-2009 winter, which underscores the need to analyze and understand caused widespread hardship and contributed to energy dependencies. Based on these factors, it casuales. These acons demonstrate the real is essenal to integrate energy dependency con- risks of Russia’s use of energy coercion. 2 sideraons into hybrid threat, risk, and resilience assessments and strategies. Therefore, enhancing the protecon and resilience of member naons’ energy systems is The goal of this paper is to enhance Hybrid CoE an urgent goal—a goal made more challeng- member naons’ and allied organizaons’ under- ing by the inherent dependencies and interde- standing of energy dependencies in the context pendencies3 within infrastructure systems and of today’s hybrid threat security environment. between energy-producing, -imporng, and - transing countries. Dependencies influence all components of risk: threat, vulnerability, re- • Provides an overview of dependency-related silience, and consequence. They can themselves policies and iniaves, be a threat, affect the resilience and protec- • Explains the geopolics of energy dependen- on of crical infrastructure, and lead to cascad- cies, ing and escalang failures. Growing dependen- • Describes the classes of dependencies, and cies across infrastructure systems, parcularly re- • Presents a general approach and recommenda- liance on informaon and communicaons tech- ons for integrang energy dependency consideraons into hybrid threat analysis and resilience assessments and strategies.

1Lynch, Sarah N., Lisa Lambert, and Christopher Bing (2018) “U.S. indicts Russians in hacking of nuclear company Wesnghouse.” Available at hps://www.reuters.com/arcle/us-usa-russia-cyber/u-s- indicts-seven-russians-for-hacking-nuclear-company- wesnghouse-idUSKCN1ME1U6. Accessed October 4, 2018. 2Harding, Luke, and Dan McLaughlin (2009) “Deal to resume Russian gas eludes EU as 11 people die in big freeze-up,” Guardian, January 11. Available at hps://www.theguardian.com/world/2009/jan/11/russia- ukraine-gas-supplies-dispute. Accessed October 4, 2018. 3A dependency is a unidireconal relaonship between two assets or enes where the operaons of one affect the operaons of the other. An interdependency is a bidireconal relaonship between two assets or enes where the operaons of both affect each other. An interdependency is effecvely a combinaon of two dependencies—therefore, understanding an interdependency requires analysis of the one-way dependencies that comprise it. (Source: Pet et al. [2015] Analysis of Crical Infrastructure Dependencies and 4Pet, F., et al. (2015) Analysis of Crical Infrastructure Interdependencies, ANL/GSS-15/4, Argonne Naonal Dependencies and Interdependencies, ANL/GSS-15/4, Laboratory, Global Security Sciences Division, Argonne, Ill., Argonne Naonal Laboratory, Global Security Sciences USA. Available at Division, Argonne, Ill, USA. Available at hp://www.ipd.anl.gov/anlpubs/2015/06/111906.pdf. hps://publicaons.anl.gov/anlpubs/2015/06/111906.pdf. Accessed October 3, 2018.) Accessed September 28, 2018.

3 Assessing Energy Dependency in the Age of Hybrid Threats Dependency-Related Policies and Iniaves

The definion, classificaon, protecon, and ure or exploitaon of interdependent systems resilience of crical infrastructure tradionally generates cascading and escalang effects. As comprise a naonal competency. For example, highlighted in the 2013 NIPP, “growing [depen- in the United States, Presidenal Policy Direc- dencies and] interdependencies across crical ve 21 (PPD-21) and the Naonal Infrastruc- infrastructure systems, parcularly reliance on ture Protecon Plan (NIPP) guide the strategy for informaon and communicaons technologies, enhancing the protecon and resilience of cri- have increased the potenal vulnerabilies to cal infrastructure. PPD-21 establishes the need physical and cyber threats and potenal conse- for operaonal and strategic analysis to idenfy quences resulng from the compromise of un- infrastructure dependencies and to incorporate derlying systems or networks. In an increasingly them into risk assessment and management pro- interconnected world, where crical infrastruc- cedures.5 The 2013 edion of the NIPP rein- ture crosses naonal borders and global supply forces the need to understand and address risks chains, the potenal impacts increase with these from cross-sector dependencies to enhance in- [dependencies and] interdependencies and the frastructure security and resilience. 6 ability of a diverse set of threats to exploit them.” 8 The need for strategic risk analysis of crical infrastructure dependencies is also a regional and The following pages present recent dependency- global consideraon. A Joint Declaraon be- related policies and iniaves by region or inter- tween the United States and Poland on Energy naonal organizaon. Security, signed in September 2018, emphasizes the need to address energy dependency- related challenges facing Poland as well as the broader internaonal community. The Declara- on promotes the development of the infrastructure necessary to increase regional energy security and diversificaon of sources and promotes the need to counter projects driven by malign actors, which use energy as a means of polical and economic coercion. 7

Energy infrastructure systems are highly interconnected. For example, Figure 1 shows the interdependencies associated with the electricity subsector. Although such interdependence has significantly benefited society in terms of efficiency, it can be a weakness when the fail-

