EU-Russia Energy Relations: Western Concerns About Energy Dependence on Russia in Terms of Oil and Gas, Research Paper Example

Introduction

In this paper I am going to examine processes of formulation and implementation of energy policy of Russian Federation, as well as key dimensions and possibilities of the Russia-EU energy relations. The main challenge for this research is to analyze the Russia’s energy policy towards the European Union as one the leading economic actors. Moreover, I will focus on Russia as a crucial element in Europe’s energy politics, based on the common strategies of integration and diversification of supply. Also it is important to keep in mind the Europe’s awareness of strengthening Russian power after the Cold War.
The viewpoint taken in this paper presents the mechanisms of European energy security, which became linked with Russian foreign policy, and interests of a number of non-transparent energy corporations (such as Gazprom), and the effective strategies for further energy market liberalization and security of supply. Also, the special emphasis is put on analyzing the transparency as a part of collective effort to adopt necessary rules and regulations for energy trade at the European Commission.
I will first argue that Russia’s energy strategy nowadays reflects the geopolitical vision of Vladimir Putin, with the heavy emphasis on energy as the central element of country’s future economic development. Second, I will suggest that this priority was subordinated to economic interests of Russian ruling elites and the strategy of expansion of Russian interests abroad, especially in the CIS area, and is firmly based of available economic resources. Third, energy, especially natural gas and oil, now represents the most effective and “civilized” power political instrument for the Russian government in the international arena. For many years to come, it will stay as an important tool in Russia’s bargaining with its European neighbors in the creation of a new security political and economic architecture for Eurasia.
Now Russia with the new President Dmitry Medvedev, will continue the same policy with much more resources available. Moscow will use this instrument in a pragmatic way, converting Russia’s stable supply of energy to European markets into financial resources and growing economic integration with its most important neighboring countries. At the same time, relations with former Soviet republics are rather directed towards concessions in the control of pipelines, investments into energy infrastructure and, as a final result, towards total economic control by Russian public and private companies of major energy assets in the CIS area.
Therefore, this paper considers the complexity of Russian-Ukraine energy relations and several energy supply crises occurred as a result. The crises in question have demonstrated the problematic level of dependence of the EU, especially on the part of some of its new member states, on Russian gas supplies as well as the excessive dependence on the Ukrainian transit system in delivering these supplies. Thus, Russia and Ukraine, both now with damaged credibility, would remain central to the security of European gas supplies along with the complexity of their bilateral relations and will continue to constitute a challenge to the EU energy security policy and its foreign policy developments. Europe’s dependency and alternative ways to get GAS and OIL from other countries should also be reconsidered.
Consequently, I agree with the argument presented by Andrew Monaghan in one of his recent analyses, in his words, “energy security thinking must move from notions of “dependence” and “producer against consumer” towards a more cooperative mindset”[1]. He proposes a three-pronged strategy for the EU: it must improve its energy efficiency; enhance its relations with key transit states; and devote time to building a more effective relationship with Russia. This relationship implies developing practical cooperation to protect critical infrastructure, investing in Russia’s domestic efficiency and investing in the Russian energy sector[2] .

Review of Sources

When research is focused on a contemporary phenomenon, like mine, the sources investigated cannot be classical and, therefore, they can range in the level of prognosis success. Moreover, many of the sources, especially media ones, may be found rather subjective, but they are adequate in terms of expressing viewpoints either stated by the governments or shared by populations of certain countries.

For theoretical platform, I studied the works by P. Aalto, D. Dusseault, M. Kennedy, M. Kivinen, A. Giddens, J. Sherr, K. Smith, M. Soroos, L. Grigoriev, A. Chaplygina, K. Borisocheva, and A. Monaghan. They present different models of international relationships with a view to energy trade and discuss the question of Russia’s aspirations for being an “energy superpower” as either realistic and, therefore, threatening or rather rhetorical. In the course of my work, I specify each author’s viewpoints.

It has been especially important for me to create a comprehensive picture of Russo-Western energy relationships, which involved the use of both Russian and Western sources on the subject. If Western sources mainly differ in the extent to which they find Russia’s self-positioning as an “energy superpower” threatening and what measures should be taken accordingly, Russian sources fall into two big categories. The first group of Russian sources, such as the works by N.A. Simonia, offer full support to the point of view of the Russian government, while the second group, which includes, for example, the works by Yulia Latynina, Mikhail Subbotin etc., presents an opposition point of view and criticizes the determining governmental line in the energy sector.

I also based my research on a number of media sources reporting the events of the last years in the world energy sector.

Social Structurationist Approaches to Global Energy Politics

In this section of my paper I will discuss conceptual challenges associated with the current situation on the world energy market. The challenges emerge from the international debate with its current focus on Russia’s aspirations for becoming or being an “energy superpower” voiced on the governmental level[3]. While many consider it an overstatement and prefer a more neutral term “energy giant” which acknowledges Russian potential in the energy sector but doubts its overriding influence, others are alarmed with such positioning of the country and already dub it a “coercive energy policy” or allude to its “neo-colonial characteristics” in its energy policy[4].

The main items of the debate, which are to be elaborated on further, are as follows:

• Due to Russia’s richness in natural resources[5] and high production volumes in the sphere as well as due to its location which makes it an important transit country, Russia has become a major producer on the global energy market, especially in the situation when European reserves are almost exhausted and it depends on import almost totally.
• The former Russian president Vladimir Putin’s administration has been making consistent and successful efforts aimed at increasing governmental participation in and control over the national energy sector. As a result, Russian foreign energy policy is greatly influenced by its political interests and is often used as a means of promoting them[6].
• Russia exercises control over a vast pipeline network on the territory of the former Soviet Union, including the Central Asian region[7], which bears special strategic importance as a strong energy producer and is often bottlenecked by Russia on its independent way to European market[8].

The context of such self-positioning by Russia and Western concerns arising in response has been interpreted within a number of theoretical models.

One should take into account here that the analysis is being made on the basis of empirically informative articles and reports which tend to be descriptive policy oriented and are either agent-centric or structure-centric.

The first theoretical model to be considered is one by Barysch and Johnson. It views energy diplomacy, demonstrates the ways it uncovers the main obstacles in the process of Eurasian economic integration, as well as enables to better understand what nowadays triggers EU—Russia relations in politics[9]. While this international relations approach employs data based upon empirical research on diplomatic negotiations on different levels (both state and regional ones), it provides us with a detailed picture of economic relations between exporters and importers.

Another approach, which is developed by Kalicki, Bahgat and Goldwyn, views the EU-Russia economic relations and the use of energy resources in the scope of global geopolitics[10]. It is called energy security approach. Here detailed study on interregional conflicts and wars is said to be of major importance[11]. As well as the first model mentioned, this one needs analyzing policies of states, regional blocs and institutions, and their political leaders as well as state-bound companies. As an example of the issue studied on the basis of the energy security approach may be given Russo — Ukrainian energy conflict 2009[12].

The explanatory model, which was described by Palonkorpi, makes an attempt to examine the problem from various perspectives including structure-centric study methods. The main concept here is that what does not seem sensible from the outside can make sense if comprehended from the inside[13].  Thus, while EU member states perceive Russia’s policy as an attempt to gain more power in international relations, from the point of view of Russian government the country logically moves in the direction of international security of markets and demand.

It is well known that in most cases different scientific approaches need to be combined, while it contributes to obtaining more precise information on objects studied. Thus, Stern, Sagers, Correlje and Linde suggest that one should link above-mentioned geopolitical approach to common research on trade and energy economics on the whole[14]. The fact that the latter one enables scientists to evaluate quantities (not just abstract notions) indicates the effectiveness of the combination like this. However, in comparison with the explanatory model this one is proved to be agent-centric[15].

In addition one cannot but mention the possibility of combining transition studies, as well as political sociology, bureaucratic and regional politics models, which were described by Kennedy and Kivinen[16].

It is important to underline that there exist models that try to make use of both agent-centric and structure-centric approaches. They were described by Anthony Giddens and Alexander Wendt, who argue for the view of structures as cultural schemata and discuss the role of events in transforming actor-structure constellations[17]. The same is mentioned in William Sewell’s work[18]. Thus, they support the point of view that both domestic and global levels of analysis are of high importance in evaluating energy policy. They also state that this theoretical model is highly dynamic and enables to trace EU-Russia energy dialogue in progress.

