Europe’s
Energy Crisis Sharpens Antagonisms With Russia
By Fergus Michaels
06 April 2006
World
Socialist Web
The
year began with an energy crisis in Europe. On January 1, the national
Russian energy company Gazprom temporarily cut off gas supplies to Ukraine
in order to enforce a five-fold price increase.
The resulting supply shortages
throughout the continent served to underline Europe’s dependence
upon Russian gas supplies, which flow through Ukraine.
Russian exports of natural
gas currently account for a quarter of the entire western European market.
Russia holds the world’s largest sources of gas reserves and is
the largest producer and exporter. Gazprom retains a monopoly over Russian
gas exports through its control of the Russian integrated pipeline network.
The European Union is largely
dependent upon external sources for its energy supplies, particularly
Russia, but also Norway and Algeria. That dependency is set to accelerate
substantially in the coming period.
In a 25-member EU, energy
demand is expected to grow by 15 percent between now and 2030. Natural
gas demand is expected to increase by 70 percent, and electricity consumption
is expected to increase by 45 percent.
EU natural gas production
represents around 12 percent of world production and is declining, forecast
to fall from 238 billion cubic metres in the year 2000 to 98 billion
cubic metres in 2030. EU oil production currently represents less than
5 percent of the world total, and is relatively costly to extract.
The EU is currently dependent
upon external sources for approximately 50 percent of its energy needs.
This is anticipated to rise to 70 percent by 2030.
The European bourgeoisie
is acutely aware of the increase in global competition for energy supplies,
particularly coal, natural gas and oil—hence the publication of
its Green Paper on March 8 on the issue. The language used in the paper,
however, reflects its growing sense of alarm:
“Global demand for
energy is increasing. World energy demand—and CO2 emissions—is
expected to rise by some 60 percent by 2030. Global oil consumption
has increased by 20 percent since 1994, and global oil demand is expected
to grow by 1.6 percent per year.
“This landscape requires
a common European response... Recent events have underlined that this
challenge must be met. An approach based solely on 25 individual energy
policies is not enough. The EU has the tools to help. It is the world’s
second largest energy market, with over 450 million consumers. Acting
together, it has the weight to protect and assert its interests.”
Claude Mandil, executive
director of the International Energy Agency, gave voice to the concerns
of the European bourgeoisie over global competition for energy supplies
In a March 22 article in the Financial Times he stated:
“Natural gas accounts
for an increasing portion of the world’s energy consumption and
imports are expected to rise significantly in most industrialised nations,
notably western European countries but increasingly the US and Japan
While global natural gas supplies are large, they are concentrated in
relatively few countries, particularly Russia, Iran and Qatar...Gas
currently provides about 21 percent of global energy supply and is expected
to rise to 24 percent by 2030, overtaking coal as the world’s
second largest energy source...
“In North America,
demand also increases steadily and imports, which are currently small,
will reach 14 percent by 2030. In the Asia-Pacific region, the import
reliance of Japan and Korea will remain very high. In addition, China
and India will emerge as big gas importers.”
Russia’s crucial position
in relation to the European energy market was underscored during a state
visit by Russian President Vladimir Putin to Beijing. On March 21, two
days before the EU summit that was meant to draw up a common policy
on energy, Russia’s Gazprom and CNPC, China’s biggest and
state-run energy firm, signed a deal to build two natural gas pipelines
to China. The pipelines are expected to cost $10 billion, supply 60-80
billion cubic metres of gas annually, and to come online by 2011. In
addition, CNPC will also provide Transneft, the Russian oil transport
company, with $400 million to finance a feasibility study for an oil
pipeline between Russia and China, and to cover construction costs on
Russian soil, according to the Moscow Times.
The Financial Times remarked
that “analysts said [Russia] appeared to be playing Europe and
China off against each other.”
Although Sergei Kupriyanov,
spokesman for Gazprom, stated that the company would have enough gas
for Europe, Russia and China, the FT continued: “However, the
future increases in gas supplies to Europe—in response to its
growing demand—will be subject to arbitrage between China and
European countries.”