5The White House (2013) Presidenal Policy Direcve 21: Crical Infrastructure Security and Resilience. Available at hps://www.dhs.gov/sites/default/files/publicaons/naonal- infrastructure-protecon-plan-2013-508.pdf. Accessed September 28, 2018. 6DHS (2013) Naonal Infrastructure Protecon Plan: Partnering for Crical Infrastructure Security and Resilience. Available at hps://www.dhs.gov/sites/default/files/publicaons/naonal- infrastructure-protecon-plan-2013-508.pdf. Accessed September 28, 2018. 7DOE (2018) Joint Declaraon between the United States Department of Energy and the Ministry of Energy of the Republic of Poland Concerning Enhanced Cooperaon On 8DHS (2013) Naonal Infrastructure Protecon Plan: Energy Security. Available at Partnering for Crical Infrastructure Security and hps://www.energy.gov/sites/prod/files/2018/11/f57/US- Resilience. Available at Poland%20Declaraon%20for%20Enhanced%20Cooperaon hps://www.dhs.gov/sites/default/files/publicaons/naonal- %20on%20Energy%20Security.pdf. infrastructure-protecon-plan-2013-508.pdf. Accessed January 2, 2019. Accessed September 28, 2018.

4 Assessing Energy Dependency in the Age of Hybrid Threats Figure 1: Electricity Interdependencies9

9Source: Argonne Naonal Laboratory

5 Assessing Energy Dependency in the Age of Hybrid Threats North America 11, 2001, in the United States, to the upsurge of terrorism-related events in Europe in 2016 and 2017. Following the Northeast blackout in 2003, the U.S. and Canadian governments created a task Similar to North America, the EU developed spe- force to analyze the causes and make recom- cific supranaonal programs for the protecon mendaons to prevent or migate future dis- of crical infrastructure. In December 2004, 10 rupons. Since the work of this task force, the Commission established a European Program plans and strategies developed between the for Crical Infrastructure Protecon (EPCIP) and United States and Canada have reiterated the a warning system for crical infrastructure, the importance of considering dependencies in risk- Crical Infrastructure Warning Informaon Net- management processes. work (CIWIN).13 The objecves of EPCIP were to ensure adequate and uniform levels of safety The Canada-United States Acon Plan for Cri- for crical infrastructure, to minimize disrupon, cal Infrastructure, in parcular, presents a cross- and to provide rapid reacon capabilies.14 CI- border approach to strengthening the resiliency WIN allows for the exchange of best pracces of crical infrastructure. One of the three ob- by providing a means of transming alerts and jecves of this acon plan is to develop a col- threat informaon.15 laborave risk-management approach, which requires idenfying and addressing key infrastruc- The EU is highly dependent on energy importa- 11 ture. The Joint United States-Canada Elec- on. This dependence leaves member naons tric Grid Security and Resilience Strategy iden- vulnerable to supply disrupons. To address this fies the need to integrate infrastructure depen- concern, The European Commission defined its dency consideraons to ensure the security and Energy Security Strategy to ensure a stable and resilience of the electric grid. One of the main abundant supply of energy for European cizens goals of this strategy is specifically to “under- and the economy. The strategy specifically in- stand and migate vulnerabilies from depen- cluded short-term and long-term measures. En- 12 dencies with other crical infrastructure.” ergy security stress tests led to the development of security preparedness plans. Long-term measures seek to promote more coordinaon be- Europe tween EU countries to use exisng storage fa- cilies, develop reverse flows, construct energy interconnectors, conduct risk assessments, and Concerns about crical infrastructure protecon establish security-of-supply plans at the regional began in the late tweneth century in relaon to and EU levels.16 tensions resulng from the Cold War. Aer the fall of the Eastern bloc, these concerns faded, only to resurface at the dawn of 2000 because of computer problems ancipated for the new mil- United Naons (UN) lennium. This need to analyze and protect crical infrastructure has grown with respect to fears UN Resoluon 2341, dated February 2017, ad- of terrorism, which have increased over the past dresses threats to internaonal peace and se- 15 years, from the terrorist aacks of September curity caused by terrorist acts. The resoluon specifically recognizes that the increase in

10U.S.-Canada Power System Outage Task Force.2004. Final report on the August 14, 2003, blackout in the United 13 States and Canada: causes and recommendaons. Europa (2012) European Programme for Crical Available at hps://energy.gov/sites/prod/files/oeprod/ Infrastructure Protecon. DocumentsandMedia/BlackoutFinal-Web.pdf. Available at hp://europa.eu/legislaon_summaries/jusce Accessed September 28, 2018. _freedom_security/fight_against_terrorism/l33260_en.htm. 11Public Safety Canada (2010) Canada-United States Acon Accessed September 28, 2018. 14 Plan for Crical Infrastructure. Available at Commission of the European Communies (2006) hps://www.dhs.gov/xlibrary/assets/ip_canada_us European Programme for Crical Infrastructure _acon_plan.pdf. Protecon, 576 final, Brussels, Belgium. Available at Accessed September 28, 2018. hp://eur-lex.europa.eu/legal- 12Governments of the United States and Canada (2016) content/EN/TXT/?uri=LEGISSUM:l33260. Joint United States–Canada Electric Grid Security and Accessed September 28, 2018. 15 Resilience Strategy, December. Available at Ibid. hps://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy 16Europa (2018) Energy Security Strategy. Available at /pdf/JOINT%20GRID%20SECURITY%20AND%20 hps://ec.europa.eu/energy/en/topics/energy-strategy- RESILIENCE-Strategy_en.pdf. and-energy-union/energy-security-strategy. Accessed September 28, 2018. Accessed September 28, 2018.

