Another year EU-Russia energy war

At the moment, the most obvious consequence of the Western sanctions is the breaking down of established rules in the global energy markets, in which EU is looking for non-Russian supplies. Natural resources are mostly located in non-democratic countries, often worse than Putin’s regime. Traditional partners, such as Saudi Arabia and the Gulf states, are still allies, but not automatically embedded in Western policies. Hence the evident jubilation of the Saudi heir to the throne, Mohamed bin Salman, who received, or was received by, smiling Westerners who, 2 years earlier had declared him an international pariah “for ever”, and who suddenly were celebrating a new era of energy cooperation. The same happened with Qatar leaders shaking hands with yesterday fierce critics of its human rights record, now competing against each other’s to sign for LNG deliveries. Algeria has also been among the much-visited country by Italy, France, Germany, EU despite the vulnerability of its regime – and the uncertain security of its exporting lines or even production sites.

Energy vs values

The paradox is that EU and members states have been obliged to accept long terms contracts after spending more than a decade denouncing Russian oil and gas long term contracts. Brussels decided to go to spot-markets and to favour short time contracts to introduce more concurrence, which pushed the prices up. Today, it is obliged to accept long term contracts with partners who are ready to invest only if they are certain about the demand. That was the case with Gazprom, it is now the rule with new partners. For instance, Qatar has imposed 15 years long contracts for delivering LNG, and the US is conditioning its gas deliveries to the construction of European ports and distribution nets.

More problematically, the list of odd bedfellows includes another ex-pariah, Venezuela’s president Maduro. Following the decision of president Biden to partially lift sanctions and move to energy cooperation, the EU announced that it was also “ready for dialogue” in the new framework of the oil crisis. Even Iran was at a time seen as another potential supplier, up to the moment Tehran delivered drones to Russian forces against Ukraine and the authorities repressed brutally the anti-mullah regime revolt. That was really too much.

Ex-Soviet producers

Logically, the EU quest for new sources of energy has extended to the former Soviet republics. Since 1992, energy cooperation with the West has been considered as a way to “support national independence” by reducing Russian influence. But that was not that easy, and today the war in Ukraine has opened the eyes of almost enclaved Central Asia countries on the risk to side with one bloc against the other. The West’s courtship has helped them to take the measure of their negotiating capacities with Russia, China, and between themselves in energy and trade fields.

Kazakhstan offers an illuminating example of the new regional complexity. The country has developed a special relationship with Berlin since the late 90thies thanks to a diaspora of Kazakhstani Germans who had moved to “fatherland”. Germany, as EU, had concluded that they were in good position to accede to Kazakhstan oil to replace Russian deliveries. But, on 30 December, Energy Minister Bolat Akchulakov confirmed earlier reports that Kazakhstan was ready to increase crude exports through the Druzhba pipeline in order to supply oil to Germany oil refineries “due to the restrictions”, a euphemism for sanctions against Russia. But he also made clear that Kazakhstan had discussed this issue with Russia, which faces an EU ban on its seaborne crude exports.  A day earlier, the Russian Deputy Prime Minister Alexander Novak, had confirmed that Russia was ready to approve Kazakhstan’s request for the transit of its Germany-bound oil via the Druzhba pipeline whose Russian section is operated by Transneft. Kazakhstan is also holding talks with Russia to supply gas to Kazakhstan’s northern and eastern regions to replace coal-fired stations.

Contingency plans

In this context, energy experts have questioned the credibility of many contracts signed in a hurry by EU and by European capitals. For instance, Kazakhstan has not enough of its own oil to meet German demands, Azerbaijani not enough gas to respect its contracts with EU. Despite that, Baku hosted a flow of European leaders including, in July and November, EU Commission president Ursula von der Leyen. Azerbaijan will slightly increase its gas deliveries to EU in 2023, but they represent less than 10% of EU needs. In the autumn, Azerbaijan has signed contracts to import Russian gas, which is already supplementing Baku’s deliveries. In return for receiving a “presidential guard” honor, von der Leyen  forgot much about “values”. There were scant mentions of the country’s human rights records; the ethnic cleansing of Armenians in Nagorno Karabakh has been forgotten, despite the latest blockade by “environmentalists who have cut the Lachin corridor, the only outside link for the inhabitants.

If EU has its problems to find new energy deliveries, Russia has its own to secure new markets. But at least, he has the resources and Russians travelling abroad are impressed by the cold rooms and the constant discussions about energy prices. In fact, their respective efforts have been hampered by the lack of infrastructures to export or to import energy. Reasons why a limited, and discreet, cooperation can not be excluded, mostly through indirect channels, during the energy gap of the next 3-4 years. EU needs not only gas and oil, but also diesel and aviation fuel produced in Russian refineries. Putin adopted a tit for tat policy, but he might also be happy to find a motive to keep trade with countries next door, through existing pipelines. Among his contradictory declarations, he said he was “not opposed” to the use of Nord Stream 1 for gas deliveries to Germany. On 30 December, he signed a decree allowing foreign buyers to settle their gas deliveries’ debts in the currency mentioned in their contracts, not imposing the ruble anymore.

One still waits a solid explanation about the reasons why the pipeline across Ukraine has not been disconnected – nor blow up by Ukrainians or Russians.

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