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Thursday, 8th January 2009

How to put the freeze on Russia's energetic aggression 

Daniel Korski 6:54pm

Rahm Emanual, Obama's chief of staff, says one should never let a serious crisis go to waste. So now that the Russians are once again blocking the supply of gas to Ukraine  – and, by extension, to Europe –Europe should act to protect itself.

Russia remains the largest exporter of gas to the EU, with total annual exports of 130 bcm today. But since the early 1980s import growth from other countries has outpaced that from Russia. 80 percent of the growth in European gas imports now comes from Norway, Algeria, Nigeria and the Middle East. The gas markets of the EU’s eastern members are, however, highly dependent on Russia. Six of these  states import more than 80 percent of their gas supply from Russia.

As Pierre Noel, a Cambridge energy expert, argues: “these national differences would not matter too much if there were a single European gas market. But the reality is that Europe’s gas market is segmented along national lines.” When supply disruptions occur – as in January 2006 when the Russians turned off the Ukraine’s tap– there is relatively little reallocation of supply between national markets.

The Tories’ Liam Fox provided the best answer for how to deal with this in July 2007: European leaders have to integrate the European gas market to create the maximum possible degree of solidarity between European gas consumers. This would improve collective energy security by enabling gas to be moved across the entire market in times of supply or demand shocks. By creating a pan-European gas market, European leaders would also render EU members’ bilateral relations with Russia – and the cosy relationships some European companies have with Gazprom -- irrelevant to the conditions of access to Russian gas for consumers. Russia must also be prevented from furthering Europe’s market segmentation by, for example, having Gazprom acquire European transmission or storage assets.

Rather than wait for Russia to turn the screw again, Europe should actually get on and act on this before next winter. 

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Jim

January 8th, 2009 7:38pm Report this comment

There are three key security responsibilities of governments: Energy Security, Food Security, and defence against attack, however that may manifest itself.

In allowing itself to become so dependent on Russia for energy the EU has abrogated one of these three essential duties.

Britain's government under Blair and now Gordon Brown has similarly neglected this most critical of responsibilities, leaving us totally exposed to any external event which may, and probably will, disrupt our national power supply.

Britain's position with regard to security of food supplies has been similarly neglected. Our ability to feed ourselves has been steadily eroded, while the number of mouths requiring feeding has been, and continues to be, deliberately increased; we can already only produce about half the food our population requires.

And Brown's studied neglect and underfunding of the military and security services since 1997 has seriously damaged our ability to defend our country and our interests.

Any one of these weaknesses could bring us to our knees in a matter of days, and at present energy appears to be the most immediate threat.

Not good. A replacement British government, when it comes, must urgently address all three security issues.

In the meantime Brown's government busy's itself prosecuting the British people for having dustbin lids which are open 4 inches on collection day......

Says it all really, doesn't it?

peter

January 8th, 2009 7:47pm Report this comment

how to put the freeze on oligarchic ambitions to get back control of russian energy wealth.

Henry Rogers

January 8th, 2009 8:11pm Report this comment

What Fox actually wrote was: "But the EU will not be a sufficiently strong vehicle. Nato must play a key role in ensuring energy security for the West. The EU lacks the military capability and the political will to undertake any ambitious energy security agenda. Politically the EU’s hand is weak against Russia, militarily it is even weaker. Jose Socrates, Portugal’s prime minister and current EU president, recently made it very clear that he would avoid confronting Russia."

I'm not sure that actually fits very well with the arguments of the column above! But for Heaven's sake we want a shooting war even less than a trade war about gas supplies. Maybe countries currently left without supplies should start negotiating with other suppliers off their own bat. Leaving business deals to supra-national organizations is no guarrantee that things will be done any better.

I'd have thought that if it's customers had the initiative to look after their interests a bit better, Russia would have found it commercially worth while to refrain from playing silly b......s with supplies.

