Russia in the European energy sector
Encyclopedia
Russia has a significant role in the European energy sector as the largest exporter of oil
and natural gas to the European Union
. In 2007, the European Union imported from Russia 185 million tonnes of crude oil, which accounted for 32.6% of total oil import, and 100.7 million tonnes of oil equivalent of natural gas, which accounted 38.7% of total gas import.
The Trans-Siberian Pipeline was constructed in 1982–1984 with Western financing to provide Soviet gas to the Western European market.
The Russian state-owned company Gazprom
exports natural gas to Europe. It also controls a large number of subsidiaries, including key infrastructure assets. According to the study published by the Research Centre for East European Studies
, the liberalization of the EU gas market has driven Gazprom's expansion in Europe by increasing its share in the European downstream market. It has established sale subsidiaries in nearly all its export markets, and also gained direct access to industrial and power generation sectors in Western and Central Europe. In addition, Gazprom has established joint ventures to build natural gas pipelines and storage depots in a number of European countries. Transneft
, a Russian state-owned company responsible for the national oil pipelines, is another important Russian company supplying energy to Europe.
), opened.
The largest importers of Russian gas in the European Union are Germany and Italy, accounting together for almost half of the EU gas imports from Russia. Other larger Russian gas importers (over 5 billion cubic meter per year) in the European Union are France, Hungary, Czech Republic, Poland, Austria and Slovakia. The largest non-EU importers of Russian natural gas are Ukraine, Turkey and Belarus.
According to the European Commission, the share of Russian natural gas in the member states' domestic gas consumption in 2007 was the following:
100% 100% 100% 100% 98% 92% 77.6% 76% 60%
52% 49% 48.15% 36% 27% 27% 14% 5%
The shares of Russian natural gas in the domestic gas consumption in non-EU countries in Europe were in 2006: 100% 98%,
Kingdom of Montenegro 87% 66% 64% 37% 12%
According to the assessment by the European Commission, Baltic countries and Western Balkans gas route are identified to be vulnerable to the Russian gas disruption.
According to Pierre Noël, Research Associate and Director of Energy Policy Forum of the University of Cambridge
, the perception that Russian dominance in the European gas market is growing is not confirmed by data. At the same time, the variety of national policies and stances of larger exporters versus larger dependents of Russian gas, together with the segmentation of the European gas market, has become an extremely divisive issue in European politics toward Russia. Therefore, creation of the integrated pan-European gas market would significantly reduce the implications of the European energy security and foreign policy.
has been criticized for lack of transparency in its structure. According to the risk analysis firm AZEast Group partner Roman Kupchinsky's testimony given to the United States Senate Committee on Foreign Relations
, "Gazprom, with the silent support of the Kremlin has set up 50 or so middlemen companies, silently linked to Gazprom and scattered throughout Europe – such as the Centrex group of companies and the Gazprom Germania
network – which do not add any value to the price of Russian gas being sold on European markets; yet they earn enormous sums of money which appears to simply vanish through shell companies in Cyprus and in Lichtenstein." According to the study published by the Research Centre for East European Studies, Gazprom uses subsidiaries such
as Gazprom Germania
, Gazprombank
, Gazprom-Media, or shell companies to avoid resistance to its investments. However, some acquisitions like an attempt to take over British gas company Centrica
in 2006 have been rejected by the hosting governments. These actions has been called by Gazprom discriminatory.
A paper by Keith C. Smith noted that Russian firms have demanded foreign joint venture partners to agree to funnel profits through offshore accounts
and well-known havens for "confidential funds" or to intermediary firms that bring no added value to the venture. Money laundering
is used in "backdoor financing" for companies that want to conceal their Russian links and for key individuals in the West who hide the origin of their "consulting fees".
Swedish Defence Research Agency
's 362-page study Russia’s Energy Policy: Security Dimensions and Russia’s Reliability as an Energy Supplier (2006) stated that from Europe’s perspective, Russia is moving in the wrong direction and is unwilling to change its behavior. The study concluded that the core problem is the combination of Russia’s perception, intentions, capabilities and track record along with lack of real stability, a high degree of unpredictability and a development away from democracy, rule of law and market norms.
