Reliance on Russia for energy exposes EU’s soft underbelly

The crisis in Ukraine appears to be a proxy dispute between Russia and the West (EU and the US). It is an issue of who will have the ultimate control and influence over the country, itself a sovereign state.

Russia supplies about 30 per cent of all natural gas requirements for the European Union (EU) countries. Specifically one pipeline carrying about 50 per cent of gas imports from Russia to EU passes through Ukraine.

Also most of Ukraine gas requirements are supplied from Russia, and have been heavily subsidised by Russia until recently.

By being dependent on Russia for energy supplies, the EU is quite aware of its limitations on how far it can politically push Russia without risking the natural gas valves being turned off.

Although Russia has not threatened to use the natural gas “weapon”, it remains a potential secret weapon which gives Russia and edge during the ongoing Ukraine dispute.

That may explain why the West has mostly chosen to maximise the art of diplomacy together with selective economic sanctions against Russia by the US.

This would not be the first time that hydrocarbons supplies have been used as collateral in global political disputes.

To sustain political leverage a country clamouring for global superiority, will need to ascertain that its has a high level of oil and gas supply security.

Energy security is inseparable from national security. Without energy security assurance a country risks being economically and politically immobilised when serious intra-state political disputes arise.

Post-1973, the Arab oil producing nations effectively used oil boycotts against the West for their support of Israelis against the Palestinians. At that time the OPEC (of which majority membership is from Arab oil producers) used to produce about 75 per cent of global oil demands.

The ensuing energy crisis prompted the West to search and develop new oil sources to reduce dependence on Arab oil producers.

The International Energy Agency was specifically created in 1974 to manage energy security mostly for the developed world. Today only about 40 per cent of global oil demands come from OPEC countries.

The North Sea oil and gas resources were actually developed after the 1973 boycotts, and became the key source of oil and gas for Europe.

However the North Sea wells have been depleting quite fast shifting EU energy dependence to imports from Russia and other parts of the world.
Dependence of EU on Russian gas supplies cannot be easily wished away for some time to come.

Experts say that for EU to establish gas supply independence from Russia, they have to embrace the non-conventional shale oil and gas which exists in large quantities, especially in the UK. Ukraine is also said to have large reserves of shale resources.

Since he came to office, President Obama has consistently pursued energy policies that are finally driving the US to near total energy independence. It has been his declared policy to substantially reduce American dependence on imported oil and gas.

The US president has liberalised oil and gas exploration and developments across all parts and frontiers of the US. This he appears to have been achieved despite environmental and political hostilities within the US.

Under his watch shale oil and gas have been successfully developed to the extent of dramatically reducing imports of hydrocarbons. It is said that in another decade US could be net exporter of hydrocarbons.

The Obama administration has also consistently promoted and funded projects and programmes that reduce use of fossil fuels.

Alternative renewable energy projects and energy efficiency programmes have all reduced the use of imported fossil fuels. All these “green” efforts have not only increased national energy security, but also created for Obama desperately needed jobs while reducing impacts of global warming.

By becoming energy independent, the US has reduced oil imports from the politically unpredictable Middle East. This apparently has enabled the US to reduce political and economic commitments with the Middle East and North African counties.

America can these days afford economic sanctions against Iran without much fear of oil supply disruption to the US.

China has its own way of ensuring its energy security by widely spreading its overseas oil and gas investments across the entire globe. This they evidently accomplish with minimum political involvement in their investment host countries.

The ongoing globalisation of oil and gas development across the “politically neutral” world that will depoliticise global energy supplies.

Upstream joint venture capital involving global companies from numerous nations continue to combine resources to create a fairly politically free oil and gas supply mix driven purely by commercial interests.

Is Kenya energy secure? Unless any country is 100 per cent supplied from its own local energy resources, it cannot be said to be energy secure.

Kenya will need to deliberately plan to maximise local resources for its domestic energy requirements so as to foster independence from energy imports.

Strategic oil reserves only provide temporary relief during times of distress. Financing imported strategic oil stocks is always a high cost option.

Having own local crude oil increases national energy security, but there has to be refining capacity to go with it.

Mr Wachira is the director, Petroleum Focus Consultants. Email: [email protected]