Introducing The New Commission & Energy Security
Amidst Brexit, the European Union (EU) appears to be caught in the middle of superpower politics of gas developing between the United States of America (US) and the Russian Federation. As Brexit progresses and these powers compete for access to the EU’s natural gas market, the incoming European Commission (EC) will play an important role in mediating between them. While doing so, the Commission must prioritise transitioning away from coal and finding a balance that is optimal for all of the EU’s Member States (MS). In this brief, I will analyse these developments and provide policy suggestions on how the Commission should respond to ensure the EU’s energy security.
One of the concerns facing the new EC is the composition of the EU’s natural gas market. The EU-28 has been the largest importer of gas in the world with few domestic reserves and declining production, it is not surprising that, in 2018, 15 MS’s had a gas import dependency higher than 90% (Eurostat, 2019). This import reliance is an obstacle for the Union to reach energy security. Energy security can be defined as the “protection of the entire energy supply chain and infrastructure” (Yergin, 2006, p. 77). While this definition covers energy suppliers and consumers, the EU follows a security of supply mindset, which prioritises the timely and uninterrupted delivery of energy to consumers at the expected price, quality, and quantity. This is the case because the EU is dependent on energy imports. The key to reaching energy security is through diversification of the routes, sources, and suppliers within your energy portfolio. While the EU’s first energy security problem is import dependency, the second arises because many of the MS’s have limited means of diversification. Considering that in 2018 up to 46% of the EU’s natural gas originated from Russia, a country that has previously leveraged energy supply, the Union’s threat to energy security vis-a-vis supply disruption becomes clearer (Eurostat, 2019).
Brexit & Russia
Brexit will only increase this vulnerability because the EU-27’s gas markets will change dramatically. First, the UK –at 17.6% of the EU’s total (Eurostat, 2019)– is one of the largest gas markets within the EU and it is one of the least susceptible to Russian imports (Tiseo, 2019a). As the UK leaves, a larger proportion of the total gas consumed by the EU-27 will be imported from Russia. Secondly, the UK is the largest importer of Norwegian natural gas within the EU-28 (Norwegian Petroleum, 2019) and as they leave, Norway’s market share –of 30.2% of the EU total (Eurostat, 2019)– will shrink. Thereby weakening the market position of one of the EU’s friendly suppliers. Thirdly, the UK –at 36.8% of total production (Eurostat, 2019)– is the Union’s largest gas producer. Once they leave, the EU’s production to import ratio will be smaller and the Union will be more dependent on imports. All three of these factors shift the supplier proportions of the remaining EU-27’s gas imports to Russia, which will increase the leverage it can exert over the EU’s natural gas supply.
Beyond Brexit, the completion of Nord Stream 2 also impacts the EU’s energy security (Euractiv, 2019). On one hand, this pipeline improves energy security because it diversifies the routes coming to the EU and will help Germany reduce coal usage (Tiseo, 2019b). On the other hand, it undermines the EU’s energy security by making its economic engine more vulnerable to Russian supply disruptions. This poses a serious security problem because if Russia were to continue its electoral interference or territorial expansion, the EU will be reluctant to sanction Russian gas because they would be disrupting their own energy supply. This is crucial because in 2018 energy exports accounted for 65% of all Russian exports (World Bank, 2019) and being unable to target them greatly reduces the foreign policy tools the EU-27 can respond with. Beyond that, the pipeline has also been the source of diplomatic tensions between the US, Germany, and Russia (Euractiv, 2019.). American President Donald Trump has used these points to motivate his sanctions on the companies involved in this project while also calling for the EU to import more American ‘Freedom Gas’ instead (Ibid.).
Transatlantic Energy Security
Given how Brexit and Nord Stream 2 will increase Russian leverage over the EU’s energy supply, there is a need for the EU to diversify its energy portfolio. To this end, North American Liquified Natural Gas (LNG) has been identified as a key to depoliticise Russian gas (Grigas, 2017). In my opinion, President Trump has opened an opportunity to pursue this. The EU has already experienced a six-fold increase in American LNG imports since 2018 and the EC has funded an increase in LNG infrastructure throughout the EU (EC, 2019). For these reasons, the Commission should use Poland’s 20-year LNG import agreement with the US as an example as the EC encourages other Central and Eastern MS’s to sign their own 5-year LNG agreements with the US (Deutsche Welle, 2019). Agreements that allow landlocked MS to access coastal LNG infrastructure and that grant American companies a set amount of their gas imports. If coordinated at the EU level, these agreements can be leveraged against the US’s sanctions and de-escalate the situation.
Such agreements will transpose the transatlantic link underlying European security to energy security. Showing that, while the EU is open to deal with Russia, their American ally is not far away. Incorporating American LNG into Central and Eastern Europe’s energy mix will increase the EU’s energy security by diversifying routes, sources, and suppliers to an area that is especially reliant on Russian pipe-gas. Doing so will create market competition and stabilise gas prices while weakening Russia’s leverage over energy supply. This is extremely beneficial for foreign policy because it gives these MS’s a means to deter Russian pressure. On one hand, should Russia try to force a price raise, these States can import more LNG and divert revenues from Russia. On the other hand, if these States disagree with a Russian action they can lean on LNG to sanction behaviour they disagree with. With these mechanisms added, Russia will be less willing to pursue national interests via its energy exports.
The Balancing Act
The EC has a crucial role to play in finding an optimal balance between Russian pipe-gas and American LNG. While LNG is important for diversification and creating competition, it will never be economically viable to fully challenge the dominant market position of Russian pipe-gas. Balancing between these two is important for the EU to reach its climate targets because the two MS’s that consume the most coal –Germany & Poland– have different perspectives on how to add natural gas to their energy portfolios. With Germany being open to Russian imports and Poland diametrically opposing this, these two countries must not lose sight of the objective: to reduce the CO2 emitted from their electricity generation. For this reason, the EC should moderate between both strategies and help each country reach its optimal supplier to phase out coal. For Poland, this can be clearing additional European funding to finance additional LNG facilities in Świnoujście and for Germany, this can be leveraging American LNG import agreements to resolve the diplomatic tension with the US.
In conclusion, the new EC faces several substantial changes to the EU-27’s energy security. As Brexit and superpower politics play out in the natural gas market, the Commission will have an important role to play in balancing these developments. By mobilising the EU’s multilateral capacities it can leverage LNG import negotiations as a bloc and dampen the influence of large external players. In doing so the Commission will help the biggest polluters in the EU move away from coal to a cleaner and more optimal energy source. While this policy suggestion focuses more on the natural gas and coal components of the EU’s energy security, this is by no means an exhaustive formulation of the problems facing the incoming Commission. With this in consideration, I suggest that future writings investigate how renewable energy investments can be used as another way to mitigate dependency on natural gas imports and balance the ongoing geopolitical tensions between the EU, US, and Russia.
- In light of Brexit, the Commission should set European energy security as a policy priority.
- Member States from Central and Eastern Europe should negotiate 5 year LNG import agreements with the US.
- The Commission should coordinate these agreements multilaterally to counter the pressure of American sanctions and balance the leverage of Russian pipe-gas.
About the Author
Loyle Campbell is the current Editor in Chief at the European Student Think Tank. Originally from Canada, he is an Honours student studying a BSc of Political Sciences at the Free University of Brussels (VUB) in Belgium. Prior to his studies, he worked for five years in exploration, production, and well servicing in the Canadian oil field. He has recently been involved in the 2020 London International Model United Nations as the Director of the UNEP and as the student workshop coordinator for the VUB’s 2020 PeaceJam youth conference on Climate Change and Sustainable Development.