Rhoda Klapp

January 9th, 2009 10:14am Report this comment

There is no problem that Korski thinks can't be solved by the EU sticking its massive oar in and coming up with a regulatory regime, and taking control of one more thing. Maybe it ought to demonstrate doing one thing, anything, successfully, from its vast ranges of competencies.

(Translation: Everything the EU touches turns to sh...)

Sreve

January 9th, 2009 10:36am Report this comment

This seemingly annual round of Russian Roulette strikes me as the best argument there is for getting oil & gas out of the equation for energy production. It may well be just about the cheapest way of electricity production, but at some point in the not too distant future we will be beholden to some pretty unsavoury regimes, some of whom will have no compunction about using energy supply as a weapon.

Ian C

January 9th, 2009 11:01am Report this comment

The response from the EU should be a threat that Russian companies will be denied access to European capital markets and any Russian company with the state as a shareholder denied ownership of assets in the EU and forced to sell should the state become a shareholder later.

Daniel Korski

January 9th, 2009 12:03pm Report this comment

Rhonda,

I am not sure how you can argue against liberalising the European gas market -- a Conservative policy if I ever saw one -- or for having 27 small regulators deal with Gazprom individually, thus letting the Russians run rings around us. This is not about more European power. It is about building the kind of Europe that makes sense. Not federalist, but open, focused on improving trade etc. etc.

Henry,

I think, like Fox, that NATO should play a role too. Not to start a shooting war, but to help assuage many of the new members who are genuinely fearful of Russia like Estonia. This could take the form of joint exercises, establishing some kind of civilian NATO facility in Tallinn, giving JFC Brunsuum a watching-brief on military movements in the Baltic Sea, as happened during the Cold War. I don't think we should be starting a war -- even a cold one -- with Moscow. But we should realise when we are being challenged and take steps to protect ourselves.

JONNY

January 9th, 2009 2:11pm Report this comment

'I don't think we should be starting a war -- even a cold one -- with Moscow.'

Because if we did Daniel Korski, we'd get licked.

Rhoda Klapp

January 9th, 2009 3:04pm Report this comment

The EU extending control over all gas resources is not liberalizing the market. The proposals (correct me if I'm wrong) include the possibilty of directing UK north sea gas supplies for the benefit of other EU nations. There is a problem now, but this is not the solution.

David Lindsay

January 9th, 2009 3:07pm Report this comment

Russia is simply doing what an emerging power does. We were just the same in our day.

And we need not be concerned in the least. Clean coal (and our main island pretty much stands on coal) and nuclear power offer high-wage, high-skilled, high-status jobs for the working class, and independence from Arab oil and Russian gas.

Among many other good things, this would contribute significantly to reversing Thatcher's destruction of the economic base of paternal authority, initially in working-class families and communities, but then very rapidly throughout society as a whole.

How could any conservative object to that? Unless, of course, the nuclear power (or the clean coal) were owned by a foreign state...

So we need public ownership, which is British ownership, since nothing else can deliver what is necessary on the scale that is necessary.

Rhoda Klapp

January 9th, 2009 3:08pm Report this comment

Daniel, is the following quote true?

The core of this will be a "five-point EU Energy Security and Solidarity Action Plan" (ESSAP?), which will propose further EU control over infrastructure needs and the diversification of energy supplies; external energy relations; oil and gas stocks and crisis response mechanisms; energy efficiency; and "Making the best use of the EU's indigenous energy resources." - which will, of course, come under EU direction.

Bye, bye, what is left of Britain's North Sea oil and gas production.

All of this amounts to one huge power grab, and this time the "colleagues" may be just cowed enough by Russia's action. But, jusr in case they are not, Barroso is looking to the EU parliament to "convince the Member States of a truly coordinated approach and the need to create appropriate mechanisms to secure short, medium and long term energy supplies."

Rhoda Klapp

January 11th, 2009 9:56pm Report this comment

I'll take that as a yes, then.

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