Thu, Jan 28, 2010 page9

• Breaking Russia’s control over the EU energy supply

  • By William Martin and Jonathan Gillman
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  Every year, it seems, starts with the return of a noxious tradition: the annual dispute between Russia and Ukraine over energy, a dispute that left millions of Europeans shivering last winter. That dispute, in turn, exposes the EU’s fragmented energy-supply system and lack of political cohesion, which undermines its ability to forge a long-term energy strategy.

  Diversification of energy sources is the first step needed to build a viable energy-security strategy. This requires long-term planning and coordination, because the necessary infrastructural decisions will take decades to implement.

  Calls for supply diversification stem largely from the EU’s reliance on Russian gas, and Russia’s willingness to use energy for political purposes. Moreover, Russia controls the vast majority of the gas pipeline system and has negotiated individually with European countries, with the result that it holds a disproportionate degree of leverage over the European gas market.

  This system is inherently unbalanced and must be corrected. New and alternative pipelines such as Nabucco must be built and closer relationships with other suppliers encouraged. It is unrealistic to call for an end to Russian gas imports or even an end to Europe’s major reliance on them, but the EU can increase its own leverage by developing alternative sources of supply.

  Aside from devising a single energy strategy to deal with Russia, however, the EU must enhance its cooperation with the Kremlin on such issues as nuclear policy and counterterrorism in order to foster warmer relations in general. Europe would then be in a better position to take a firm and unified stance on intentional supply disruptions, thereby avoiding repetition of the Ukraine-Russia gas disputes in 2006 and last year. In other words, the EU should develop a policy under which cutting off supplies to one member country is equivalent to cutting off supplies to all.

  Russia’s “divide and conquer” strategy for dealing with its European customers has put it in a powerful position, despite its reliance on the EU for a majority of its income from gas. But Russia is currently in a precarious financial situation, owing to declining commodity prices and falling output — partly because of its dilapidated energy infrastructure. Now is the time for the EU to use its relative strength and take bold action.

  The development of renewable energy sources should play a major part in any integrated EU energy policy. Such resources are not only environmentally beneficial, but also diversify energy supplies by creating a domestically controlled alternative. Europe is at the forefront of renewable energy development, though it must avoid several pitfalls.

  For example, EU countries must not become too committed to any single energy source without careful consideration of market forces. A solar or wind lobby can be just as self-serving as an oil or gas lobby, while excessive government involvement in the energy sector through subsidies or restrictive regulation can distort natural market conditions and ultimately damage alternative energy development. Similarly, EU-wide collaboration on research and development and on subsidy programs should be encouraged in order to prevent individual member states’ policies from undercutting each other’s efforts.

  Moreover, Germany and Austria should re-examine their staunchly anti-nuclear stances and consider building new nuclear plants, or at least continuing the operation of existing ones. Global warming has done much to change the argument over nuclear power, and perhaps an EU-wide nuclear commission or blue-ribbon panel could explore whether expanding nuclear power is now more practical for Europe. Such action would have to begin immediately, as construction of nuclear power stations takes many years.

  Only a strong and unified European voice, reinforced by the option of alternative supplies, can counter intimidation tactics by powerful suppliers. Dependence on Russian gas varies within the EU and this creates policy divisions, which must be overcome by recognition of Europeans’ common interests. By acting together, the EU can protect those member states that are more reliant on and vulnerable to Russia. This has not happened in the past because EU governments have all scrambled to protect their own interests at the expense of the common good.

  The EU now needs to develop a single European body for international energy negotiations. Closer European cooperation would give the EU greater leverage when dealing not only with suppliers like Russia, but also with other consumers like the US and Asia’s emerging economies. The EU body’s responsibilities could extend to overseeing resource allocation for research and development and for subsidies to alternative-energy producers.

  Many of these proposed solutions to Europe’s energy problems have been attempted before, but have been stymied by the lack of cohesion between EU governments. The absence of a European “grand strategy,” together with the way Europeans undercut each other, leaves these issues unresolved, and in some cases exacerbates the problems. But, in these times of economic uncertainty, EU governments should view a common energy policy as an opportunity to be seized.

  William Martin, a former US deputy secretary of energy, is co-founder of the Robinson-Martin Security Scholars Program at the Prague Securities Studies Institute. Jonathan Gillman is an energy analyst at Washington Policy & Analysis.

  COPYRIGHT: PROJECT SYNDICATE/EUROPE’S WORLD
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