As the first step, Giddens’ argument can be taken against establishing direct causal links from actors to structural outcomes. The structural outcome in this approach is the formation of Russia’s energy policy and its impacts domestically and internationally. Giddens suggests that interaction among actors, their interests, and the structures which enable and constrain these is essentially complex[19]. In other words, actor agency does not occur in a vacuum. Actors’ preference formation and benefit maximization strategies are mediated by the structural positions they occupy at a given time, and the structures that shape their behavior are a result of that strategic action, and patterns of practice that have preceded it[20]. Under these conditions, one needs to attend both to recognized and unacknowledged conditions of action – ranging from physical-material facts to socially conditioned rewards and sanctions, and to those structural factors limiting the options available – and to the intended and unintended consequences of this action[21].

Nevertheless, in spite of the fact that Giddens’ theory seems to explain the majority of social factors which influence actors’ choices, it may be strictly limited by particular qualities of the actor, as well as conditions specifying it (so called “time-geographies”)[22]. Here one can also mention such factors as climate, geography, pipelines, transport routes, investment possibilities and energy infrastructure which may hinder research.

While Giddens explains his structurationist theory predominantly on the regional level, within the state, Wendt adapts the same ideas to the international level. He believes that the interaction between states, conflict of interests, as well as privity makes state leaders change their policy according to the demand of the system and, therefore, provides the most effective way of interaction. In other words, interests of states are not satisfied directly but through a process of competition and interaction[23].

Very important in Wendt’s theory is the fact that he compares state-actors to people-actors and here means to deliver the idea that along with pursuing one’s ambitious interests each state needs satisfying “materially based needs and desires dictated by evolution just like people-actors: they need physical security, have expectations about the natural world around them, need to be in contact with other states and acquire a place among them, and need to re-make their material circumstances”[24].

Although Giddens’ and Wendt’s models do not deal directly with the problem of international energy politics, they provide us with a good theoretical basis which explains how international relations may be influenced by inner state developments[25]. Later they were used by other researchers for explanation of more specific and applicative questions. Thus, William Sewell applied their ideas to the problem of energy politics in his work – The Logics of History: Social Theory and Social Transformation.

However, one should take into account that Sewell not just adopts their ideas but debates them. Specifically speaking of rules developed to support the structure he prefers to use the term “schemas”, while, in his opinion, “rules” imply generalization which is impossible in relation to social institutions[26]. The same concerns the word “resources” which William Sewell prefers to use only in the context of a material exchangeable commodity[27]. As for the meaning “resource as the component of structure” he is again inclined to use “schema” as a more illustrative notion.

The importance of Sewell’s work consists also in the fact that he made an attempt to distinguish for dimensions of structure in order to illustrate its work in the most understandable way.

• Physical and environmental dimensions of structure, which include the spatial and temporal accessibility; the means of production; the terrain including pipeline, railroad and port building geography; distribution grids and other channels for reaching the final consumers; as well as climate and perspectives of its change[28].
• Financial dimensions of structure, which include investment and exploration resources, commodity prices, as well as size and evolution of domestic and international markets[29].
• Informational dimensions of structure comprising the technology that distributes it, the institutions that provide their work, and the people who get and, consequently, transmit it[30].
• The institutions which regulate and allocate financial resources, as well as organize the production, distribution, and consumption of energy resources[31].

Another revision William Sewell applied to the structurationist models of Giddens and Wendt concerns the flow of identity formation and discourse through events. According to Sewell, events may lead to drastic changes in a structure, which in their turn may affect all the components of the structure. At the same time the researcher states that these events become subject to transformation only through their prior implication in the social aspects of structure[32]. Sewell considers that for this process to take place two requirements should be met. First, cultural categories should be used to recognize changes in a structure through. Second, these events should be the result of attempts to keep existing priorities in context of new circumstances[33].

The effectiveness of this idea can be demonstrated on the instance of Russo-Ukrainian gas conflict of 2008, when one had to trace how new formulations of problems could develop in the course of events[34].

To conclude this part of my research, I managed to view the main theoretical models which could help me to look into the process of Russia becoming the leader of the global energy policy, as well as the best ways EU states can establish the interaction with this country[35]. I found out that there are three researchers who having taken as a basis the ideas of their colleagues (Barysch, Johnson, Kalicki, Bahgat, etc.) developed the theories enabling me to evaluate how both social and material aspects shape Russia’s energy political agency in two different structural environments – in the European direction and in the Far East[36]. The factors that help to get an insight into the problem are as follows: physical, environmental, financial, informational and institutional ones, as well as mode of transformation, and the role of events[37].

Moreover, these models appear crucial in an attempt to understand if Russia as the largest energy supplier will be able to remain a reliable partner or it is already turning to an aggressive oppositionist struggling for world domination.

Energy Sector in Russia’s Economy and Politics

Natural Reserves

This is a brief overview of the events and situations on the Western and Russian oil and gas arena of the last five years. Oil and gas industry has kept its decisive role in the development of the world economy and the energetic security of developed countries is determined by the availability of reliable suppliers[38]. While developed countries are the chief oil and gas consumers, the bulk of export-oriented production is concentrated in a relatively small group of developing countries. For example, the United States consume 25,4% of the world production of oil but produce only 9,9%[39]. Moreover, North-East Asian countries (Japan, Southern Korea, and Taiwan) do not produce oil at all consuming, nevertheless, 11% of the world production. Among oil and gas producers and exporters, Middle East holds the first place with its 28,5% of produced world oil and only 5,9% of the consumed. Russia comes just after with its 10,7% of production and 3,5% of consumption[40].

Just like oil came to replace coal in the world energy balance, gas is now coming to replace oil or at least put it on the second place. Gas is three times less harmful than oil in terms of environmental pollution[41]. Gas resources are used by a roughly similar geographical scheme. Although the United States are the second larges gas producer (21,7% of the world gas), they consume more than produce (26,3%) and consumption grows annually with the majority of new electric stations working on gas[42]. The European Union is even more dependent on gas import with gas consumption amounting to 15,2% and production of only 8,3%[43]. The European strategy in terms of gas and oil is that of domineering consumption due to the exhaustion of European resources and increasing convergence of gas and electricity production. Like in case of oil, the developed countries of North-Eastern Asia fully rely on the import of gas, usually liquefied natural gas.

Russia remains the leading exporter of natural gas. The country produces 22% of the fuel. Despite the fact that Russian domestic consumption is quite substantial and takes 15,3% of the world gas, its export potential (the difference between production and consumption) exceeds the total export potential of three regions – Middle East, Africa, South and Central America. In fact, Saudi Arabia consumes the whole of the gas produced by it, and in Iran consumption even exceeds production. Qatar and the Untied Arab Emirates export mainly to the neighbouring countries. Indonesia, Malaysia, and Australia can boast a considerable export potential – 6,2% in production against 3,4% in consumption[44].

In the year 2005 Western Europe as a whole was the main importer of oil and gas. The lion’s share came from Russia (214,6 million tones), Middle East (161,1 million tones) and North Africa (122,5 million tones)[45]. The Unites States import 26% of all the world’s oil and related products (561 million tones), but the structure of import has been farsightedly diversified[46]. The main part (171,7 million tones) came from Canada and Mexico – the North American Free Trade Agreement partners. 119,2 million tones were imported from South and Central America, 69,1 – from Africa, 57,0 – from Europe, 114,7 – from Middle East, 12,8 – from the Asia Pacific Region, and only 9,8 million tones came from Russia. Furthermore, unlike Western Europe, the United States have their own oil and gas reserves which are not developed currently but may be used in case of emergency[47].

Western Europe is the leading importer of pipeline gas with Russia as its main supplier. Undoubtedly, Russia possesses the record amount of evident natural gas resources – 30% of all the world resources which are to satisfy another 89 years of development[48]. Europe possesses only 8,7% of resources, with the exhaustion of British resources predicted in a couple of years and Norwegian – in less than 30 years.

