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THE FUTURE OF ENERGY SECURITY IN EASTERN & CENTRAL EUROPE

Implications for EU & US Policy

Abstract

Purpose – This paper highlights the future of Europe’s energy security in the wake of growing Russian energy designs in Central Asia and Eastern Europe. A framework has been presented considering various options left for the U.S. and the EU, their viability and consonance with U.S. Eurasian Strategy.

Methodology – An in-depth research has been conducted to map the current geopolitical situation of Eastern and Central Europe (ECE) by analyzing what courses of action are available for the U.S. and EU in Eurasia. An effort took the shape of this paper as a result of consulting scores of websites, articles and books on the subject.

Findings – Fast depleting energy sources in Central Asia for the U.S. proposed oil and gas pipelines, and the monopolistic tactics of Russia’s Gazprom, are going to put lot of stress on the policy makers in the U.S. and EU in the near future. It is the Author’s strong belief that Europe is increasingly more vulnerable to Russian influence with every passing day.

Research limitations & implications – The research is based on a short-time study of a very vast subject. However, it is hoped that the recommendations proffered as a result of this study are best suited for taking some immediate steps at the policy-making level.

 Originality & value – The proposed framework can support the think-tanks and policy makers at the highest level to put forth certain initiatives that are of immediate concern of the U.S. National Security Objectives.

Recommendations

  1. Comprehensive militarization of the Eurasian corridor. Successful implementation of SRS requires concurrent militarization of the Eurasian corridor (largely directed against business interests of China, Russia & Iran), from the Baltic States, through the Balkans and the Greater Black Sea Basin (GBSB), down along the Eastern Mediterranean, and eastward to China’s Western borders onto Afghanistan as a means of securing control over extensive oil and gas reserves, as well as protecting pipeline routes and trading corridors. A Eurasian Security Alliance separate from NATO is needed to compete with the Moscow-Berlin-Rome-Paris Energy Axis in Europe and the Russia-China-Iran Energy Nexus in Asia. Such an alliance was already attempted through GUAM; but it is essential that the later is expanded beyond the GBSB, to include Poland, Romania, Bulgaria, Greece, and Turkey (the authors recognize that this option will be difficult to realize, especially given Turkey and Romania’s indecisive play in the Energy Game).
  2. Immediate Consolidation of the available energy sources and trade / transport corridors. Like the first point, this recommendation refers to strengthening the U.S. position in Eurasia by focusing on strategic rather than historical allies. The Silk Road Strategy must play a major part in this consolidation process.
  3. Increase State Ownership of Energy Companies in ECE to 51%. This is an absolute requirement for all U.S. allies in Eastern and Central Europe. The authors estimate that if this step is not being taken by 2020, ECE may wake up with the Russian government owning those 51% (directly or indirectly). Please note that this paper is not supporting the nationalization of energy companies; rather a joint-venture with the government acting as the major shareholder. Nationalization is not an option because most ECE countries do not have the investment capabilities of foreign companies, and this step will prove to be even more disastrous in the long run (considering the lack of government efficiency in most ECE states).

Introduction

In 1999, PLA colonels Qiao Liang and Wang Xiangsui (Unrestricted Warfare) insisted that the United States can be easily defeated without the use of military force; by exploiting her economic and legal vulnerabilities. This paper uncovers Putin’s plan to weaken the NATO Alliance by turning U.S. allies against each other through various economic means; particularly through Russia’s monopoly of energy resources from Central Asia to Europe. Aside for the recommendations listed above, the remainder of this paper addresses the current threat to the U.S. strategic alliances in Europe, and presents a depressing picture for the future (or lack of it) of U.S. policy in Eurasia.

The Silk Road Strategy (SRS) and the “Great Game”

The Silk Road Strategy (SRS), also described as the Trans-Eurasian Security System, constitutes an essential building block of U.S. foreign policy. The U.S. Congress adopted the Silk Road Strategy Act (HR 3196) in March 1999 in order to define America’s broad economic and strategic interests, and called for the creation of an energy and transport corridor linking Western Europe to Central Asia and eventually to the Far-East. The act was revised in 2006 to include the energy interests of the U.S. as one of the primary reasons for the U.S. to be in Afghanistan. Despite legislative setback, SRS can be described today as the de facto basis of the U.S. – NATO plan to integrate the former soviet republics of the South Caucasus and Central Asia into the West’s sphere of influence in a post-cold war era.

