The EU should not fear Russia’s “gas weapon”

By Rick Van Assel

One of the key priorities of the European Commission’s Energy Union is to improve energy security. This entails that EU countries can enjoy energy supplies without interruptions, and at an affordable price. In the past years, energy has become more and more a geopolitical weapon, as the current Ukraine-Russia crisis shows. This, of course, is not a good evolution with regard to the goal of achieving more energy security. However, European citizens should not fear that Russia will turn off the gas switch to Europe entirely when the Kremlin wants to achieve other policy goals, for example today in Syria. This view is too narrow minded, because there are several limitations to the so called energy weapon of the Russian Federation.

Being dependent on energy imports is not abnormal. Countries cannot do magic and create oil and gas fields out of the blue. It is not even necessarily a bad thing, but therefore two conditions need to be fulfilled: there should be diversification of both suppliers and supplies. For the European Union (EU), this becomes a problem when we look at some figures regarding gas imports. Eurostat figures reveal that in 2013 more than two thirds of natural gas imports (69%) came from only two suppliers: Norway and Russia. Especially Russia has a very large share in the EU’s gas imports. In 2013 our eastern neighbours accounted for 39% of the entire gas imports to the EU. You do not have to be an award winning scientist to see that such a situation is not really healthy.

Thus, should EU member states’ governments and citizens be scared? Might Russia make abuse of the European Union’s dependence on its gas? Could Russia threaten the EU by claiming that it will turn off the gas switch whenever the EU is standing in the way of a Russian foreign policy goal? In theory it could, but it is highly unlikely.

Firstly, the dependence is not just a disadvantage for the European Union alone. Russia gets an income out of gas sales. A high income. 68% of Russia’s export revenues in 2013 were generated through selling oil and gas. Russia’s federal budget is highly dependent (about 50%) on the export of oil and gas. And the most important client of Gazprom, Russia’s state owned energy company, is the EU. From an economic point of view, it would therefore not be wise to cut off gas supplies.

This brings us to the second argument, which has been pointed out before by Thijs Van De Graaf, a Belgian professor in global energy politics. One might say that Russia should then sell its gas to other, non-EU countries. That way it could make up for the loss of income it gets from EU states. However, this is not possible. Unlike oil, which is a liquid and gets round the world through oil tankers, gas is mainly transported through pipelines, and not every country has a direct link with the Kremlin. Russia cannot send a lot of extra gas to countries with which it already has a pipeline link, because they might not have enough storage infrastructure. Another option might be sending the gas through Liquefied Natural Gas (LNG) tankers, but this is a very expensive option. Building new pipelines is a long and expensive process, so Russia would remain tied to the countries with which it has direct links through pipelines for its gas relations.

In 1973, the world got hit by a massive oil shock. After the Yom Kippur war, where the United States supported Israel in a war against Egypt and Syria, the Arab members of the Organization of the Petroleum Exporting Countries (OPEC) started an oil embargo against several countries, among which the United States and the Netherlands. The consequences were severe. Oil prices quadrupled and production declined. If Russia would impose a gas embargo on the EU, the consequences would not be the same as with the 1973 oil embargo, and not because the scale would be different. 

From 1973 up until today, oil was and still is the driving force for the entire transportation sector. There was no alternative, which explains why prices soared. For natural gas, things are different, as Van De Graaf pointed out. The energy services that are running on gas, are also being driven by other forms of energy, such as coal or nuclear energy. Russia could threaten the EU that it would cut gas supplies, this would (in the short term) not hurt our way of life because there are substitutes for natural gas, which was not the case in 1973 with the oil embargo.

A last argument relates to Russia’s international reputation. If Russia were to cut off gas supplies for its own political benefit, this would, without a doubt, damage its reputation. Gas demanding countries might be thinking twice to sign an agreement with Gazprom if they see that the guarantee of supply is not a full 100%. Therefore it would not be wise of Russia to stop gas supplies, let alone threaten with it. Because this might jeopardize future investments, which in turn could have a negative impact on the Russian federal budget. To put it simple: doctor Putin might not want to threaten his patient’s life, because he might not be getting any more patients afterwards.

All this does not mean that Russia does not have an appetite of influencing other states’ internal policies through its role as gas supplier. In 2013, Russian president Vladimir Putin promised a discount on the gas price for Ukraine if Viktor Yanukovych, Ukraine’s former president, would drop an association agreement with the European Union. We all know what has happened since then. The real Russian gas power thus lies in setting the prices and allowing discounts. That way it can still have an influence in third countries and shape its own interests. This analysis just shows that the gas ties between the EU and Russia are too big to start messing with them. At this time, nor Russia, nor the EU would gain something by cutting off gas ties. And if this game were to be played after all, there would only be losers.