Janusz Bugajski's book "Cold Peace: Russia’s New Imperialism" states that through targeted foreign investments and strategic infrastructural buyouts in Eastern Europe Russia is building monopolistic positions and substantial influence over any country's economic, financial, trade, and investment policies. Coordination is easily visible in connections between the Kremlin and the largest Russian companies - such as executive appointments, promotions of overseas operations, and financial, legal, and police instruments. Russian enterprises are used to gain political influence through involvement with officials, parties, and media outlets in targeted East European states.
According to the US-based Heritage Foundation
think-tank analyst Ariel Cohen's paper "Europe's Strategic Dependence on Russian Energy" (2007) Russia is consolidating its grip on oil and gas in Europe utilizing the following strategies and tactics:
Moscow signed the Energy Charter Treaty
in 1997, but it has refused to implement it.
Despite calls for European energy diversity being recently amplified, doubt has been cast on whether diversification away from Russia is actually possible, as Russia's European customers have long term legal contracts for gas deliveries despite the disputes, most of which stretch beyond 2025–2030.
Keith C. Smith's Russia and European Energy Security – Divide and Dominate (2008), the Kremlin has systematically created or cultivated "friendly" interest groups in both Central and Western Europe. These groups "benefit financially from their formal and informal ties to Russian state energy companies". He suggested that if Russia succeeds to make a significant portion of Europe’s political and economic elite reliant on nontransparent financial payments, the impact on national sovereignty and decisionmaking may be greater danger than dependency on energy resources.
In Germany, members of the SPD
have ties with Kremlin and Gazprom
, including posts at company boards or party donations. Gerhard Schröder
signed Germany into an agreement to build the Nord Stream pipeline, just before general elections. Schröder later received a post at Nord Stream AG
.
In addition, Germany's policies have been accused of undermining human rights in Russia. Oleg Orlov, head of the Memorial human rights group
in Russia, says that Schröder's and Steinmeier's policies on Russia have been "extremely bad for civil society, democracy and the country as a whole".
An article published by the Financial Times Deutschland suggested that close ties may lead the world to view Russia’s human rights violations as Germany’s human rights violations.
) which would reduce dependence on Gazprom.
Russia is concerned that Iran's potential entry would undermine Russia's dominance. The Chinese People's Daily also noted that: "Observers speculate that Russia's fresh attempts to reach Iran's energy resources and its tempting proposals to Iran suggest that Moscow is willing to see Tehran's energy flow to Europe via Russia in order to maintain the monopoly of transport routes."
Keith C. Smith recommends that both Article 82 and the Energy Charter Treaty
are used to prosecute Gazprom. In addition, "Western firms should petition the European Union, DG COMP, and national governments to enforce vigorously existing antitrust and competition policies". The European Union has previously prosecuted Microsoft
. Keith C. Smith states that the price tag of Microsoft's behavior is a just small fraction of "the cost paid by Germans, Czechs, Hungarians, Italians, Greeks, and Austrians for Russian oil and gas as a direct result of the state-dictated export monopolies of Transneft and Gazprom".
Marvin Baker Schaffer suggested that the European Union could prosecute Gazprom
and Eni
under Article 82.
A panel in a seminar organized by Chatham House
and Transparency International
said that "These anti-trust and anti-competition practices are a clear violation of Article 82 of the EC Treaty and of Article 45 of the Energy Charter Treaty" and asked "How many Western leaders can really negotiate well with the seasoned KGB-ers who make energy policy?"
Claude Mandil
, the former head of the International Energy Agency, has said that "We need more energy efficiency, more liquefied natural gas
, more renewable energy
, more nuclear energy
".
Keith C. Smith proposed that the Union demands the right to immediately investigate the causes of disruptions of Russian or non-Russian oil or gas to any EU member state. When disruptions appear designed to pressure a member state, the European Union should apply economic sanctions on the assets in Europe of Transneft and/or Gazprom. Both companies should be forbidden to buy assets in EU member states until the companies become more transparent in their accounting and operating practices.
Keith C. Smith recommends that if EU investors in Russia can not own more than 25 percent of Russian enterprises, then Russian enterprises should not be able to own more than 25% of European energy facilities and energy marketing companies.
Many authors have called for common European foreign policy on energy.
The European Union
has made proposals to diversify energy supply. One of them is the Nabucco pipeline
.
