Energy and Foreign Policy

EU-Russia Energy Dynamics

March 20, 2014

Overview

Role of energy in foreign policyThe security of supply crisisImpact on European and Russian foreign

policyImplications for current situation in

Ukraine

Why this case?

Shows the growing importance of energy in foreign policy

Highlights the challenges of interdependence in foreign policy

Energy as a factor in foreign policyNatural resources long history of influence

on foreign policyLevel of significance depends on

economic and political vulnerabilities of dependent states - energy dependence

See energy as strategic resourceEnergy policy impacted by state, non-

state and private actors

Two key aspects of energy for FP

The sovereign aspects of energyEnergy as inherently territorializedConsolidating domestic and foreign status

of the state

Energy’s ability to significantly impact fortunes of a state

Has major impact on revenue of energy producing states

Role of energy in foreign policy

Energy as indicator of national prosperity and underwrites national security

Energy security as variableSecurity of demandSecurity of supply

Energy as economic concernMaintaining supply and demand, minimize

energy disruptions

Role of energy in FP (Cont.)

Energy as political concernConcern over potential leverage of

exporter states over importer and transit states

Energy as foreign policy toolExporters - use to shape diplomacy,

embargos and coercionImporter - soft power objectives, sanctions

and motivation for conflict

Russia: Energy exporter

Three key aspects of power in Russian energy:

Size and ownership of resource World’s largest gas exporter and second

largest oil exporter Gazprom - state-owned

Pipelines are also state-owned Long-term contracts

Europe: Energy importer

Most European states have little or no energy reserves

On average EU is 30-50% dependent on Russian gas and 26-30% dependent on Russian oil

Also dependent on transit countries to get that energy to it

The transit states

Countries between Russia and EU through which the pipeline pass

Caught between pull of EU and RussiaTransit countries dependent on revenue

from energy moving through the pipelines but also dependent on the energy itselfSo dependent on both EU and Russia

Ukraine key transit country with two major pipeline passing through it

The crisis: The preamble

Late 2004, tension arises between Ukraine and Russia over Ukraine’s inability to pay for Russian gas

Previous Russia solution was to reduce supply to Ukraine

Problem: Russia still needs to send gas to EU, so Ukraine just took from that portion

Also have tensions over transit tariffs

The crisis

Two key causes:Remote cause- the Orange Revolution

Ukraine government shifts towards EuropeRussia sees itself losing influence of key region

and further encroachment of West

Proximate cause- inability of Ukraine to pay for Russian oil

The crisis

January 1, 2006 Russia cuts gas supplies to Ukraine

Ukraine argues entitled to 15% of transit gas

Result: several key European countries see gas deliveries drop by 14 to 40%

Russia responds by increasing flow of gas on January 2

The crisis: aftermath

RussiaArgues crisis solely about Ukraine not

paying for gasReject any notion that stoppage was

political

UkraineSee stoppage as effort to show Russian

disproval at Ukrainian shift towards West

Impact on European & Russian FP

Hardens European perceptions of Russian willingness to use energy as foreign policy tool

Dramatically exposes European dependence Russian energy

Puts need for common European energy policy on the agenda of the EUEnergy now clearly seen as strategic issue

Highlights interconnected nature of EU-Russian energy security

Lessons for foreign policy

Energy creates vulnerability in foreign policy for both exporter and importers

Energy as important mediating factor in national and regional power relations

Growing interconnections between states means conflict between two states can impact many othersFurther complicating foreign policy decision

Implications for current crisis in UkraineWhat are the implications from this for the

current crisis?What does it tells about how we might

expect the various actors will behave in the current situation?