The Crepiscule of the Russian Gas Oligopoly

2014 will arguably be the most important year of the decade when it comes to energy security in the European Union (EU). No other year in the recent past has seen such an imposing shake up in Europe’s energy geopolitics; one which will inevitably see the build up to the coming and going of significant energy partners for the EU in the future.

Several factors have been at play so far: political tensions in Ukraine and Russia, new participants in the gas supply market, plans for reinforcement of existing pipelines as well as for the construction of several new trans-continental gas pipelines, and lastly the heavy internal pressure for reform of energy security policy from several member states of the EU.

The amalgamation of these is forcing the EU to reconstruct its energy policies as well as its security policies. Essentially, what can be witnessed by the end of the decade is a transference in EU geopolitical energy partnerships towards the south.

Energy diversification is a trend that became increasingly important to states in the 1970’s as a result of the Middle Eastern Oil Crisis. An austere shortage in natural energy supply is what led to energy security to be intersected with national security as well as economic prosperity due to the importance of energy in national economic development.

This move by the EU away from the Middle East and towards Russia as its largest energy partner, although fruitful in ensuring a constant supply of gas, has exposed Europe to a perilous amount of Russian influence. As a response, the European Commission (EC) has established the “Energy Security and Solidarity Action Plan”, a plan which is meant to generate a unified energy policy for the EU that will be focused on energy security and the diversification of energy sources to deviate away from the current situation of the energy supply oligarchy that is currently in place.

What the EU therefore needs to look at are viable long-term energy partners. While the EU has not officially determined any single region as a guaranteed future energy partner, it has indicated in its “Energy Security and Solidarity Action Plan” interest in establishing a southern gas corridor.

Gas discoveries and political as well as diplomatic developments in the last decade in the south are showing promise in the fulfillment of this aspiration that the EU has. The Levant Basin in particular will be an area of interest for the EU due to its direct proximity to Mediterranean Europe.

The dozens of gas fields discovered in both Israeli and Cypriot waters over the last decade, coupled with the rapid development of the hydrocarbon fields makes this region a reliable as well as likely energy partner. However, it will most likely not become a large-scale energy partner until the next decade, due to a lack of an existing support infrastructure for extraction of the gas.

Nonetheless, the fact that discovered hydrocarbon reserves are enough to last Israel more than 200 years, is more than enough to make the EU push for a joint energy partnership.

Still along the ‘southern gas corridor’, but a bit further east, is the Persian Gulf, an area so rich in hydrocarbon reserves that it has historically always been at the epicenter of global natural energy supply. However, when it comes to gas it has two main players: Qatar and Iran. Not only would this help to diversify the gas suppliers, but it would also help to diversify the EU’s energy portfolio as almost all gas that comes from Qatar is in the form of Liquefied Natural Gas (LNG).

The development of a significant energy-based relationship with the Persian Gulf would therefore bring about two key elements to the EU’s energy security policy. Firstly, the reinforcement and continued development of LNG in the EU gas demand market, evidence for which would be the planned construction of eight new LNG regasification plants throughout EU member countries. Secondly, this relationship would also bring about the reincorporation of Iran into the EU energy supplier portfolio, a monumental step forward from the EU’s past relationship with the Islamic state. Due to progress made last November between the US, the EU, and Iran on the issue of nuclear proliferation and oversight in Iran, steps can now be made towards incorporating Iran once again in the economic sphere of theses two great powers.

However, what all these regions have in common is that they must all use the same middleman. If using traditional gas pipelines to transfer the gas, the only country that directly connects them to Europe is Turkey. Therefore no energy relationships can be sustainably created without the cooperation of Turkey, giving it an upper hand in this development of the EU energy policy.

Turkey’s awareness of this privileged position that they are in has led them to prepare to take on this role. Although the EU-backed Nabucco pipeline, which was going to connect any pipelines that went through Turkey to Europe, failed and thus surrendered to the Russian-backed South Stream pipeline, Turkey was able to save part of Nabucco that runs through its own territory by creating the Trans-Anatolian Pipeline (TANAP).

This therefore facilitates them to direct any incoming gas straight to Europe. The origins of this project came from the desire to connect the hydrocarbon discoveries in the Black sea and Caspian regions with Turkey. Thus, not only would gas from the Levant Basin, the Persian Gulf, and the rest of the Middle East use Turkey as a transient country, but so would the gas that comes from the Caspian. Essentially, Turkey will become the new energy gatekeeper to Europe, making any future EU energy policy that is seeking a reduction of Russian influence on the EU futile without Turkey as a strategic partner.

The desire of the EU to therefore deviate from Russian influence, by creating a southern gas corridor, is entirely possible and in the making. It would thus not be unreasonable to estimate that by 2030 these regions will cumulatively account for 20%-25% of the total EU gas imports.

While serious efforts are being made at reducing Russian influence, it will not be possible to completely eradicate it due to a termination of the energy partnership resulting in a massive lost economic opportunity as a result of the infrastructure that is already in place. However, the valiant effort of the European Commission to pave a path towards a stronger EU energy policy, although slow, will result in not only greater energy security, but also a strengthened and strategic global partnership portfolio.

Gabriel Uribe