6 Assessing Energy Dependency in the Age of Hybrid Threats cross-border crical infrastructure interdepen- NATO is enhancing the resilience of crical in- dencies between countries—combined with infrastructure by improving situaonal awareness, creasing threats and vulnerabilies—creates new strengthening deterrence and defense, and ex- security concerns.17 The protecon of crical panding its toolset to address hosle hybrid oper- infrastructure, therefore, requires an all-hazard aons.21 At the 2016 Summit in Warsaw, Allied approach promong informaon sharing among leaders commied to further developing their governmental authories, foreign partners, and naons’ individual and collecve capacity to re- the private sector, as well as domesc and cross- sist any form of aack, including hybrid war- border collaboraons to develop policies, good fare; assist an ally that is a target in a hybrid pracces, and lessons learned.18 operaon; and counter hybrid warfare as part of a collecve defense.22 The 2018 Brussels Summit Declaraon announced the establish- ment of Counter Hybrid Support Teams, which North Atlanc Treaty provide targeted assistance to Allies in prepar- Organizaon (NATO) ing for and responding to hybrid operaons. The Declaraon also idenfied support for Ukraine’s efforts to strengthen its resilience against hy- Enhancing the resilience of crical infrastruc- brid threats by intensifying acvies under the ture is a top priority for NATO, which comple- NATO-Ukraine Plaorm on Countering Hybrid ments the collecve defense clause in Arcle Warfare.23 5. NATO has a significant dependency on civil and commercial infrastructure, including military transport, communicaons used for defense pur- poses, and host naon support to NATO oper- Other Internaonal aons from local commercial infrastructure and services. Many of these dependencies lack re- Organizaons dundancies,19 highlighng the need to idenfy and migate potenal failure points vulnerable to Other intergovernmental organizaons, such as exploitaon through hybrid interference and in- the World Economic Forum (WEF) and the fluencing. Organisaon for Economic Co-operaon and Development (OECD), idenfy the importance Specific to energy, the 2018 Brussels Summit of assessing infrastructure interdependencies. Declaraon states: “… it is essenal to ensure that OECD specifically highlights the importance of the members of the Alliance are not vulnerable understanding the characteriscs of complex to polical or coercive manipulaon of energy, systems in ancipang catastrophic events that which constutes a potenal threat.” Because could result in global shocks.24 The WEF’s 2013 many NATO allies depend on Russian gas and Global Risk Report also highlighted the need to oil, the resiliency of energy infrastructure plays consider interdependencies and priorize appro- an especially crical role in the common security priate response measures.25 These two organi- of NATO member naons. Therefore, idenfy- zaons are parcularly interested in ancipang ing stable and reliable energy supplies, diversi- events that may require policy intervenons and fying transport routes, establishing suppliers and idenfying where those intervenons should or energy resources, and understanding the inter- could occur.26,27 dependencies within energy networks are vitally important to increasing resilience against hybrid threats.20

21Ibid. 22Ibid. 23Ibid. 17United Naons Security Council (2017) “Resoluon 2341: 24OECD (2011) Future Global Shocks: Improving Risk Threats to internaonal peace and security caused by Governance. Available at terrorist acts,” February 13. Available at hp://www.oecd.org/governance/48329024.pdf. hp://unscr.com/en/resoluons/doc/2341. Accessed September 28, 2018. Accessed September 28, 2018. 25WEF (2013) Global Risks 2013, Eighth Edion. Available 18Ibid. at 19NATO (2018) “Resilience and Arcle 3.” Available at hp://reports.weforum.org/global-risks-2013/. hps://www.nato.int/cps/en/natohq/topics_132722.htm. Accessed September 28, 2018. Accessed September 28, 2018. 26Ibid. 20NATO (2018) “Brussels Summit Declaraon,” July 11–12. 27OECD (2011) Future Global Shocks: Improving Risk Available at hps://www.nato.int/cps/en/natohq Governance. Available at /oﬃcial_texts_156624.htm. hp://www.oecd.org/governance/48329024.pdf. Accessed September 30, 2018. Accessed September 28, 2018.

7 Assessing Energy Dependency in the Age of Hybrid Threats Crical infrastructure dependency analysis can take various forms. Naonal governments and crical infrastructure operators are responsible for the protecon and resilience of crical infrastructure systems; their responsibilies require an operaonal approach. Supranaonal organizaons, like the UN and NATO, have a coordinaon role and propose strategic approaches to promote the integraon of naonal programs. Challenges addressed through these approaches must include the exploitaon of dependencies through hybrid threats. Tailoring the approaches to consider hybrid operaons requires consideraon of geopolics, infrastructure systems, and assets that comprise energy dependencies.

