How the Russian oil and gas exports
to Europe effect the Europe Russia
Geopolitical and economic relations?
Nadav Avni
Petroleum & Energy:
Geopolitics, Economics, Strategy & Security
Dr. Amit Mor
IDC, Herzliya
Lauder School of Government
Background
• Russia is very reach in Natural Resources,
especially Natural Gas and Oil
• Between the 1960’s and the 1980’s, the pipes
infrastructure to supply those resources to
Europe was built
• The production of those resources increased
since the collapse of the Soviet Union. Boris
Yeltsin, the Russian President at that time,
privatized the country assets to the Oligarchs
that invested money in improving the production
technology
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• The increased production and the world energy
prices in the 1990’s made the Russian energy
market very attractive to European countries and
their demand for Russian energy increased and
so their dependency on Russia.
Russia from Yeltsin to Putin
In 1999 elections to President took place in
Russia. Vladimir Putin, Russia’s 5th Prime
Minister and a favored candidate by Boris
Yeltsin President of Russia at that time won the
elections and took office. Putin in his first term
as President, between 1999 to 2003 was very
interested to open the Russian energy market to
Western energy companies and sign an energy
partnership with the USA.
Putin’s reelection and his
actions in the Russian energy
sector
• In 2003 Putin won the elections again and
remain in office. When he started his second
term everything changed regarding foreign
expectations in the Russian energy market.
Putin ordered to arrest high officials at Yukos,
Russia’s largest Oil company due to illegal
taxing actions. In the west the thought was that
the real reason is a political one
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• After the arrests Putin “Nationalized” Yukos. He
took the power in the company from the
Oligarchs and now the government holds more
than 50% of the company shares, which means
the government owns the company
• Vladimir Putin did what he did because he saw
Russia’s interests put a side, he saw soaring
energy prices and last he thought that Yeltsin’s
decision to privatize the country assets was
wrong and that government should be the main
power, especially when it comes to energy
resources.
Russia’s energy market is
owned by the government
• After what Putin did to Yukos, the Russian
government was now the major player in the
Russian energy market. Owner of Gazprom, the
Russain largest Natural Gas company in the
world and now also Yukos, Russia largest Oil
company
• In 2003 Gazprom decided to raise Natural Gas
prices because of growing market demand.
Ukraine threaten Russia
• Ukraine which was part of the Soviet Union is a
very important junction for the Russian energy
that is going to the European countries. The Gas
and Oil pipes pass in its territory
• Ukraine threatened Russia that if Gazprom will
raise the gas prices, it will shut down the
Russian pipes that pass in its territory.
The consequences of Ukraine act
• What the Ukraine did, put a lot of European
countries under pressure. It was winter time, and
most of their Energy is based on Russia’s
Natural Gas. Austria for example is 100%
dependent on Russian gas for heating,
electricity making etc… and if the gas flow will
stop its economy will be hurt badly and a lot of
its citizens will freeze to death
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• Russia knows that a lot of European countries
including Ukraine is dependent on its Natural
Gas and Putin decided to teach the Ukraine a
lesson and shut down the gas production pipes
• The result was that the European countries
started to use their energy reserves and right
before they were about to end a freeze wave
came to Europe
• This caused 7 European Head of States to
demand the Ukraine to apologize to Russia and
they also had to fly to Moscow to beg Putin to
open the gas production pipes, in order to avoid
disaster and he agreed.
Conclusion
This was an examples among many others which
occurred in the last couple of years with Putin’s
Russia (until 2008) and now with Medvedev’s
Russia (since 2008), when Russia’s energy
played a major role in The Russian European
Geopolitical and economic relations regarding
who says the final word and how the decision
would look like.
Personal Remarks
• I tried to show in this presentation how Europe
energy dependency on the Russian energy put it
in a lot of trouble politically and economically
when it needs to face Russia.
Russia can use its energy as leverage against
Europe and Europe will have to line up or
comprise with Russia and sometimes its
interests will get hurt badly.
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• I think that Europe needs to find other energy
suppliers that it will have the possibility to
maneuver if things go wrong with Russia, than it
will need less to line up and less comprise on its
interests.
Also Europe needs to find new energy soultions,
e.g. wind and water power in order to produce
electricity etc… it will require a lot of investments
but it’s worth that.
References
• Lucas E., The New Cold War, Putin’s Russia
and the Threat to the West. Palgrave Macmillan:
London, England, 2008.
• Olcott B.M., The Energy Dimension In Russian
Global Strategy. The James A Baker III Institute
For Public Policy Of Rice University: Houston,
Texas, US 2004.
• Bloomberg website www.bloomberg.com
• European Energy Review website
www.europeanenergyreview.eu
• The Institute For National Security Studies
website
www.inss.org.il
Questions