Security of Russian gas supplies to the EU - the question of infrastrucutral connections. OSW Point of View, February 2005

The energy security of countries importing energy resources depends largely on the shape and quality of operational transport connections. This is particularly important in the case of natural gas supplies. Natural gas is transported mostly by gas pipelines which permanently connect gas producers and consumers. Thus Europe as a consumer is "tied" to certain gas suppliers for anywhere between a dozen and several tens of years. As their own resources are becoming depleted, the EU Member States get increasingly dependent on import of natural gas. The present paper discusses the existing and projected gas transport routes from Russia to the EU. The first part deals with the importance of gas exports to the economy of the Russian Federation, and the second delves into the EU Member States' dependence on gas imports. Then this paper examines the differences in perceiving the energy security issue between the old and the new Member States, those differences stemming from the different degrees of their dependence on Russian supplies. In the third part, two new transport route projects for Russian gas supplies to the EU are compared and it is argued that from the point of view of the Community's interests, the Yamal gas pipeline is a better solution than the North European (Trans-Baltic) gas pipeline.

An economy with unrealistic indicators: an evaluation of the economic situation in Belarus and a forecast for 2013. OSW Commentary No. 103, 2013-02-20

The macroeconomic results achieved by Belarus in 2012 laid bare the weakness and the inefficiency of its economy. Belarus’s GDP and positive trade balance were growing in the first half of last year. However, this trend was reversed when Russia blocked the scheme of extremely lucrative manipulations in the re-export of Russian petroleum products by Belarus and when the demand for potassium fertilisers fell on the global market. It became clear once again that the outdated Belarusian model of a centrally planned economy is unable to generate sustainable growth, and the Belarusian economy needs thorough structural reforms. Nevertheless, President Alyaksandr Lukashenka consistently continues to block any changes in the system and at the same time expects that the economic indicators this year will reach levels far beyond the possibilities of the Belarusian economy. Therefore, there is a risk that the Belarusian government may employ – as they used to do – instruments aimed at artificially stimulating domestic demand, including money creation. This may upset the relative stability of state finances, which the regime managed to achieve last year. The worst case scenario would see a repeat of what happened in 2011, when a serious financial crisis occurred, forcing Minsk to make concessions (including selling the national network of gas pipelines) to Moscow, its only real source of loans. It thus cannot be ruled out that also this time the only way to recover from the slump will be to receive additional loan support and energy subsidies from Russia at the expense of selling further strategic companies to Russian investors.

Energy Union: Can Europe learn from Japan’s joint gas purchasing? CEPS Commentary, 11 December 2014

Japan’s two major electricity producing companies reached a preliminary agreement recently to establish a joint venture for the procurement of fossil fuel resources, primarily liquefied natural gas (LNG). The authors of this commentary ask whether this commercial initiative could serve as an example to Europe of how to increase the negotiating power of individual EU member states. They conclude that a private joint gas procurement company may indeed offer a solution for EU member states in Central and Eastern Europe, instead of yet another source of confrontation. Given the political volatility in the region, it could well be the key to balancing out the need for security of supply with an offer to guarantee security of demand, thereby creating the climate for stable commercial relations.

Europe's LNG Strategy in the Wider EU Gas Market. CEPS Policy Brief No. 333, October 2015

In its Communication on an Energy Union published in February 2015, the European Commission committed itself to “explore the full potential of liquefied natural gas (LNG), including as a back-up in crisis situations when insufficient gas is coming into Europe through the existing pipeline system” and to address the potential of gas storage in Europe by developing a comprehensive LNG and storage strategy by the end of 2015 or early in 2016. This is a comprehensible move in the current context. Geopolitical tensions between the EU and Russia explain the EU’s willingness to further diversify its supply sources of natural gas to reinforce its long-term energy security on the one hand, and to strengthen its ability to solve future crises on the other hand. Moreover, the current market dynamics could support diversification towards LNG. Increasing the flexibility of LNG trade, decreasing LNG prices and LNG charter rates and an apparent price convergence between the European and the Asia-Pacific LNG imports would all reinforce the economic viability of such a strategy. This Policy Brief makes three main points: • For the LNG and gas storage strategy to work, it needs to be embedded in the realities of the natural gas market. • The key to a successful LNG strategy is to develop sufficient infrastructure. • The LNG strategy needs an innovation component.