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and natural gas to the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
. In 2007, the European Union imported from Russia 185 million tonnes of crude oil, which accounted for 32.6% of total oil import, and 100.7 million tonnes of oil equivalent of natural gas, which accounted 38.7% of total gas import.
The Trans-Siberian Pipeline was constructed in 1982–1984 with Western financing to provide Soviet gas to the Western European market.
The Russian state-owned company Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
exports natural gas to Europe. It also controls a large number of subsidiaries, including key infrastructure assets. According to the study published by the Research Centre for East European Studies
Research Centre for East European Studies
The Research Centre for East European Studies at the University of Bremen was founded in 1982. Under the directorship of Professor Wolfgang Eichwede, it has since then carved its own distinctive niche within the German academic community through an intensive study of recent developments in the...
, the liberalization of the EU gas market has driven Gazprom's expansion in Europe by increasing its share in the European downstream market. It has established sale subsidiaries in nearly all its export markets, and also gained direct access to industrial and power generation sectors in Western and Central Europe. In addition, Gazprom has established joint ventures to build natural gas pipelines and storage depots in a number of European countries. Transneft
Transneft
Transneft is a Russian state-owned business responsible for the national oil pipelines. It was founded in 1993 and owns the largest oil pipeline system in the world, with a total network length of almost...
, a Russian state-owned company responsible for the national oil pipelines, is another important Russian company supplying energy to Europe.
History
In the early 1980s some policymakers including Ronald Reagan's administration warned that the Urengoy–Pomary–Uzhgorod pipeline (Trans-Siberian Pipeline) project could lead to increased political risks.Russian natural gas deliveries by country
In 2007, 38.7% of the European Union's natural gas total imports and 24.3% of consumed natural gas originated from Russia. As of 2009, Russian natural gas was delivered to Europe through 12 pipelines, of which three pipelines were direct pipelines (to Finland, Estonia and Latvia), four through Belarus (to Lithuania and Poland) and five through Ukraine (to Slovakia, Romania, Hungary and Poland). In 2011, an additional pipeline, Nord Stream (directly to Germany through the Baltic SeaBaltic Sea
The Baltic Sea is a brackish mediterranean sea located in Northern Europe, from 53°N to 66°N latitude and from 20°E to 26°E longitude. It is bounded by the Scandinavian Peninsula, the mainland of Europe, and the Danish islands. It drains into the Kattegat by way of the Øresund, the Great Belt and...
), opened.
The largest importers of Russian gas in the European Union are Germany and Italy, accounting together for almost half of the EU gas imports from Russia. Other larger Russian gas importers (over 5 billion cubic meter per year) in the European Union are France, Hungary, Czech Republic, Poland, Austria and Slovakia. The largest non-EU importers of Russian natural gas are Ukraine, Turkey and Belarus.
According to the European Commission, the share of Russian natural gas in the member states' domestic gas consumption in 2007 was the following:
100% 100% 100% 100% 98% 92% 77.6% 76% 60%
52% 49% 48.15% 36% 27% 27% 14% 5%
The shares of Russian natural gas in the domestic gas consumption in non-EU countries in Europe were in 2006: 100% 98%,
Kingdom of Montenegro 87% 66% 64% 37% 12%According to the assessment by the European Commission, Baltic countries and Western Balkans gas route are identified to be vulnerable to the Russian gas disruption.
According to Pierre Noël, Research Associate and Director of Energy Policy Forum of the University of Cambridge
University of Cambridge
The University of Cambridge is a public research university located in Cambridge, United Kingdom. It is the second-oldest university in both the United Kingdom and the English-speaking world , and the seventh-oldest globally...
, the perception that Russian dominance in the European gas market is growing is not confirmed by data. At the same time, the variety of national policies and stances of larger exporters versus larger dependents of Russian gas, together with the segmentation of the European gas market, has become an extremely divisive issue in European politics toward Russia. Therefore, creation of the integrated pan-European gas market would significantly reduce the implications of the European energy security and foreign policy.
Gazprom in Europe
GazpromGazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
has been criticized for lack of transparency in its structure. According to the risk analysis firm AZEast Group partner Roman Kupchinsky's testimony given to the United States Senate Committee on Foreign Relations
United States Senate Committee on Foreign Relations
The United States Senate Committee on Foreign Relations is a standing committee of the United States Senate. It is charged with leading foreign-policy legislation and debate in the Senate. The Foreign Relations Committee is generally responsible for overseeing and funding foreign aid programs as...
