Who Is Creating the Myth of Russian Energy Expansion?
The European Union currently accounts for 52% of Russian exports, and energy commodities make up the overwhelming majority of this volume. For instance, Russia provides roughly 20% of all primary energy resources consumed by Germany, and more than 35% of the natural gas and over 30% of the oil consumed in Germany comes from Russia.
It is therefore clear why the energy industry has become one of the top priorities of the EU’s internal policy and why its relations with Moscow have been pushed to the top of the agenda. At present, Russia is building relations with the EU in the framework of a mutually beneficial energy dialogue which was launched at a summit in October 2001. In practical terms, Russia and the EU have managed to reach an agreement on the cancellation of recommended import limits previously established by the EU for Russia (no more than 30% of energy imports from one external source), to link the subject of the dialogue with a roadmap for achieving their objectives, and to provide an overall assessment of several cooperation projects. Together they set up the Energy Technologies Center, where a promising effort is under way to utilize associated gas, refine heavy grades of crude, build mini-hydropower plants, and use clean coal-burning technology. The Center is to play a key role in the realization of a new Russia-EU joint energy conservation initiative. The first projects of this kind have been implemented in Kaliningrad, Arkhangelsk, and Astrakhan regions.
Unfortunately, however, nettlesome hindrances in the form of artificial barriers have periodically blocked the path to mutually beneficial energy cooperation between Russia and the EU.
On February 5, 2008, US National Security Agency Director John Michael McConnell announced in his annual report to Congress that Russian energy expansion was occurring at a threatening pace. McConnell argued that Russia, whose financial capabilities were growing as a result of windfall oil revenue, aspired to gain control over the energy resources and the transportation network from Europe to Eastern Asia. He called Moscow’s potential economic “threat” one of the most serious challenges for the US and said it was on a par with terrorism, the spread of nuclear weapons, and the vulnerability of computer networks.
It is little wonder that not long after this statement was made one of the most respected US newspapers, The Wall Street Journal, published a headline with a free interpretation of his words titled “In Gazprom’s Grip.”
In the European press, unfortunately, the tone of publications under the general slogan “The Russians Are Coming!” was even more alarming. The European community essentially ignored the Russian government’s statements that the use of money from the country’s Stabilization Fund and Future Generations Fund was a general strategy for diversifying investments and not an attempt to buy up any strategic assets in Europe. The Western press interpreted Russia’s refusal to ratify the Energy Charter as some kind of secret plan to achieve energy dominance throughout the continent. It could very well be said that EU countries had never been so concerned before about the alleged weakening of their energy security because of a growing dependence on crude hydrocarbon supplies from Russia. Even the most common market occurrences, such as Gazprom’s hike in natural gas prices for Ukrainian consumers this year, was presented in the EU press as an instrument of harsh political pressure on Kyiv. And all of this was happening despite the fact that Russia had been consistently reproached in the past for selling natural gas to CIS countries at prices that were too low.
Unfortunately, under the influence of a massive media campaign, many people in the EU began to perceive Gazprom and all other Russian companies as foreign policy tools of Moscow and the efforts of these companies to expand business on EU markets as a kind of aggressive foreign economic policy. At the end of 2007, the Hamburg-based Europaeische Verlagsanstalt publishing house released a book by German journalist Gemma Pörzgen titled Gasprom. Die Macht aus der Pipeline [Gazprom: Pipeline Power]. This was the first work of this kind in Germany that provoked a mainstream debate about the possibility of foreign state-owned companies having wide access to the economies of EU countries, and it captivated European politicians and businessmen. For Russian readers, this book revealed no secrets or sensational details at all about Gazprom or the “motives” of the Russian energy policy. At the same time, it visibly and vividly illustrated the main stereotypes and perceptions, ingrained in the mass public consciousness of various groups and levels of European society, of how Russian companies purportedly conduct their foreign operations. Unfortunately, the psychology of double standards was strongly reinforced here—the flow of foreign capital into the Russian economy is perceived as a positive development and described as Russia’s integration into the global community, while the investments of Russian companies in various industrial branches of other countries are sometimes viewed negatively and labeled as threatening “Russian expansion.”
At present, with their energy security under threat, European policymakers have begun to understand that the position of energy suppliers, particularly Russia, has strengthened to a certain degree, which, in their view, has led to a sharp decline in competition on energy markets, heightened political vulnerability in EU countries and ultimately, led to an undermining of the rule of law. Appeals have been increasingly made in the foreign press for protection from Russian “energy aggression” by any means necessary, which led to a kind of psychology taking hold in the West of rejecting Russian business and prompting growth of protectionist sentiment throughout Europe. It is not surprising that the European Commission last year proposed dividing companies operating on the EU market into production and transportation/distribution divisions—a move that, if approved, would block Gazprom from entering the EU energy distribution market.
It is obvious that the energy policy of leading countries is invariably based on a sound and sensible strategy that includes both an economic ideology distinguished by long-term stability and specific targets for the development of branches of the national fuel and energy industry.
The events of the last decade have shown that the global crude market is susceptible to serious market fluctuations, from $9 per barrel in 1998 to $111 per barrel in March 2008. Prominent experts have voiced the unanimous opinion that energy prices will continue to grow steadily while remaining highly volatile. This will clearly have an inevitable negative impact on the economic development of most countries—both importers and exporters of energy resources. It is therefore extremely important for Russia to maintain stable and long-term relations with its foreign partners, given its current economic structure and considerable dependence on crude commodity markets.