A feigned liberalisation: Russia is restricting Gazprom's monopoly on exports. OSW Commentary No. 121, 26.11.2013

An act restricting Gazprom’s monopoly in Russian gas exports came into effect on 1 December 2013. Previously Gazprom had had a legal guarantee to its monopoly position. The changes are an effect of consultations between various ministries that had been conducted for many months and were affected by lobbying from Novatek and Rosneft (Gazprom’s competitors on the domestic gas market); they need not, though, be seen as system changes. The ‘liberalisation’ they appear to bring in is feigned. Proof of this are found for example in both the limited material scope of the new law (it concerns only exports of liquefied natural gas, LNG) and the small number of the beneficiaries of the new regulations (the new solutions will be beneficial for Novatek and Rosneft). Contrary to initial announcements, the right to export LNG has not been restricted to South-Eastern Asian markets, which means that Russian liquefied natural gas is also likely to be sold to Europe in the coming years. Although these changes have been motivated above all by the individual interests of Gazprom’s competitors, they are also to a certain extent a response to the processes taking place on regional gas markets. They may, therefore, turn out to be beneficial for the state (increasing Russia’s share on the global LNG market and attracting foreign investors to gas extraction projects being implemented in Russia). The new regulations are probably the first step down the long road to breaking Gazprom’s monopoly in gas exports via the pipeline system.

Nord Stream II – Another test for EU unity. EPC Commentary, 9 October 2015

In September 2015, Gazprom and major European energy companies (Germany's E.ON and BASF/Wintershall, Austria's OMV, France’s ENGIE and Royal Dutch Shell) signed an agreement to double the Nord Stream gas pipeline’s capacity by 2019. The plan is to transport up to 55 billion additional cubic meters of gas a year to Germany through the Baltic Sea, bypassing Ukraine and other Central-Eastern European countries.

Nord Stream II-testing EU and credibility. EPC Commentary, 16 December 2015

In September 2015, Gazprom and major European energy companies (Germany's E.ON and BASF/Wintershall, Austria's OMV, France’s ENGIE and Royal Dutch Shell) signed an agreement to double the Nord Stream gas pipeline’s capacity by 2019. The plan is to transport up to 55 billion additional cubic metres of gas a year to Germany through the Baltic Sea, bypassing Ukraine and other Central-Eastern European countries.

Annexe II: Analyse de la situation politique en Mediterranee et dans les pays du golfe el les risques sur les approvisionnements petroliers et gaziers 1) Algerie & Pays D'Afrique du Nord 2) Pays de L'Est Mediterraneen et du Golfe. OME, Draft du 18 April 1995 = Annex II: Analysis of the political situation in the Mediterranean and the Gulf countries and risks on petroleum and gas supplies 1) Pays D'Algerie & North Africa 2) Country of Eastern Mediterraneen and the Gulf. OME, Draft of 18 April 1995

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On Ukrainian Gas Transit and South Stream. There may be more than meets the eye. CEPS Commentaries, 21 March 2014

The EU relies to a considerable degree on imports to meet its demand for natural gas. Whereas Norwegian export pipelines are directly connected to the EU gas system, a major share of Russian gas flows through the Ukrainian territory before reaching consumers located other consumers located down in the supply chain (e.g. Slovakia, Hungary or Italy). But is the Ukrainian gas transit route still a risk? Will the construction of the South Stream pipeline further reduce the importance of Ukraine as a transit country? Or is there more at stake here than meets the eye?

The Iasi-Ungheni pipeline: a means of achieving energy independence from Russia? Moldova's attempts at gas supply diversification. OSW Commentary No. 118, 2013-10-08

Since taking power in 2009, the Alliance for European Integration (AIE) has been trying to end Moldova’s dependence on Russian gas. Currently, natural gas accounts for about 50% of the country’s energy balance (excluding Transnistria), and Gazprom has a monopoly on the supply of gas to the republic. The key element of Chișinău’s diversification project is the construction of the Iasi-Ungheni pipeline, which is designed to link the Moldovan and Romanian gas transmission networks, and consequently make it possible for Moldova to purchase gas from countries other than Russia. Despite significant delays, construction work on the interconnector began in August 2013. The Moldovan government sees ensuring energy independence from Russia as its top priority. The significance and urgency of the project reflect Chișinău’s frustration at Moscow’s continued attempts to use its monopoly of Moldova’s energy sector to exert political pressure on the republic. Nonetheless, despite numerous declarations by Moldovan and Romanian politicians, the Iasi- -Ungheni pipeline will not end Moldova’s dependence on Russian gas before the end of the current decade. This timeframe is unrealistic for two reasons: first, because an additional gas pipeline from Ungheni to Chisinau and a compression station must be constructed, which will take at least five years and will require significant investment; and second, because of the unrelenting opposition to the project coming from Gazprom, which currently controls Moldova’s pipelines and will likely try to torpedo any energy diversification attempts. Independence from Russian gas will only be possible after the the Gazprom-controlled Moldova-GAZ, the operator of the Moldovan transmission network and the country’s importer of natural gas, is divided. The division of the company has in fact been envisaged in the EU’s Third Energy Package, which is meant to be implemented by Moldova in 2020.