The March 23-24 EU summit’s
proposed “Energy Policy for Europe” focuses on an attempt
to lessen Russia’s domination over European energy supplies. It
calls for the opening up of Russia’s gas pipeline monopoly to
European investment and stresses the desirability of increased “diversification”
of European supplies toward other, non-Russian sources. The summit also
insisted upon the further internal liberalisation of the European energy
market.
Russia has been pressed upon
in recent weeks to ratify the European Commission’s Energy Charter
Treaty, which, according to the Financial Times, “would stop Russia
from simply suspending supplies to another country” and “would
also require Russia to open its export gas pipelines to independent
producers and third countries, such as Kazakhstan.”
The EPE calls for “revitalised”
dialogue with Russia “in support of EU energy objectives”
and allowing “non discriminatory access to third party pipelines
in Russia,” reiterating that “decisive efforts” should
be made to “secure Russia’s ratification of the Energy Charter
Treaty.”
Russia has rebuffed the request.
The EU summit also proposed
the need for “intensified diversification” into energy sources”
and for the opening of “New gas supply routes... in particular
from the Caspian region and north Africa.” But this desire to
secure Europe’s energy interests—whether in North Africa,
the Caspian region, or the Middle East—does not occur in a geopolitical
or military vacuum.
In the first place it only
exacerbates tensions with other major powers, such as the US and China.
Multibillion-dollar European and British investment in oil and gas and
plans for liquefied natural gas (LNG) production in Iran have been recently
suspended amid fears of United Nations sanctions, according to the Financial
Times.
Moreover, Russia is not standing
idly by while Europe seeks access to other suppliers. A recent state
visit to Algeria by President Vladimir Putin saw Russia conclude a $7.5
billion arms deal with the North African country. M.K. Bhadrakumar,
in an article for the Asia Times headlined “Reheating the Cold
War,” notes that the arms deal involves “deep collaboration
between the two countries in the energy sector... Russian companies
have been given monopoly rights for oil production in the Sahara desert;
Russia’s Gazprom will participate in the development and production
of Algeria’s gas sector; and Algeria will share with Russia its
sophisticated Western technologies in gas liquefaction.” Of crucial
significance is that “Algeria is Europe’s only viable alternative
source of gas at present, ranking fourth in the world as a gas-exporting
country.”
Algeria has the eighth largest
proven natural gas reserves in the world. It accounted for one-fifth
of natural gas imports to the EU in 2000, second only to Russia. It
is also the second largest exporter of LNG behind Indonesia, with approximately
17 percent of the world’s total. In 2003, Algeria’s exports
of LNG to the US constituted some 11 percent of total US LNG imports.
The desire to “develop
a common voice” for the EU in securing its energy interests abroad
is also bound up with increasing pressure on European industry to remain
globally competitive against its rivals. The Green Paper makes this
connection explicit, stating: “One of the most important objectives
of the internal energy market is to promote the competitiveness of EU
industry . . . Secure availability of energy at affordable prices is
crucial. Integrated and competitive electricity and gas markets with
the minimum of disruption are essential.”
The concern is that if Europe
does not determine its energy policy as one big bloc, then it is more
open to prices being determined by external suppliers. Fulvio Conti,
the chief executive of Italy’s largest power company Enel, told
the Financial Times that Europe needs an open, fully integrated energy
market, driven by strong European companies, because there are “big
guys coming in from outside Europe,” such as Russia’s Gazprom,
which is looking to expand into the distribution market.
This would entail the coordinated
development of a single electricity and gas grid across the EU, rather
than the irrational collection of national energy grids and systems
now in place But the EU is wracked by internal contradictions and national
tensions that are exacerbating protectionist sentiment rather than encouraging
cooperation, forcing the Green Paper to recognise that whereas “it
is essential to act in an integrated way...[e]ach Member State will
make choices based on its own national preferences.”