Problem for
Europe: Ideological disputes over reliability of
Moscow may mask a bigger issue
Nov 22, 2006 - International Herald Tribune
Author(s): Judy Dempsey
When Gazprom, Russia's giant state-owned gas monopoly, cut supplies
to Ukraine last January in a price dispute, shivers went through a
wintry Europe, which started looking harder at ways to reduce dependence
on Russian gas imports by finding more, and different, suppliers.
In the ensuing months, that quest has opened a fierce divide in the
West between pro- and anti-Russian camps - those who believe Russia is
just as reliable a source as alternatives in the Middle East, northern
or sub-Saharan Africa, and those who see Russia exploiting its energy
resources for political purposes.
The former German chancellor Gerhard Schroder, who now heads the
effort to build a Baltic Sea pipeline to carry gas directly from Russia
to Germany, and thus weaken Belarus, Ukraine and Poland as transit
countries, has come to embody the first group. This group, consisting of
German Social Democrats as well as big German, Italian, Dutch and French
energy companies, argues that Russia is a reliable supplier and that its
dependence on revenues from gas sales in Europe is at least as great as
Western Europe's need to get the energy. In this view, energy revenues
will help spur and stabilize Russia's development, and thus bring it
both economically and philosophically closer to the West.
On the other side stands an assortment of Western conservatives long
mistrustful of Moscow, as well as former Soviet-bloc states, with
memories of Communist domination and trade policies dictated by the
Kremlin. To the delight of some Poles and Lithuanians, the U.S. vice
president, Dick Cheney, earlier this year accused Russia of using its
vast energy resources for "blackmail" during a speech in the Lithuanian
capital Vilnius.
But it is in Poland where the nationalist-conservative government is
leading the group inside the EU that believes Russia is using energy as
a political tool. Prime Minister Jaroslaw Kaczynski is threatening to
block an EU-Russia summit meeting later this week in part over energy
supplies but also over Russia's year-long ban on Polish agricultural
products, which Russia claims are unhygienic.
"We have been victims of many negative Russian gestures toward Poland
for a long time," Kaczynski said in an interview Tuesday with the mass
circulation newspaper Fakt. "Russia must accept the fact that the era of
its rule over Warsaw is finished."
But these ideological disputes, which have flared with surprising
vigor and even venom 17 years after the Berlin Wall fell, mask what is
perhaps a more uncomfortable truth: Russia may not have enough gas to
keep both Europeans and Russians themselves warm in winters to come.
"The issue is not about Russia's reputation as a reliable supplier of
gas to Europe," said Jonathan Stern, director of gas research at the
Oxford Institute for Energy Studies. "The fact is that there is a limit
over how much gas Russia can sell to Europe. I don't think Europe
realizes it, but we are reaching the limit of Russian exports. Russia
needs the gas for themselves."
The signs emerged during bitter cold last January and February when
demand across Europe and Russia reached record highs. According to
Vladimir Milov, president of the independent Institute of Energy Policy
in Moscow and a former deputy minister of energy, "gas supply cuts to
power states in central Russia reached between 80 and 85 percent as
compared to base contractual volumes." Milov, who quit his job in 2002
after failing to persuade President Vladimir Putin to restructure
Gazprom and make it more competitive by breaking it up and giving the
regulators genuine powers, says Russian and European customers could
face a gas deficit of 100 billion cubic meters a year, beginning in
2010, compared to actual demand.
"The Russians are suffering this monopoly environment in the gas
sector," said Milov. Gazprom produced 547.1 billion cubic meters last
year. Of that amount, nearly 300 billion cubic meters was supplied to
domestic consumers, at subsidized prices, and around 150 billion cubic
meters was sold to Europe. The company said it was planning to increase
production to 560 billion cubic meters by 2010. And even if demand were
to rise in Russia, Gazprom's deputy chairman, Alexander Medvedev, has
dismissed suggestions that Russia would renege on its gas contracts to
Europe. "Gazprom has and will remain a reliable partner for Europe" he
said in a recent interview.
Gazprom supplied 23 percent of Europe's gas needs last year.
Still, for a country which holds 40 percent of the world's gas
reserves - making it the largest - shortages may seem a bizarre
situation for Russia to find itself in. Robert Larsson, energy analyst
at the Swedish Research Defense Agency, said the main reason is that
"Gazprom is buying gas instead of developing the fields." The Gazprom
chairman, Alexei Miller, recently broke off talks with several foreign
energy companies, including Conoco Philips of the United States and
Norsk Hydro of Norway, on development of the huge Shtokman fields in the
Barents Sea.
"We will do it ourselves," Miller said.
But Roland Gotz, an energy expert at the German Institute for
International and Security Affairs in Berlin, said he was skeptical that
Gazprom would develop the field, which holds 2.5 trillion cubic meters
of proven reserves. "Gazprom has very little experience of doing
offshore work," Gotz said. "Gazprom stopped the international consortium
because it did not want to lose control." To make up for any shortfalls,
Gazprom has bought gas from Turkmenistan while embarking on a separate
program of heavy spending. "In the past three years, and after more or
less sustainable windfall export revenues, Gazprom has spent nearly 14
billion on the acquisition of shares in companies operating outside the
gas sector," Milov said.
"This is more than had been invested in the development of upstream
gas production in a decade." The response by the Europeans to potential
Russian gas shortages has been mixed. European energy companies which
have very close ties to Gazprom have played down the issue. But Andris
Piebalgs, the EU's energy commissioner, acknowledges the problem. He
wants to start focusing on energy efficiency, liberalization of the
energy markets and more support for renewable, cheaper energy.
"The EU must create the conditions for developing a long-term energy
strategy and not let governments decide to deal with external suppliers
like Gazprom," said Emmanuel Bergasse, an independent energy analyst in
Paris. "If the EU is serious about an energy policy, it should reduce
its vulnerability through robust energy efficiency and renewable-energy
action plans." A consensus is a long way off. "Old Europe," meaning
Western Europe, has already diversified. It is New Europe, those
countries which were under the Soviet Union, that had no chance to
diversify," said Iwona Wisniewska, an energy expert at the Center for
Eastern Studies in Warsaw.
Christian Egenhofer, an energy analyst at the Center for European
Policy Studies in Brussels, said that if the Europeans were serious
about wanting a more secure energy sector, the EU should plan for more
storage facilities for reserves, begin interconnecting the pipelines
running across Europe and give more emphasis on saving energy and
renewables. "That is not yet happening because the member states,
particularly Germany, are still thinking of their own markets,"
Egenhofer said.
Even if there were a decision to diversify further, Stern from the
Oxford Institute for Energy Studies is not convinced buying gas from the
Middle East, Central Asia, Iran or Nigeria would lead to greater
security. "Why does everyone assume that non-Russian gas will be more
secure than Russian gas," asked Stern.
Piebalgs, in the meantime, is still trying to persuade Russia to
ratify the EU Energy Charter that would give European companies access
to Russia's energy sector - particularly since Gazprom has already a
free hand to enter the export and distribution market in Europe. Were
that to happen, it could at least create something of a level playing
field and ensure that investments would flow into Russia's energy
sector. So far, Putin has refused.
© Copyright 2006 NetContent, Inc. Duplication and
distribution restricted.The POWER REPORT
PowerMarketers.com · PO Box 2303 · Falls Church · VA ·
22042
To subscribe or
visit go to: PowerMarketers.com
PowerMarketers.com@calcium.netcontentinc.net
|