Events in Ukraine have propelled energy security back to the top of the EU’s foreign policy agenda. Russia’s actions have spurred sharper consideration of the need for energy diversification, with Moscow closing gas supplies to Ukraine and debates sharpening over the South Stream pipeline. Instability in the Middle East and North Africa compounds the challenge of finding reliable sources of alternative supplies.
What makes this backdrop particularly daunting is that crises in Russia and Ukraine and parts of the Middle East coincide with other vital energy security challenges. There are in fact three aspects of EU energy policies that currently stand at pivotal points of redefinition. First is the extent to which new EU climate change policies will affect the union’s broader international influence. Second are the changing parameters of international energy markets and the new foreign policy challenges these present for the EU. Third is the more specific crisis unleashed by Russia’s actions in Ukraine.
The common thread that runs through these three issues is that more geopolitical dimensions to European energy security are gradually coming to the fore. This presents both new challenges and opportunities and will change the way that the EU relates to the rest of the world. It will push European governments to coordinate their energy policies more effectively—while making persistent differences among member states more costly. The EU needs not merely to reassess its energy policies toward Russia but also to link these different strands of energy security together to fashion a fully strategic approach.
A Leading Player in Energy and Climate Debates?
In the last three to four years, the EU has agreed on a number of new documents that promise to strengthen Europe’s presence in international energy policies. These include an EU Energy 2020 strategy, a communication on climate diplomacy, and an Energy Roadmap 2050 that presents scenarios for the next four decades. In January 2014, the European Commission published its proposed energy policy guidelines up to 2030. The latest upgrade is a European Energy Security Strategy published at the end of May 2014; this promises political commitment to accelerate progress on a range of energy strategies, in particular as a response to Russia’s actions in Ukraine.
In preparation for the crucial UN Climate Change Conference (COP 21) in Paris in 2015, world leaders meet on September 23, 2014, to discuss climate change—the largest climate summit since the ill-fated Copenhagen meeting of 2009. In October, the EU is set to decide its approach to energy policy after 2020. While the commission initially proposed a single post-2020 target of a 40 percent reduction in emissions, several member states now advocate a binding target of 30 percent energy efficiency savings too. They cite the Ukraine crisis as reason for the EU needing to bolster efforts to increase energy efficiency.
The EU’s global energy policies are clearly undergoing a period of intense change. There is much fluid debate about the best ways for the EU to confront a new set of challenges. While efforts are under way to deepen unity among the union’s member states, doubts remain about how well positioned the EU is adequately to navigate both the positive and negative sides of the evolving international context.
The EU remains a highly complex actor in the field of energy policy. There is an intricate division of energy competences between the union’s supranational bodies and the member states. The EU is a foreign policy actor in energy issues but is also itself a set of energy market rules. It relies heavily on a regulatory approach to energy questions. Common EU rules co-exist with fiercely independent member-state policies, especially in the international arena. The division of labor between the European Commission, the European External Action Service, and member states is not always clear-cut. Some aspects of European global energy policies constitute highly geopolitical paths followed by member states’ national governments. Other aspects rely more on EU cooperation processes and common technical regulations.
This complexity does not entirely undermine EU effectiveness. But it does mean that overall, European polices are more varied than those of, say, the United States or China.
It is in the field of international climate diplomacy that the EU claims its clearest global leadership. The standard view is that this constitutes the union’s most important influence over global energy geopolitics. Over the last year, the EU has had some success in pushing China, India, and the United States toward the principle of agreeing to emissions targets with legal force when the new post-Kyoto framework is due to be signed in 2015.
The EU has the lowest energy intensity of all world regions and the highest demand for renewable energy. It is on track to meet its target to generate 20 percent of its energy from renewables by 2020. Two-thirds of the new generating capacity in the EU now comes from renewable sources. In 2012, the EU agreed on a new energy efficiency directive. Under the 2014–2020 EU budget, 20 percent of spending must be related to climate action.
However, doubters wonder whether the EU is really living up to the promise of a lead role in international climate policy. Critics argue that the EU has only made progress on its emissions targets because of the economic recession. The recession has eaten into funding for renewables. The EU’s much-lauded Emissions Trading System has not had a dramatic impact on emission levels.
The merging of the climate action and energy portfolios in the new commission may increase coherence; but environmentalists fear it may signal a downgrading of the priority attached to climate action.
Since the 2011 Fukushima disaster in Japan, Europe’s nuclear renaissance is on hold, making it much harder to reduce emissions. High-polluting coal production is booming. Germany, Spain, Poland, and others have been slow to reduce state aid to the coal sector. Poland may have won plaudits as one of the most proactive and strategic EU member states in its response to the Ukraine crisis and the vanguard advocate of EU energy integration. Yet Warsaw has also used this crisis to justify its refusal to turn away from coal—and is apparently unwilling to accept the European majority view on this issue. Since the 2014 European elections, Euroskeptic parties have more power in the European Parliament and will impose obstacles to the new EU climate package.
