From the February 8, 2008 Wall Street Journal Europe
February 8, 2008
by Zeyno Baran , Rob Smith
It's now been more than two years since Moscow cut off gas supplies to Ukraine. Yesterday, it threatened to do so again.
Many in the European Union said back in 2006 that they had finally woken up to the risks of overdependence on a single supplier. Consequently, the EU began promoting several non-Russian gas pipeline projects to increase diversification and market competition. But in the absence of a unified EU energy security policy, Moscow has been able to play divide and rule with Europe, cementing its gas monopoly power on the Continent.
Unless the EU starts treating energy as a foreign and security policy issue, one that may even have to be dealt with at NATO level, it will continue to be outmaneuvered by countries that do view it that way. In recent weeks, Russian President Vladimir Putin has orchestrated three major energy deals that will increase Europe's already substantial dependence on Russian natural gas, which Moscow exploits for political and economic gains.
On Jan. 18, Mr. Putin secured the commitment of the Bulgarian government for the construction of the massive South Stream gas pipeline. This project would carry Russian gas through Bulgaria into Greece, Italy, Serbia and potentially Hungary and Austria. It is designed to undermine the EU-backed Nabucco pipeline, as well as the Turkey-Greece-Italy (TGI) pipeline. Both are intended to help the EU diversify its natural-gas supply by bringing gas from Azerbaijan and Central Asia to the heart of Europe.
Nabucco and TGI make much more commercial sense than South Stream, whose astronomical costs -- due to the large part of the pipeline that has to be built underneath the Black Sea -- undermine the Russian project's financial viability. But Gazprom is happy to pursue noncommercial projects to bolster its monopoly power, as demonstrated by the Blue Stream gas pipeline that crosses the Black Sea to Turkey and the planned Nord Stream gas pipeline through the Baltic Sea to Germany. Earning a commercial rate of return or supplying gas at attractive prices is not what a monopolist like Gazprom seeks. Rather, it seeks to stifle competition, even at a significant commercial loss in the short term.
One week after the Bulgaria deal, Russia also secured Serbia's cooperation on South Stream. For good measure, Belgrade also sold its national oil company, NIS, to Gazprom. The very same day, Austria's state-controlled energy company, OMV, inked a deal handing over 50% of its massive Baumgarten gas-storage facility to Gazprom. This move could well be the prelude to a deal between Austria and Russia on South Stream. Austrian Economy Minister Martin Bartenstein has already suggested "integrating" Nabucco with South Stream and filling that pipe with Russian gas. Obviously, such integration would completely undercut the whole point of Nabucco: diversification away from Russia.
Europe has been utterly incapable of putting forward a consistent, unified effort to advance Nabucco, supposedly its "priority" project. Instead, it has allowed its member states and Serbia, which wants to join the EU, to undermine the pipeline's prospects.
Many European nations are simply afraid of angering Russia. In the late 1990s the U.S., along with Azerbaijan, Turkey and Georgia, took the lead in building oil and gas pipelines from the Caspian Sea to Turkey. Moscow fiercely opposed these projects. At the time, Europeans claimed the projects weren't feasible and did little to support them. Yet today, the EU recognizes that these pipelines are vital to its energy security and that without them its dependence on Russia would be even greater.
Strong U.S. support was sufficient to counter Russian opposition and European reluctance in the 1990s. But it won't be enough today. Thanks to the high energy prices, Moscow is much stronger and more assertive now than it was in the 1990s. What's more, the EU lacks the resolve to challenge Russia's monopoly pressure.
Perhaps it is time for energy security to be more firmly integrated in the NATO treaty, as U.S. Sen. Richard Lugar suggested at the organization's November 2006 summit. That way, when energy is used as a political weapon to pressure a NATO member, the alliance would stand together in support of the beleaguered state. It may also be time to introduce energy into the NATO-Russia dialogue. These are topics that leaders must discuss at the NATO summit in Bucharest this April.
At the end of the day, though, this is a European problem and it requires a European solution. If the EU is to survive as a united and global actor, it needs solidarity on energy security, not dissention.
Zeyno Baran is a Senior Fellow at Hudson Institute.
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