Energy Security in Europe: Seeking Synergies and Strengthening Ties for Improvement

Zhanetta Zhakypova, SPP, MPA 2016 reports

Wolfgang Sporrer, the founder of the Vienna Centre for Energy Diplomacy delivered a presentation on the question of whether current natural gas policies serve as engines for stability or instability in Eurasia. His main argument was that energy security in Europe should be strengthened by seeking synergies instead of confrontation. He gave an overview of the current global picture in the energy sector, noting that it was affected by several major trends including: the shale gas revolution, the effects of the Fukushima catastrophe, and the crisis of European liquefied natural gas (LNG).

Participants discussed the impact of the Ukrainian crisis on the Russian Federation’s role as a gas supplier. Sporrer described the European gas sector as impacted by uncertainties about demand, regulation, and pricing resulting in uncertainty about the future role of gas in the European energy mix.

There was a lively debate about the advantages and disadvantages of EU energy regulation, and how this affects third parties such as suppliers and potential investors.

Sporrer questioned if there really was such a thing as an EU energy policy, as many member states insist on pursuing energy policies exclusively driven by their own interests. Big suppliers also often have no interest in a common EU policy, as they prefer to negotiate with countries separately. Several countries are bound by long-term contracts, but in the future, the gas price will more likely be defined by trading on gas exchanges.

Sporrer described the current situation with regards to European gas supplies as an “uneasy marriage.” A quarter of EU natural gas comes from Russia, mainly through Ukraine, but Russia is equally dependent on EU consumption. The Balkan countries and Turkey are especially dependent on Ukrainian transit. The pipelines in Ukraine are 40-50 years old and are in urgent need of modernization however investments are being held off due to the uncertainty about future Russian-Ukrainian relations. The EU is seeking ways out of this “uneasy marriage” by diversifying the sources and routes of gas. Russia is seeking diversification of routes to avoid transit difficulties as well as trying to find new markets. The “South Stream” project of Gazprom has several obvious advantages for the EU, in particular that it will not depend on old pipelines. But there are legal, political, and cost issues related to this project that have hindered its realization until now.

The potential solution for the current instability could be in seeking synergies instead of confrontation, strengthening ties between Europe and Russia through “Eurasian Connector” (Nabucco + South Stream), and restoring existing infrastructure (Blue stream, Ukraine). Participants were interested in finding out which countries would be most affected if the gas supply from Russia were limited. Sporrer replied that South Eastern European countries, such as Bulgaria, Macedonia, and Serbia are most vulnerable to gas shortages.