8 Assessing Energy Dependency in the Age of Hybrid Threats Geopolics of Energy Dependencies

Because energy trade is highly polical, it is use- Polics of Supply ful to examine the geopolical aspects of energy dependencies in assessing risk. Such dependen- When the balance of the relaonship between cies reflect the geopolical, polical, and com- the supplier and importer naons is lted in fa- mercial relaonships among three categories of vor of the supplier, that naon can pursue a set naons: those that produce energy, those that of policies known as the “polics of supply,” ne- import energy, and those whose territories or goang from its posion of strength relave to territorial waters are essenal for the flow of en- the consumer naon. Supplier naons can also ergy supplies from producing to imporng na- advance their naonal, economic, polical, and ons (transing countries). When assessing the security interests by implemenng certain eco- factors that influence the geopolics of energy nomic and polical policies: flooding or starving dependencies, researchers need to consider the the market, favoring allies, or punishing enemies disncons between different resources, such as by implemenng pricing or supply policies. For natural gas, oil, coal, nuclear, or renewables. Fun- instance, negoaons of gas supplies or prices gible commodies (those that can be easily ex- can be accompanied by demands that import- changed or replaced) are less suscepble to poli- ing naons alter their domesc or foreign polics because they are easy to transport and their cies and/or join polical or economic blocs or al- global market and trade mechanisms are more ro- liances with the supplier naons rather than rival bust. Less fungible resources tend to be more ones. highly policized and therefore more vulnerable to geopolics. None of the categories described Not all gas-producing countries can pursue the below is mutually exclusive; oen, researchers polics of supply. Certain characteriscs can ei- can evaluate a country across mulple categories, ther constrain or broaden its power and influence depending on the circumstances. in the supply relaonship. Smaller suppliers that cannot meet a significant poron of their cus- tomer naon’s needs lack the market or polical Polics of Interdependence leverage over importers. Likewise, regionally iso- lated suppliers who cannot access many markets or imporng countries are much weaker players While the term “energy polics” implies an ele- in the polics of supply. ment of power and influence, the relaonships are complex and not one-sided. Exporng naons depend on their markets or on imporng naon(s) for revenue. The resulng relaonship Polics of Dependence can be one of interdependence or one of varying degrees of dependence, resulng in stable sup- When the interdependence of suppliers and implies that are less vulnerable to polical shis. porng naons is asymmetric, the imporng The degree of interdependence varies depending countries can fall prey to the “polics of depen- on a number of condions, such as the balance dence” or the “polics of demand,” depending on (or symmetry) in the dependency relaonship be- their level of diversificaon, volume of imports, tween a supplier and a consumer, which reflects and market condions. Such importers are dis- (1) the size of both markets, (2) the degree to proporonately reliant on a single or limited set which each side has alternave import or export of energy-producing or -exporng naon(s), sup- market opportunies, and (3) related infrastruc- ply routes, or infrastructure. With limited polit- ture. The degree of symmetry is not stac: it can ical and economic opons available, they oen change with changing market condions; discov- operate from a posion of weakness. eries of new resources or technologies; economic performance; and other domesc, bilateral, and internaonal factors. In the real world of trade and commercial relaons, perfectly balanced in- Polics of Demand terdependence is rare. In contrast, the “polics of demand” is a set of economic and polical policy opons available to energy-consuming countries to pursue their naonal economic, polical, and security interests

9 Assessing Energy Dependency in the Age of Hybrid Threats by leveraging their strong posion in energy markets or relave to specific gas-exporng countries or sets of countries. For instance, an imporng country can enjoy a posion of strength and negoaon leverage simply because it imports large volumes of a commodity or by having a number of diversified suppliers. The difference between being stuck in the polics of demand versus benefing from the polics of supply can also depend on market condions, such as liq- uidity and pricing, which determine whether it is a buyer’s or seller’s market.

Polics of Transit

The term “polics of transit” describes the dy- namics for transit states, which retain some nego- ang power by collecng revenues in the form of transit fees or for operang energy transit infrastructure; however, these naons can also fall into the trap of being “rener states.” Transit countries can use energy supplies as a means of coercion by destabilizing the transport of commodies through their territory, essenally hold- ing supplies hostage. Historically, transit states have relied on land-based pipelines or rail or truck deliveries, but the boom of tankers carrying oil and liqueﬁed natural gas (LNG) across global markets has added the element of internaonal waters to the equaon. 28

28For a detailed analysis of the geopolical dependencies described in this secon, see Grigas, Agnia (2017) The New Geopolics of Natural Gas, Harvard University Press, Cambridge, MA, p. 13–20.

10 Assessing Energy Dependency in the Age of Hybrid Threats Classes of Dependencies

Crical infrastructure assets are in constant inter- Geographic acon with their socio-economic environment, using and transforming inputs (i.e., resources) from the environment and providing outputs (i.e., This class of dependency characterizes the col- new resources) to the same environment (e.g., locaon of infrastructures and the potenal that other crical infrastructure assets). Several char- the disrupon of one infrastructure asset may af- acteriscs of the crical infrastructure consid- fect other infrastructure assets located nearby. ered and its operang environment (e.g., pol- The collocaon of natural gas pipes and under- icy, security, safety, polical consideraons) have ground electric lines in urban right-of-ways con- specific effects on the interconnecons among stutes a geographic dependency. crical infrastructure assets.29 The best method by which to characterize crical infrastructure dependencies is to consider their classes based Logical on the types of resources transferred and the level of interacon:30,31 This class of dependency characterizes linkages aributable to human and financial decisions and acons. Geopolical and financial decisions in- Physical fluencing the availability and the price of natural gas constute logical dependencies. This class of dependency characterizes the func- Geographic dependencies define major energy onal and structural linkages required to trans- corridors. Physical and cyber dependencies oc- fer goods and services. The connecons (i.e., cur at operaonal and control levels. Finally, pipelines) between the natural gas system and logical dependencies occur at management and the electric power system that supply the natural strategic levels. All these classes of dependen- gas needed to fire up thermal generang plants cies directly affect the energy supply chains. constute physical dependencies. Their consideraon in risk management and resilience strategies is important to understand the funconing of energy systems and to ancipate Cyber potenal cascading and escalang failures result- ing from hybrid threats.

