Europe: Towards a Reduced Dependency on Russian Fossil Fuels

Whilst Europe’s energy dependency on Russian supplies has always been an underlying concern, the recent crisis in Ukraine has highlighted the crucial need to diversify the energy importations to become more economically secure as well as credible politically.

First of all, the E. U. is the biggest consumer of energy in the world. With 28 countries, over 505 million people, Europe is home to 10.5% of the world population but uses 20% of the energy produced in Europe. Yet Europe has very few natural resources – only 1% of the world reserves in oil, 1.5% of natural gas and 4% in coal – and is highly dependent on importations.

Nuclear energy counts for 15% of energy in Europe, mostly produced on European territory. Though Europe has strict targets to rely less on fossil fuels and reach 20% of renewable energy resources by 2020, it is at the moment heavily dependent on energy importations.

Over half of fossil fuels (40% of coal, 60% natural gas and 80% of oil) are imported with the main exporting countries being:

- Oil: Russia, OPEC countries, Norway

- Gas: Russia, Norway, Algeria

- Coal: Russia, Colombia, South Africa, USA

In the above list, the name that stands out is obviously that of Russia, which has the largest resources in natural gas in the world, the second largest in coal and is amongst the 10 biggest world oil producers. Some European countries are especially dependent on Russian gas importations, for instance the Baltic States (100%), Poland (66%), Finland, Hungary, Slovakia and Bulgaria. Germany, the biggest economy in Europe also heavily relies on Russian gas (40%). Gazprom, the group exploiting the natural resources (especially natural gas) is 50% owned by the Russian government and contributes a sizeable share to the Russian revenue.

This powerful position has long been a source of worry in Europe, concerned about an excessive dependence on Russian fossil fuels – and also, of being held hostage to their energy needs and prevented to take adequate measures and pressure tactics as recently demonstrated by the recent events in Ukraine. Indeed, around 30% of European gas comes from Russia, and 80% of it transits through Ukraine. The Russian federation uses its energy supplies “as a weapon” according to David Goldwyn, US State Department's special envoy and coordinator for international energy affairs from 2009 to 2011. There is currently little Europe can do without punitive actions backfiring. There have already been two occasions in 2006 and 2009 when Russia, following a dispute with Ukraine as a main transit country, turned off the shipments, creating energy shortages in Europe.

However that dependence is – somewhat - two-sided. If Russia is a key supplier for Europe, so is Europe an important customer for Russia, with an estimated 60% of Gazprom’s revenue coming from European markets. A drop in the share of European imports would mean a significant drop in state revenue, which explains Russia’s interest to diversify and export to Asian countries.

There are plans to try and wean Europe from the dependency on Russia, which include the growth of Norwegian supplies and the development of importations from America, especially with the growth of shale gas that may threaten the Russian position. High gas prices have already resulted in a decreased use of gas both in households and businesses in Europe. The target is to reach 27% of renewable energy in the E.U. by 2030. However this is unlikely to happen in the near future.

Recently and in the light of the Ukraine crisis, the European leaders have met to discuss plans to warrant energetic security for Europe and step up moves to reduce its dependency towards Russia. Targets include reducing energy demands, develop energy sources, especially renewable, increase energy efficiency and diversify the supply routes to Europe. Herman Van Rompuy, President of the European Council, also highlighted the need for European countries to share information and terms of contracts negotiated by each country with Russia and show more solidarity in case of energy disruption in some areas. The Commission’s proposals will be discussed at the EU summit at the end of June 2014.

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