Rahm Emanual, Obama’s chief of staff, says one should never let a serious crisis go to waste. So now that the Russians are once again blocking the supply of gas to Ukraine – and, by extension, to Europe –Europe should act to protect itself.
Russia remains the largest exporter of gas to the EU, with total annual exports of 130 bcm today. But since the early 1980s import growth from other countries has outpaced that from Russia. 80 percent of the growth in European gas imports now comes from Norway, Algeria, Nigeria and the Middle East. The gas markets of the EU’s eastern members are, however, highly dependent on Russia. Six of these states import more than 80 percent of their gas supply from Russia.
As Pierre Noel, a Cambridge energy expert, argues: “these national differences would not matter too much if there were a single European gas market. But the reality is that Europe’s gas market is segmented along national lines.” When supply disruptions occur – as in January 2006 when the Russians turned off the Ukraine’s tap– there is relatively little reallocation of supply between national markets.
The Tories’ Liam Fox provided the best answer for how to deal with this in July 2007: European leaders have to integrate the European gas market to create the maximum possible degree of solidarity between European gas consumers. This would improve collective energy security by enabling gas to be moved across the entire market in times of supply or demand shocks. By creating a pan-European gas market, European leaders would also render EU members’ bilateral relations with Russia – and the cosy relationships some European companies have with Gazprom — irrelevant to the conditions of access to Russian gas for consumers. Russia must also be prevented from furthering Europe’s market segmentation by, for example, having Gazprom acquire European transmission or storage assets.
Rather than wait for Russia to turn the screw again, Europe should actually get on and act on this before next winter.
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