This class of dependency characterizes the elec- The following secon provides historical exam- tronic and informaonal linkages required to ples of interdependence among energy subsec- transfer informaon and data. The transfer of tors. data between sensors and the control center for monitoring day-to-day pipeline operaons constutes a cyber-dependency.

29Rinaldi, S.M., J.P. Peerenboom, and T.K. Kelly (2001) “Idenfying, Understanding, and Analyzing Crical Infrastructure Interdependencies,” IEEE Control Systems Magazine, December. Available at hps://ieeexplore.ieee.org/document/969131. Accessed September 28, 2018. 30Ibid. 31Pet, F., et al. (2015) Analysis of Crical Infrastructure Dependencies and Interdependencies, ANL/GSS-15/4, Argonne Naonal Laboratory, Global Security Sciences Division, Argonne, Ill, USA. Available at hps://publicaons.anl.gov/anlpubs/2015/06/111906.pdf. Accessed September 28, 2018.

11 Assessing Energy Dependency in the Age of Hybrid Threats Case Studies

European Union and Gazprom for gas at the inflated rate for several months, Russia cut off supplies. Subsequently Ukraine has The energy relaonship between Europe and been receiving Russian gas in reverse flows from its European neighbors rather than from Rus- Russia has been one of asymmetric energy in- 34 terdependence. The EU has imported Russian sia directly. Nonetheless, in March 2018, de- oil and natural gas, while Russia has historically spite the Stockholm Arbitraon panel, Gazprom depended on European markets, as well as Eu- refused to resume gas shipments to the Ukrainian ropean investments and technologies. However, market, forcing Kyiv to suspend schools and uni- versies during the winter months and creang the EU has faced the polics of dependence in 35 the gas sector, where Russian gas represented up risks to the EU’s supply. to 40 percent of its gas imports.32 Individual EU Going forward, the risks associated with Europe’s naons reflect a wide spectrum of energy secu- dependence on Russian gas remain; the least se- rity risks based on their relave (in)dependence vere of these risks could include price hikes and from Gazprom—the largest supplier of natural gas cutoffs. The EU’s vulnerability to gas cutoffs will to Europe and Turkey— complicang efforts to increase with the construcon of the Gazprom- develop a common approach in Brussels. led Nord Stream 2 natural gas pipeline, which will According to Agnia Grigas’ book, The New concentrate two-thirds of Russian gas exports to Geopolics of Natural Gas, although Moscow Europe in parallel interconnectors (Nord Stream employed gas cutoffs in the former Soviet Union 1 and Nord Stream 2). Europe could not sur- during the 1990s as a well-established pres- vive even 30 days without Russian gas in the sure tacc, several flashpoints in the 2000s con- winter, while Russia can certainly survive a year (if not years) without European gas purchases, tributed to a reevaluaon of the EU’s percepon 36 of Russia as a reliable gas supplier and marked investments, and technologies. This situaon a new stage in EU-Russia gas relaons. In the will prove dire when Russia’s Power of Siberia winters of 2006 and 2009, Russia ceased sup- gas pipeline to China becomes operaonal in late plies to Ukraine over tensions between Gazprom 2019 and Russia obtains alternaves to Euro- and Kyiv over gas prices. The dispute halted Rus- pean markets. As a result, the Kremlin may ap- sian gas deliveries to the EU that were transit- ply a carrot-and-sck approach to the EU and in- ing through pipelines on Ukrainian territory. The dividual member naons and seek to sway both 2009 gas crisis lasted 2 weeks and affected sup- their domesc and foreign policies in relaon to plies to the following EU member states: Czech gas trade. Republic, Romania, Austria, Poland, Croaa, and Slovakia. The halt in gas supplies resulted in at least 11 casuales as cizens froze to death, in- Nordic-Balc Region: Power & cluding 10 people in Poland, where temperatures Pipelines reached negave 20 degrees Celsius.33 The Nordic-Balc region faces a number of risks Aer its purported annexaon of Crimea and related to new energy infrastructure projects, led connued aggression in eastern Ukraine, Russia dramacally increased the price of gas sold to Ukraine. In June 2014, when Kyiv refused to pay 34For a historical overview of EU-Russia gas relaons, see Grigas, Agnia (2017) The New Geopolics of Natural Gas, Harvard University Press, Cambridge, MA, p. 146–161. 32Keang, Dave (2018) “While Expelling Diplomats, 35Soldatkin, Vladimir, and Natalia Zinets (2018) “Gazprom Germany Quietly Increases Dependence on Russian Gas,” seeks to halt Ukraine gas contracts as dispute escalates,” Forbes, March 29. Available at Reuters, March 2. Available at hps://www.forbes.com/sites/davekeang/2018/03/29/while- hps://www.reuters.com/arcle/us-russia-ukraine- expelling-diplomats-germany-quietly-increases- gas/gazprom-seeks-to-halt-ukraine-gas-contracts-as- dependence-on-russian-gas/#5c340f955b1c. dispute-escalates-idUSKCN1GE2DW. Accessed October 6, 2018. Accessed October 6, 2018. 33Harding, Luke, and Dan McLaughlin (2009) “Deal to 36Umbach, Frank (2014) “Russian-Ukrainian-EU gas conflict: resume Russian gas eludes EU as 11 people die in big who stands to lose most?” NATO Review. Available at freeze-up,” Guardian, January 11. Available at hps://www.nato.int/docu/review/2014/nato-energy- hps://www.theguardian.com/world/2009/jan/11/russia- security-running-on-empty/Ukrainian-conflict-Russia- ukraine-gas-supplies-dispute. annexaon-of-Crimea/EN/index.htm. Accessed October 6, 2018. Accessed October 1, 2018.