Against this background, EU international climate leadership and its influence over other countries’ commitments has come under more critical scrutiny. The commission’s March 2013 green paper on climate and energy policies acknowledged that by making an offer of a 30 percent emissions target conditional on similar moves by others, the EU has not brought forward new pledges from around the world. A post-2015 international agreement remains highly uncertain.
In short, EU climate policies have advanced but are not without serious shortcomings. The EU regularly claims that the example of its own climate leadership gives it international influence in this area of policy. But this claim may look rather exaggerated in light of shortfalls in the EU’s own climate policy commitments.
Recent EU summits have witnessed profound divisions. The Polish government has sought to rein back the EU’s ambitions as a global leader in climate diplomacy. Denmark has led the countercharge. New procedures are being put in place to ensure that heads of state and government are in a position to take firm decisions on the EU’s contribution to the COP21 meeting. But with differences among member states apparently widening, a testing time is ahead: if the EU stumbles in its widely praised climate diplomacy, this will undermine the union’s effectiveness in broader debates on energy security.
Moreover, the link between climate change and the EU’s broader set of geostrategic interests still needs to be made tighter. The EU was one of the first organizations to identify climate change as a security issue—as a “threat multiplier.” The union has gradually put in place a collection of policy initiatives designed to mainstream climate-related factors within its foreign and security policies.
But the EU has followed up on this so-called “climate security” imperative only in very limited ways. There is a risk that short-term crises are crowding climate security from the EU’s highest foreign policy priorities. While this may be understandable, the union must remember that climate security is set to become one of the defining strategic issues in future years and must be kept at the forefront of security strategy upgrades.
At the same time, the patterns of global oil and gas supplies are shifting in a way that has implications for EU foreign policies. This more conventional dimension of energy security has long been one of the EU’s Achilles’ heels. Member states have traditionally pursued their own interests in securing oil and gas supplies. They have not waited for common EU guidelines to orient their actions in relation to hydrocarbon diplomacy.
This has undermined other EU foreign policy objectives. The EU has struggled to develop united policies toward the geopolitics of oil and gas supplies much more than in the area of climate diplomacy. It has long been lamented that the EU lacks a common external energy security policy.
In the last three years, the EU has invested considerable effort to rectify this shortcoming. Some advances have been made. Since late 2012, the commission has had new powers to assess the compatibility of member states’ bilateral energy agreements with EU rules (albeit only those agreements involving governments). The idea is to stop governments from undercutting common EU aims when they sign energy contracts with suppliers, many of whom come from some of the world’s most repressive states.
The EU has long assumed that its global energy interests could best be advanced by getting other countries to incorporate the rules of the EU’s own internal market. This would give a framework of firm, multilateral rules to help guarantee predictable and cost-effective oil and gas supplies. Slowly, the EU has realized that in a more unfavorable global context, this approach needs to be complemented by a more geopolitical awareness.
To this end, the EU has signed a plethora of bilateral energy accords with Central Asian states, Azerbaijan, Algeria, Egypt, and others. These deals reflect a much more geopolitical approach toward energy security, with European suppliers reacting to uncertainty by seeking more predictable long-term contracts with producers.
Moreover, gas pipeline projects abound. The Nord Stream pipeline, which directly connects Russia with German markets, started pumping in November 2011. While the Nabucco pipeline from Turkey to Austria has been scrapped, the trans-Adriatic pipeline will bring supplies into southern Italy, albeit in lower quantities and farther removed from Central European markets. The commission has intimated at funds for the submarine trans-Caspian pipeline from Turkmenistan to Azerbaijan, to be finished by 2018. European Investment Bank funds rescued the Medgaz pipeline between Algeria and Spain, and efforts are being made to advance with the more challenging trans-Saharan pipeline.
Critics say this geopolitical fixation with expensive, large-scale oil and gas infrastructure undermines the EU’s climate change commitments. The EU already enjoys an incoming pipeline capacity well in excess of what its hydrocarbons consumption must be to meet its 2050 emission targets. The tenor of the EU’s 2050 road map seemed to undercut the consensus that climate policy should unequivocally lead energy policy.
Yet, progress on traditional energy security is itself slow. The amount of funding allocated for infrastructure projects is only a fraction of what is needed, experts say. Spain is about to get its first interconnector in thirty years, to France; but Paris still has many vested interests that limit the likelihood of further links. The prospect of a perfectly connected and efficient internal EU energy market that can dramatically reduce external dependency remains slim.
