ally denes the relationship between the EU and Russia,that Germany, Italy, and other EU countries that importheavily rom Russia (and whose companies have investedinside Russia) are compromised by this dependence andwill be reluctant to criticize Moscow. Tis puts them atodds with new EU member states in Central and EasternEurope, which look to Western Europe and the UnitedStates to put political pressure on Russia to reduce theirvulnerability.
U.S. interest in European energy security is illustrated by the appointment o a veteran diplomat,Richard Morningstar, as Special Envoy o the U.S. Secre-tary o State or Eurasian Energy.
Europe’s Energy Predicament
Europe regularly beats its brow over its dependence onenergy imports, especially natural gas. In a 2008 policy paper, the European Commission noted that the EUimported more than 50 percent o its total energy andexpected the share to rise to 70 percent by 2030.
Teproblem is not dependence on imports
; turningto a well-unctioning international market or any commodity is normal in a globalized economy. Butnatural gas poses special problems because it is nottraded globally (apart rom limited trade in liqueednatural gas) but is instead dependent on a xed pipe-line inrastructure. In 2008, 61 percent o all the gasconsumed within the European Union was imported,o which 42 percent came rom Russia.
DomesticEU production is declining, and the percentage o gas imports is expected to increase to 73 percent. Te
Katinka Barysch, introduction to Pipelines, politics and power: The future of EU-Russia energy relations, Center for European Reform, 2008
European Commission, “Towards a secure, sustainable and competitive Europeanenergy network,” Green Paper, Brussels, 13 November 2008
24 percent came from Norway, 18 percent from Algeria, and the remainder from
other countries including via liqueed natural gas imports. European Commission,
“An EU energy security and solidarity action plan,” COM(2008) 781, Brussels, 13November 2008
dependence problem becomes more acute in Centraland Eastern Europe, where Russia is the sole supplier ormany EU member states, such as Lithuania and Slovakia.Tere are our main concerns with this relationship:1.
Russia may not be investingin domestic production at sucient scale and there-ore may not meet expected demand in the uture.
Russia, as the dominant supplierto the European Union, has price-setting power overEU consumers.
Furthermore, there are concernsabout Gazprom’s market-hegemonic designs as seenin its expansion and investment priorities.
Demand-side competition romIndia, China, and other emerging economiescould diminish any monopsony power that Europecurrently has.
China has increasing nancial powerin this regard as well because the Chinese govern-ment is willing and able to invest in the requiredinrastructure.4.
Although Russia constantly statesthat it is Europe’s most reliable supplier and indeedsupplied gas to Europe without issue or decadessince exports began in the 1960s, its interruptions o gas to Russia’s “near abroad” in 2006 and 2009 hadmajor economic repercussions in western Europe.Te issue threatens to create tension within Europe,too. Former Soviet Union members or satellite stateslike Poland, the Czech Republic, and the Baltic statesare worried that they are the rst to eel the eects o any supply disruption rom the east, whereas WesternEuropean countries are reluctant to bear the costs o thenecessary storage or other inrastructural changes thatwould hedge against supply risks.
Tis concern is at theheart o calls rom these countries or EU “solidarity” in
Christian Cleutinx and Jeffery Piper, “The EU-Russia Energy Dialogue,” in
Pipelines,politics and power: The future of EU-Russia energy relations
, Center for EuropeanReform, 2008
Daniel Gros, “The money benets of diversication,” in Pipelines, politics and power:
The future of EU-Russia energy relations, Center for European Reform, 2008
Roland Götz, “A pipeline race between the EU and Russia?” in Pipelines, politics andpower: The future of EU-Russia energy relations, Center for European Reform, 2008
Pavel Baev, “Asia-Pacic and LNG: The lure of new markets,” in Pipelines, politics
and power: The future of EU-Russia energy relations, Center for European Reform,2008
Keith C. Smith, “Bringing Energy Security to East Central Europe: Regional Coopera-tion Is the Key,” Center for Strategic & International Studies, April 2010
Natural gas poses specialproblems because it is nottraded globally but is instead
dependent on a xed pipeline