Europe moves to reduce energy dependency on Russia

Europe moves to reduce energy dependency on Russia

The Ukrainian crisis and sour relations with Russia highlight the need to address the EU’s energy security issues. The recent EU Ypres summit decision might be an important step in this direction.

In late May, the European Commission unveiled the new European Energy Security Strategy (EESS) with key recommendations on how to improve the EU’s energy security in response to the Ukrainian crisis. The document is a response to the March call by the European Council for a comprehensive plan to reduce European energy dependency. EU heads of states endorsed the Commission’s recommendations at the Ypres European Council June meeting, and if pursued in the proposed format, the Strategy should create a more efficient and better-coordinated EU energy security policy.

Energy dependency risk top of mind for EU

According to the Strategy, Europe is planning to strengthen its energy security by reducing its energy dependency, with a strong emphasis on reshuffling its energy import relations with Russia, increasing energy production in the EU (primarily through renewable energy and shale gas), and by further developing energy technologies to reduce energy demand and optimise the use of energy.

Europe currently imports 53 percent of its energy, and more than 60 percent of its gas consumption, with Russia accounting for 39 percent of natural gas imports and 27 percent of the EU’s gas consumption. In addition, Russia provides much of Europe’s crude oil and nuclear fuel.

Although global oil and uranium markets provide more security in terms of supply, the EU’s refinery industry is nonetheless heavily dependent on Russian crude oil and increasingly Russian ownership of EU refineries in Central Eastern Europe, where most crude oil supplies arrive from Russia through the Druzhba pipeline. Similarly, Russia’s nuclear technology is well represented in Eastern Europe, further highlighting Europe’s energy dependency on Russia.

With some countries almost entirely dependent on gas and electricity imports from Russia, Eastern Europe poses a particular problem in terms of energy security. The most exposed are the Baltic States, where electricity and gas supplies come exclusively from Russia. Similarly, Finland, Austria, Czech Republic, Slovakia and Bulgaria import more than 50 percent of their gas from Russia.

Diversified gas import sources sought

Gas will remain a key ingredient in Europe’s energy mix, and the Commission has devised several measures to diversify its gas import sources. The key potential is further development and utilisation of the LGN terminals, and the construction of a functional European interconnector pipeline system to ensure that all EU countries have access to gas from different sources.

Furthermore, to surpass the politically highly volatile Ukraine, and reduce dependency on Russia, the Commission has identified the Southern Corridor pipeline system as a way to secure additional quantities of gas from Central Asia and the Middle East.

Moreover, the Commission has identified 27 gas and 6 electricity interconnector projects (worth around €17 billion) as critical for EU’s energy security, with around half of them planned to be completed by 2017, and the rest by 2020. Most of them are located in Spain, Portugal, and Eastern Europe.

There are challenges ahead though. Europe still does not speak with one voice when it comes to energy policy, and different interests surrounding it could make the Commission’s plans harder to implement.

The best example is the case of the South Stream pipeline project. The Gazprom-financed project has been a matter of contention between the European Commission, Gazprom and interested member states since 2012, when the EU launched the anti-trust investigation against the Russian energy giant. The project has been suspended until Gazprom complies with the requirements of the Third Energy Package.

In the meantime, those involved, such as Bulgaria, are under pressure from both the EU and the US to freeze the construction until the dispute is resolved. Still, there is strong pressure from several EU countries and energy companies for the project to continue. Italy is a strong proponent of the South Stream, and Austria recently signed a deal for the construction of the Austrian section of the pipeline.

The geopolitical clash over the future of European energy dependency is likely to continue. However, if the EESS gains political momentum with its strong emphasis on diversification, creation of EU’s single energy market, and dependency reduction on Russia, Europe’s energy story might be very different in five years’ time.

About Author

Ante Batovic

Ante was previously a lecturer in International History at the University of Zadar where he specialised in Cold War and East European history. He was also a visiting fellow at the LSE IDEAS centre and the fellow of the Robert Schuman Foundation in the European Parliament. He holds a master’s degree in Global Politics from the London School of Economics and a PhD from the University of Zadar.