, "Gazprom, with the silent support of the Kremlin has set up 50 or so middlemen companies, silently linked to Gazprom and scattered throughout Europe – such as the Centrex group of companies and the Gazprom Germania
Gazprom Germania
GAZPROM Germania GmbH , a company registered in Berlin, Germany, is headquarters of a diversified conglomerate, GAZPROM Germania Group, operating in more than 20 countries, and is a 100% subsidiary of the world's largest natural gas company, Gazprom....
network – which do not add any value to the price of Russian gas being sold on European markets; yet they earn enormous sums of money which appears to simply vanish through shell companies in Cyprus and in Lichtenstein." According to the study published by the Research Centre for East European Studies, Gazprom uses subsidiaries such
as Gazprom Germania
Gazprom Germania
GAZPROM Germania GmbH , a company registered in Berlin, Germany, is headquarters of a diversified conglomerate, GAZPROM Germania Group, operating in more than 20 countries, and is a 100% subsidiary of the world's largest natural gas company, Gazprom....
, Gazprombank
Gazprombank
Gazprombank is the largest Russian non-state owned bank, which is among the three largest banks in Russia. It is a joint stock bank founded in 1990. The bank is owned by the Russian gas company Gazprom, which controls 62.59% of shares directly and also retains shares through its subsidiaries...
, Gazprom-Media, or shell companies to avoid resistance to its investments. However, some acquisitions like an attempt to take over British gas company Centrica
Centrica
Centrica plc is a multinational utility company, based in the United Kingdom but also with interests in North America. Centrica is the largest supplier of gas to domestic customers in the UK, and one of the largest suppliers of electricity, operating under the trading names "Scottish Gas" in...
in 2006 have been rejected by the hosting governments. These actions has been called by Gazprom discriminatory.
A paper by Keith C. Smith noted that Russian firms have demanded foreign joint venture partners to agree to funnel profits through offshore accounts
Offshore bank
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
and well-known havens for "confidential funds" or to intermediary firms that bring no added value to the venture. Money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
is used in "backdoor financing" for companies that want to conceal their Russian links and for key individuals in the West who hide the origin of their "consulting fees".
Swedish Defence Research Agency
Swedish Defence Research Agency
The Swedish Defence Research Agency is a Swedish government agency for defence research that reports to the Ministry of Defence. It has its headquarters in Kista, Stockholm and other locations in Grindsjön south of Stockholm, Linköping and Umeå...
's 362-page study Russia’s Energy Policy: Security Dimensions and Russia’s Reliability as an Energy Supplier (2006) stated that from Europe’s perspective, Russia is moving in the wrong direction and is unwilling to change its behavior. The study concluded that the core problem is the combination of Russia’s perception, intentions, capabilities and track record along with lack of real stability, a high degree of unpredictability and a development away from democracy, rule of law and market norms.
Janusz Bugajski's book "Cold Peace: Russia’s New Imperialism" states that through targeted foreign investments and strategic infrastructural buyouts in Eastern Europe Russia is building monopolistic positions and substantial influence over any country's economic, financial, trade, and investment policies. Coordination is easily visible in connections between the Kremlin and the largest Russian companies - such as executive appointments, promotions of overseas operations, and financial, legal, and police instruments. Russian enterprises are used to gain political influence through involvement with officials, parties, and media outlets in targeted East European states.
According to the US-based Heritage Foundation
Heritage Foundation
The Heritage Foundation is a conservative American think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong...
think-tank analyst Ariel Cohen's paper "Europe's Strategic Dependence on Russian Energy" (2007) Russia is consolidating its grip on oil and gas in Europe utilizing the following strategies and tactics:
- Locking in Demand – Moscow is attempting to use long-term contracts with European countries to lock in demand. By dealing separately with countries rather than as a group, Moscow can discriminate countries on prices.
- Locking in Supply – Moscow attempts to consolidate its control of strategic energy infrastructure throughout Europe and Eurasia, including supply, sale, and distribution of natural gas as well as pipelines, refineries, electric grids, and ports.
