MOSCOW AND EU BATTLE FOR CONTROL IN ESCALATING ENERGY WAR
Simon Tisdall
The Guardian
Friday May 18, 2007
European Union efforts to loosen Russia’s energy grip by seeking
alternative supplies from central Asia via the Caucasus suffered a
stunning setback this week. But even before President Vladimir Putin
agreed deals expanding his control of Kazakhstan’s and Turkmenistan’s
gas and oil exports, Europe’s drive to diversify was running on empty.
Russia supplies about 25% of Europe’s gas and a rising proportion
of its oil. That is increasingly seen as a strategic weakness that
could leave the continent vulnerable to politically motivated energy
blackmail. This was the fate that allegedly befell Ukraine and Belarus
last year. Lithuania is currently under similar pressure after Moscow
cut oil deliveries.
Energy security will figure high on the agenda at today’s EU-Russia
summit in Samara. A key aim is to induce Moscow to sign up to
the Energy Charter, a set of rules covering trade, investment and
transportation of oil and gas. But experts predict the Kremlin will
continue to resist the scheme.
Russia is focusing instead on increasing its market dominance from
production through to the point of sale, by expanding its investments
in Europe (while denying European businesses reciprocal access). The
state-controlled energy giant Gazprom now has a stake in 16 of the
EU’s 27 countries. And while the EU remains divided on the question
of how to respond, Gazprom is busy maximising its advantage.
"Gazprom already has direct access to end-consumers in three of the
biggest EU gas markets: Italy, Germany and France," said Katinka
Barysch in a study published by the Centre for European Reform. "In
the UK, it hopes to raise its market share to 10% by the end of the
decade. Not content with controlling pipelines, Gazprom is building
power plants and gas storage facilities in various EU countries."
Russia’s other main tactic is forging bilateral deals that undermine
a collective pan-European approach. Moscow’s most spectacular success
was agreement with Germany on a Baltic pipeline that is to bypass
Poland. But Mr Putin has also dangled the prospect of individual
supply-and-distribution arrangements with Slovakia, Hungary, Bulgaria
and a host of other energy-hungry EU members.
Moscow’s aggressive, and increasingly successful, attempts to entrench
its dominant position have also undercut political and financial
support for alternative European supply projects that would bypass
Russia. One is the so-called Nabucco pipeline to bring gas from the
Caspian. It may not go ahead.
Russia’s weekend deals with Kazakhstan and Turkmenistan have also
raised possibly terminal doubts about the viability of US- and
European-backed ideas for a central Asia pipeline. Russia’s energy
minister, Viktor Khristenko, dismissed it this week as a "political
project" that was unlikely ever to materialise.
"Russia is increasingly setting the agenda for EU-Russia relations
while EU policymakers are struggling," Ms Barysch said.
Russia is not having it all its own way. EU foreign ministers agreed a
counter-offensive this week to intensify energy and other cooperation
with Black Sea countries, including new neighbours Ukraine, Georgia,
Moldova, Armenia and Azerbaijan. Acting unilaterally, Poland is
leading efforts to build east European links with Caspian Basin energy
producers .
All the same, effective EU action to diversify energy supplies faces
particular difficulties that do not trouble Moscow. These include
concerns about good governance and human rights in partner countries.
The political show trial of a former economy minister mounted
this week by the democratically challenged rulers of Azerbaijan,
a key producer and transit route for central Asian gas and oil,
has highlighted these contradictions.
Azerbaijan’s 2005 presidential election was blatantly stolen; it has
an appalling human rights record, and the use of torture is said to
be endemic.
But for now at least, all this is largely tolerated in the west –
just as long as Azerbaijan’s feudal oligarchs keep on the "right side"
in the high-stakes energy war with Russia.