22 February 2008

GPPi Fellow publishes article entitled “Russia’s energy weapon is a fiction”

Following last week’s publication Andreas Goldthau, a GPPi Fellow, published another article this week in one of Europe’s leading political journals, “Europe’s World.” The piece, entitled “Russia’s energy weapon is a fiction,” looks at why energy could be considered a futile foreign policy weapon for the Kremlin.

Recent accounts of the Russian leadership supporting the idea of a cartel of gas producing states, along with Moscow’s aspiration to squeeze out competition of energy suppliers to the European market has raised alarms that Russia is increasingly using its energy supplies as a foreign policy instrument. No doubt, rising energy prices have accelerated Russia’s recovery in the post-Soviet period allowing Moscow to regain some of its previously ailing political and economic clout. The re-energized Kremlin, however, appears increasingly menacing and unreliable in the eyes of its neighbors and its European counterparts. Yet, Goldthau suggests otherwise. In this article he explains why Russia cannot afford to use energy as a foreign policy instrument.

First, Goldthau points out that crude oil is traded on the global market and could be bought by consumers in many ways. If an oil producing country decides to cut off supplies to the consumer, the shortfall could readily be made up for by purchases on the spot market. So, this leaves gas. Housing the world’s largest gas reserves and being the most important supplier country to western and central Europe for gas imports, Russia should have considerable leverage using gas as an energy weapon. Goldthau opines otherwise for two reasons. First, gas pipes are extremely expensive and time consuming to construct. It is a two-party-play that requires long-term contracts to be negotiated and agreed upon by each side which also provides planning security and reliable return on investments. Second, gas is transported almost exclusively via pipelines which, once built, makes it all too expensive for either party to abandon the deal. Europe and Russia are interlocked with such pipelines, neither side could afford to divorce from the money already invested in them and nor do they have much choice. Russia and China simply do not share the required infrastructure and Europe cannot go anywhere else for gas for the same reasons. As such, the two are dependent on each another.

Finally, Goldthau draws on some conclusions and offers policy implications for European and Russian relations based on the Energy Charter Treaty (ECT).

To read the full article, please click here.

For more information please contact Andreas Goldthau.

 

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