Iran comes after Russian with 14,8% of the world natural gas resources which are unlikely to be exhausted within another 100 years[49]. Qatar follows with 9,2% and greater political attractiveness. In Africa, considerable resources exist in Algeria, Nigeria, and Egypt. Indonesia and Malaysia possess only 1,7% and 1,4% for 33 and 38 years respectively[50]. All the three countries of North America possess 4,6% of the world resources for another 6 years. South and Central America with their 4,5% of natural gas resources for 64 years are unlikely to help their northern neighbors because of the growing domestic market[51]. The only serious gas exporter here is Trinidad and Tobago. It means that the United States are in tough competition with Europe and North-Eastern Asia for gas. A new actor in the field is China with its rapidly growing demand for gas[52]. Under the circumstances, Russia appears an indispensable exporter.

However, the situation is far from being just that of mutually profitable export, import or even competition. Oil and gas issues have become an integral part of state policies and debates about them are the debates between presidents and ministers, not only oil and gas company executives[53]. In Europe the majority of energy companies are state owned partially or completely. This is the reason why energy issues immediately become elements of foreign policy. In order to understand the nature of current debates between Europe and Russia, it is essential to perceive the components of European energy policy and, on the other hand, the components of Russian oil and gas infrastructure and Russian energy policy.

It should be mentioned that the European energy policy is not the result of a determining policy-making effort of a monolithic body. It is rather a vector of collective efforts of all the stakeholders[54] within the current bureaucratic framework[55]. The current European integration process works as a drive in forming a single direction of energy policy. In fact, European energy policy implies today the management of external energy supplies to the European Union[56]. Many scholars are inclined to talk now about pan-European energy policy – a notion strikingly different from governmental and national policy as well as from foreign policy of a particular member state. Pan-European energy policy can be understood at this stage as a voiced “call for an energy policy within the wider European area”[57].  Apart from building a desirable partnership with the supplier, energy policy should comprise relationships with EU-Russian borderlands, especially Belarus and Ukraine, which act as transit lands. In addition, transit issues within the territory of the European Union are not to be neglected[58].

The Russian Federation relies heavily on its natural resources for both its inner prosperity and its foreign status. I have already described the richness of Russian oil and gas sources, which is undoubted. It should also be understood that Russia is not only a producer and exporter of gas and oil, but also an important transit land for the gas which comes to Europe from Middle and Central Asia[59]. There are 48.000 kilometers of oil pipelines, 18.000 km of oil products pipelines as well as the world record of 154.000 gas pipelines on the territory of the Russian Federation. The pipelines are either state owned or fully controlled by public institutions. In its capacity as a producing country, Russia resembles Kazakhstan and Turkmenistan, but as a transit country Russia plays the same role as Ukraine and Belarus[60]. Both exporting countries and transit countries seem to copy from the Russian style of energy management. For example, Ukraine and Belarus imitate Russian behavior in terms of gas transit.

The Russian economy depends heavily on petro-dollars obtained from oil and gas export. It has been energy export that enabled Russia to pay back its foreign debts, to boost Russian stabilization fund, and to expand the currency reserves of the Central Bank of Russia[61]. Russia has become able to maintain a non-deficit budget and steady the ruble’s exchange rate. The higher energy prices are, the more prosperous Russian economy is. High oil and gas prices in the pre-crisis period strengthened the Russian economy considerably and accounted for the appeal of Putin’s government to the majority of Russians[62].

The Kremlin counts on the presumed comparative advantages which Russia gains in particular due to its natural resources. The country positions itself as a leader in the post-Soviet area. Russia supports state owned and private companies on the territory of the former Soviet Union and in the direction of the European Union[63]. The Kremlin believes that the penetration of Russian capital into European national economies is likely to result in the increased Russian influence in foreign policies. The implementation of this program is impossible without the crutch of energy export[64].

Unlike Norway, Saudi Arabia, Brazil, Malaysia, and many other countries in which the main part of oil producing companies are state-owned[65], Russia has a strikingly small number of state-owned companies. The only large public oil company is Rosneft. It would be natural in this context to expect the Russian government to be willing to assume the leading role in the energy sector within the country. In fact, this was one of the tasks clearly set by Vladimir Putin’s administration for itself. By the year 2009, their success was almost full. In 2001, Putin changed the leadership of Gazprom, Russia’s largest oil and gas company, and concentrated about 50% of the company’s assets in the hands of its new administration (these assets had previously been trusted to “friendly companies”). After that, members of Putin’s administration took over a number of Russia’s largest energy companies. It was a soft yet firm nationalization of private energy companies. The main area of governmental control is the strategy of energy transportation[66]. Routes for new pipelines, building of terminals, establishing partnerships in investment and contracting lies within the sphere of government control. In the field of gas production, the Presidential administration went as far as establishing control over exploration of natural gas. Moreover, it is the state government which decides now on the questions of allowing entry into the Russian market for foreign energy companies. Vladimir Putin also got tight on tax havens which hid a number of Russian oil companies.

The Russian business community tried to resist nationalization and the resulting tightening of the tax system but was forced to pay the full sum of taxes to the federal and regional budgets. Putin ruined a number of Russian “oligarchs” – rich and influential businessmen and politicians who could create a real opposition to the Kremlin[67]. These representatives of private capital in the energy business seemed to have been much more diplomatically and commercially successful in international trade than the Russian government with its traditionally pushy style[68]. With this respects, Europe will never welcome the nationalization of the Russian energy infrastructure.

Origins and Priorities of Vladimir Putin’s Energy Policy

The nationalization of the Russian energy sector makes it essential for me to investigate the Russian foreign policy program. This program as defined by former President Vladimir Putin in 2000 focuses mainly on economic development as a security platform. Although not explicitly mentioned in the early documents of Putin’s presidentship, the energy sector falls in the category of the Russian companies whose interests are to be protected on foreign markets by the federal government and embassies[69].

The Russian Energy Strategy for 2020, the first version of which was signed in 2000, describes the problems of energy policy and its suggested solutions. The document makes a point about the desired cooperation between federal institutions and private companies and leaves the leading role in decision-making to the government and parliament of Russia. In Putin’s own words, “we are not going to divide Gazprom[70]. The EU Commission should not have any illusions: in the case of gas, it has to deal with the state. The gas pipeline network is the creation of the Soviet Union, and it is only the Russian Federation which can keep it in a functioning order, even if we speak about its parts located outside Russian territory” [71].

Categoric as it was, the declaration challenged the interests of American and European policymakers who were hoping to see Russian energy markets liberalized and opened for foreign investments and corporations and thus boost Western presence in the Russian energy sector.

The nationalization of Russia’s natural resources was presented in Putin’s program as an all-important step in the restoration of the country’s economic power[72]. Already in his doubtful dissertation Putin promoted the idea that market forces will never ensure favorable economic conditions and social stability for Russia and it is only the government-controlled economy that can push the country to prosperity[73]. Foreign investment, even if welcome, should leave the dominant position to federal administration.

Russian Oil and Gas Companies

It is difficult to evaluate the current role of leading Russian oil and gas companies in decision-making concerning foreign policy and economy. The abovementioned Putin’s efforts to reduce their influence succeeded in decreasing the lobbying capacity of private companies. On the other hand, many Russian energy corporations managed to continue building up economic capacity and ten of them never left the list of top fifty of the world’s largest oil companies[74] despite the global economic crisis. In fact, in the year 2009 there are only two large Russian companies whose controlling stakes are state-owned. In other cases, regulation is performed mainly through legislation and a number of “informal rules of the game”[75].

Any Russian energy company who would decide to do without the patronage of the Federal government would have to face a number of bottlenecks. For example, the underdeveloped export infrastructure, especially port terminals, which will not enable the company to avoid state-owned facilities[76]. Moreover, it is very hard to find enough domestic investments for the company. And finally, new deposits of energy are taken into at a very slow speed[77]. All these factors make cooperation with the government and regional authorities vital. Even if the company has a cushion of foreign investments and advanced technologies, it is most unlikely to get through the corrupted bureaucratic apparatus without government approval[78].

It should also be mentioned that the legal base and tax exemptions devised for foreign companies willing to participate in the Russian energy sector are often notoriously vague and ambiguous. It is extremely discouraging for a number of Western and Asian energy companies who would otherwise invest in the Russian energy industry, which in its turn stifles its development.

OAO Gazprom

OAO Gazprom is at the heart of Russian politics and economy and its role has to be discussed separately. It has even been dubbed by some “Russia’s ministry of Foreign Affairs for the 21^st century”[79]. In fact, Gazprom’s executives are no less powerful than Russian state officials when it comes, for instance, to their relationships with other post-Soviet countries[80].

