Russia, Ukraine and European energy security

By Wojciech Jakóbik

An interview with Natalia Slobodian, a National Centre for Strategic Studies energy expert living in Kyiv. 

WOJCIECH JAKÓBIK: In what way is the energy sector part of the “hybrid war” waged in Europe by Russia? Who are the actors and what are its consequences?

 

NATALIA SLOBODIAN: One of the key tools in Russia’s “hybrid war” taking place within Europe is the energy component. Russia is a state heavily reliant on energy and raw materials, where hydrocarbons are not just a commodity, but also a tool for achieving geopolitical objectives. To achieve its political goals, Moscow has used the energy tool against Ukraine on three levels: political, economic and information. Ukrainian energy infrastructure has become a matter of special attention for the Kremlin, since its occupation or destruction does not only cause significant economic losses to Ukraine, but also threatens European countries’ energy security.

 

I would like to draw your attention to the Russian “gas aggression” that occurred against Ukraine in 2006 and 2009. In 2006, Russia demonstratively conducted so-called “punishment actions”, cutting off gas supply to Ukraine and reducing the volume of gas transit via Ukraine to the EU. As a result, Ukraine was punished for  its 2004 Orange Revolution and Europe was punished for having supported Ukraine. The crisis in 2009 also had a specific purpose. It was meant to provoke an internal political crisis in Ukraine and worsen the country’s relationship with the EU. Moscow’s  basic idea was that in case gas supply to Ukraine would completely stop, Kyiv’s authorities would be unable to deliver gas from western storage to the main industrial centers in the east and south of Ukraine and thus would leave them without heating. This was meant to provoke a “social explosion” within Ukraine.

 

Mikhailo Gonchar, a Ukrainian expert who has closely investigated the elements of hybrid war, said that in 2009 the Russian Strategic Culture Foundation studied the so-called “half-hard” scenario, which provided for the emergency deployment of military contingents to Ukraine combined with the installment of a “provisional government”, a dynamic expansion of local self-government on occupied territories. The latter relied on “support forces” which had been trained in advance; these were marginal groups critical towards Kyiv-based authorities as well as towards the creation of “independent” quasi-state institutions.

 

Some experts view “energy wars” as a post-Soviet space phenomenon, arguing that Russia uses energy as a weapon to further control former USSR states. However, it is wrong to assume that such tools cannotbe applied to the EU and NATO member states as well, especially in light of Russia's official declaration about using energy resources and infrastructure in order to “address national and global problems". In recent years, Russia has also been using the energy weapon against European countries: the reduction of oil supplies to the Czech Republic in 2008 when Prague signed an agreement regarding the deployment of American missiledefense radars on its territory is a case in point. In 2007, Russia suspended the supply of oil and coal to Estonia for one month due to the transfer of a monument of Soviet soldiers, explaining that it was a technical problem related to logistics. In 2015, Russia reduced the oil transit through Lithuanian ports by 20 per centwithout giving a reason for it.

 

It is also worth remembering Russia’s large-scale projects which are meant to create a surplus of pipeline capacity. At present, Nord Stream 2 is a highly controversial project which helped reveal a number of significant differences between EU member states and their positions. If Nord Stream 2 is implemented, the Czech Republic, Hungary and Slovakia may suffer economically due to the billions of euros lost in transit fees.

 

In the absence of an integrated gas infrastructure in the EU, the Kremlin can manipulate the volumes, directions and prices of gas. In case of a deterioration of relations between Russia and NATO, Moscow will be in a position to reduce gas supplies to European countries in combination with waging an information and psychological campaign and, perhaps, cyber-attacks. The Kremlin’s new pipeline projects will allow for a selective reduction or suspension of gas supply to Germany, Poland, Hungary, Romania and others, jeopardising  these countries’ energy security.

 

The active promotion of Nord Stream 2 has created some divisions between EU member states and the European Commission. Without a doubt, the main beneficiary of such divisions is Moscow. The Nord Stream 2 pipeline constitutes an important and dangerous barrier to the EU’s Energy Union strategy and an obstacle in the plan to boost Liquefied Natural Gas (LNG) imports.

 

Ukraine’s energy infrastructure has been under the gun of cyber attacks. Can you explain what happened?