- Derailing Competition – For example, Moscow has pushed South StreamSouth StreamSouth Stream is a proposed gas pipeline to transport Russian natural gas to the Black Sea to Bulgaria and further to Greece, Italy and Austria. The project is seen as rival to the planned Nabucco pipeline...
which competes against the EU's Nabucco pipelineNabucco PipelineThe Nabucco pipeline is a proposed natural gas pipeline from Erzurum in Turkey to Baumgarten an der March in Austria diversifying natural gas suppliers and delivery routes for Europe. The pipeline attempts to lessen European dependence on Russian energy...
as well as the proposed extension of the EU-backed South Caucasus PipelineSouth Caucasus PipelineSouth Caucasus Pipeline is a natural gas pipeline to transport natural gas from the Shah Deniz gas field in the Azerbaijan sector of the Caspian Sea to Turkey...
. - External Consolidation – Moscow is consolidating control of supply outside Russia, particularly by signing long-term exploration and supply agreements with Turkmenistan, Uzbekistan, and Kazakhstan.
- Internal Consolidation – Moscow is consolidating Russia's oil and gas sector in the hands of state-controlled entities. Major international entities are pushed out of Russia.
- A Gas OPEC – Russia is "stealthily and steadily" developing a "gas OPEC" cartelCartelA cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
to control the output and price of gas. The cartel would include major producers, including Argentina, Bolivia, Venezuela, Iran, and Qatar.
Moscow signed the Energy Charter Treaty
Energy Charter Treaty
The Energy Charter Treaty is an international agreement which provides a multilateral framework for energy trade, transit and investments...
in 1997, but it has refused to implement it.
Despite calls for European energy diversity being recently amplified, doubt has been cast on whether diversification away from Russia is actually possible, as Russia's European customers have long term legal contracts for gas deliveries despite the disputes, most of which stretch beyond 2025–2030.
Keith C. Smith's Russia and European Energy Security – Divide and Dominate (2008), the Kremlin has systematically created or cultivated "friendly" interest groups in both Central and Western Europe. These groups "benefit financially from their formal and informal ties to Russian state energy companies". He suggested that if Russia succeeds to make a significant portion of Europe’s political and economic elite reliant on nontransparent financial payments, the impact on national sovereignty and decisionmaking may be greater danger than dependency on energy resources.
In Germany, members of the SPD
Social Democratic Party of Germany
The Social Democratic Party of Germany is a social-democratic political party in Germany...
have ties with Kremlin and Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
, including posts at company boards or party donations. Gerhard Schröder
Gerhard Schröder
Gerhard Fritz Kurt Schröder is a German politician, and was Chancellor of Germany from 1998 to 2005. A member of the Social Democratic Party of Germany , he led a coalition government of the SPD and the Greens. Before becoming a full-time politician, he was a lawyer, and before becoming Chancellor...
signed Germany into an agreement to build the Nord Stream pipeline, just before general elections. Schröder later received a post at Nord Stream AG
Nord Stream AG
Nord Stream AG is a consortium for construction and operation of the planned Nord Stream submarine pipeline between Vyborg in Russia and Greifswald in Germany, a project initially promoted by Chancellor Gerhard Schröder and President Vladimir Putin. The consortium was incorporated in Zug,...
.
In addition, Germany's policies have been accused of undermining human rights in Russia. Oleg Orlov, head of the Memorial human rights group
Memorial (society)
Memorial is an international historical and civil rights society that operates in a number of post-Soviet states. It focuses on recording and publicising the Soviet Union's totalitarian past, but also monitors human rights in post-Soviet states....
in Russia, says that Schröder's and Steinmeier's policies on Russia have been "extremely bad for civil society, democracy and the country as a whole".
An article published by the Financial Times Deutschland suggested that close ties may lead the world to view Russia’s human rights violations as Germany’s human rights violations.
Documented examples of financial ties
- Gerhard SchröderGerhard SchröderGerhard Fritz Kurt Schröder is a German politician, and was Chancellor of Germany from 1998 to 2005. A member of the Social Democratic Party of Germany , he led a coalition government of the SPD and the Greens. Before becoming a full-time politician, he was a lawyer, and before becoming Chancellor...
