Energy supply and security
Baltic Sea Parliamentary Conference Visby 2.9. 2008
Energy and security go together in many ways. In discussions like these the emphasis is usually almost exclusively on security of supply. I will also also address this, but to begin with I want to stress what in my opinion is the most important security issue linked to energy. This is the unstainable way mankind is gorging energy, devouring non-renewable energy resources and the effects of the continued emissions of greenhouse gases into the atmosphere.
The recent surge of power politics notwithstanding climate change is and remains the most important threat to security that the world as a whole is facing. All of the Baltic Sea States are parties to the Kioto convention and, at least those who are members of the European union, are also committed to much more far-reaching reductions in CO2 emissions to slow down and ultimately stop the advance of climate change.
I shall not attempt any more through-going review of all the policies needed to combat climate change ranging from developing renewable energy sources and running down the use of fossile fuels, to using nuclear energy as an interim solution to speed up the replacing of oil and gas with non-polluting alternatives. I stress the interim nature of nuclear energy. Although nuclear energy may be preferable to fossile fuels, it also involves grave issues of safety and security, and it is not a renewable source of energy and thus does not fill the reguirements of sustainable development. Nor should nuclear energy be regraded as a purely national issues for those countries contemplating its use, as the risks involved with nuclear energy, should they ever materialize, will inevitably have vast cross-border consequences.
I also want to draw attention to the importance of increasing energy efficiency and investment in energy saving. It is a strange failure of all market economies, that investments in energy saving are expected to be much more profitable than investments in increasing energy production before they are taken into consideration. This psychological failure to take investment in saving seriously was of course as least as evident in Communist command economies, where the attitude toward investments was the bigger the better, resulting in huge environmentally deadly memorials to forced industrialization.
Modern society is dependent on the smooth and uninterrupted supply of energy. Energy production and transport are thus obvious targets for terrorists seeking to cause as much pain and disruption as possible. This is not, however, an energy-specific concern, but pertains to all and any vulnerable functions of our societies. The most important lesson here too is that broad-based multilateral cooperation between all countries is the only really workable way of combating terrorist threats.
Energy supply is a security issue which is highlighted by the fact, that the countries and regions which cater to the energy needs of those industialized countries which are not self-sufficient tend to be often the same ones where multiple political problems and potential and real conflicts occur threathening the security of supply, such as the Middle East and such as Russia and some of the former Soviet republics in Central Asia.
The problem is not that these countries may have authoritarian or totalitarian regimes. The US and other Western democracies have been quite content to live and do profitable business with non-democratic countries and leaders without being unduely bothered by their Human Rights records – Saudi-Arabia, the Shah’s Iran, Turkmenistan, Kazakstan and the like – as long as these countries are internally stable and externally acquiescent. But when those endowned with natural resources turn uppity and begin to challenge the existing order – such as Chavez’s Venezuela or Saddam’s Iraq – they become grave threats to security in dealing with which it is legitimate to ”have all options on the table”, meaning also military intervention.
Indeed, while most countries without domestic energy feel insecure and may dream of suddenly being anointed with oil and gas riches, it is not at all sure that these in excess quantities are actually a blessing. Weak countries with such resources may find themselves being preyed upon by energy-hungry great powers and subjected to strong outside pressures. Neither is it always evident that oil riches actually enrich the people. Even without outside interference or intervention not all countries have used their riches wisely and developed their non-export sectors for the day when oil and gas production and the income it generates starts to fall.
In short, there are not too many Norways around: small, unthreathening, environmentally conscious, assuredly democratic oil and gas exporters, who use their riches both domestically and intenationally in a responsible manner. Who would feel any concern in Europe even if we were dependent on Norway for more than 50 % of our energy needs?
Instead we have been for a long time dependent on the Middle East and now increasingly also on Russia for our energy needs. Russia is already providing 24 % of the gas used in the EU and both gas consumption and imports to Europe from Russia are forecast to grow substantially. This is also why we are also increasingly worried about the security of our energy supply.
Is this concern warranted? The growing interdependence of importers and exporters of energy should not be regarded in SWOT-analysis terms as falling solely under the T for threats category, but also as an opportunity with strengths and weaknesses to be found in all categories.
I will not dwell too much on the threats involved as they have received ample and even exaggerated prominence. They are real enough without being artificially magnified. Obviously it is never healthy to be reliant on too few sources of supply as well as transport routes for these supplies without real alternatives. The use of the energy trade for explicitely political ends should not be allowed to take place.
But when some here in the Baltic region regard the North Stream gas pipeline project from Russia across the Baltic Sea to Germany as a grave threat to security, I beg to differ. The ecological concerns about the pipeline are legitimate and have to be taken seriously, as we are dealing with a particularly vulnerable marine environment. But if state-of-the-art environmental protection procedures and technologies are applied this should not be a threat, and certainly a much smaller one than if the equivalent amount of energy was transported in surface-vessels across the Baltic. After all, it is not as we were dealing with some completely unkown technology, as pipelines have been crisscrossing the world’s many seas already for decades, without any serious mishaps up to now. But I too agree with the European Parliament that all countries around the Baltic Sea must ratify the Espoo Convention on transational environmental impact assesments before the projetct can receivet the go-ahead.
Of course Russia will have an interest in safeguarding the smooth functioning of the pipeline, but Germany and others on the receiving end will have exactly the same interest. This should make the pipeline more an object for mutual security cooperation rather than a source of conflict.
This is of course what interdependence is about: creating mutual interest in safeguarding the security of supply. Western Europe is not getting its energy imports for free, and Russia will have an equal interest to see that the markets which buy their energy will not be distrupted thus cutting of the supply of money which is now nourishing the Russian economy.
Indeed, it should be noted that the most serious instances of problems with security of Russian energy supplies have occured where the principles of transparent market pricing and contacts have not been applied. I have always argued, that if you get your gas with a 50 percent rebate compared to world market prices, you implicitely accept that the other 50 percent can be used for political purposes. And while subsidized cheap energy may look tempting, it has proven in the long term to be detrimental both for the subsidized country’s economic competitivety as well as the well-being of its environment. The more closely and transparantly energy trade follows market pricing, the less there will be possibilities and risks for political disruption.
This is the best-case description of the benefits of interdependence, and we do not live in a world or deal with a Russia where all the necessary conditions for this to apply are in place. Market pricing is not a sufficient condition without equality and reciprocity. At present there is a serious imbalance on both accounts. Russian energy policy is highly centralized with Gazprom an awowed arm of the Russian government, where as the European Union has so far notoriously failed to agree on any kind of meaningful common energy policy. Even the principle of the Single Market which is fundamental to the EU, is not respected and implemented for energy as it should be.
Reciprocity is also sorely lacking. The downstream investments in distribution networks of Gazprom and other Russian energy companies would and should be welcomed in the West as an element which strenghtens mutual interdependence, but only if and when Western energy companies have the same possibilities for investing securely in Russia. As we have seen this is not case; new investment is not welcomed and older foreign investment in the energy sector has been subject to harassment on thinly veiled pretexes.
The tragedy is, that this kind of policy does not serve Russia’s long-term interests either. Without foreign investment gas and oil production in Russia will inevitably peak, creating a situation where Russia’s ability to fulfill its contract obligations will be jeopardized. This is also an issue of energy supply security for its customers.
The principles which should guide European energy policies in general and its policy towards Russia in particular are not difficult to state, but they are much harder to implement. It would help, if there was first a common agreement on these and a firm commitment by all to follow them.
Erkki Tuomioja MP
President of the Nordic Council
former Finnish Minister for Foreign Affairs