Russia’s unintended Ukrainian fallout
April 17, 2014
Whatever the outcome, the Crimea and Ukraine crises have made western Europe painfully aware that they had become so dependent on Russian gas and oil, they were unable to react forcefully. Russia had become the master of their foreign policy souls. A western European backlash, to seek more energy independence, would mean unintended long-term consequences for Russia.
Post-communism, many of our eastern European friends enjoyed warming relation, freedom to immigrate or travel and a much-improved standard of living. However, we also have been close-hand observers of Europe's recent and ever-increasing dependence on Russian gas and oil. One-third of western Europe's energy comes from Russia and other countries once in the Soviet sphere of influence.
Much of our family is related by marriage and blood to Austrians and Croatians and over the past 40 years we have made nearly annual trips to that part of the world. We have observed Croatia's increasing dependence on Russian energy. In Croatia, my sister-in-law's apartment is heated by its gas (around 30 percent of Croatia's natural gas is Russian). On their Dalmatian Coast, Russia's Gazprom has recently bought service stations to fuel the tourist trade.
On a trip through Romania three years ago, we crossed the Ploiesti oilfields, site of World War II air battles. Rusting oil refineries and storage tanks dotted the fields and a large pipeline carrying Russian oil bordered it. "But why?" I asked our guide, remembering Romania was once a famous oil producer. "It is cheaper to get it from Russia", he replied.
That viewpoint is changing, however. Romania is 25 to 35 percent dependent on Gazprom gas, but it has 15 years worth of gas reserves itself, which it will soon begin tapping. Their energy prices will rise, but they have already planned to take advantage of lower consumption to gain more energy independence.
SETimes (setimes.com) shed more light on the dilemma facing Europe using oil and gas policy to bridle Russian ambitions. Boycotting Russian oil and gas could backfire on them. Gazprom is the sole provider of their energy for Poland, Hungary, Slovakia, Bulgaria, Finland and the Baltic states. Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Moldova, Montenegro and Serbia also strongly depend on Russian gas.
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Petro policy can backfire on the Russians. Fifty-three percent of Russia's annual gas export pipelines cross the Ukraine. Control of the Ukraine is critical to them. But any loss of Western markets could seriously damage the Russian economy fed heavily by petro income and diminish Putin's domestic support.
In June, the E.U. will present a plan for reduction of energy dependence on Russia, including developing more renewables and their own shale gas, increase imports of liquified natural gas from Qatar and the U.S., improving pipeline infrastructure within the E.U. and reviving eastern European gasfields. While the plans will take time to realize, just the threat of implementation being formalized now should give Russia some serious second thoughts as they ponder the long-term unintended consequences of their recent policies.
For more, visit http://www.mufticforum.com