's deal with Gazprom and subsequent chairman position with Nord Stream. - In Poland, Russian agent Vladimir AlganovVladimir AlganovVladimir Alganov is a Russian spy. He was Soviet KGB officer in Warsaw, Poland in the 1980s and Russian SVR officer in the same city in the 1990s.In 1996, Poland's Prime Minister Józef Oleksy resigned because of his links to Alganov....
was recorded discussing bribery of Polish officials, in Vienna. Marek DochnalMarek DochnalMarek Dochnal is a Polish businessman and polo player.In 1990 he founded a company called Proxy with Sergei Gavrilov, a Russian banker who held a passport from Belize. In 1993 Marek Dochnal co-founded the company called Chemico, which was to take over chemical and fuel businesses, but never did...
was caught bribing officials on behalf of a Russian client. - In Finland, Paavo LipponenPaavo LipponenPaavo Tapio Lipponen is a Finnish politician and former reporter. He was Prime Minister of Finland from 1995 to 2003, and Chairman of the Social Democratic Party of Finland from 1993 to 2005...
first backed Gazprom's pipeline plans as Prime Minister and was then was hired by the consortium. - In Italy, parliamentary investigations alleged that Prime Minister Silvio BerlusconiSilvio BerlusconiSilvio Berlusconi , also known as Il Cavaliere – from knighthood to the Order of Merit for Labour which he received in 1977 – is an Italian politician and businessman who served three terms as Prime Minister of Italy, from 1994 to 1995, 2001 to 2006, and 2008 to 2011. Berlusconi is also the...
's friend was a major beneficiary in a Eni-Gazprom deal which involved Central Energy Italian Gas HoldingCentral Energy Italian Gas HoldingCentral Energy Italian Gas Holding is a gas distribution and trade company. It is a part of the Centrex Group, a company related to Gazprom...
. - In Serbia in October 2008, signing of the an annual protocol to the Russia-Serbian gas agreement was criticized as non-transparent. The critics alleged that YugoRosGazYugoRosGazYugoRosGaz a.d. is a Gazprom subsidiary in Serbia. Yugorosgaz is owned by Gazprom , Srbijagas , and Central ME Energy & Gas AG , a member of the Centrex Group...
, a joint subsidiary of Gazprom and Yugoslav government is redundant and introduced in the supply scheme under pressure from Gazprom. - Gazprom's subsidiary Nord Stream AGNord Stream AGNord Stream AG is a consortium for construction and operation of the planned Nord Stream submarine pipeline between Vyborg in Russia and Greifswald in Germany, a project initially promoted by Chancellor Gerhard Schröder and President Vladimir Putin. The consortium was incorporated in Zug,...
has hired at least one former Swedish official. - GPlus Europe is one of the PR agencies used by Gazprom. GPlus specializes in recruiting former EU officials and eminent journalists.
- Hill and Knowlton, another PR company used by Moscow, has given Members of European ParliamentMember of the European ParliamentA Member of the European Parliament is a person who has been elected to the European Parliament. The name of MEPs differ in different languages, with terms such as europarliamentarian or eurodeputy being common in Romance language-speaking areas.When the European Parliament was first established,...
private jets flights to Siberia. - CEZ GroupCEZ GroupCEZ Group is a conglomerate of 96 companies , 72 of them in the Czech Republic. It is involved in the electricity generation, distribution, and trade. CEZ Group operates also in Albania, Austria, Bosnia and Herzegovina, Bulgaria, Germany, Hungary, Kosovo, Poland, Romania, Serbia, Slovakia and...
's influence on the Czech politics and connections to Russia has come under scrutiny. - Czech President Václav KlausVáclav KlausVáclav Klaus is the second President of the Czech Republic and a former Prime Minister .An economist, he is co-founder of the Civic Democratic Party, the Czech Republic's largest center-right political party. Klaus is a eurosceptic, but he reluctantly endorsed the Lisbon treaty as president of...
and his staff has been associated with Russian energy interests. - Czech political party Party of Civic Rights – ZemanovciParty of Civic Rights – ZemanovciThe Party of Civic Rights – Zemanovci is a social democratic political party in the Czech Republic founded in October 2009 by Miloš Zeman, a former prime minister and the former leader of the Czech Social Democratic Party....
has ties to Russian energy interests.
