External problems for Europe’s energy policy – A brief geopolitical analysis

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Article by: Elmar Hellendoorn, Postgraduate student at College of Europe, March 2009 Tags: External problems Europe Energy Policy brief geopolitical analysis

Elmar Hellendoorn

Bio of Elmar Hellendoorn

Elmar Hellendoorn is Postgraduate student at College of Europe. Before, he studied History (BA) and International Relations (MA) at the University of Utrecht.

Energy security is still at the forefront of international and European politics. In its attempts to create an ‘Energy Policy for Europe’ the European Commission listed three objectives: promoting environmental sustainability, limiting external vulnerability and increasing economic competiveness.

In November 2008 the Commission underlined its ‘desire to guarantee secure and sustainable energy supplies’. In the contemporary highly interdependent world, external issues may complicate the obtaining of internal objectives. Concerning its ‘Energy Policy’, which external problems does the EU face in its attempts to develop this? This paper will use a classical geopolitical approach, analysing the issues at stake through a geographical lens.

Russia

In the period 2001 to 2006 the imports of gas and oil combined increased by 17%, but natural gas imports rose with 34.5%. In 2006 the EU-27 imported 54% of its energy supply, which was dominated by oil and gas. Russia was the main supplier, accounting for 33% of oil imports and 40% of gas imports. Eastern Europe even has a relatively higher dependence on Russian gas imports. This clearly makes the EU vulnerable to Russian decisions on its supply of hydrocarbons to Europe.

The strong Russian state control over production and supply to Europe is problematic. It became very clear that Moscow intends to strengthen its grip on its national energy resources during the struggle between the Russian state and the Royal/Shell-Mitsui Consortium in the Sakhalin-II dispute in 2006. The control over the Sakhalin-II-project was finally put in the hands of Gazprom, Russia’s national oil corporation (NOC).

NOCs are, unlike private firms, often driven by ‘governmentally mandated objectives’ (instead of the pursuit of profit) and they can be used by their governments as an instrument of foreign policy. Consequently, NOCs are less concerned about the commercial viability of projects than (European) privately owned international oil corporations (IOCs). This is not to say that Gazprom does not look for profits, but it can start projects that lead more to political than economic gains. The fact that Europe is confronted by these NOCs forms thus another problem.

Apart from control over its domestic energy resources, Russia also pursues stronger control over (future) energy transit networks, including those delivering energy from Central Asia. Control over these networks is essential in regulating the supply of energy. The threat of the energy weapon being used against the EU became apparent when Russia’s national oil corporation, Gazprom, briefly cut off gas supplies to Ukraine, Belarus and Georgia during 2006-’07. Nevertheless, Gazprom was able to enter into separate contracts with individual member states’ energy corporations in the same period, thereby frustrating a combined Euro-pean approach and thus weakening internal European efforts to establish a common energy policy.

The development of the Nabucco pipeline, bringing gas to the EU from Central Asia and circumventing Russian territory and financial control, became less commercially viable after Gazprom initiated a parallel project in cooperation with some member states. This di-vide-and-rule strategy by Russia is a major problem for the EU energy policy in ensuring a constant supply.

Africa

Turning to the South, here the EU is confronted by a less ‘coherent’ provider, Africa. In 2006, around 17% of the EU’s oil imports came from Africa. This remained more or less stable since 2001, both relatively and absolutely. According to British Petrol, Africa holds 9.5% of the world’s proved reserves of oil. Furthermore, in the supply of natural gas, Africa became of greater importance. The gas imports from Africa’s main gas producers rose with 51% between 2001 and 2006, constituting 21.5% of the overall EU’s natural gas imports in 2006. The African natural gas production is expected to triple by 2030.

Oil and gas exploration in Africa has historically been dominated by European IOCs. But because of rising demand worldwide, the USA and China have also set their eyes on Af-rica’s energy resources. In 2002, the US administration called ‘African oil […] of national strategic interest’. Consequently, it considers military intervention in Africa if instability (which is not unlikely to occur there) threatens the production of oil or gas. The first steps for a long term US military presence in the region have already been taken, by the establish-ment of the AFRICOM in September 2008.

On the other hand, European states are with-drawing their forces from Africa. Possible ESDP (European Security and Defence Policy) missions to Africa are short-term and place an emphasis on ‘African ownership’, out of fear of colonialist connotations. At the same time, China is successfully pursuing an aggressive strategy to gain control over African resources. This strategy does not pay attention to con-cepts such as ‘good governance’ or ‘human rights’, and least of all ‘African ownership’ – it aims at Chinese ownership. This situation poses an external problem to the EU’s energy policy, to the extent that the USA and China are less scrupulous in applying military force or in dealing with local African elites.