As an integral part of the Great Game – a strategy devised to combat the growing influence of Russia, China and Iran in Eurasia, SRS calls for the development of strong political, economic and security ties among the countries of South Caucasus, Central Asia, South Asia, and the West by encouraging open market economies. In Caspian-Black Sea region, EU and U.S. have concentrated on setting up a reliable logistics chain to connect Central Asia with the EU via Central Caucasus and Turkey/Ukraine. The routes form the centerpiece of INOGATE (an integrated communication system along the routes taking hydrocarbon resources to Europe) and TRACECA (the multi-channel Europe-Caucasus-Asia corridor) included Georgian and Turkish Black Sea ports (Poti, Batumi and Ceyhan), railways of Georgia and Azerbaijan, BTC, Ferry lines connecting Turkmenistan and Uzbekistan with Azerbaijan across the Caspian Sea and highways now being built in Turkmenistan, Uzbekistan, Kyrgyzstan, Kazakhstan and China, as well as Chinese Pacific terminals as strategically and systematically important parts of the mega-corridor. Nabucco, TAP, TAPI and the BTC (the first non-Russian pipelines in the region), as essential parts of this mega-corridor, have been dubbed as versions of this U.S. “Silk Road Strategy” that aimed to block Russia from controlling the gas fields around the Caspian Sea (Rusila).

At stake is not only the geopolitical control over the Eurasian corridor, but the U.S. strategic alliances in Europe. Countries like France, Germany, and Italy, who have traditionally been American allies during the Cold War, will become further estranged as their dependence on Russian gas will grow. And with the energy rusification of Eastern and Central Europe (ECE), diversification of Europe’s energy supplies need not focus only on where the hydrocarbons come from; equally important would be the availability of diversified transportation routes ensuring security of the energy being supplied.

Energy Security in Eastern and Central Europe (ECE); implications for the Silk Road Strategy (SRS)

According to Russian propaganda, the invasion of Afghanistan in 2001 has served to support US strategic objectives in Central Asia, thus guaranteeing the control of pipeline corridors, and developing the United States’ business empire along an extensive geographical corridor. This encroachment into Russian and Chinese territorial spheres of influence led to the rapid growth of two regional military alliances i.e. SCO & CSTO, who signed in 2007 an MOU for military cooperation meant silently to stop the strategic regional constructs of America’s business empire as the building block of the “New World Order” (Chossudovsky).

Maintaining its monopoly on energy supplies to Europe at the price of profitability, Russia managed to interdict the U.S. and European access to East Caspian gas by “buying” Turkmenistan. Turkmenistan has already committed its entire gas exports to China, Russia, and Iran – selling its gas to Russia at a higher price than U.S. and the EU are willing to pay (Bhadrakumar). Once this was realized, Russian focus changed to Eastern and Central Europe (ECE). Often viewed as the periphery of the European Union, but also as an important transit corridor for gas to Europe, Eastern and Central Europe (ECE) became overnight the most important battle space of the energy war (Smith).

Locked between the new Moscow-Berlin-Rome-Paris Energy Axis in Europe (Smith, 12) and the growing Russia-China-Iran Energy Nexus in Asia (Bhadrakumar), Eastern and Central Europe (ECE) holds the power to consolidate Russia’s monopoly on energy supplies to Europe. Russian control of Eastern and Central Europe (ECE), and NATO and European Union’s newest members, will further subjugate the later to do Kremlin’s bidding in international relations (Smith). In this endeavor, unless the Nabucco project falls through, the Russian control of Gas supplies to ECE will exceed 90 percent by 2020 (Lajtai et al), Romania and Poland remaining the only countries with access to domestic production. This will undoubtedly affect the balance of power in the region in favor of Russia, and against SRS and U.S. policy interests.

