Russian Energy Diplomacy and the Southeast European Response

Russian Energy Diplomacy And
The South East European Response

By Andreas Andrianopoulos

May 21, 2008 - Russia has found itself, rather unexpectedly, in control of energy resources which are of paramount importance to its global wellbeing. The big industrial nations, along with the fast growing economies of South and East Asia, are in desperate need of ever larger energy inflows and Russia appears to be in the right position to guarantee, at least for some years to come, part of their supply.

Within the increasing competition for energy resources, it becomes evident that control of their supplies equals command of overreaching power and political influence. In order to be able to cement and sustain this position of power, Russia has to make sure to satisfy the increasing demand. Oil production, however, grew by just 2 percent in 2007 and actually sank in 2008, as oil firms are facing heavy taxes while delaying to develop untapped fields in Russia's most difficult regions.

Although Russian oil per se is not an indispensable item for European energy security, the curtailing of its production rates and the effort to control oil routes from all former Soviet Central Asia countries is worrisome. Russia is also in a position to create problems for nations of its close periphery (the so-called Near Abroad) by either halting the supply of oil or by diverting its export routes through other countries. Gas, however, is important to Europe. Having been a reliable supplier at the time of the Soviet Union, Russia damaged its image during the dispute with Ukraine, which resulted in a loss of gas supplies to Western Europe.

Since Russia admittedly is not, at present, a full-blooded Western-style liberal democracy, is it advisable to rely on her for energy supplies? What would stop Russia, based on these estimations, to utilize its energy power to blackmail Europe? And enforce upon her undesirable policies or exercise undue political influence?

Economic nationalism that is the fostering of national champions and the tightening of control over the energy industry is not unique to Russia. The United States, France, Italy, to name but a few, have all fiercely defended major industrial and energy national companies. Even from fellow European investors, as far as the French, the Italians and the Germans are concerned. They stood firmly behind their "national champions" to ensure their strength and, in the case of energy, to safeguard supplies.

From the Kremlin's point of view, developments on the energy front are forcing Russia to react rather than to act. After the Baku – Tlibisi – Cheyhan oil pipeline which got off the ground as a major energy project during the Yeltsin years, the U.S. now and Europe embarked on establishing new export routes for gas from Central Asia to bypass Russian territory (Nabucco pipeline carrying gas from Turkmenistan/Azerbaijan to Turkey, Bulgaria, Austria, and Hungary; and the gas line under construction from Azerbaijan to Turkey, Greece, and Italy), Moscow obviously decided to thwart these plans by securing most of the oil and, primarily, gas extracted in Central Asia for its own employ. The energy authorities in the Kremlin decided to put forward ideas of new pipelines: the Blue Stream (under the Black Sea to Turkey), the Nord Stream (directly to Germany, by means of the Baltic and North Seas) and the multi-branched South Stream (to Italy and Hungary through Greek, Bulgarian, Serbian and possibly Albanian lands). Moscow has also made overtures to the Greek and Turkish governments for the use of the Azerbaijan-Turkey-Greece-Italy pipeline to transport to the West the excess gas from the Blue Stream line to Turkey. The irony of the case is that now the Nabucco executive authorities stated in late June 2008 that they aim to use Russian gas to fill their pipeline!!

Having perceived the Baltic States and Poland among the main advocates of anti-Moscow policies, Russians decided that the new energy routes should avoid crossing those countries' terrain. Russian energy diplomacy was designed and enforced in response to perceivably adverse Western initiatives.

Irrespective of Moscow's capability to realize those schemes, it has nevertheless struck quite hard at the heart of Western camaraderie. The deals have been negotiated under a well-tested strategy of "divide and rule," by favoring select European capitals, while bypassing and undermining the future energy supplies and strategic positions of others.

No doubt, the global phenomenon of acute energy anxiety and the run for sufficient resources has raised hopes of dominance to some and fears of dependency to others. The oil and gas producers visualize a future of abundant wealth and prosperity.

Within this volatile environment Russia and Europe are dancing to the tune of an antagonistic environment. Brussels is afraid of a Europe totally dependent on Russian gas, while Moscow maintains there is nothing that Europeans should fear from their enigmatic neighbor. In short, Russia and the West are going through a serious phase of distrust. Both initiate projects that attempt to undermine the other's bargaining power and, inescapably, welfare.

The real question is whether these adverse postures have any substance and a foothold in reality. For Russia, exploiting energy as a tool of diplomacy is a great gamble. As large portions of its population are still below the poverty line, and oil and gas money are tied mostly to programs of social support, halting energy supplies to the West is not a realistic option. Likewise, Brussels, and the West in general, recognize that, besides Russia, there is no other viable choice for Europe, in the near future at least, to guarantee adequate supplies of energy - especially gas. The countries of Central Asia are still extremely insecure and unreliable. They promise their supplies to almost everyone. For their products however to reach Western markets, it would take time, heavy investment and a lot of construction work.

It is becoming obvious that irrespective of rhetoric, reality commands cooperation, which is set to be the principal mode of the relationship between Russia and Europe. Both sides will compete for the markets in Turkmenistan, Kazakhstan and Uzbekistan, but eventually both sides will be forced, by the course of events and economic necessity, to withdraw their bluffs. Good faith and upright good sense will have to be established. At the end of the day, this is in everybody's best interest.