Documented examples of energy sector incidents
- Russia cut gas supply to Ukraine in 1991 and 1992
- Energy to Estonia, Latvia and Lithuania was cut off in winter 1992-1993 order to affect a policy change.
- Russia–Ukraine gas disputes in 1994
- Oil deliveries to Lithuania were cut off 9 times in 1998-1999 alone.
- Gas supply to Moldova was cut off in the winter of 1999.
- Georgia in January 2001
- In 2001, Lithuania sold Mazeikiu refinery to an American company instead of Russian company. Russian Lukoil started to harass the company.
- In 2002, Russia cut oil deliveries to Ventspils Nafta in Latvia. A Russian company had earlier attempted to acquire it, but had failed.
- Georgia in 2003
- Russia cut gas supply to Ukraine in 2005-2006 and in 2007-2008
- Russia–Belarus energy dispute in 2007.
- In 2007, Swedish Defence Research Agency's 110-page study Nord Stream, Sweden and Baltic Sea Security (2007) counted over 55 incidents (cut-offs, explicit threats, coercive price policy and certain take-overs) since 1991, most with "both political and economic underpinnings".
- Russia cut gas supply to Ukraine in 2008-2009
Iran as alternative supplier
Iran has proposed a pipeline from Iran to Europe (Persian PipelinePersian Pipeline
Persian Pipeline is a proposed natural gas pipeline to transfer Iranian gas from the Persian gulf to European markets.-Route:...
) which would reduce dependence on Gazprom.
Russia is concerned that Iran's potential entry would undermine Russia's dominance. The Chinese People's Daily also noted that: "Observers speculate that Russia's fresh attempts to reach Iran's energy resources and its tempting proposals to Iran suggest that Moscow is willing to see Tehran's energy flow to Europe via Russia in order to maintain the monopoly of transport routes."
Proposed measures to reduce dependence and risks
Several authors have recommended legal action. Antitrust and anticompetitive behavior by European and foreign companies doing business inside the European Union is prohibited by Article 82 of the Treaty Establishing the European Community. Neither Transneft or Gazprom has yet faced anti-trust charges.Keith C. Smith recommends that both Article 82 and the Energy Charter Treaty
Energy Charter Treaty
The Energy Charter Treaty is an international agreement which provides a multilateral framework for energy trade, transit and investments...
are used to prosecute Gazprom. In addition, "Western firms should petition the European Union, DG COMP, and national governments to enforce vigorously existing antitrust and competition policies". The European Union has previously prosecuted Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
. Keith C. Smith states that the price tag of Microsoft's behavior is a just small fraction of "the cost paid by Germans, Czechs, Hungarians, Italians, Greeks, and Austrians for Russian oil and gas as a direct result of the state-dictated export monopolies of Transneft and Gazprom".
Marvin Baker Schaffer suggested that the European Union could prosecute Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
and Eni
Eni
Eni S.p.A. is an Italian multinational oil and gas company, present in 70 countries, and currently Italy's largest industrial company with a market capitalization of 87.7 billion euros , as of July 24, 2008...
under Article 82.
A panel in a seminar organized by Chatham House
Chatham House
Chatham House, formally known as The Royal Institute of International Affairs, is a non-profit, non-governmental organization based in London whose mission is to analyse and promote the understanding of major international issues and current affairs. It is regarded as one of the world's leading...
and Transparency International
Transparency International
Transparency International is a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide...
said that "These anti-trust and anti-competition practices are a clear violation of Article 82 of the EC Treaty and of Article 45 of the Energy Charter Treaty" and asked "How many Western leaders can really negotiate well with the seasoned KGB-ers who make energy policy?"
Claude Mandil
Claude Mandil
Claude Mandil is a members of the Board of Directors of Total S.A. and the former Executive Director of the International Energy Agency . He is graduated from the France's École Polytechnique and École des Mines...
, the former head of the International Energy Agency, has said that "We need more energy efficiency, more liquefied natural gas
Liquefied natural gas
Liquefied natural gas or LNG is natural gas that has been converted temporarily to liquid form for ease of storage or transport....
, more renewable energy
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
, more nuclear energy
Nuclear power
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...
".