From Divide and Conquer to Reflexive Control: Old Soviet Tactics Undermining NATO Influence

Reflexive control is the main Soviet tactic used since the 1960s by the KGB, and later by the FSB to influence its adversaries decision making process by predisposing them to make choices predetermined, in our case, by the Kremlin. Putin’s use of reflexive control becomes even more evident in the Russian energy strategy; meant not only to increase Europe’s reliance on Russia as its main energy supplier, but through the concept of divide et impera (divide and conquer), leading to the eventual founder of the transatlantic cooperation, and ultimately, the breakdown of the NATO alliance (Smith, 11).

Growing influence of Russia in German, French, Italian, and even Austrian politics, already put a halt to NATO expansion eastward; thus forcing the U.S. to support the formation of the GUAM (Georgia, Ukraine, Azerbaijan and Moldova) military alliance instead, opening the door for a possible comprehensive militarization of the Eurasian corridor in the future. Internal conflicts and political and economic challenges in these countries, however, rendered this alliance insignificant compared to Russia’s influence in the region (Zarbabyan). Furthermore, calls for a stronger military alliance in the Greater Black Sea Basin (GBSB) have been completely ignored by ECE members like Romania and Bulgaria, who were too busy competing against each other on Russian energy projects like the South Stream (Baran). While Bulgaria won the South Stream bid (the pipeline already gained irreversible momentum), the Romanian state company Romgaz is expected to establish a joint company with Gazprom by the end of 2010, allowing Russia “to invest in Romania's natural gas system” (novinite.com). This represents just another attempt by the Kremlin to strike at the sovereignty of the newest NATO allies along the Black Sea.

Pipeline Politics

Securing control over Caspian and Middle Eastern extensive oil and gas reserves, as well as protecting pipeline routes and trading corridors to Europe is vital not only to the security and welfare of the European Union, but is an imperative for the future of the NATO Alliance as it stands. From the Russian standpoint, direct access to EU markets without transit via Turkey and Ukraine will ensure the rebirth of the lost soviet empire, the growth of its influence over Europe, and the corrosion of the greatest threat in its area of influence (AI): the NATO Alliance. These competing interests that define the pipeline politics clashed in Eastern and Central Europe (ECE) with Russian backed North Stream and the South Stream gaining the support of Western Europe (at the detriment of ECE), and with U.S. backed Nabucco failing to obtain support from America’s historical allies.

North Stream. Often described as the new Ribbentrop Molotov, North Stream is a project that will benefit Russia and Germany at the cost of Poland and the Baltic States. Using the influence of corrupt western politicians like Schröder (former German Chancellor who became Nord Stream’s CEO after promoting Nord Stream as a ‘European project’), and Lipponen (former Finnish Prime Minister, also employed by Nord Stream), Gazprom ensured that the North Stream project will weaken the positions that Poland and the Baltic States enjoy as energy transit countries to Western Europe (Baran); thus ensuring the growing influence of the Kremlin over the former, and a stronger ‘cooperation’ with Germany.

Nabucco. While on one hand TAP[1] (Turkmenistan-Afghanistan-Pakistan) pipeline would provide gas to U.S. Allies in South West Asian and South Asian countries (especially Pakistan and India), the Nabucco pipeline was designed to bring gas from central Asia and the Middle East to NATO European members, bypassing Russia, and thus con­tributing to the “diversification of sources and routes of natural gas supply to Europe” (Łoskot-Strachota). Essential to the SRS strategy, the project gained support only after the Russian gas giant Gazprom successfully compelled the European Union not to interfere with its expansion plans (threatening to move energy focus to Asia, instead); and especially after the Russian-Ukrainian gas crisis (same year).  However, while it is considered a “priority” project for the European Union (Smith)from an economic perspective, investors are not very confident that they will make a profit from Nabucco. There are also issues with supply sources, and concerns that Nabucco will not be able to meet the increasing European demand (Baran, 10). Additionally, with Turkmenistan committing its entire gas exports to China, Russia, and Iran (Bhadrakumar), Nabucco may be left with only one very risky alternative: taking gas from Azerbaijan, Iraq AND Iran.