Russia’s largest state-owned corporation, Gazprom is at the same time the world’s biggest gas company with its 17% of the world’s gas resources and more than 20% of the total world gas production. As to its part in the Russian production, it is responsible for more than 85% of it. It also owns all export and major pipelines and is privileged with the right to ship gas to international markets[81].

A change on the global energy market associated with opening new markets in the Asian-Pacific region, oil prices rise and the formation of a new European regulatory framework induced Gazprom to change its policy, too. What had been “big pipeline” policy was replaced with “big business” policy[82].Gazprom faced the need to expand its production to previously conserved territories with often difficult climatic conditions and to start working not only with natural gas but with oil and coal as well and launch the production of liquefied natural gas to be able to adjust to the changing demand. It meant that the company needed a strong inflow of investments and new technology. Gazprom had to develop the image of a global company open to international partnership in the form of asset swaps with foreign partners, selling shares on the open market etc. Although it led to a considerable increase in capitalization, Gazprom is protected from changes in the ownership structure by the law according to which the majority of stock is owned by the government[83].

To elaborate on the change of Gazprom’s policy from “big pipeline” to the “big business” concept, I would mention four components of this change. First, it implies a diversification of the market (not only export to Europe, but also to the Asia-Pacific region). Second, maximizing profit instead of maximizing gas volume. Third, raising the proportion of gas import from Central Asia and expanding the production beyond the former Soviet territories instead of working mainly with domestic sources. Moreover, the new policy suggested upstream and downstream integration of Russian energy companies in the international business with a particular focus on Central Asian area[84].

Gazprom is also willing to take advantage of the liberalization of the European gas market and acquire immediate access to end-consumers due to it. This initiative, however, is met with resistance on the part of several European countries. For example, in 2007 the EU Commission adopted the decision on strategic foreign investments according to which companies from third countries cannot control community transmission system or its operator unless it is separately agreed on between the European Union and the third country [85].

Europe, which still remains the crucial market for Gazprom, may impede its expansion in a number of ways. One of the possible challenges which Gazprom will have to face has already been mentioned – it is regulatory barriers. Another includes toughening competition and unpredictable price and volume fluctuations[86].

Gazprom will not welcome the European initiative to revise long-term contracts which are the foundation of Gazprom’s commerce in Europe. They are based on a “take or pay” or “minimum mandatory purchase (MMP)” provision which guarantees steady gas supply and prices for end-users. Under the long-term agreements, Gazprom can be sure that its multibillion dollar investments will be repaid in return for the steady gas flow[87]. With industrial incentives such as the development of Yamal peninsula or Stockman gas field, it is only natural that Gazrpom prefers the stability of long-term agreements and is reluctant to rely on short-term contracts.

The global energy sector is today gravely affected by price volatility. For Gazprom in particular this can mean further problems in attracting investments. Price fluctuations on spot markets combined with oil prices fluctuations weaken the existing contracting system[88]. The liberalization of European gas market is going to create greater competition and, as a result, lead to a decrease in gas prices. However, it is felt by the experts that price instability would harm Gazprom worse than just a general but steady decrease[89].

Another problem is associated with low predictability of demand rate on the European market. Despite the fact that Europe has been expected to substantially increase its demand for gas, the current economic recession and implementing energy efficiency programs are likely to affect the demand.

In addition, the political component of Gazprom’s image cannot be neglected. As a state-owned company, Gazprom embodies not only Russian economic initiatives, but also its political interests. The tendency in recent years has been for the government to turn Gazprom into a “national champion”, which means that Gazprom will be a promoter of the Russian pushy diplomatic style with less respect for international rules of operation. At the same time, Gazprom will strive for being profitable, efficient, and commercially oriented (after all, 49% of its stock is in private ownership) and succeed in international competition[90]. From the commercial viewpoint, it cannot be denied that politization is beneficial for Gazprom because it induces the company to move away from successful business style.

It is felt at the European energy market that Gazprom’s integration is only possible if the company changes its business image and adjusts to the existing behavior standards of international energy companies[91]. Naturally, the limitation of the status of foreign partners to minority share-holders in Gazprom does not appeal to Europe. In the new export projects, Gazprom will have to put up with equal cooperation with foreign companies. Gazprom does not remain rigid, and joint projects which operate on this principle are already in progress. For example, the Gazprom-ENI cooperation in Astrakhan, the Blue Stream and South Stream parity projects, the Gazprom-Wintershall joint venture (Urengoi), the Gazprom-Total-Statoil in Stockman field, the Gazprom-BASF-E, and cooperation at the North-European gas pipeline (NEGP) and gas fields in southern Russia[92].

Gazprom can be characterized by an inherent dichotomy[93]. On the one hand, it is a powerful corporation which is willing and deserves to be an integral part of international energy business. In this capacity, Gazprom is an organization which is ready for business dialogues and has a vested interest in establishing the relationships of trust embodied in long-term contracts. On the other hand, Gazprom is the promoter of the Russian political program. The second image makes it much less flexible on the international market and limits free and mutually beneficial cooperation[94].

Russia and EU Energy Relations

European Dependence and Russian Energy Leverage 

How does Europe view its energy-related relationships with Russia? Europe’s strategy is clearly that of reducing the proportion of Russian oil and gas at its market, primarily, by diversification of the import. Another possible solution lies in the field of innovation and is associated with combating the European energy insecurity by finding carbon-neutral energy sources such as nuclear power[95]. The concerns about Russian export voiced or felt by Europe are as follows.

First, Russia regards its energy security as “the most important element in Russia’s national security” and explains the domineering role of state in the energy sector by its close connection with protecting the country both internally and externally[96]. The central role of energy in the Russian foreign policy makes it impossible for Europe to cooperate with Russia in the energy sector without cooperating on other issues, for example, in the Middle East[97]. Europe cannot be sure that any disagreement on seemingly unrelated issues of foreign policy will not result in blockage of energy supply on the part of Russia which tends to feel that oil and gas can work as its weapon. The threat is especially obvious with the Kremlin’s control over the Russian pipelines. The “gas wars” with Ukraine in 2006 and the beginning of 2009 are viewed by many as an example of withheld deliveries on the part of Russia used as a means of economic blackmail.

Another concern is with leveling off of oil and gas production in Russia which had been steadily on the rise before the global crisis. Leveling off, however, is associated with tough state control of energy sector which, in particular, is realized in tax regimes which discourage foreign investment rather than with the crisis. Europe is concerned about possible supply shortfalls caused by a possible fall in production and failure to produce the contracted amount of energy.

Moreover, Europe does not like Russian almost monopolistic ownership of pipelines which link the Caspian with Europe[98]. This control gives Russia a possibility to isolate Europe from access to upstream countries in Central Asia. Gas and oil import from these countries will only be possible with Moscow’s agreement.

In addition, systemic corruption characteristic of the Russian energy sector reduces the predictability of the Russian business behavior and interferes with Russia’s integration in the European market[99]. Apart from excessive governmental participation in the energy sector, corruption is contributed to by low development level of the natural gas market which creates possibility for Gazrpom to negotiate differential prices with its clients.

Corruption of the system is another obstacle on the way to working out a uniform European energy strategy[100]. There is not guarantee that Gazprom will not try and make use of its payoffs to political allies to impede European integration[101]. Nontransparency is also often and explanation to the delays and problems associated with projected construction of new pipelines, which Europe finds a sing of unpredictability and unreliability[102]. Grand pipeline projects offer lucrative opportunities for embezzlement which results in extremely low construction speed, like in the case with the Far Eastern Oil Pipeline[103]. Unfortunately, corruption marks the business style of nearly all post-Soviet states including Ukraine. Shady utilities such as RosUkrEnergo have long been the main source of corruption and the resulting political shakiness. For example, until 2008, Gazprom bought natural gas from Turkmenistan for approximately $130 per tcm and sold it to Ukraine twice as expensive. However, the difference mostly went as payoffs to Russian officials whose job was to prevent Western companies to obtain immediate access to Russian gas[104].