12 Assessing Energy Dependency in the Age of Hybrid Threats by both the EU and Russia. The EU member ity to a cutoﬀ of gas supplies because it will con- states seek to diversify their sources of energy, centrate two-thirds of Russian gas imports along as with the NordBalt power cable, and Russian the same route. The pipeline would also remove energy companies seek to increase access to EU a key strategic deterrent against Russian aggres- markets, as with the Nord Stream 2 pipeline. sion in Ukraine without fear of damage to the gas These new projects demonstrate the geopolical infrastructure that supplies European markets. It factors that make up the polics of dependence, would also give Moscow new means of using en- as well as physical, cyber, geographic, and logical ergy for polical coercion in Ukraine and in Eu- dependency classes. rope more broadly.

NordBalt, the submarine power cable between Finally, the new pipeline would not only facili- Lithuania and Sweden, expands integraon of tate Russia’s export of corrupon to European the Balc states to the Nordic electricity markets business and polics but also increase the sus- and facilitates power trading between the Balc cepbility of the EU’s gas supply to cyber risks. and Nordic states. Geographic dependency risks There are major drawbacks to concentrang EU’s could be a significant consideraon for the power pipeline infrastructure, as Nord Stream plans to cable in the future. The Balc Sea is a small, flat do. Given that Nord Stream AG will operate both body of water—less than 20 meters deep in some Nord Stream 1 and 2, the pipelines will likely have places—and liered with countless mines, unex- overlapping soware that monitors day-to-day ploded bombs, and sunken vessels from the two operaons, and, at the exit, the two pipelines will world wars. Accidental explosions are a real con- be joined with interconnected hardware. There- cern: in 2015, part of the Nord Stream 1 pipeline fore, if hackers wanted to gain access to both was briefly closed aer the Swedish navy dis- pipelines, they would only have to hack into one covered an unexploded mine nearby. Moreover, system, not two, pung between one-third and Russia could also pose a security threat to Balc one-fourth of EU gas imports at risk. energy infrastructure. Despite its small size, the Balc Sea is home to a significant amount of Rus- sian military acvity, including large-scale exer- Ukraine and Nuclear cises and regular patrol missions. Over the years, Russian servicemen have caused numerous high- Manipulaon risk incidents against NATO forces, including in the Balc Sea.37 While the Kremlin is best known for using natural gas for polical advantage, Russia and its na- With Nord Stream 2, Russia intends to expand onal nuclear energy company, Rosatom, have the infrastructure delivering gas directly to Ger- also vied for dominance in nuclear energy. A many under the Balc Sea, bypassing Ukraine large number of EU and NATO countries are de- as a transit state and depriving it of $3 bil- pendent on Russian-built nuclear power plants lion in annual transit revenues (roughly equiva- for their electricity; Moscow could use this de- lent to Ukraine’s Ministry of Defense budget in pendence as a coercive tool, creang a long-term 38,39 2018). While Nord Stream 2 would face the strategic vulnerability for ally states. same risks of explosions or accidental military ac- cidents as NordBalt in the Balc Sea, if built, the In late 2014, when the conflict between Kyiv and new pipeline would increase Europe’s vulnerabil- Moscow escalated, Ukraine decided to purchase nuclear fuel from the U.S. nuclear engineering group and global leader in nuclear fuel produc- on, Wesnghouse.40 Its tradional supplier, 37Grigas, Agnia, and Lukas Trakimavicius (2018) “Nord Rosatom, previously had a near monopoly in the Stream 2 is a Bad Deal for Europe,” Atlanc Council, July Ukrainian market. The Kremlin launched a propa- 10. Available at ganda and disinformaon campaign. The Russian hp://www.atlanccouncil.org/blogs/new- Foreign Ministry issued a statement, which was atlancist/nord-stream-2-is-a-bad-deal-for-europe. Accessed October 6, 2018. widely promoted on Russian media, that Ukraine 38Carrel, Paul, and Madeline Chambers (2018) “Merkel says was endangering public safety in Europe by us- Nord Stream 2 not possible without clarity for Ukraine,” ing a U.S. supplier for Soviet-built nuclear plants. Reuters, April 10. Available at hps://af.reuters.com/arcle/worldNews/idAFKBN1HH1HP. Accessed October 10, 2018. 39Defense Express (2018) “Ukraine’s Ministry of Defense 40Williams, Carol J. (2014) “Russia says Ukraine deal to buy 2018 budget approved at $3.1B,” March 26. Available at U.S. nuclear fuel poses safety risks,” Los Angeles Times, hps://defence-ua.com/index.php/en/news/4345- Dec. 30. Available at ukraine-s-ministry-of-defense-2018-budget-approved-at- hp://www.lames.com/world/europe/la-fg–russia- 3-1b. Accessed October 10, ukraine-nuclear-fuel-20141230-story.html. Accessed 2018. October 5, 2018.

