As expected, Russia and the EU have admitted that they need each other for the sake of their own economic development and their internal stability. But for more than 20 years, they have had different understanding of basic concepts concerning energy. For instance, “reciprocity” has been understood by EU as the freedom to invest in Russian production and energy infrastructures; for Russia, it was meaning the possibility to invest in European storage and transport infrastructures, down to the end of the chain where benefits are made. They also diverged in their conception of energy security which, at the origin, simply referred to the security of prices and volumes guaranteed by long term contracts between producers and buyers.
Today, much has been said about the origins of the present energy crisis, whose beneficiaries are not EU nor Gazprom, but traders and junk bonds investors. Contrary to reports that influenced the EU institutions, the market is not overflooded with gas, but is considered an essential tool for turning the world greener. Gazprom has no reason to feel pressured to sell its gas at any costs to European consumers, and it does not feel under any obligation to increase its production. Certainly no more than members of OPEP do, unless they want to prevent prices to feed inflation and instability of the markets. For some years already, Gazprom had accepted to sell limited quantities on short contracts.
In fact, one can detect 5 main EU failures,
- First it lost sight of the evolution of Gazprom. Its links with the Kremlin are real, and strong, but not as simplistic as stated in the West. Gazprom’s lobbying forces in the Kremlin are known to have resisted, with some successes, pressures to use their trade for purely political motives. It has a potential for bargaining, as do have other Russian key industrial or financial sectors, because of its important contribution to the federal budget. But it acts as an international company looking for profits and markets more than as a Soviet state enterprise.
- It also lost sight of the global dimension of the energy crisis, which is larger than a battle of egos between Moscow and Brussels. EU is in competition for energy resources with the rest of the world, and huge national and European funds are, and will be, needed for alleviating social and economic hardship. In this competition, EU can benefit of its geographical proximity with a company that never renegaded any contractual obligations, and is not a monopoly with 35% of the market. Moreover, Russian energy sector covers all the type of energy that can be needed in the transition period to a greener Europe, from nuclear to hydropower. And, despite of brain drains, it has kept skilled teams – partially helped by sanctions, which obliged Russia to developed its own technology instead of buying it.
- EU nurtured the unrealistic vision of a world where it can oblige partners, starting with Russia, to follow its own internal reforms, even after contracts have been signed. Russia adjusted to the liberalisation of the EU market, including the 2008 “unbundling” rules. But it rejects any kind of extraterritoriality rules in energy matters, notably concerning Nord Stream 2.
- EU underestimated the basic difference between EU and Russia decision making process. Putin’s regime is able to adopt a wait and see position, then quickly move on, because it is centralised and illiberal, but also because the population shares a century old notion of national interests where EU is still divided according to national lines.
The Russian proposals
The first official declarations, that the medias inflated, described EU as the victim of its own mistakes. But clearly, Moscow wants to adopt a carrot and stick approach. It was evidenced in two key declarations. One came from Putin’s address at the forum for Russian energy actors and then his speech at the meeting of the EU-Russia business association. It hints of readiness to slightly increase gas deliveries and even make some concessions, but Russian decisions “must be prudent, taking into account our national interests and, most importantly, the needs of our citizens, and, of course, they must be sustainable in the long run”. The other signal came from the Russian ambassador to EU, Vladimir Chizhov, who explained that the gas question will have to be settled in the larger framework of the relations between Moscow and Brussels. Starting, for instance, which “a change of phraseology”, such as calling Russia an “adversary.
It did not help that, on the same days, the European Council published the names of 8 additional Russian individuals sanctioned for their actions to undermine Ukraine independence (referring to occupation of Crimea); that the Ukrainian president official website published conclusions of the 23rd EU-Ukraine Summit, that includes a point stating that “ the full implementation of the Minsk Agreement remains the key condition for any substantial change in the EU’s stance in its relations with Russia”. Nor that NATO decided to further reduce the size of the Russian delegation at Brussels headquarters, whose installation has been the result of long efforts to “engage” Russia after the gap created by the Kosovo crisis and Western bombing of Serbia.