Russia’s contract to use Ukrainian pipelines to ship natural gas to Europe expires on Dec. 31. The last time the contract was up for negotiation, Russia stopped gas shipments for 13 days in the depths of winter. The result was freezing temperatures in homes from Sofia to Rome. Since then, Russia has built or is building a web of pipelines that will allow it to cut gas flows selectively without interrupting service to other customers.
According to the Institute of Energy Economics at the University of Koeln (Cologne), there are approximately 240 billion cubic meters (bcm) annually of gas transmission capacity linking Russia to Europe: around 43 bcm/a (including Yamal) through Belarus and Poland, up to 120 bcm/a via Ukraine, 16 bcm/a via Blue Stream through the Black Sea/Turkey and 55 bcm/a via Nord Stream, plus additional pipelines into Finland and Baltic countries (around 6 bcm/a).
New construction includes Nord Stream 2 and TurkStream. These two projects together will be able to carry 87 bcm/a of Russian gas bypassing Ukraine. The ability of Nord Stream 2 to deliver gas is limited, however, by a European Court of Justice ruling on Sept. 10 that restricts the amount of product from Nord Stream 2 in the Opal connector pipeline to 50 percent of Opal’s usable capacity.
Nord Stream 2 will travel under the Baltic Sea to Germany without transiting other countries. The other pipeline to Germany goes through Belarus and Poland. With two different lines, Russia could force transit states to toe a Kremlin policy line by threatening to divert deliveries to other pipes. The United States long has opposed the construction of Nord Stream 2 for this reason. There is no economic justification for this pipeline — there is no additional Russian gas being produced. Like the alcoholic who swills the cheap hootch he knows eventually will kill him, however, Western Europe ignores the threat of American sanctions and continues to consume the cheap Russian energy supplies that will make it subservient to Moscow’s will.
Nor is the threat of diversion an idle one. If no contract is reached and Ukraine ceases to be a transit state, Europe may not immediately suffer a shortage, but prices would spike. The Institute reports European storage inventories close to their maximum and prices at multi-year lows. For Ukraine, however, the effect would be catastrophic. The Institute estimates that in the first three months of a cutoff, Ukraine would lose €0.5 billion in transit fees.
TurkStream is being built as a rival to the Southern Energy Corridor, which is an alternative to reliance on Russian energy. Russia is building TurkStream in two lines, with 15.75 bcm annual capacity each; the first leg is aimed at supplying Turkey and the second one would run further, from Bulgaria to Serbia and Hungary.
Former U.S. Interior Secretary Secretary Ryan Zinke says the economic answer to Russia is leveraging and replacing fuels. This could include the European goal of more reusable energy sources, or replacing the source of the fuels our allies currently use.
The Southern Energy Corridor is a reliable supplier of non-Russian energy. It began with the construction of the Baku-Tbilisi-Ceyhan oil pipeline. Since its inception in 2006, this energy highway has carried over 3 billion barrels of Azerbaijani oil from its offshore fields to the Mediterranean. In fact, Azerbaijan produces an estimated 40 to 45 percent of all oil consumed in Israel, with the remaining oil being shipped to Europe via tankers. In April 2019, British Petroleum signed an agreement to continue pumping the oil through 2050. BP also agreed to invest an additional $6 billion for the development of the giant Azeri-Chirag-Deepwater Gunashli oilfield complex. This will bring new production online by 2023.
Azerbaijan is becoming an important alternative source of natural gas for southern Europe. The Trans-Anatolian Natural Gas Pipeline (TANAP) became operational in 2018, providing up to 16 bcm of gas from the Shah Deniz II field in Azerbaijan to the Turkish market. Its onward connection, the Trans-Adriatic Pipeline (TAP), running from the Turkish border through Greece and Albania to Italy, is expected to come online sometime in late 2020. This will provide an additional 16 bcm/a to southeastern Europe.
If the Trans-Caspian Pipeline (TCP) is ever constructed to connect Turkmenistan production with TANAP, additional lines could be constructed to deliver 40 bcm/a of non-Russian gas to NATO allies. In June 2019, the Council of the European Union endorsed the implementation of joint energy and transport connectivity projects in which the bridging potential of the Black and Caspian Seas is fully used. This would mean the construction of the TCP. Turkmenistan has spent billions of dollars to link its gas fields to the Caspian, and Azerbaijan has agreed to act as a transit state. Despite the 2018 agreement on the status of the Caspian, Iran and Russia continue to oppose construction of this vital energy link.
Ronald Reagan was the first American president to warn about Europe becoming overly reliant on Russian (then Soviet) energy supplies. At the Ottawa Summit of July 1981, Reagan pursued a strategy that envisaged a coordinated diplomatic offensive to convince Western allies to abandon their participation in the Yamal pipeline project. He considered it one of Soviet Union’s most significant tools to spread Moscow’s influence over Europe and the Western Alliance.
Europe ignored Reagan’s warnings then, and they continue today to ignore the security peril in which they place themselves. The United States should encourage Europe to exploit fully non-Russian sources of energy. The Southern Energy Corridor is a good start, as is the exploration of natural gas fields in the eastern Mediterranean.
The U.S. also should insist that the European Commission implements fully its Third Energy Package. This set of rules was created to increase competition and decrease reliance on Russia. It states that the owner of the pipeline cannot own the gas within it. This would force Russia to continue to use Ukraine as a transit country, since Gazprom owns both Nord Stream 2 and the energy it carries. These measures together go a long way toward breaking the umbilical cord to Moscow.
James J. Coyle, Ph.D., served in a number of positions in the U.S. government, including as director of Middle East Studies, U.S. Army War College. He is the author of “Russia’s Border Wars and Frozen Conflicts.”