 

An act of sabotage was carried out against the Urengoy-Uzhgorod-Pomary gas pipeline in Ivano-Frankivsk and Poltava regions in 2014, and some elements of the cyber war scenario were implemented on December 23rd, 2015.The “Black Energy” virus attack led to power outages in a number of areas. At least five Ukrainian energy companies had to cut down on their operations. Given the fact that cyber-attacks significantly increased, the Ukrainian government decided to strengthen computer systems’ protection mechanisms, which were recently included in Ukraine’s cybersecurity strategy.

 

Against this background, it is very important to mention cooperation between European and Ukrainian cybersecurity experts, which led to the development of the “common action plan” as well as the elaboration of key elements of crisis strategy in case of a cyber threat. In addition, it is worth mentioning the joint research projects of European and Ukrainian institutions to combat cyber attacks and protect critical infrastructure.

 

You mentioned the information element of hybrid war. Can you explain what it is and how it works?

 

The energy component has become a tool of Russian propaganda to exert psychological pressure on Ukrainian society and upon the international community. At the beginning of the active phase of the Ukrainian-Russian confrontation, Moscow, without any evidence, repeatedly accused Kyiv of illegal extraction of transit gas intended for European consumers. The purpose of those false accusations was to create the image of Ukraine as an unreliable supplier in the eyes of its European partners and to cultivate distrust towards Ukrainian authorities.

 

The launch of stable reverse gas supplies to Ukraine from its European partners and the country’s refusal in 2015 to purchase gas from Russia have become the main issues of expert discussions centered around the question of whether Ukraine will pass (or survive) the 2015/2016 heating season. A number of experts in favour of the Kremlin predicted an “energy Armageddon” for Ukraine if it does not buy Russian gas. Last summer, this topic was actively discussed in the Ukrainian media, increasing tensions and anxiety within Ukrainian society.

 

Recent reports about the plans of Eni, an Italian energy company, to drill shale gas exploration wells in Ukraine were met with mass criticism related to environmental issues, including  warnings against another Chernobyl disaster. The launch of fuel imports to Ukraine’s nuclear power plants by American Westinghouse Electric Company has also sparked critical comments from various experts and another warning against a “second Chernobyl”. Changes in the energy market and the reform of national energy policy have often been used by pro-Russian organisations to critically evaluate the government’s actions and acceleratesocial psychosis. Any decisions aimed at addressing the energy sector’s crisis adopted by the Ukrainian government have been used to provoke negative attitudes towards public authorities and the country’s leadership.

 

How are the countries of Central and Eastern Europe responding to this threat?

 

In this context, I would like to highlight the European Commission’s last two initiatives.

 

First of all, the Commission has recently proposed to review energy contracts EU member states sign with countries outside the block in terms of their compliance with EU rules.  At present, the Commission can only inspect these agreements after they have been signed. This initiative will contribute to strengthening European solidarity and trust, as political leaders will not be able to make decisions which in the future could have a negative impact on the security of supply in neighbouring countries. Moreover, if all the EU’s energy contracts are unified, Gazprom, Russia’s state energy company, will lose leverage over the European consumers it currently has through a system of discounts and individual agreements. The Commission’s revision of energy contracts and their unification will primarily help strengthen the most vulnerable EU member states’ energy security, including the Visegrad countries’. In the end, Gazprom will not be able to manipulate and pressure the EU countries which are most dependent on Russian gas supply. It is safe to say the European Commission's active participation in gas negotiations with third countries could help to more effectively avoid undue pressure or market distortions resulting from agreements with countries that don’t respect European legislation.

 

Another important step with the potential to enhance EU states’ energy security has been the establishment of nine gas supply security zones. The European Commission has passed a new energy security regulation aimed at ensuring secure supplies for EU member states based on a regional principle. For example, Poland will have to coordinate gas supplies together with other Visegrad states, such as the Czech Republic and Slovakia, as well as with Germany. It is expected that countries in every zone will share responsibility for the accumulation of strategic gas supplies and the development of gas infrastructure in their respective zones.

 

I am confident that this new gas supply security regulation can have a direct impact on the European gas market and change “the rules of the game” for Russia. As a result, the Kremlin will lose its key instruments of influence and manipulation. Moreover, these initiatives can become a part of a crisis management approach to EU energy security. It is very important for the European community to create joint prevention plans and risk analyses in the energy security field.

