Holger Brandl (University of Kent at Canterbury)
PEEER workshop, Moscow, September 2009:
‘Transit Conflicts and Energy Relations’
(preliminary presentation overview)
I.
Introduction
The existing European dependency upon Russian natural gas supplies, combined with a
number of consequential Russo-Western CIS energy disputes, has triggered off vital
debates surrounding energy security within the geopolitical realm of the European Union
(EU), in particular European security of supply, and has divided both EU policy making
circles as well as analysts. One interpretation regards the Russian Federation to be an
unreliable and potentially dangerous supplier of hydrocarbons, calling for multiple
diversification measures to be implemented as an imperative in order to encounter overreliance and thus guarantee a high degree of energy security. Others, on the contrary, view
the Federation to be an essentially steady and trustworthy partner, referring, amongst other
arguments, to an existing interdependency, due to Russia’s reliance on European
consumer markets, and blame recent delivery interruptions (mostly) on the unpredictable
variable posed by transit states. This presentation discusses the role transit states play
within the wider framework of EU-Russia natural gas relations, with a focus on the case
of the Ukraine, the risks related to transit and possible problem-solving strategies.
II.
Overview / historical context
Post-Soviet climate altered Russo-European energy relations fundamentally:
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Emergence of the Commonwealth of Independent States (CIS):
o Former Soviet republics (Western CIS) not only became independent
importers (characterised through subsidies, barter deals & asset swaps)
but also took a key role in the transnational transmission of
hydrocarbons deliveries from East to West.
 A new constellation of relations between the RF and CIS countries
emerged, frequently characterised by power political frictions and
alliances.
o The formation of OAO Gazprom (out of the Ministry of the Gas
Industry) in 1992 with subsequent centralisation / monopolisation of
the Russian gas market (including export) during the Putin era.
o The (partial / formal) liberalisation process of EU energy markets
during the 2000s altered the character of Russo-EU natural gas
relations, including transit issues, to a considerable extent.
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The concept of energy security (EU security of supply) gained critical
importance: Exemplified in the EU-Russia Energy Dialogue and the Energy
Charter Treaty (ECT; and its adherent Transit Protocol)
 Contextualisation of transit considerations
-
Assumption: Russo-European bilateral relations effectively always are
multilateral in character (as an imperative):
o Irrespective of the constellation of relations (whether Russo-Ukrainian
energy quarrels or Russo-German energy relations), the factor
transmission inevitably affects third parties and, hence, shape a
multilateral outlook.
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Holger Brandl (University of Kent at Canterbury)
III.
Russo-Ukrainian natural gas disputes (as a transit-related case study)
a.) the ‘gas wars’ of 2006 and 2009 – a reoccurring pattern endangering EU
energy security
IV.
-
Underlying problems – conflictual bilateral relations:
 Accusations of theft, arguments regarding reasonable pricing of both
natural gas deliveries and transit fees, an end to barter trade, the role of
the Joint Venture (JV) RosUkrEnergo (intransparency & rent-seeking)
-
Ukraine’s transit role within EU-Russia energy relations:
o Characteristics: Western CIS country, heavily dependent on Russian
gas imports and transmission revenues; major transit country –
Brotherhood pipeline; complicated diplomatic relations with RF,
particularly post-Orange revolution; crucial geopolitical relevance for
RF; signed & ratified the ECT)
-
The entanglement of politics with economics
o Natural gas applied as a political weapon?
o EU (&Western) understanding of political elite, European media
coverage and an objective assessment of the ongoing Russo-Ukrainian
quarrels (energy security encompasses transit security)
-
The wider geopolitical context (Ukrainian rapprochement towards EU and
NATO membership following the Orange Revolution of late 2004; Russian
determination to gain control of Ukrainian pipeline grid)
Problem-solving strategies – prospects, obstacles and possible consequences
a.) The Energy Charter Treaty (ECT) and its adherent Transit Protocol (TP) – a
supranational regime (legal framework) to guarantee security of supply?
o In the case of the Russo-Ukrainian energy dispute of January 2009
 Result: No satisfactory political leverage / dispute settlement authority
o What are the chances to modify the ECT in order to acquire Russian
ratification?
b.) Transit-avoidance strategies (risk minimisation)
-
Bypass-pipelines: Nord Stream, South Stream and Nabucco:
o Feasibility (incl. profitability & upstream capacity
o Political obstacles
o Resulting consequences (threefold: affecting RF, EU, transit states)
-
Diversification measures:
o Source / supplier (e.g. LNG from Africa & the ME)
o Resource (energy mix / diversification)
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Holger Brandl (University of Kent at Canterbury)
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V.
The vicious circle of underinvestment in Ukraine
o Due to enormous amounts of debts to Gazprom (around $ 1.7bn) and a
weak economy in general, the Ukraine struggles to maintain its pipeline
(transit) network – bypass strategies worsen future prospects:
 A worst case scenario would result in a drying up of the Brotherhood
(transit) pipeline which would have disastrous economic & political
consequences for the Ukraine.
Future prospects – Résumé
As the facts and realities indicate, there is neither a simple solution to the problems caused by
Western CIS transit states to European security of energy supply, nor can this obstacle be
eliminated solely through, for instance bypass pipelines, at least not in the foreseeable future.
However, in the case of the Ukraine, the existing Ukrainian dependence (and, indeed,
interdependence) upon gas imports and transit revenues suggests an advantageous foundation
upon which stabilising long-term solutions can be based and realised. Ultimately, and taking
into account the wide range of conflicting geopolitical factors (e.g. Ukraine’s strategic
relevance to the RF), politico-economic strategies (e.g. Gazprom’s insistence to receive
European netback prices from Ukraine, including the abolition of subsidies and barter deals
and a drive towards increased ownership of Ukraine’s transmission system) and European /
Russian security of supply / demand concerns, the path towards stability and thus (energy)
security will be a rocky one with numerous obstacles to overcome. The entanglement of
politics with economics – in which the line is frequently blurred – additionally complicates
relations and it seems that solely through the establishment of both a supranational regime, in
the sense of the ECT, in conjunction with a range of diversification measures, a realistic longterm solution can be found.
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