30 May 2008
U.S., Europe Need Collective Energy Security Strategy
Experts say supply diversification must be basis for moving forward
Washington -- When President Bush and his European counterparts meet June 10 in Brdo, Slovenia, one of their top priorities will be to move closer to a common approach to energy security.
Officials from both sides of the Atlantic understand that such an approach not only is fundamental to maintaining a consistent flow of energy at sustainable prices, but is also vital to tackling broader climate change challenges.
European Union (EU) member states have taken actions recently to boost the use of renewable energy and reduce carbon dioxide emissions. U.S. experts argue, however, that it also is critical for European countries to develop a unified policy that promotes the diversification of its sources of energy, particularly with the countries of the Caspian Basin and Central Asia, and eventually with Iraq.
The key issue is how dependent should Europe be on its main energy supplier -- Russia. Gazprom, a Russian company, accounts for nearly all of Russian natural gas production and controls more than 15 percent of world gas reserves. It currently fulfils more than one-quarter of demand for natural gas from the European Union and between 50 percent and 100 percent of demand from most of the former Soviet republics.
According to the European Commission, Europe currently imports about 50 percent of its total energy supply, a figure that is projected to rise to 65 percent by 2030.
But European nations are not of one mind in addressing energy security. While some European countries wish to move forward with long-term bilateral supply contracts with Russia, other European countries believe their more urgent priority is to strengthen their negotiating position with Russia by developing diversified supplies of natural gas. Their concerns stem from Russia’s manipulation of gas and oil flows to the European market in recent years, according to a recent report by the U.S. Congressional Research Service (CRS).
“Our approach is to help Europe and help our European allies achieve their goals in diversification and to put them in the strongest possible negotiating position with a Gazprom partner who will be around for a long time,” Matthew Bryza, deputy assistant secretary of state for Europe and Eurasia, said February 26 in a press briefing with Hungarian journalists. “Strength in negotiations comes from diversification.”
Richard Lugar, ranking Republican on the U.S. Senate Foreign Relations Committee, agrees. “The trans-Atlantic community must come to grips with the fact that our future is threatened by the continued abdication of leadership on energy,” Lugar said April 15 at a conference on U.S.-Ukrainian issues. “Our energy-derived vulnerabilities will continue until we have the possibility of collective action and are implementing supply diversification.”
Russia currently has a lock on the price of natural gas in Europe because Gazprom has acquired 50 percent ownership of the strategic gas trading and distribution hub at Baumgarten, Austria, where the pipelines from the North Sea and Russia converge, Bryza said in an April 30 interview with Greek journalists.
“Our goal is to make sure that that price-setting mechanisms operate freely, smoothly, according to market economic principles, and the only way to do that is to get more gas flowing there into Baumgarten so it’s not just Russia bringing the gas in because then Russia sets the price,” Bryza said.
Clearly, the Bush administration would like to see accelerated development of natural gas pipelines from Central Asia and the Caspian region to Europe that promises new and reliable energy sources. There is a foundation of success in place with the development of Caspian region oil and gas pipelines to date, including the Baku-Tbilisi-Ceyhan and Baku-Supsa pipelines, which together carry more than 1 million barrels per day of Azerbaijani offshore Caspian crude oil to international ports in Turkey and Georgia. The Baku-Tbilisi-Erzerum natural gas pipeline already carries Azerbaijani off-shore Caspian natural gas to Turkey via Georgia.
While there have been a number of attempts to develop trans-Caspian gas pipelines from Central Asia to Europe across the South Caucasus to promote European diversification, little action has been taken to date.
More than a decade ago, a Trans-Caspian gas pipeline from Turkmenistan to Azerbaijan and then on to Turkey was proposed with the objective of circumventing both Russia and Iran. Unresolved issues over the legal status of the Caspian Sea, regional stability issues related to the dispute between Azerbaijan and Armenia over Nagorno-Karabaugh, and EU willingness to compete with Russia hampered its development, CRS said. In the end, the Baku-Tbilisi-Erzurum pipeline was built, but not without an extension to gas supplies in Turkmenistan.
And in 2007, Russia signed an agreement with Kazakhstan and Turkmenistan for Gazprom’s Central Asia-Center pipeline to supply additional volumes of gas to Europe, potentially scuttling further development of the Trans-Caspian pipeline.
Construction of the Nabucco pipeline from Turkey to Austria through Hungary, Romania and Bulgaria, however, is scheduled to begin in 2010. Intended to transport as much as 31 billion cubic meters of Central Asian gas, the project repeatedly has been delayed and concern remains as to whether Gazprom contracts for gas from its South Stream pipeline are undermining development of the project.
“The trans-Atlantic community now stands at a critical decision point that demands a collective energy security strategy,” Lugar said. “The current European strategy will be unsuccessful in meeting this challenge. Success at developing productive European and Russian energy interdependence requires much more European unity.”