 

What tools is Russia using to influence the energy sector in Central and Eastern Europe?

 

Russia is using two main tools to influence the energy sector. The first one is a gas price formula, the second is the divisions that exist between Europe’s states. It is impossible to avoid misunderstandings and differences within the EU, due to the lack of transparency of prices offered by Gazprom. There is a chance that annexes to agreements on hydrocarbon supplies from Russia will eventually be leaked. The unclear relationship between Russia and some EU countries lead to an assertion that there is a strong political component in economic relations with Russia. It would be difficult to argue that the Gazprom price offer is compatible with the market economy’s rules. Indeed, by sheer logic, the greater the amount of certain goods a consumer buys, the lower the cost of this product. However, in the case of Russian gas supply to the European market, such logic does not apply. As a result, Russian gas supply to European markets is no longer an ordinary product but a tool of political influence. The Kremlin skillfully uses the energy factor, pushing EU member states towards unhealthy competition. As a result, these factors inhibit the creation of a single European energy market.

 

What needs to be done?

 

The region has to build a stronger and wider multi-regional energy cooperation in order to oppose Russian pressure. One of the most important steps should be the development of gas infrastructure and the exploration of new delivery routes.  At the moment, a number of connections in the region exist on paper only, including routes such as: Poland-Czech Republic, Czech Republic-Slovakia, Poland-Slovakia, Poland-Lithuania, Slovakia-Hungary, Hungary-Croatia and Hungary-Romania. Needless to say, the expansion of these routes will significantly strengthen regional energy security and allow for the creation of an interconnected single market. At present, European energy infrastructure priorities include the development of a North-South Energy corridorlinking the Baltic, Adriatic and Black seas. The key goal of this project is to connect the three regions to alternative supply routes and ensure that gas flows in each direction.

 

The countries of Central and Eastern Europe should cooperate more closely with Ukraine and consider the country’s stability and energy security as crucial to their own interests.  Ukraine is currently experiencing a number of challenges related to the hybrid war conducted by Russia. Its deep economic crisis has also affected its energy sector. Nevertheless, Ukraine managed to survive without gas from Russia since June 2015 and reforms to reduce energy consumption and increase its effectiveness have been under way. Central European countries can support this process. Due to close proximity, the need for integrity and market stability, Ukraine has become a key element of regional energy security.

 

What can we expect from the NATO summit in Warsaw?

 

Without a doubt, the NATO summit in Warsaw is an important event for all European countries and their neighbours. The summit’s attention will be focused on issues closely related to hybrid and information warfare, strengthening its member states’ partnership and broadening the alliance. I hope that energy security, and in particular the critical energy infrastructure and cyber security of the energy complex, will be on the agenda. NATO is currently dealing with a number of challenges, including the threat from Russia. It is worth stressing that the United States and Norway, both of which are important NATO members, are gas producers who could support their partners in Europe.

 

What can we expect from the Energy Union project?

 

At the beginning of last year, the European Commission published a paper titled “A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy”. The title itself indicates that it is a very ambitious document. There is no doubt that the main goal of establishing the Energy Union is to face common challenges in areas such as energy security.

 

It is worth mentioning a project titled “Single gas market and energy security in the Visegrad states: models, challenges, perspectives”,financed by the Visegrad Fund, which included a survey of experts and top-managers of energy companies from the V4 states. One of its questions focused on the goals of regional cooperation. Most of the respondents identified the following objectives: to lower gas prices, to diversify and increase the security of supply and to expand the market and improve business opportunities. In my view, the Energy Union’s key priorities should be to speak with one voice in regards to energy policy, common market and cross-border cooperation.

 

In the meantime, a wider energy cooperation can be achieved through an enhanced infrastructure net, which would also help reinforce cross-border trade. It is worth noting that the concept of the Energy Union focuses primarily on the expansion of such interconnections, which in theory should solve the issue of infrastructure bottlenecks in Europe. Thanks to that, European consumers will enjoy greater competition, lower prices and an opportunity to buy energy from companies located in other EU countries.

 

Natalia Slobodian is a National Centre for Strategic Studies energy expert living in Kyiv. 

 

Wojciech Jakóbik is an energy analyst at Jagiellonian Institute and editor-in-chief of economic portal biznesalert.pl.

 

 

New Eastern Europe

 

 

30.05.2016

 

 

 
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