If there ever was bad blood between the EU and Russia over the war in Georgia, none was to be detected in the French town of Nice where the two recently met for has what been described as an “important” summit. So cordial was the atmosphere that one of the main issues discussed was Russia’s potential entry into the World Trade Organization (WTO), a goal that Russia has pursued for over a decade. There have been several obstacles to Russia’s accession, most of which had to do with the country’s questionable business practices and trade policies. Issues of concern included – among others – export duties, import bans, widespread theft of intellectual property and endemic corruption. At Nice, however, Russia was all but assured of speedy admittance.
This turn of events is noteworthy for at least two of reasons. As of this time, Russia has still not rectified most of the problems that had been previously cited as obstacles to its joining the WTO. Even more remarkably, only three months ago a number of EU countries threatened to block Russia’s application as punishment for its Georgian invasion.
And yet today, all the objections and threats seem completely forgotten. Not only are EU countries now ready to embrace Russia, but they are willing to do so even while it is still in violation of the ceasefire agreement negotiated by their own representatives.
The question is what accounts for this sudden change of heart.
One may think that the Europeans are simply afraid of Russia’s military might. But even though this may be a concern for the border countries, nations further away do not at this point face the possibility of being threatened militarily by Russia. And yet it is those countries – Germany and Austria, for example – who are among the most vocal supporters of Russia’s entry into the WTO. Why?
For the answer we must look not to Russian arms, but to Russia’s natural wealth. Russia, as most people know, is a country very rich in natural resources and energy. It is currently the world’s second biggest exporter of oil (after Saudi Arabia), producing some ten million barrels a day. Its oil reserves are estimated to be the eight most extensive in the world, but this figure is probably greatly understated, since large swathes of the vast Russian land have not yet been properly explored. But large as Russia’s oil reserves are, they are dwarfed by another valuable source of energy – natural gas. At more than 47 trillion cubic meters, Russia’s reserves are by far the largest on the planet, almost twice those of the next country, Iran. As could be expected, Russia is the world’s leading producer of natural gas exporting more than 182 billion cubic meters a year.
Most of those exports end up in Europe, which is not surprising, since the old continent is the most logical destination for this Russian commodity. Unlike oil which can shipped and ferried with relative ease, natural gas is much more difficult to transport. The most economical and practical way to get it from one point to another is in its gaseous form through pipelines. But since such infrastructure is difficult to build and costly to finance, producers tend to point their gas lines to markets that are closest geographically. In Russia’s case this would be Europe.
The arrangement is mutually advantageous. Operating in a milieu where greens have been traditionally influential, Europe’s political establishment has long pursued environmentally “friendly” policies. We mostly associate natural gas with home heating and cooking, but in Europe it is also widely used for electricity generation. Europe’s first industrial power generating gas turbine went online in the Swiss town of Neuschatel in 1939, and since then gas-generated electricity has found application in many countries. According to Edgar Gärtner writing in the Wall Street Journal, gas accounts for most of Spain’s electric output. In Germany the figure stands at nearly 12 percent. Needless to say, both countries get almost all of their gas from abroad. Germany imports 83 percent, much of it from Russia.
Because of its efficiency, versatility and cleanness, natural gas has become the fuel of choice for many European countries. For nearly half of them it accounts for more than 30 percent of their primary energy needs. In comparison, the figure is just above 20 percent in the United States. While it is often said that America is addicted to oil, it is equally true that Europe is addicted to natural gas.
Until recently the Europeans were not particularly troubled by their dependence on Russia. Following the collapse of the Soviet Union, the Russian Federation under Boris Yeltsin became an ally of the West. It was not until late in Putin’s first presidential term that the Kremlin began growing distinctly anti-American and increasingly anti-western. Furthermore, not until long ago energy was relatively inexpensive. Wishing to stay in Europe’s good graces, Moscow kept natural gas prices pretty much in line with other sources of energy.
But things changed dramatically when energy prices skyrocketed. To keep up with the rising tide, the Kremlin jacked up its fees to previously unthinkable levels. When the Europeans protested, Moscow retorted that it was merely seeking to keep parity with other commodities. This was not an unreasonable position and since the Russians hold something of a gas monopoly in large parts of the continent, their customers had little choice but to pay up.
The bad energy situation was then made worse by Russia’s geopolitical resurgence. Growing prosperous and confident on energy proceeds, Russia became increasingly assertive. It did not take the Kremlin long to figure out that it could use natural gas as a powerful lever. The idea is simple, but very effective: Friendly countries receive discounts, the less compliant are charged a premium, and troublemakers risk having their supplies cut off.
The last option especially causes cold shivers in Europe’s capitals given how vulnerable they are to such blackmail. To give an idea, Germany’s imports from Russia account for 43 percent of the country’s natural gas consumption. The figure is 70 percent in Greece and the Czech Republic, 60 percent in Austria, 83 percent in Lithuania, 46 percent in Poland, and 100 percent in Finland.
Three years ago Russia showed how serious it is about wielding its gas stick. On January 1, 2006, following months of bickering, the Kremlin suddenly cut off supplies to Ukraine. Since Ukraine is one of the world’s foremost consumers of natural gas of which a substantial portion was coming from Russia, the supply interruption in the middle of winter portended a national disaster. Even though the valves were reopened three days later, the episode sent a chilling message: “If you cross us, we will leave you out in the cold.”
Europe’s politicians got the point. The prospect of cutoffs and subsequent heat and electricity shortages looms like a nightmare in their minds. If they should be so afflicted in the middle of a winter, there is little chance they could politically survive the anger of their populations.
The situation is likely to grow worse in the years ahead. Should the EU continue in its misguided energy policies – chasing after inefficient renewable energy such as wind power – their dependence on Russian natural gas will only increase in the future. A recent paper by The George C. Marshall European Center for Security Studies offered a bleak prognosis:
“Looking 25 years out, it is estimated that 80% of the EU’s natural gas will be imported, with Russia providing up to 60%, equating to one fifth of the overall EU energy mix coming from Russia in the form of pipeline natural gas.”
The Europeans’ cravenness at the Nice summit can thus largely be explained in terms of their dependence on Russian energy. Hard hit by the financial and economic crises, an energy squeeze is the last thing they need. With winter approaching, they know all too well that cutoffs would have devastating consequences. Conscious of its power, Moscow is making high demands even though it would rightly deserve the opprobrium normally reserved for international pariahs. Sadly, its EU “partners” have not choice but to go along, their initial indignation over Georgia discarded for the sake of energy security and political expediency.
The EU’s humiliation should serve as a warning to us. Energy is the lifeblood of modern nations, and countries are not really free as long as they depend on others for their crucial needs. If we fail to make ourselves energy independent, somewhere along the line we will end up just like the Europeans: weak, spineless and pathetic. Like them we will have our strings pulled by some wayward regime, and we will have no choice but to march to the tune of its drumbeat.