Political instability in Ukraine is partially explained by attempts of rival bureaucratic clans to secure the profits of oil and gas commerce for itself. The resulting fierce political struggle with quick turnover of people in power leaves a considerable hole in Ukraine’s national economy and makes the country unreliable and undesired as a transit agent. After the “gas war” of January 2009 Russia and Ukraine decided to disintegrate RosUkrEnergo from the energy sector and to pay Central Asian oil and gas producers prices at the European level. Although the steps are surely positive, they are unlikely to bring about fundamental changes to the corrupt systems. For the European Union, an effective solution in dealing with nontransparent partners is, first and foremost, strong legislation in the spheres of transit and ownership. Already present on the European energy market, Russian companies should be bear regulatory and judicial oversight[105].

Russian Corporate Investments in the EU’s Energy Sector

Europe is also preoccupied with Russian participation in European energy markets in the form of buying equity in European utilities (refineries or pipeline operators)[106].  Europe finds it hard to deal with mostly nontransparent Russian energy companies which may at any time appear to promote the Kremlin political line apart from pursuing their own economic interests[107]. Europe contemplates anxiously Moscow’s attempts to gain total control over oil and gas distribution infrastructure, especially on the territory of CIS. For instance, the “gas war” with Belarus of 2007 resulted in Gazprom’s acquisition of controlling stake in Belarusian pipeline monopoly BelTranzGaz. So important this controlling power was, that Gazprom decided to obtain it even at the expense of lowering gas delivery price to $100 per thousand cubic meters with a planned continuous rise to market prices within the next four years[108].

In general, cross-border investment should be desirable and profitable for both the EU and Russia. It creates interdependence, competition and the necessity to cooperate for the Western states and Russia. In the situation when both Europe and Russia accuse each other, no matter explicitly or not, of attempts at strategic manipulations, cross-border investment is a tool to ensure that interests of both parties are aligned[109]. However, it can only work if Europe and Russia make steps to reduce mistrust, i.e. for Russia to make its energy sector more transparent and less corrupt and for Europe to ensure steady demand.

Healthy and desirable as a step towards market liberalization in theory, the presence of Russian companies on the European market in fact brings about splitting and interferes with plans to create a unified energy market of the European Union with a definite strategy[110]. Although the European Commision failed to unbundled the operations of German and French energy monopolies, it attempts to divide Gazprom’s transportation and refining operations[111]. Moscow resists and accuses Europe of double standards for EU and non-EU members of the market. EU, in its turn, does not want to allow Gazprom to purchase transit infrastructure on the European territory. Under the circumstances Gazprom has decided to deal separately with members of the EU and signed a number of bilateral contracts with both transit countries and end-buyers: Romania, Bulgaria, Ukraine, Germany, Hungary, Austria, and Finland. Needless to say, that individual contracting makes it more difficult for Europe to promote a uniform energy strategy[112].

Asian Alternatives for European Consumers

Not only within Europe, but also between Europe and the United States there is a certain difference of opinions and policies in energy relations with Russia. While a number of EU states make a point of buying the maximum amount of gas from any of the available sources[113], the United States find it increasingly important to make Europe less dependent on Russia for supply[114]. Washington, on the other hand, contemplates the long-term task of building an east-west energy corridor leading form Caspian to Europe and crossing the border of neither Russia nor Iran.

The Baku-Tbilisi-Ceyhan (BTC) oil pipeline and Baku-Tbilisi-Erzurum gas pipeline were steps in implementation of the strategy. The BTC can transit 1,6 million cubic meters of crude oil per day through Kazakhstan, Azerbaijan, Georgia, and Turkey to be transported by sea to the European Union[115]. Another hope of Washington’s is with natural gas supplies from Azerbaijan and Central Asia (Kazakhstan and Turkmenistan) through a newly-built pipeline going beneath the Caspian Sea (the Trans-Caspian pipeline). On reaching Turkey by this pipeline, gas will be then transported to Europe by Nabucco, already negatively connoted as a sign of animosity in Russia (Russian view of Nabucco is to be described separately).

Russia challenges Nabucco with a rival project of the South Stream pipeline which is to be constructed by Gazprom in cooperation with the Italian energy firm Eni. South Stream is to connect the Russian Black Sea terminal Novorossiysk with Bulgaria by a submarine pipeline. In Bulgaria the pipeline will be divided into a southern branch (Greece and Italy), and northern branch (Serbia, Hungary, Slovenia, and Austria). Ideally, Nabucco and South Stream can operate simultaneously creating healthy competition[116]. However, the fact that they intend to transport enormous quantity of gas from nearly one and the same place to one and the same destination shows that both investments are rather parts of political games than real economic necessity. Moreover, the implementation of both projects is fraught with a number of problems, especially during the global economic recession[117].

Apart from financial problems, Nabucco can face with unequal commitment of different states involved in the project, especially after the war in Georgia of summer 2008[118]. The war showed that the Western influence on a number of post-Soviet republics bordering on Russia in the south is not as strong as it seemed to be[119]. Many leaders of Caspian states also interpret Western attitude to the war in Georgia as that of inability to protect Georgia against Russia, which makes them suspicious of not receiving adequate support when in need[120]. Afraid of spoiling the relationships with Russia, Caspian leaders may appear not ready to commit to Nabucco. Furthermore, it remains uncertain what countries will play the role of main suppliers for Nabucco. Kazakhstan, Turkmenistan, Azerbaijan, Iraq, and Egypt have been considered as candidates, but it has been only Azerbaijan whose interest in the project never wavered. It does not mean, however, that Azerbaijan is willing to work with Nabucco at the expense of its relationships with Russia. Russia is lobbying Baku to make a greater use of Russian pipelines and Baku tends to react positively[121].

In fact, unless Europe and the United States manage to secure a reliable energy supplier in Central Asia or the Arab Middle East, Nabucco will be senseless. It should also be mentioned that Russia made attempts to participate in the Nabucco project in different forms. Gazprom proposed to become part of Nabucco consortium. Although a number of European experts welcomed Gazprom, it was clear that Washington’s support of the project would have fallen dramatically if Russia entered[122].

Another problem is presented by Turkey which in its capacity as a transit country also fails to have earned Western trust. Greece, Hungary, and Bulgaria are afraid that Turkey may act like Russia and use withheld deliveries as a political step in pursuit of its own interests. It makes the three countries give support to South Stream as a means of diversification and, naturally, interferes with European attempts at uniformity[123].

Overall, it is felt that the Nabucco project lacks flexibility because it is too clearly a part of political agenda (in this case, the American one)[124]. Its freedom of Russian and Iranian participation may mean its freedom of Russian and Iranian gas. Although it may be good as a means of diversification, it is unlikely to be a solution so effective that it would be a real alternative to imports from Russia.

The Caspian Region and Diversification of Europe’s Energy Supplies

Any attempt at avoiding Russia in the energy sector means for Western countries building profitable economic and political relationships with the Caspian states supported by pipeline paths. However, for the time being it is only Azerbaijan which appears fully ready to cooperate[125]. The Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines helped the country to become economically and strategically independent from Russia. Via them Azerbaijan is supplying gas to Georgia and Turkey. Connected in the future to Greece and Italy, Azerbaijan is expected to accomplish a firm arrival on the EU market[126]. However, two other major energy producers Kazakhstan and Turkmenistan appear much more reluctant to change their traditional economic connection with Russia which is closer and already has a developed pipeline infrastructure[127]. Western failure to support a number of projects considered by Caspian leaders necessary did not contribute to flourishing relationships between Europe and the Caspian states.

With less oil than in Azerbaijan but more gas, Turkmenistan has long been supplying gas in Russian-controlled pipelines[128]. Negotiations with its administration were complicated by the unpredictable late president-for-life Saparmurat Niyazov. Russia bottled up all the Turkmen export routes and was enjoying significant discounts. However, president Niyazov died in December 2006, and the new president Gurbanguly Berdymukhammedov seems more open to diversification[129]. He is already exploring pipelines to South Asia, Iran, and China and does not appear as loyal to Russian export as his predecessor. In April 2008, he claimed a wish to participate in the projects which would allow to access the European market directly and offered to sell 11 bcm already in 2009[130].

It does not mean, however, that Turkmenistan reoriented its energy trade exclusively to the West and considers ending relationships with Russia whose cooperation Turkmenistan needs for both economic and political reasons. Already in May 2007 Turkmenistan signed an agreement with Russia and Kazakhstan to construct another pre-Caspian pipeline which would go along the northern shore of the Caspian Sea and transit natural gas to Russia. The pre-Caspian pipeline is obviously prioritized in comparison with Nabucco for Berdymukhammedov. The Russian market is familiar and closer geographically. Moreover, a number of analysts express concern about Turkmenistan’s ability to handle the projected diversification and to supply for both the pre-Caspian pipeline and Nabucco[131].