13 Assessing Energy Dependency in the Age of Hybrid Threats They noted: “Consequences of possible acci- 12 miles from the Lithuanian border and 30 miles dents and meltdowns will be the full responsi- from the capital city of Vilnius.45 bility of the Ukrainian authories and U.S. suppliers of the fuel.” The statement referenced the In the aermath of Chernobyl, authories in world’s worst nuclear disaster, the 1986 Cher- Moscow sought to hide the Chernobyl disaster nobyl meltdown in Soviet-run Ukraine: “It seems from the domesc and internaonal public. This that the Chernobyl tragedy did not teach Kyiv au- resulted in higher human and economic losses, thories any lessons.” This panic-inducing state- the results of which linger to the present day, un- ment from the Russian Foreign Ministry did not dermining public conﬁdence in the region. reﬂect the fact that Wesnghouse had been working in the Ukrainian market since 2003, including operaon of the South Ukraine Nuclear Analycal Approach Power Plant.

The Kremlin has tried to stoke anxiety in the As demonstrated by the case studies described in Ukrainian public, which connues to suffer the the preceding secon, energy dependencies con- consequences of Chernobyl. Web blogs ran sto- stute a risk mulplier—they create new threats, ries like this one from January 12, 2015, “Oh expand vulnerabilies, expand resilience require- no! Kiev plans to jam (nuclear) square pegs into ments, and generate cascading and escalang round holes.”41 Given that nuclear energy is re- failures. Therefore, it is important to assess the sponsible for 60 percent of electricity generaon potenal consequences of dependency failures in Ukraine, supplies to nuclear power plants are and develop approaches to prevent and manage of strategic domesc economic and polical im- escalang failures. Integrang infrastructure de- portance.42 With Kyiv having faced a number pendency analysis in risk management supports of Gazprom gas cutoffs, a turn to Wesnghouse the development of resilience-driven strategies during mes of tension with Moscow could be that can be adapted to local and regional needs.46 perceived as a means of ensuring the connued operaon of its nuclear power plants. By Analysts can use a systemic approach that com- 2018, Wesnghouse was supplying nuclear fuel bines top-down and boom-up regional anal- to 7 of Ukraine’s 15 nuclear power plants, while ysis to manage these complexies and to es- Rosatom supplied the rest.43 tablish the appropriate scope of analysis, as well as the specific assets and subsystems for However, disinformaon campaigns have conn- which resilience-related informaon should be ued, including informally. An announcement of collected.47 fuel supplies for Ukrainian nuclear power plants by Wesnghouse led to many crical comments Figure 2 illustrates an analycal approach to re- by Russian experts and fake news predicons gional dependency analysis. that a “second Chernobyl” could result.44 Given the Kremlin’s propensity to use informaon warfare, false reports by Russia suggesng malfunc- ons in the nuclear plants could cause panic in a populaon traumazed by the Chernobyl disaster. Lithuanian authories are also concerned about such a scenario given that Russian firms 45Standish, Reid (2017) “Lithuania, Leery of Moscow, Spars are building a nuclear power plant in Belarus, just with Belarus over Nuclear Reactor,” Foreign Policy, October 31. Available at hps://foreignpolicy.com/2017/10/31/lithuania-leery-of- moscow-spars-with-belarus-over-nuclear-reactor/. 41 Fireflyfans (2015) “Oh No! Kiev plans to jam (nuclear) Accessed October 8, 2018. square pegs into round holes,” January 12. Available at 46United Naons Office for Disaster Risk Reducon (2017) hp://www.fireflyfans.net/mthread.aspx?d=58977. Words into Acon Guidelines: Naonal Disaster Risk Accessed October 3, 2018. Assessment. C. Cross-Sectoral and Mul-Risk Approach 42 Timtchenko, Ilya (2018) “Wesnghouse seeks bigger share to Cascading Disasters, Available at of nuclear fuel supply,” Kyiv Post, June 8. Available at hps://www.prevenonweb.net/files/52828 hps://www.kyivpost.com/business/wesnghouse-seeks- _ccrosssectoralmulrisk[1].pdf. bigger-share-of-nuclear-fuel-supply.html. Accessed September 28, 2018. Accessed October 4, 2018. 47Carlson, L., et al. (2012) Resilience Theory and 43 Ibid. Applicaons, ANL/DIS-12-1, Argonne Naonal 44Slobodian, Nataliia (2016) “Energy instruments of ‘hybrid Laboratory, Decision and Informaon Sciences Division, warfare,’” Straor Worldview, March 7. Available at Argonne, Ill., USA. hps://worldview.straor.com/arcle/energy- Available at instruments-hybrid-warfare. hps://publicaons.anl.gov/anlpubs/2012/02/72218.pdf. Accessed September 30, 2018. Accessed September 28, 2018.

14 Assessing Energy Dependency in the Age of Hybrid Threats Figure 2: Regional Dependency Analysis48

This approach is based on the assumpon that a community or region operates as a “system of systems,” in which crical infrastructure assets and systems can be analyzed as part of a broader system of infrastructure. In this systemic approach, top-down analyses characterize high-level system operaons and help idenfy cascading and escalang failures within individual systems. Ulmately, top-down analyses help idenfy supply areas that would potenally be aﬀected by the loss or degradaon of the resource supplied by the crical infrastructure considered (e.g., areas without electric power).

Boom-up analyses characterize asset-level operaons and help idenfy first-order upstream and down- stream dependencies. Ulmately, boom-up analyses characterize how asset-level operaons would react to the loss or degradaon of a resource. Considering energy systems, top-down analyses can allow analysts to idenfy areas where, for example, natural gas supply shortages could occur. Boom-up analyses con- ducted in these areas allow analysts to determine how specific crical assets would react to a natural gas shortage. For example, natural gas-fired electric power-generang plants cannot operate without a supply of natural gas. Including the degradaon of the generang plant in electric power top-down analyses allows analysts to idenfy areas that could experience blackouts.

