Connect with us

Hi, what are you looking for?


Europe’s energy security asymmetry

Soňa Muzikárová is a chief economist at Globsec.She is a former European Central Bank economist and a former diplomat to the OECD. 

There are few possible sanctions against Russia left in the European Union arsenal that are both potentially effective, as well as politically and economically “easy.” 

Just look at the current impasse over a proposed oil embargo. The discord over the sixth tranche of sanctions is especially pronounced across Europe’s east-west axis due to the east’s disproportionate dependence on Russian energy commodities, typically ranging between 70 to 100 percent for oil or gas for most countries depending on the commodity. And despite the exceptions of Poland and Bulgaria, without a thorough solution for the region, achieving energy security in Europe will not be possible. 

The asymmetry in Russian energy dependence is why the European Commission was initially willing to seek a compromise on the oil phase-out — considering extra time, entertaining exemptions and offering cash to upgrade the oil infrastructure of the most troubled countries.  The bloc’s toughening stance came after the uncovering of war crimes against civilians, as well as President Vladimir Putin’s decree demanding “unfriendly” countries pay for Russian gas in rubles, cutting off Poland and Bulgaria a month later for failing to comply.  

Poland was dependent on Russian gas for less than half of its supplies and Bulgaria was dependent for almost all of them at over 90 percent. But with both countries’ contracts with Gazprom due to expire, they were not caught off guard, escaping relatively unscathed. 

Poland had already amassed gas stockpiles with its tanks 76 percent full and has been preparing alternative sourcing, including from Norway via the Baltic pipeline and a completion of a new liquefied natural gas (LNG) terminal to bring in additional supplies from the United States and the Middle East.  

By comparison, Bulgaria’s gas tanks were only about 18 percent full, but the country had undertaken sufficient contingency planning, securing alternatives including through the Trans-Balkan pipeline in Romania, liquefied natural gas (LNG) supplies via the Revithoussa terminal in Greece, and a new inter-connector pipeline with Greece to bring in volumes from Azerbaijan starting at the end of next month. Halting gas supplies also currently has less of an impact as it’s spring.Just because Poland and Bulgaria dodged the bullet, however, does not mean that other landlocked Central and Eastern European countries can.  

Countries like Slovakia, the Czech Republic and Hungary face additional policy issues emanating from transit, infrastructure and trade facilitation that coastal countries do not. And the combination of high dependency and being landlocked weighs on their ability to seek alternatives, as well as tweak infrastructure quickly and efficiently. It also costs more in domestic political capital.  

Slovakia, for example, currently imports about 85 percent of its gas from Russia and is the fourth most Gazprom-dependent country in the EU, after the Czech Republic, Latvia and Hungary. Its storage is only about 20 percent full, covering its consumption for about four months without limiting industry or household use. In terms of alternatives, the country is exploring LNG supplies from the U.S., Qatar, Australia and Egypt and it has started delivering LNG supplies from the U.S. via  tankers on the Croatian island of Krk. Poland’s LNG terminal due to be completed in the summer should also help ease the strain. 

As for oil, Slovakia is 100 percent dependent on Russian supplies, followed by Finland, Lithuania and Poland. And though, in theory, the country could pump oil through the Adria pipeline from Saudi Arabia or other partners, in practice, the leading Slovak refinery’s facilities are not suited for the Saudi “light” crude alternative, and refitting existing facilities will require time. 

On top of that, the region’s annual rate of inflation has also soared well above the EU average at 7.8 percent in March, in some cases reaching double digits. The region is already struggling to absorb refugees; the weakening of local currencies is adding to inflationary pressure; and much of its manufacturing sector is energy intensive. It also remains unclear how well their central banks will be able to contain inflation. 

 The cost-of-living crisis will only get worse before it gets better, and domestic political crises are only a short step away. These considerations no doubt all enter the Kremlin’s calculus.  

But when it comes to Europe and its energy security, now more than ever, the chain remains only as strong as its weakest link.  

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

TOP news

Paul Sancya/AP On June 2, Delta will become the first US airline to pay its flight attendants for boarding time. Previously, flight attendants were...


Adeline van Houtte is the Economist Intelligence Unit’s lead analyst on Russia. It looks like Russia is at it again, after the unusual movement...


The EU should play an active role in the upcoming U.S.-Russia talks over security concerns around Ukraine, the bloc’s top diplomat told German media...

Health Care

Former President Donald Trump confirmed he had gotten a booster during a live show with Bill O’Reilly in Dallas on Sunday.

Сentral Tribune - Politic News