Moreover, companies remain reluctant to give up their exclusive private contracts for the notion of the EU negotiating single contracts for all 28 member states as a public policy at the core of an energy union. Commission officials point out that this approach may anyway sit uneasily with competition rules—the same rules it is using to curb the power of Russian energy giant Gazprom.
More broadly—and potentially more positively—these geopolitical considerations are now compounded by changes to the international energy panorama. Energy security is increasingly a matter of the “switch to gas.” Policymakers’ main concern now is the advent of sizable shale gas supplies. Much has been written on this topic; the significant aspect here is how the shale question is influencing EU foreign policy debates.
The advent of shale gas will require the EU to reconsider its patterns of international alliances, with potentially far-reaching effects for EU geopolitics. Countries like Algeria claim that they have more shale gas than natural gas. Other shale basins exist in Norway, Poland, Ukraine, Turkey, and East Africa. Some industry analysts talk of an impending end to “pipeline politics.” They also cite the way in which U.S. shale gas production has pushed down liquefied natural gas prices and given European states a stronger hand in negotiating with supplier states.
EU member states currently have very different views on shale gas. Poland has been the keenest on developing the resource; France has restricted fracking, the controversial drilling technique commonly applied to shale gas wells; the UK has given the go-ahead to preliminary exploration. These internal differences risk magnifying divergence among member states’ foreign policy positions too.
With shale gas present in many stable, advanced, and friendly countries, the security worries may appear less acute. Some experts say the shale revolution is also not entirely negative for climate change aims. Industry experts even calculate that using natural gas as a “bridging” solution would reduce the cost of meeting the EU’s emissions targets relative to the huge subsidies plowed into wind and solar energy. And more environmentally friendly drilling techniques are being developed for shale gas.
Unconventional oil is already proving more controversial, however: the first large shipments of tar sand oil from strategically friendly Canada to Spain have provoked anger from environmentalists.
Whatever the right view is on the potential of unconventional energy sources, it is significant that debates have returned to very traditional questions of hydrocarbon supplies. Notwithstanding the benign aspects of the shale gas panorama, in the long term this resource may leave Europe just as strategically vulnerable in its set of geopolitical alliances.
The Russia Factor
Just as the EU was seeking to digest these changes, the Russia-Ukraine crisis hit in early 2014. This conflict has spurred further efforts to strengthen the EU’s external energy policy commitments, but it clearly threatens worrying instability.
The EU stresses that its priority focus will now be more unequivocally on reducing dependence on Russian supplies. This aim has already been part of the equation for some years, but it has now assumed much greater urgency.
That urgency was compounded in June, when EU-mediated talks between Ukraine and Russia broke down and Moscow announced that it would close off gas supplies to Ukraine. This has not unleashed an immediate crisis. Currently, half the supplies coming into the EU market from Russia cross Ukraine—down from 80 percent when Moscow cut supplies in 2009 following a pricing dispute with Kiev. Gas storage levels are high. Yet most member states believe diversification needs to extend much further. The Ukraine crisis has also had an impact on shale gas production: NATO has accused Russia of funding antifracking groups in Europe.
The European Energy Security Strategy released in May has an unprecedentedly geopolitical tone and is remarkably open in its stated aim of pushing back against Russian influence. The paper proposes a whole battery of policy moves; among these are the completion of the internal energy market, increased storage capacity, and strengthened solidarity mechanisms to provide concrete protection, especially for the half-dozen states still entirely dependent on Russia for energy imports.
The document also advocates reverse flows to deliver gas to where supplies are most vulnerable, more investment in liquefied natural gas terminals, and strategic coordination on pipeline projects so that one member state cannot decide on a project that undermines the security of another member state. Finally, the strategy recommends an eventual enlargement of the southern gas corridor through the inclusion of Iraq, Iran, and Turkmenistan, a deepening and extension of the energy community through the EU’s neighborhood, and €27 billion ($35 billion) of investment in renewable energy sources.
The crisis will certainly give a further prompt to internal EU energy market integration. Most notably, Poland has pushed for an EU energy union. The EU was already committed to completing the internal market in energy by the end of 2014. It was acknowledged that the EU must end the isolation of some member states from European gas and electricity markets by 2015. The Ukrainian crisis has injected fresh urgency into this debate.
The commission is already taking on Gazprom in a legal case and recently overturned a number of bilateral deals related to the Russian-backed South Stream project. Bulgaria has paused its work on South Stream. The commission has explicitly stated that it intends to frustrate South Stream using its third energy package of legislation to challenge Gazprom’s insistence on retaining its overwhelming control of the project.
One effect of the Ukraine crisis will be to increase the EU’s focus on gas supplies from other regions, including North Africa and the Middle East. The turn to the Middle East makes sense as a long-term option, as the region holds over 50 percent of global hydrocarbon reserves. Russia has only 3 percent, having relied far more in recent years on high production rates and maximizing revenues as a short-term cash cow.