In conclusion, establishing long-term cooperation with Caspian countries is no easy task for the West. Russia is a historical partner and still enjoys great influence in the region[132]. To compete with Russia, the Western states will have to offer opportunities which would seem to Caspian leaders credible and profitable and would be realized in the near future. Timely financing is central in earning the trust of Caspian leaders. It may be beneficial for Europe to build the projected pipeline faster than Russia would build its pre-Caspian route[133]. However, construction speed cannot be the only competition item since Russia already has operating utilities in the region[134].

Integration and Diversification

Europe is now more than ever ready to take measures and reduce its energy dependence on Russia. Even the countries which always appeared reluctant to change the situation, such as Germany, have been pushed to consider some changes by the latest “gas war” between Moscow and Kyiv[135]. The global crisis with a radical fall in energy prices as an integral part of it creates a good opportunity for Western countries to take steps towards greater energy security. It may be argued that the crisis has made energy security less urgent for Europe, but it should also be taken into account that it has weakened Russia’s position on the European market because the demand has reduced considerably. Consequently, Europe’s bargaining opportunities have soared, especially in the issues of Gazprom’s potential unbundling, introducing a new regulatory framework etc[136].   Therefore, it is now when it is critical that Europe should develop an effective unified policy to secure itself in the view of the consequences of Russia’s energy-fueled resurgence.

What components should be included in a successful strategy for Western states? The most obvious tasks are as follows:

• to try and limit Russia’s freedom to obtain political advantage on the basis of record oil and gas production and export;
• to guarantee secure access to energy for all countries of the European Union;
• to support parity, respect and mutual profit between Russia, Ukraine and other neighboring production and / or transit countries in the questions of investment and ownership of energy resources and transport systems;
• to guarantee high levels of innovation and development in the energy sector due to adequate investment.

The strategy should be aimed at achieving diversification on Europe’s gas market which is expected to reduce Europe’s dependence on Russia caused by geopolitical reasons and make Russian investment less problematic. At the moment Europe does not regard Russia’s partnership dangerous and unreliable enough to exclude it from the energy market, for example, by refusing to buy its oil and gas. Moreover, Europe cannot afford it with the current demand and alternative pipelines developed only to the stage of projects. In addition, Europe understands that Russia also needs it as a large market and should be ready for cooperation. Europe needs to work out a unified energy security program for all the members of the Union. By correct and effective legislation as well as by tactful diversification, Europe will lay ground for Russia’s transformation into an active and reliable participant in Europe’s energy market.

It should be understood, however, that Russia may appear unwilling to abandon its aspirations for becoming “the energy superpower”[137]. The recent refusal of Russia to participate in the International Energy Charter may be viewed as a sign of it. The document was drawn up by the members of the European Union in the early 1990-s[138]. It was signed on December 17, 1991 in the Hague by a number of European countries as well as Australia, Canada, Turkey, the United States and Japan. Later Russia joined the Charter. The document aimed at creating certain regulations of relationships between exporting, importing and transit countries already at that time[139]. The Charter suggested a free access of European countries to Russian resources and pipelines but Russia already felt that its energy subjects had less access to European markets and end-users. Moscow only signed the document because it did not impose an obligation to give foreign investors access to Russian energy reserves. However, the country did not ratify the Charter[140]. According to a series of statements of the Russian government, the Charter did not observe Russian interests in the question of natural gas transit to Eastern Europe. In 2006, Europe again suggested to ratify the Charter and Moscow refused. The Russian Foreign Ministry made a point that although Russia was not fully against the Charter, it disapproved of a number of its provisions, especially the one which obliged Russia to make its pipelines available for free natural gas transit from Central Asia to the EU despite the fact that the transit protocol did not suggest that Gazprom would have free access to European pipelines in return.

After a series of “gas wars” between Russia and Ukraine or Belarus resulting in withheld gas deliveries to Europe, the latter reminded of the Charter seeing is as a step in the revision of international energy market functioning mechanisms[141]. But in April, 2009, the Prime Minister Vladimir Putin claimed directly that the International Energy Charter was senseless and played no role in the relationships between Moscow and Brussels. Moscow suggested an alternative document but it was not supported by the Western states[142]. The former Russian Deputy Minister of the Department of Energy Vladimir Milov called Russian refusal to join the International Energy Charter a purely political move[143]. In Russia, energy experts tend to find the Charter outdated and no longer able to serve as an instrument of global regulation. Russian commentators expect this refusal to meet with a new surge of disapproval on the part of Western countries caused by Russia’s reluctance to cooperate within the framework suggested by Europe[144]. It is generally felt that the Charter would work more effectively if Russia participated in it.

But to say that Europe needs to cut its energy relationships with Russia because continuing it is unprofitable and possibly dangerous would be an overstatement and a sign of inflexibility[145]. Russia has a great potential for boosting energy security on the territories of the European Union and post-Soviet republics. Russian partnership should be organized within a certain framework which would guarantee that energy supply would not be withheld for political or technical reasons[146].

This framework should rest upon an effective combination of the principles of integration and diversification. Diversification allows to avoid an increase in European dependence upon Russia; at the same time, integration smoothes its effect on relationships with it. Diversification implies the construction of new pipeline routes and liquefied natural gas terminals as described above as well as more extensive use of alternative energy sources. Diversification is expected to protect Europe from possible Russian dictatorship in the energy sector resulting from further integration[147]. Integration suggests a considerable change of the rules of the game and combating a number of political obstacles[148]. On the one hand, it is easier because it does not involve large-scale construction projects. On the other hand, it may not go completely smoothly because of lacking unity within Europe in energy issues and probable resistance on the part of Russia like in the case of the International Energy Charter participation.

First of all, Europe needs to promote integration within the Union. A series of “gas wars” have shown that energy security can only be addressed adequately at the level of the Union, not of each member-state. Brussels should cooperate with European governments to prepare a pan-European regulatory system supported by an efficient pipeline network. It should be clearly understood by each of the European Union member that the support of a common strategy in more far-sighted and important than any, even currently beneficial, bilateral agreement. This may be one of the greatest challenges, especially during a major economic recession which often makes EU-members to give priority to their national interests. Germany, Poland, Hungary, Spain and other countries have adopted often contradicting energy doctrines which can only be reconciled if every country is ready to commit[149]. Russia’s market participation will only be constructive if regulated by a system of consistent and enforceable rules.

A powerful mechanism of diversification is the construction of a new east-west energy corridor. It is essential that the United States and Europe implement the Nabucco project and make it competitive and successful despite such Russian initiatives as Nord and South Streams. Since the United States do not depend on Russian energy reserves, their participation in the Nabucco project can be interpreted as purely political. Russia tends to limit American involvement by not sustaining dialogue with the United States on energy issues. But Europe needs Washington support for its Caspian projects because it is likely to help win the trust of Caspian leaders[150].

American independence from Russia can also be an advantage because it makes the United States an almost ideal disinterested intermediate and consensus-builder for the European countries[151]. However, Europe tends to feel that the United States are too focused on the idea of reducing dependence on Russia by means of building new pipeline routes. Europe does not one such radical decisions and prefers to build more constructive relationships with Russia rather than abandon them at all. Europe thinks that Washington has to understand that interdependence between Europe and Russia can be advantageous if organized properly[152].

In the situation of global uncertainty associated with the economic crisis it is especially important for countries which may be gravely affected by any energy supply disruptions to protect themselves. The integration of the energy market and the resulting interdependence is a powerful safeguard against such disruptions. In prospect, diversification of export will mean for Europe a stronger position and a constraint on Russian leverage which may take the forms of withheld deliveries.

It is interesting to compare European and Russian media sources in their estimation of the events which happened in the global energy sector recently. For example, Leonardo Coen published an article on the project Nabucco in the Italian La Repubblica[153]. His style is characteristic of the European view of the problem. The author writes that Gazprom had to swallow a bitter pill when after seven years of hesitations, discussions and delays a document which allowed the building of 3300 km long pipeline for an annual number of 31 billion m3 of natural gas to be transferred from Central Asia to Europe beyond the southern boundaries of the Russian Federation was signed. When implemented, the project will help Europe avoid “the sword of Damocles” in the form of incessant gas debates between Moscow and Kyev. These conflicts are viewed by Europe as unacceptable in the energy business, especially after the latest “gas war” when Russia stopped supplying gas to Ukraine and a number of European countries were left in terrible conditions. However, the same events of the “gas war” (the blockage of gas supply in the pipelines) are reported by Russian officials to have been caused by Ukraine. Russian officials deny the fact of switching Ukraine and, consequently, Europe from gas supply[154].

