Energy Security in Europe – An Individual Approach to a Collective Problem

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(Photo Credit: TASS, kremlin.ru)

(Photo Credit: TASS, kremlin.ru)

Since the dawn of the European Union, European leaders have discussed whether to manage Europe’s energy security collectively or individually. The discussion is important; energy security goes to the heart of national security. Without the proper level of energy security, private homes are exposed to power cuts, putting a strain on economies. The Nord Stream 2 pipeline, the subject of much debate earlier this year, illustrates a dire threat to this energy security.

That energy security is a powerful tool was clearly demonstrated in January of 2009, when all Russian gas flows through Ukraine were halted for 13 days, cutting off supplies to parts of the European Union. While energy diversification has improved in recent years, countries in eastern Europe remain substantially or entirely dependent on energy supplies from Russia.

In spite of this grave threat to our security and economy, Europe is increasingly exposed to the danger of external energy supply cuts and manipulation. Europe remains the largest energy importer in the world. In 2013, energy imports – in oil and gas – accounted for 53 percent of the union’s total energy consumption and cost approximately $450 billion. A recent report from the International Environmental Agency highlights that as domestic fossil fuel production continues to decline, gas imports are expected to increase, while oil imports are projected to remain stable.

EU member states, the European Commission, and the European-Parliament have now commenced on a rocky path to revert this trend and improve Europe’s poor track-record on energy security. An important step was taken in March, 2015, when Europe’s 28 Heads of State adopted a plan for the creation of an Energy Union that seeks to bolster Europe’s energy security, create an internal energy market, improve energy efficiency, and decarbonize and enhance research and innovation within the field.

As part of the strategy, pipeline interconnectors will be added and reverse-flow capability will be fully unrolled. Liquefied natural gas (LNG) receiving terminals will be built in order to improve energy diversification and allow European countries to import gas from the United States and other countries.

These are important steps in the attempt to bolster energy security, but will they change the name of the game? Probably not.

Europe will continue to look for foreign energy sources, as domestic energy production declines. This problem can be contained – but not resolved – by improved energy diversification, energy efficiency, and energy alternatives such as advanced biofuels.

In order to resolve Europe’s sustained lack of energy security, EU member states have to adjust the workings of the European energy market and address the lack of governance structures. The crux of the matter is that in a liberalized market, as is the case in Europe, companies will look for the lowest-cost producers. This effectively means that gas from Russia and the Maghreb-region will remain in high demand.

The proposed plan to build the gas pipeline, Nord Stream 2, is a threat to Europe’s energy security and unity. The project might be profitable from a commercial point-of-view, but it is unsustainable from a security perspective. Nord Stream 2 will send gas directly from Russia to Germany, doubling existing capacity to 110 billion cubic meters of gas a year, after it is completed in 2019.

A recent paper highlights that Nord Stream 2 would not only make Germany more dependent on Russian energy, but also strengthen Gazprom’s position and leverage on the European market, in addition to hindering efforts toward the diversification of sources of energy supply.

A recent European Commission antitrust investigation revealed that Gazprom has used its dominant market power in Central and Eastern Europe to block the integration of the region’s gas markets, in an attempt to maintain control over key transit pipelines.

As seen from a foreign policy perspective, the move to build Nord Stream 2 comes at a time when the EU and United States have imposed sanctions on Russia because of its annexation of Crimea and its support for separatist rebels in eastern Ukraine. Nord Stream 2 would challenge a cohesive EU policy on Russia – one that German Chancellor Angela Merkel has worked hard to secure.

From the Russian perspective, the new pipeline would not only secure a strong Russian footing in a key market, but also enable them to bypass Ukraine and bring Russian gas directly to Europe’s borders. By cutting off gas transit, Ukraine would be deprived of $2.2 billion in annual revenue. This not only threatens Ukraine’s income and resources, but also undermines fuel diversification in Europe, especially in southeastern Europe.

Robin Dunnigan, U.S. Deputy Assistant Secretary for Energy Diplomacy, has asked, “Why would you support Ukraine with one hand and strangle it with the other?”

I am not suggesting an alternative to the liberalized energy market, as we know today. But I am arguing in favor of a European energy policy guided by grand strategy rather than only commercial interests.

The solution to the problem is already there. Nord Stream 2 should comply with the EU’s Third Energy Package and energy liberalization policies, which stipulate that access to pipelines must be open to third parties. This mechanism has previously been applied to the South Stream pipeline, which would have run from the Black Sea to Austria – once again bypassing Ukraine – if Russia had not dropped the plan in 2014, due to the European Commission’s tough stand over the Third Energy Package.

Nord Stream 2 is a litmus test of the visions set out in the Energy Union proposal and the EU’s policy with regard to Ukraine and Russia. The pipeline poses a significant risk to Europe’s energy security and confirms that national and commercial interests can indeed undermine collective EU efforts to create an energy union.

Instead of half-hearted measures, EU member states and the European Commission should stop the discussion and collectively endorse the vision of a European Energy Union. The first step in doing so would be to scrap Nord Stream 2.

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Anders Fogh Rasmussen, former Prime Minister of Denmark and Secretary General of NATO, is the Founder and Chairman of Rasmussen Global.

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