New CFR Report Provides Solutions for European Dependence on Russian Energy Supplies

February 11, 2009

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“Ensuring reliable access to Eurasia’s energy at a reasonable price is among the most crucial strategic imperatives for Europe and, by extension, for Europe’s allies in the United States,” finds a new Council Special Report, Eurasian Energy Security. The report, authored by Jeffrey Mankoff, adjunct fellow for Russia Studies at the Council on Foreign Relations (CFR), addresses Europe’s overreliance on Russia as an energy supplier and proposes solutions to mitigate and eventually free Europe from its vulnerability in the energy sphere.

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Mankoff urges Brussels and Washington to act immediately in light of the global financial crisis and the Russia-Ukraine gas war, a situation which “strengthens the case for countries vulnerable to supply disruptions to insulate themselves against future difficulties.”

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Geopolitics of Energy

Europe’s precarious situation is partly caused by a resurgent Russia, particularly the Russia that has developed under the control of Prime Minister Vladimir Putin, explains the report. “Russia’s massive oil and gas reserves, moreover, are increasingly under the direct control of the state,” which bolsters the Kremlin’s ability to assert its influence in the region. Mankoff says that Russia’s monopolist gas exporter Gazprom is a “company that is at times indistinguishable from [the Russian] government.”

The reliance on Gazprom—and Russia in general—is also of concern given Russia’s declining trajectory in domestic energy production capacity. “Forecasts estimate that, after reaching a peak level of around 10 million barrels per day, Russian oil output will rapidly decline to around 6 million barrels per day as early as the middle of the coming decade; persistent low prices and a deep recession could make the decline even steeper.”

The report warns against efforts to “to exclude or limit Russian participation in the European market” but instead find “clear and enforceable rules” by which to subject Russian companies’ to European “regulatory and judicial oversight.”

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Eurasian Energy Security makes two recommendations for EU and U.S. policy toward Europe’s overdependence on Russian energy.

· Integration of an energy framework: The EU should create “a common European framework for energy, especially in the gas sector, while binding the Russian energy sector more closely to Europe.” The report urges that the EU, with the support of the United States, seek to reform both its internal energy market and its energy relations with Moscow. Within the EU, it recommends forming an integrated gas market in Europe with a common regulatory framework, which should be coordinated by the European Commission. The construction of interconnector gas pipelines would help insulate countries from being heavily dependent on Russian gas. The EU should also insist on rules for transparency and “signal unambiguously its acceptance of long-term supply contracts as a way to reduce risk for Russian companies”—a source of concern for Moscow.

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· Diversification of energy supplies: “No magic bullet will rescue Europe from its dependence on Russia for the foreseeable future. For that reason, diversification must be a long-term strategy involving several components: boosting Russian output; building new pipelines; increasing supplies from Scandinavia, North Africa, and the Middle East; developing new types of energy; and improving efforts at conservation. Diversification will not be an immediate fix; it is not practicable in the near or medium term for both political and technical reasons.”

The EU currently imports around 33 percent of its oil from Russia and 36 percent of its gas (a figure that the European Commission predicts will rise to over 60 percent by 2030). Eurasian Energy Security acknowledges the challenges in reconciling the “diverging interests of countries in positions as different as Germany, Poland, Hungary, and Spain.” Yet efforts at achieving solidarity remain worthwhile, because “a common position on energy security remains critical to the viability of the EU as a political force.” In this goal, the United States “is well positioned to play the role of a disinterested consensus-builder among the Europeans.”

For full text of the report, visit www.cfr.org/eurasian_energy_security.

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Jeffrey Mankoff, a specialist in Eurasian/Russian affairs, is adjunct fellow for Russia studies at the Council on Foreign Relations (CFR) and associate director of International Security studies at Yale University. Previously, he was a John M. Olin national security fellow at the Olin Institute for Strategic Studies, Harvard University; Henry Chauncey fellow in grand strategy, Yale University; and a fellow at Moscow State University. He is the author of a new CFR book, Russian Foreign Policy: The Return of Great Power Politics.

Council Special Reports (CSRs) are concise policy briefs that provide timely responses to developing crises or contribute to debates on current policy dilemmas. CSRs are written by individual authors in consultation with an advisory committee. The content of the reports is the sole responsibility of the authors.

The Council on Foreign Relations is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens in order to help them better understand the world and the foreign policy choices facing the United States and other countries.

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