Nabucco is to have been completed and set in operation in 2014; the construction cost is to amount to € 7,9 billion. It will pass through the territories of Turkey, Bulgaria, Romania, Hungary and Austria. Apart from financial and political support of the European Union, the project meets with the approval of the United States based mainly on geopolitical reasons.

The day after the project was signed the Russian President Dmitry Medvedev paid a visit to South Ossetia, which was viewed by Mikheil Saakashvili as a provocation made in response to Nabucco. In their turn, Gazprom and Eni plan to build “South Stream” – a system of pipelines which will not cross the territory of Ukraine. Its capacity will be 64 billion cubic meters of gas, but construction cost will amount to €10 billion. In this respect, Coen mentions the possibility of aggravation of the situation and prognoses future problems with supplying gas to Ukraine. The Kremlin is believed to be determined to go to any length and show that Europe will not dispense with Russia in solving its energy problems[155].

Nabucco is expected to transport gas bought from Azerbaijan and Turkmenistan. However, according to the Vice Speaker of the Russian Parliament and the president of the Russian Natural Gas Society, both countries will not satisfy the European gas demand. A similar project is Turkey-Greece-Italy pipeline which is to link Azerbaijan with Italy via Turkey without the Russian participation.

As can be inferred from the tone of the article by Coen in particular (which I take as a characteristic example) and, of course, from the measures taken by Europe, its position is defensive. It views Russia as a problematic and even dangerous partner and tries to avoid it in both its capacities as a producer and as a transit country. Is such position justified or is Europe afraid of ghosts associated with former regimes in Russia? Should Russia be viewed as an enemy or is partnership still possible? To answer this question, we have to consider the Russian opinion. A thorough analysis of Russian sources on the problem revealed two main tendencies.

One part of the sources clearly supports the governmental political line. These sources emphasize the comparative richness of Russian natural reserves as one of its main powers. They tend to state that Europe does not like Russia to be powerful and strong[156]. They claim that the United States and the European Union reacted negatively to Russia’s recent effective attempts at restoring its economy which include developing a new strategy of economic development coherent with its national interests and starting to implement it, in particular, by stopping the uncontrolled embezzlement of its natural resources[157]. The coolness in the relationships between Brussels and Moscow is explained mainly by Europe’s annoyance with a failure of its strategy based on the Russia’s desired weakness. Europe is believed not to be able to put up with the fact that Russia is no longer the weak and always ready to compromise country of Yeltsin’s time and that Russia’s political line will be firm and unbending when its national interests are concerned[158].

It is admitted, however, that the Russian economy is not at its peak[159]. The challenge faced by the country today is to modernize its industry sector and found a new post-industrial society. Moscow is interested in developing economic cooperation with the West but it should not mean that Russia will play the role of just a source of natural reserves[160]. Cooperation with the West, therefore, should be based on mutual profitability and parity with the West interested in reliable energy supply and energy security and Russia – in its economic rise[161]. In terms of foreign investments, Russia claims that while direct investments in the energy sector development are welcome, any that go against its national interests will be prevented.

The second part of the sources is based on the opposition – analysts who are not afraid to voice their concerns about the main political line despite governmental attempts to reduce freedom of speech. They tend to analyze the events happening in the energy sector from the point of view of business ethics. For example, Yulia Latynina, a journalist who works for the major Russian opposition channel “Echo Moskvy” sees Nabucco as a sign of Russia’s defeat in the “gas war” against Ukraine. She mentions a number of interesting consequences of the war. First, immediately after the war the Russian Vice Prime Minister Igor Sechin claimed that Russia will sue Ukraine. However, Russia did not sue Ukraine but when Bulgaria threatened to sue Gazprom, the latter immediately paid it €250 euro to avoid the lawsuit. Despite governmental claims about Nabucco’s inability to seriously affect Russian energy trade, opposition analysts view it as a direct and destructive consequence of the “gas war” which renders the Russian project South Stream inherently unsuccessful[162].

In 2005, when the Nord Stream project was signed, the Kremlin claimed Russia a great energy superpower in possession of energy weapon. The “gas war” showed that indeed the Kremlin used gas as a weapon and could switch it off when necessary[163]. It was Europe’s natural reaction to defend and to defend from gas as a weapon is one has to avoid purchasing it. That was why Europe sought ways of diversification of its energy import.

Other opposition journalists view the Russian energy policy as unreasonably asymmetric[164]. Its exceptional natural resources, vast territory and governmental ambitions make the country aspire to a unique position on the energy market. To be more precise, Russia wants to domineer as a monopolistic transit country and as a main producer[165]. However, both exporting and transit countries tend to copy its behavior in the energy sector, as it has already been mentioned above. Ukraine and Belarus copy its transit policy, while Asian countries imitate its model of relationships with clients[166]. For instance, the Russian administration believes that Europe is unable to dispense with Russian gas and the European demand will grow while its production will fall. Europe does not have any reasonable alternative but to buy Russian gas. The President of Ukraine echoes this statement with a similar one: “Russia needs a reliable strategic supply route. Russia will never manage to diversify its transit routes. Never. It can reduce the volume of transit to ten or twenty billion, but this is no answer”[167]. The President of Ukraine exercises the same logic of being indispensable and, therefore, able to dictate.

In his turn, the Russian Prime Minister states that political struggle is embodied in conflicts between clans whose aim is to satisfy personal ambitions and acquire access to the main streams of finance one of which is Russian gas trade[168]. According to him, to avoid the situation one has to diversify the streams and transport possibilities of supplying gas to Europe. Again, the solution is universal and Europe has the same reasons for constructing Nabucco as Russia for building its own new pipelines. Apart from the Nord Stream and South Stream pipeline projects, Russia plans to build the second branch of the Blue Stream which leads to Turkey. Apart from Nabucco, Europe plans the White Stream for 8 billion m3 of natural gas (with a perspective to increase the volume three times) to be transported from Central Asia through the territories of Georgia and Ukraine[169].

Under the circumstances, the Russian opposition journalists can understand Europe’s desire to diversify supplies and thus fight for its right to choose the most reliable and pleasant to deal with gas producer. For Russia it means that it does not hold the monopolistic position any longer and has to compete. It can still be very successful in the situation if it adopts a more flexible and less aggressive business style.

The situation repeats itself in case of Russia, Belarus and Ukraine. Russia strives for diversification of gas transport system, but Belarus claims that the construction of Nord Stream is much more complicated and expensive than the pipeline Yamal-Europe 2. However, Russia is interested in the Nord Stream because it ensures a direct supply of Russian gas to Europe beyond the territory of Belarus. When asked to choose, Russia appears ready to sacrifice its immediate profit for diversification. But it does not want its European clients to exercise the same strategy.

On the North-West, Yamal-Europe 2 allows Russia to reduce its dependence on Ukraine for transit but at the same time binds it to Belarus with which energy relationships have not always been unclouded. On the other hand, the modernization of natural gas pipeline system on the Ukrainian territory reduces Russia’s dependence on Belarus for transit and widens the channel to Europe. If Russia were only interested in healthy trade and profit and did not strive to occupy a unique position which allowed to dictate, it would be interested in any transport opportunities.

On the South, Russia accuses Nabucco project of having mainly political grounds and being divorced from economic realities in terms of natural gas sources and demand for gas. However, the South Stream promoted by Russia is no more economically justified than Nabucco and is built for the same reason – for the sake of diversification.

Instead of seeing Europe’s unwillingness to depend so heavily of the Russian gas as a direct consequence of supply blockage in the course of “gas war” with Ukraine and abstaining from such methods in future, the Russian Foreign Ministry warns that Europe can expect new problems with natural gas supply unless Russian interests are taken into account in the process of Ukrainian pipelines modernization. The Foreign Ministry representatives talk about “technological faults” which can lead to problems with natural gas supply. At the same time, Gazprom reduced the purchase of natural gas from Turkmenistan dramatically. Turkmengaz was suggested to revise the contract signed a year ago and to shorten its supply in proportion to shortening of the Russian export in Europe.[170] Just like Kyev asked Moscow during the “gas war”, Moscow is now asking Turkmenistan to change its price formula.