However, this European external ‘problem’, is an advantage for the other powers. If Europe needs a more secure access to the African resources, it might start to reconsider its own approach, instead of waiting for the other powers to adopt more morally guided external energy policies.

Middle East

The Middle Eastern region seems to become less important as a source of oil for Europe, but this appears to be balanced by the strengthening of the region’s role as a provider of natural gas. Between 2001 and 2006 the absolute amount of oil imported from the Middle East de-creased with 17.5%, constituting 17.5% of the overall oil imports of the EU in 2006. Gas im-ports from the region, increasing eightfold in this period, remain however relatively marginal to the EU, with only 1.5% of Europe’s total gas imports. This margin is expected to increase rapidly, thereby reassuring the strategic importance of the Persian Gulf for Europe’s energy policy.

Dependence on oil and gas supplies from the Middle East creates several problems for Europe’s energy policy. First, the continuity of production in this highly unstable region is unsure. Against the background of the Israeli-Palestinian conflict, the future developments concerning Iran’s nuclear weapons programme and the prospects in Iraq, the Middle East is clearly a very volatile region. The production of oil and gas can be threatened by interstate conflict or terrorism. The transportation of oil and gas destined for the European energy market faces more risks than the production. Tankers on their way to Europe have to pass three Middle Eastern naval chokepoints, the Strait of Hormuz, to get out of the Persian Gulf, then the Bab El-Mandab, linking the Gulf of Aden with the Red Sea, and, lastly, the Suez Canal between then Red Sea and the Mediterranean.

These chokepoints form the weak links in the network of maritime energy transporta-tion. During and after the Suez Crisis in 1956 and the Six Day War in 1967 the Suez Canal was blocked. The Gulf of Aden is currently plagued by Somali pirates, whom also hijack oil tankers. The alternative to the Suez Canal or Bab El-Mandab is to travel around the Cape, which increases the transports costs and time considerably.

During the Iran-Iraq War of the 1980s, the Strait of Hormuz was mined and in the event of a future escalation in the confron-tation with Iran, such a blockade might occur again. In case of such a denial of access to the Persian Gulf, still 20% of the world’s oil supply would be disrupted, even if all trans-Arabian pipelines would be put to maximum use. Since these narrow sea lanes are congested by heavily laden tankers, they are high risk zones, where terrorist attacks or shipping accidents might occur, resulting in environmental disasters through oil spills and consequently blocking further traffic.

These strategic locations should be firmly controlled by allied, or at least trustworthy, governments. This is not the case and the EU does not seem to be in the position to change this situation. Thus, interstate conflict, piracy, terrorism and shipping accidents will keep posing a threat specific to energy transports from the Middle East. Because of the expected growth of gas imports from Qatar, this is also an external problem for Europe’s energy policy.

Europe

A way to become less dependent on external developments is the push for higher energy efficiency at home. This, however, leads to the question of maintaining international industrial competitiveness. Phrases about stimulating the EU’s industrial competitiveness through increased energy efficiency may sound very nice, but they do implicate energy-taxes and costly technologies on the short term.

In October 2008, Business Europe, the European employer’s organization, voiced its concern that Europe’s measures to promote sustainable industrial growth would not be followed by parallel measures in non-European economies. The introduction of CO2-caps and the imposition to introduce of environmental technologies brings high costs and diverts economic resources for investments in other areas. In some sectors, which are exposed to international competition and/or are energy-intensive, this may lead to a decrease in competitiveness. Consequently, this may result in an outflow of investments and lower employment levels. Therefore, a truly global agreement on emission levels is required to promote an international level playing field and protect the European jobs and competitiveness.

Conclusion

The EU faces a range of complex external problems in its attempts to develop an energy poli-cy. The future security of supply is of primary concern, since it is threatened by political ma-nipulations, instability in production and transportation zones, and the increasing assertiveness of third states to control energy resources. It appears that these other powers are more pragmatic and consequently more successful in obtaining more secure access and future influence over the world’s energy supply.

The EU should adapt to this situation. Its internal poli-cies to improve efficiency and sustainability could hurt the competitiveness of certain eco-nomic sectors vis-à-vis external competitors, which are less inclined to follow environmental friendly production techniques. The bottom line is that Europe is less in a position to change external players when it concerns the energy question, which is closely related to national security issues. If Europe cannot adapt itself to these external problems, it might fall victim to them in the future.

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