Keith C. Smith proposed that the Union demands the right to immediately investigate the causes of disruptions of Russian or non-Russian oil or gas to any EU member state. When disruptions appear designed to pressure a member state, the European Union should apply economic sanctions on the assets in Europe of Transneft and/or Gazprom. Both companies should be forbidden to buy assets in EU member states until the companies become more transparent in their accounting and operating practices.
Keith C. Smith recommends that if EU investors in Russia can not own more than 25 percent of Russian enterprises, then Russian enterprises should not be able to own more than 25% of European energy facilities and energy marketing companies.
Many authors have called for common European foreign policy on energy.
The European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
has made proposals to diversify energy supply. One of them is the Nabucco pipeline
Nabucco Pipeline
The Nabucco pipeline is a proposed natural gas pipeline from Erzurum in Turkey to Baumgarten an der March in Austria diversifying natural gas suppliers and delivery routes for Europe. The pipeline attempts to lessen European dependence on Russian energy...
.
See also
- Energy policy of RussiaEnergy policy of RussiaThe Energy policy of Russia is contained in an Energy Strategy document, which sets out policy for the period up to 2020. In 2000 the Russian government approved the main provisions of the Russian energy strategy to 2020, and in 2003 the new Russian energy strategy was confirmed by the government...
- Energy policy of the European UnionEnergy policy of the European UnionAlthough the European Union has legislated in the area of energy policy for many years, and evolved out of the European Coal and Steel Community, the concept of introducing a mandatory and comprehensive European energy policy was only approved at the meeting of the European Council on 27 October...
- Foreign relations of RussiaForeign relations of RussiaThe foreign relations of Russia is the policy of the Russian government by which it guides the interactions with other nations, their citizens and foreign organizations and sets standards of interaction for Russian organizations, corporations and individual citizens towards them...
- Russian influence operations
Further reading
- Cold Peace: Russia's New Imperialism. Janusz Bugajski (November 2004). ISBN 0-275-98362-5
- Petrostate: Putin, power, and the new Russia. Marshall GoldmanMarshall GoldmanMarshall Goldman is an expert on the economy of the former Soviet Union. Goldman is a Professor of Economics at Wellesley College and Associate Director of the Harvard Russian Research Center. Goldman received his Ph.D. in Russian studies from Harvard University in 1961.Goldman is well known for...
. Oxford University Press US, 2008 ISBN 0195340736 - The New Cold War: Putin's Russia and the Threat to the West. Edward LucasEdward Lucas (journalist)Edward Lucas is a British journalist.Lucas is International Editor of The Economist, the London-based global newsweekly and also oversees the paper’s political coverage of Central and Eastern Europe. He has been covering eastern Europe since 1986, and was the Moscow bureau chief from 1998-2002,...
. Palgrave Macmillan; Second Edition, Revised and Updated edition (17 March 2009) ISBN 0230614345 - The New Cold War: Revolutions, Rigged Elections, and Pipeline Politics in the Former Soviet Union, a 2007 book by Mark MacKinnonMark MacKinnonMark MacKinnon is a Canadian journalist, currently the Beijing bureau chief for Canada's national newspaper, The Globe and Mail...
ISBN 0786720832 - Russian energy politics in the Baltics, Poland, and Ukraine: a new stealth imperialism? Keith C. Smith (2004) ISBN 0-892-06456-0
- The New Cold War: How the Kremlin Menaces Both Russia and the West. Edward LucasEdward Lucas (journalist)Edward Lucas is a British journalist.Lucas is International Editor of The Economist, the London-based global newsweekly and also oversees the paper’s political coverage of Central and Eastern Europe. He has been covering eastern Europe since 1986, and was the Moscow bureau chief from 1998-2002,...
. 2008 - Russian Energy Power and Foreign Relations: Implications for Conflict and Cooperation. Taylor & Francis, 2009. ISBN 0415484383
External links
- Nord Stream, Sweden and Baltic Sea Security Robert L. Larsson March 2007
- Russian Leverage on the CIS and the Baltic States. Jakob Hedenskog, Robert L. Larsson. June 2007
- Russia, Georgia and the European Union – The Creeping Finlandization of Europe Marcel H. Van Herpen September 2008
- Mariusz Nogaj, Russia – A New Empire under construction: the Russian policy towards former communist satellites – mechanisms of exertion of influence, Naval Postgraduate School, 2008