Instead of an energy dialogue, EU and Russia have two energy monologues. Europe is afraid of serious conversations, but we need to talk and get our message across. There is still space to negotiate, but it is shrinking.
We often hear people ask: What is the purpose of forums like the recent Valdai Club conference in Berlin, “Europe and Eurasia: Moving toward a New Energy Security Model?” After all, everyone’s position is clear going in, and we often fail to achieve better understanding with the Europeans. Instead of an energy dialogue, we have two energy monologues. Even before the sanctions, Russia and Europe were talking past each other. Over the past five to 10 years, talking with the Europeans on energy issues hasn’t been easy, and it’s rare to hear rational arguments backed up by actual statistics from them.
If talking isn’t working, the logical next step is to try something different. But what? Refusing to supply gas to Europe? If we stop talking to the Europeans, we may soon start fighting them. It’s a road to nowhere.
This is why conferences like the recent one in Berlin, with high-level participants, are so important. Unfortunately, Europe is afraid of serious conversations, but we still need to talk and get our message across.
The current situation is fairly complex. Previously, the energy dialogue – or rather two energy monologues – unfolded in a situation where there were long-term contracts in place, business was going smoothly and everyone thought that Europe would continue to put pressure on Russia for decades without encountering much of a problem. But let’s look at the current situation in southern Europe. Russia claims that it cannot guarantee safe gas transit through Ukraine, and when the agreement ends on December 31, 2018, gas supplies via Ukraine will be terminated. These supplies make up 40 percent of our supplies to the EU. By that time, we will have built the Turkish Stream, but what will happen to the gas that reaches the border of Turkey and Greece?
Russia can’t afford to waste time talking for another three years. If the European Union doesn’t build a pipeline on its territory by January 1, 2019, it would be a disaster. Gazprom’s CEO Alexei Miller said in Berlin that Gazprom is ready to take a break, but what does taking a break mean? Cutting off supplies to southern and southeastern Europe? This is a region where the Russian share of gas supplies runs as high as 70, 80, 90 and even 100 percent. There will be no other options there by 2019. The only alternative that Europe has identified is 10 billion cubic meters of gas from the second phase of the Shah Deniz field. However, this gas will only become available in 2021-2022, and moreover it will only be in the early stages of availability. In the best case scenario, peak supplies in the amount of 10 billion cubic meters will become available only in 2025.
In other words, there will only be Russian gas at the Turkish-Greek border on January 1, 2019. There will be no gas from Iran or Iraq, or even Turkmenistan or Azerbaijan. The situation is, in fact, quite dramatic.
Russia is better positioned, because by that time, in addition to the eastern route known as The Power of Siberia, Moscow may sign a contract with China to build a new gas pipeline across the Altai Mountains along the western route. This is not blackmail. If we are constantly being told that Russian gas is not needed, we cannot continue to live in uncertainty. The Europeans are in the awkward position of saying Russia is no good and they will look for an alternative supplier, while still wanting to keep Russia as a backup.
That being said, we are still interested in the European market, and we must fight for it. But fighting doesn’t involve demeaning ourselves. There’s no point in starting a fistfight. That’s why we need forums, such as the Valdai Club conference in Berlin, even though the expert community finds it increasingly difficult to work together. While we may have two energy monologues instead of an energy dialogue today, that’s no reason to get discouraged and go straight to escalation. There is still space to negotiate, but it is shrinking.
Konstantin Simonov is Director General of the National Energy Security Fund.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.