South Stream. Designed to bypass Ukraine and Turkey, and to compete with the Nabucco pipeline, the South Stream is already expected to start transporting Russian gas to the European Union by the end of 2015. U.S. concerns are that through South Stream, Russia will manage to hijack Nabucco; not only by denying Nabucco access to the gas supplies in Turkmenistan, but also by contracting with the same Austrian hub at Baumgarten, and by inviting RWE to join the South Stream project, despite RWE involvement in Nabucco (Platts). The project, which gives significant control to the Kremlin over Italy’s and Austria’s international relations, also gives Gazprom full access to most privileged information on Europe’s energy-related infrastructure (through contracts with Italy's Eni, and Austria's OMV), and Austria’s trading floor (Baran).

The only natural step to follow is the purchase of smaller energy companies in Europe by Gazprom; and especially the main gas companies in ECE. Since the Russian Government owns 51% of Gazprom, such a step will consolidate Kremlin’s control over the energy infrastructure in ECE, and will ensure Russia’s monopoly on energy supplies to Europe (Zarbabyan), and  a permanent foothold in the policy-making of the European Union, and its NATO members.

[1] The development of TAP/ TAPI to Arabian Sea and the extension of BTC from Ceyhan to Ashkelon – Eilat and joining with Red-sea pave way for the emergence of a versatile energy corridor taking oil & gas from Arabian Sea through red Sea to Mediterranean and vice versa. This will eventually not only bypass Russian territories and countries under direct Russian control, but also diversify the energy needs of the Europe as well as new emerging Asian markets as a unique trading corridor.

Bibliography

Baran, Zeyno (Director). Security Aspects of the South Stream Project. Center for Eurasian Policy (CEP). Hudson Institute: OCT 2008.

Bhadrakumar, Amb. Pipeline Geopolitics: Major Turnaround. Russia, China, Iran Redraw Energy Map. Turkmenistan commits its gas exports to China, Russia and Iran. Global Research. 12 JAN 2010. http://globalresearch.ca. Retrieved on 28 JUL 2010.

Chossudovsky, Michel. Notes from The Eurasian Corridor: Pipeline Geopolitics and the New Cold War. http://www.globalresearch.ca/index.php?context=va&aid=9907. Retrieved on 28 JUL 2010.

Lajtai, Rolan, Annamária Czinkos and Tamás Dinh. NABUCCO VS. SOUTH STREAM: THE EFFECTS AND FEASIBILITY IN THE CENTRAL AND EASTERN EUROPEAN REGION. KPMG in Central and Eastern Europe. 24th World Gas Conference. Buenos Aires, Argentina: 5-9 OCT 2009.

Łoskot-Strachota, Agata. Nabucco vs. South Stream– Rivalry over Balkan Gas Pipelines. Center for Eastern Studies (CESCOMMENTARY). Issue 3. Warsaw: 19 MAR 2008.

Novinite.com. Romanian EconMin: Romania, Bulgaria Not Competing for South Stream. Sofia: 22 JUL 2010. http://www.novinite.com/view_news.php?id=118389.  Retrieved on 28 JUL 2010.

Platts. Germany's RWE puts Nabucco ahead of South Stream gas pipeline. Edited by John Roberts (john_roberts@platts.com). Edinburgh:  14JUL2010. http://www.platts.com/RSSFeedDetailedNews.aspx?xmlpath=RSSFeed/HeadlineNews/ Natural Gas/8904213.xml. Retrieved on 28 JUL 2010.

Smith, Keith. Russia-Europe Energy Relations. Implications for U.S. Policy. CSIS. Washington D.C.: FEB 2010.

Zarbabyan, Ruben. From the Caspian Sea to the Mediterranean. Militarization of Strategic Energy Corridors. Global Research. 16 NOV 2008. http://globalresearch.ca. Retrieved on 28 JUL 2010.

By: 

SAEED MUHAMMAD & GHALEB ALEXANDER

August 2010

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