Considering energy infrastructure’s operang environments (e.g., policy, regulaon, geopolics) with the four dependency classes produces an opmal analysis for comprehensively understanding energy dependency and interdependency dimensions. Through these acvies, decision makers can ancipate and characterize how energy dependency and interdependency dimensions inﬂuence the protecon and resilience of crical infrastructure systems targeted by hybrid operaons. This eﬀort requires a collaborave environment that promotes informaon sharing and muldisciplinary analyses. The overall analysis must expand beyond consideraon of crical infrastructure to consider geopolical, polical, and economic characteris-

48Pet, Frederic, Duane Verner, and L.A. Levy (2017) Regional Resiliency Assessment Program Dependency Analysis Framework, ANL/GSS-17/05, Argonne Naonal Laboratory, Global Security Sciences Division, Argonne, Ill. USA.

15 Assessing Energy Dependency in the Age of Hybrid Threats cs.

16 Assessing Energy Dependency in the Age of Hybrid Threats Table 1 – Opmal Energy Dependency Analysis to Combat Hybrid Threats

Table 1 presents a general overview of the data, analysis, and output characterizing an opmal analysis.

Data Collecon Analysis Output

Includes both geopolical Integrates infrastructure Enhanced situaonal awareness dependency categories and modeling and failure analysis, of hybrid threats to energy crical infrastructure including cascading and systems. dependency classes. escalang failures. Integrated understanding of Collected through a variety of Considers the fungiblity of potenal cascading and mechanisms, including surveys, energy resources, market escalang failures from the local academic research, and open condions, and other dynamic to the global level. source informaon. factors. Insight into hybrid-threat actors’ capabilies and intenons.

17 Assessing Energy Dependency in the Age of Hybrid Threats Recommendaons

Current energy security consideraons include a experse on combang hybrid threats to energy number of factors, such as diﬀerent geopoli- systems through the Hybrid CoE’s Energy Net- cal dependencies and classes of dependencies in work. As part of the Hybrid CoE’s Vulnerabili- infrastructure. Cybersecurity, informaon war- es and Resilience Community of Interest (COI), fare, and geopolical tensions require connued the Energy Network facilitates mulnaonal and risk assessment and resilience conngency plan- muldisciplinary collaboraon so that member ning. The increasingly interconnected global en- naons and instuons can beer understand, ergy markets, including the gas and nuclear sec- defend against, and respond to hybrid threats. tors, can implicate EU and NATO member states Speciﬁc outcomes from the Energy Network COI in the energy security risks of members of their will include the following: alliances and beyond.

Because of the interconnected nature of energy • Improved understanding of hybrid threats and infrastructure, Hybrid CoE member naons and vulnerabilies to energy supply networks, allied organizaons should consider adopng a • Increased resilience through shared best prac- common approach to assessing risk associated ces and new policy proposals, with energy dependencies in the age of hybrid • Improved applicaon of exisng policies and threats. The U.S Department of Homeland Secu- funding programs, rity’s (DHS) Regional Resiliency Assessment Pro- • Improved public-private partnerships in coun- gram (RRAP) provides a best-pracce assessment tering hybrid threats and improving resilience, of crical infrastructure dependencies. Iniated • Promoon of potenal business soluons and by the DHS Oﬃce of Infrastructure Protecon regulatory frameworks at naonal and commu- in 2009, the RRAP addresses a range of infras- nity levels, and tructure resilience issues that could have signiﬁ- • Proposed topics for academic research. cant regional, naonal, and cross-border consequences.49 Recently adopted by Public Safety Canada, and implemented through cross-border projects with the United States, the RRAP provides a process that can be replicated to help organizaons measure and improve their resilience to all hazards, such as cyber threats, accidental or intenonal manmade events, and natural catastrophes.50 The RRAP is an ideal framework in which to incorporate energy infrastructure’s operang environment (e.g., policy, regulaon, geopolics) with the four dependency classes (i.e., physical, cyber, geographic, and logical) to produce an opmal analysis for comprehensively understanding energy dependency and interdependency dimensions and associated risks in the age of hybrid threats.

In addion, Hybrid CoE member naons and allied organizaons should share best pracces and

49DHS (2017) “Regional Resiliency Assessment Program,” last published September 22. Available at hps://www.dhs.gov/regional-resiliency-assessment- program. Accessed October 3, 2018. 50Public Safety Canada (2018) “The Regional Resilience Assessment Program,” modiﬁed August 13. Available at hps://www.publicsafety.gc.ca/cnt/ntnl-scrt/crtcl- nfrstrctr/crtcl-nfrstrtr-rrap-en.aspx. Accessed October 3, 2018.

18 Assessing Energy Dependency in the Age of Hybrid Threats The European Centre of Excellence for Countering Hybrid Threats tel. +358 400 253800 www.hybridcoe.ﬁ

Hybrid CoE is an internaonal hub for praconers and experts, building member states’ and instuons’ capabilies and enhancing EU-NATO cooperaon in countering hybrid threats located in Helsinki, Finland.

The responsibility for the views expressed ulmately rests with the authors.

ISBN 978-952-7282-15-1