The potential of gas from the Eastern Mediterranean is now high on the policy agenda. The EU is making new commitments to the “Mediterranean energy area.” The UK urges the EU to focus more attention on the Gulf. Spain insists that around half of the gas that currently comes to the EU via Ukraine could be supplied from North Africa if only interconnections were in place between the Iberian peninsula and the rest of Europe.
The EU has long promised diversification, and there are some reasons to doubt that the union will in fact be willing to push back hard against Russia. When Polish Prime Minister Donald Tusk pushed for an EU energy union, European Energy Commissioner Günther Oettinger said diversification could not be the leading edge of the EU’s response to the crisis. Oettinger stressed that deals with Gazprom should not be affected by sanctions.
In practice, the EU has set itself up as an even-handed mediator between Ukraine and Russia, as Russia demanded that Ukraine pay its debts and accept a significantly higher gas price. The commission has encouraged Ukraine to reach a new deal to prevent disruption to supplies. Some member states note that, for all the talk of diversification, this merely reflects the reality of a “Russia first” policy that continues in the aftermath of the Ukraine crisis.
While European governments now talk of energy independence, several are still heavily committed to and reliant upon the South Stream pipeline. Indeed, EU positions on South Stream remain chaotically varied. In June 2014, the Ukrainian government introduced a plan for allowing European and U.S. companies to take joint venture stakes in the country’s gas facilities, saying this would negate the need for South Stream. Oettinger replied by suggesting that the EU would continue to need South Stream supplies.
At the end of June, Austrian energy company OMV signed a deal with Gazprom to build part of South Stream into Austria, directly against the commission’s injunction that the pipeline was planned in a way that contravened EU competition rules. Taking over the rotating EU presidency in July 2014, the Italian government said explicitly that South Stream should go ahead and that the EU should actively support it. The Bulgarian government is mired in corruption allegations linked to Gazprom’s apparent ability to buy support from the country’s political elite.
Some observers perceive that the EU has been cautious over sanctions against Russia because Crimea, which Russia annexed in March, is thought to contain most of Ukraine’s potential shale gas. A major new Russian gas deal with China has engendered caution too, however unfavorable the terms of the agreement are to Moscow. And U.S. uncertainty about allowing the export of shale gas narrows the EU’s short-term alternatives to Russian gas.
Fresh importance is now attached to relations with Azerbaijan and the trans-Caspian pipeline, with EU commissioners again visiting Baku in early September to tighten energy cooperation. At the same time, Russian oil company Rosneft has also signed a new agreement with Azerbaijani oil and gas firm Socar. That deal suggests that the South Caucasian republic will continue to play off the EU and Russia for its own benefit.
And rather obviously, reliance on Middle Eastern supplies hardly offers an easy alternative at this particular geopolitical juncture. Iraq’s descent back into jihadist-fueled conflict makes this patently clear. Islamic State insurgents have taken control of two oil fields in Iraq, halting the country’s dramatic rise in production of recent years.
Libya is also beset by increasing instability and institutional paralysis. With jihadists now in control of parts of the country, Libyan supplies are likely to be unpredictable for the foreseeable future. Conflict in Lebanon and Syria and delicately balanced relations with Iran make this a difficult moment for the EU to rely even more heavily on Saudi Arabian supplies. Energy diversification plans have already been set back by problems in convincing Saudi Arabia to release more supplies onto the market.
The complex scenario of Middle Eastern energy supplies will also make it more important to secure a rapprochement with Iran and finally bring Iranian supplies fully into the picture. This will add pressure to already-tense negotiations over ensuring a lasting deal on Iran’s nuclear program. This tension in turn feeds into bitter rivalry between Saudi Arabia and Iran. For now, efforts to bring Iran fully back into the international fold are still to bear fruit in energy markets.
The EU will be obliged to make far-reaching decisions affecting its energy security during the forthcoming months. The challenge posed by the Russia-Ukraine crisis comes on top of the need to set parameters for the next phase of EU climate policies and of more structural changes to international energy production.
In recent years, the EU has repeatedly promised a more joined-up, geopolitically sophisticated energy security strategy. The clustering of these challenges makes the delivery of such a strategy increasingly urgent, and it renders the kind of EU geostrategic ambiguities identified in this article increasingly costly.
The Russia crisis may just be the prompt that spurs the EU into devising more comprehensively strategic approaches to energy security. Yet the EU has a record of committing itself to such improvements in previous moments of crisis and then not delivering. The coinciding of all the challenges highlighted in this article means that this time, it should be different. For all the recent activity, there is no guarantee it will be.