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European energy diversification after Crimea

By Joshua Noonan

As the Russian occupation of the Crimea continues by an ersatz self-defense force, markets have taken a tumble. This tumble is tied in part to the energy dependence of Europe on Russian gas market. With more than 30% of petroleum utilized and 160 bcm of natural gas imported to Europe from Russia, dependence renders it a straw man due to its inability to act without facing the energy weapon.

In 2007, the Swedish Defense Research Agency documented 55 instances of Russian energy actions in Europe i.e. actions range from subsidizing natural gas and petroleum through providing below-market rate energy for transshipment, refining for export-markets, and internal consumption to halting delivery of natural gas including with 44 having both political and economic underpinnings instead of simply an economic calculus.

As Crimea hangs in the balance, Germany, the United Kingdom, and the other European states hesitate on half-measures, ruling out economic sanctions. A driver of the concerns at one level is the economic clout of Russia as a consumer of European goods and with Russian plutocrat-investor in the City of London. The deeper concern is the energy weapon. Europeans have played lip-service to the diversification of energy supplies, with discussions of a putative Nabucco pipeline being discussed for years. Nonetheless, decisive action has been absent.

Some neighboring states have taken action; namely Turkey, Georgia, and Azerbaijan. The Trans-Anatolian Pipeline and the Trans-Adriatic Pipeline which are anticipated to go online in 2018. Nonetheless, the Shah Deniz projects of Azerbaijan are only part of the solution as the State Oil Company of Azerbaijan only intends to supply 10% of the European demand at its peak according to Vitaliy Baylarbayov, the Deputy Vice-President of SOCAR for Investment and Marketing at a recent CSIS event. The development of the infrastructure of the Southern Corridor will allow for the diversification of energy supplies, but it alone is not enough.

European states must look further, seeking to create routes in the developing offshore gas fields in the Eastern Mediterranean Sea. The sticking point here is the frozen conflict of Cyprus, which was on its way to being resolved until its derailment by southern Cypriots who wished to be in the European Union without their northern compatriots. Preparations for Iraqi gas from northern regions must start being exploited and transported along this route.

Furthermore, it must also seek a Trans-Caspian agreement so that Kazakh and Turkmen gas can more easily flow to Europe. Looking to the southern states along the Mediterranean, Libya and other states require assistance in order to create a sustainable investment climate.

At home, Europe must acknowledge the national security import of this project above green worries. This will allow for the rescinding of misplaced bans on hydraulic fracturing, a proven technology which would create production and jobs within Europe. Finally, for the United States and the European Union, the swift passage of the Transatlantic Trade and Investment Partnership (TTIP) must be prioritized in order to allow the export of Liquefied Natural Gas (LNG) from the United States to Europe. European investment in regasification plants is a key bottleneck in Europe while export capability is limited in the United States. In addition to increasing energy security for Europe, it would provide means of strengthening the Atlantic Alliance by providing an economic pillar to the extant security, political, and cultural pillars.

A lack of diversity in energy suppliers, creates a rationale for inaction when even the core values and agreements of the West are challenged. The Russian diminution of core agreements such as the Helsinki Final Act and the Budapest Memorandum in the current conflict in Crimea signal their disregard for issues of less gravity including energy security. Let the Russian incursion in Ukraine serve as a wake-up call to redouble European and American efforts to spur a diversity in energy suppliers, allowing for a broader range of action in case any NATO ally ever comes under threat by Russia.

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Joshua Noonan

Joshua Noonan is an Azerbaijan News Analyst; John Hopkins SAIS MA Candidate in Russian and Eurasian Studies, International Economics and is the Presidential Management Fellowship Finalist. Joshua Noonan is a frequent contributor to Foreign Policy News.

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