Before the global crisis Russia tried to contract to buy the maximum amount of gas on the post-Soviet territory and was ready to pay for it the European price minus transit costs. Nowadays a decrease in demand leaves Gazprom to choose: it can either stop its own production and raise transport costs for private oil and gas companies such as Lukoil, Novatek and meet its foreign contract obligations or sacrifice the obligations now that they became unprofitable and face the economic and political consequences.

The current rise in the number of energy transport projects means that a number of them will not be realized because they will not be profitable. The competition is getting tougher. A number of Russian economists feel that it is time for Russia to compete on purely economic grounds, i.e. to offer better and cheaper products than others. But this orientation on competitiveness would mean an abandonment of national ambitions (not interests)[171].

Conclusion

The research I conducted showed that there is a tendency of escalation of the conflict between Russia and Europe. The reasons for this are quite evident: expectations of both sides did not appear to be satisfied which led to mutual discontent and even indignation. While Russia seems to be getting more and more power, the West feels at a loss being unawares of what one should do to establish equal partnership links. Russia itself does not feel quite sure if it has chosen the right direction in its energy policy and, therefore, its main goal is to remain independent which results in misunderstanding and conflicts between the most powerful states which purpose, on the contrary, should consist in keeping peace and harmony in the world.

James Sherr – a Fellow of the Conflict Studies Research Centre of the Defence Academy of the United Kingdom – offers several points which, in his opinion, appear to be helpful in understanding the perspectives of international energy relations. I find them very reasonable and believe that it is crucial to take them into account while trying to change world energy policy. They are as follows:

• Partnership links that were established after the Cold War do not meet requirements of today’s life. In early 90th relations were conditioned by the weakness of one of the sides and overstated expectations from both sides. Nowadays, when Russia managed to gain enough power to compete, the policy like this seems just impossible[172].
• The relations between Russia and the West are no more the basis of international interaction, while both Moscow and the Western capitals have their priorities on the regional level.
• While the European Union tends to efface boundaries between states and nations, Russia means to protect its sovereignty and national interests.
• In spite of the fact that several independent states which appeared after the collapse of the Soviet Union wish to join the Western institutions, Russia continues to impose its conditions on them, as if these states were still included in Russian territory.
• Energy policy remains a stumbling block in EU-Russia relations. However, in spite of the fact that the policy of Dmitry Medvedev is aimed at getting the whole energy transportation and distribution under control, much attention is also paid to greater development based on more transparency, diversity and freedom of choice.[173]
• According to Sherr, our natural benefits are not what should alienate us. On the contrary, they provide us with a good opportunity to complement each other and, therefore, move in the same direction side by side.[174]

To sum up, James Sherr describes a number of drastic changes that occurred in the last two decades which forced both Russia and the West to redefine their aims concerning their policy in relation to each other.

Nowadays the West begins to realize that the events of early 90^th meant that Russia rejected its obsolete principles and was ready to begin the new era of development and prosperity. At that time Western Europe made several mistakes. Thus, it did not notice that national planning in the former Soviet Union was substituted not by the open market but the rigged one and went on supporting the current situation. Consequently, Russian citizens got sure that the West meant to support chaos in their country and acquired negative attitude to the western policy.

Moreover, Western leaders did not expect Russia to reject the policy of the status quo which was established after the Cold War. Thus the West did not have the real picture of events taking place in the former Soviet Union.[175]

In addition, it is important to say that at that time Russian political and power departments had also dim idea about what was going on in European state institutions and, therefore, expected too much of them[176].

It is evident that these peculiarities of relationships between the West and Russia defined the model of policy in relation to each other[177].

Speaking of energy security, which nowadays is known one of the most urgent problems in global politics, one should keep in mind that this notion is understood by representatives of different institutions in a different way.[178] For a seller it means that one department should control recovery, transportation, storage and selling, whereas for a buyer – diversification of sources, suppliers and transportation routes.[179] Taking it into account one will understand why the West grew deeply concerned when Gazprom was said to take control over the whole supply chain. Thus, while each kind of control may be used in a negative way, the monopoly like this may lead to increase in costs. At the same time liberal or diversified market enables the buyer to choose among several variants and, therefore, keeps sellers from raising prices on energy.[180]

What makes both sides keep to each other is the fact that Europe needs Russian energy resources and Russia, in its turn, needs European markets. Until they are able to satisfy their needs with the help of other sides, they will be forced to reach a compromise[181]. Thus, Russia and the European Union appear to be interdependent in the energy sphere, still their relations are unbalanced.

In the research I made an attempt to trace what this misbalance consists in. It appears that while Russia as a supplier represents one body, the European Union as a consumer represents several states. At the same time, in trade sphere the uniform policy has already been developed, whereas in energy sphere there is not one yet[182]. Moreover, Gazprom represents national interests, whereas the European Union is a composite of both state and private companies. To sum up, it is no wonder that the differences like these lead to contradictions between authorities and consumers, as well as prevent the West from using the power it is invested with.

Moreover, for a long time Europe was concerned with methods Gazprom was using to implement its policy. Now the situation changed due to the following reasons:

• Despite the fact that Russia possesses inexhaustible energy resources, there occur problems in supply to satisfy the gas demand for favorable price[183].
• New EU members that were a part of the Soviet energy system now are a sore spot in the gas transit chain[184].
• The new EU configuration aggravated the criticism of Moscow energy policy in relation to a number of contracting countries, in particular Ukraine, Turkey, etc.[185]
• The West can not be sure that Russia will be using its geopolitical influence in an appropriate way[186].

To conclude, because of the fact that energy policy reflects political and economic interests, as well as cultural values of states and demonstrates the main international contradictions and conflicts, if one wishes to establish proper relations, it is extremely important to make energy interaction as efficient as possible. My research showed that while today this problem is actively handled by both sides, there is an evident tendency of improvement of the energy interaction between Western states and Russia.

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[1] Monaghan, A., “Russia and the Security of Europe’s Energy Supplies: Security in Diversity?,” Conflict Studies Research Centre (2007).

[2] Ibid.

[3] Goldthau, A., “Resurgent Russia: Rethinking Energy Inc.,” Policy Review (2008) and Monaghan, A., “Russia and the Security of Europe’s Energy Supplies: Security in Diversity?,” Conflict Studies Research Centre 7.2 (2007) and  Rutland, P., “Russia as an Energy Superpower,” New Political Economy 13:2 (2008): 203-10.

[4] Larsson, R., Russia’s Energy Policy: Security Dimensions and Russia’s Reliability as an Energy Superpower (Swedish Defense Research Agency, 2006), 119-94 and Smith, K., Russian Energy Politics in the Baltic, Poland and Ukraine: A New Stealth Imperialism? (Center for Strategic and International Studies, 2005).

[5] Aalto, P., “The EU, Russia and the Problem of Community,” in Mayer, H., A Responsible Europe: Ethical Foundations of EU External Affairs (Palgrave, 2006), 90-116.

[6] Milov, V., “Russia’s Energy Policy, 1992—2005,” Eurasian Geography and Economics 47:3 (2006): 286-311.

[7] Westphal, K., “Germany and EU—Russia Energy Dialogue,” in Aalto, P., The EU—Russian Energy Dialogue: Europe’s Future Energy Security (Ashgate, 2007), 94-117.

[8] Tkachenko, S., “Actors in Russia’s Energy Policy Towards the EU,” in Aalto, P., The EU—Russian Energy Dialogue: Europe’s Future Energy Security (Ashgate, 2007), 160-89.

[9] Barysch, K., “EU—Russia Economic Relations,” in Pinnick, K., Russia and the European Union (Routledge, 2006), 114-28 and Johnson, D., “EU—Russia Energy Links,” in Robinson, P., Perspectives on EU—Russia Relations (Routledge, 2006), 177-92.

[10] Bahgat, G., “Europe’s Energy Security: Challenges and Opportunities,” International Affairs 82:4 (2006): 960-74 and Kalicki, J., and Goldwyn, D., Energy & Security: Toward a New Foreign Policy Strategy (Woodrow Wilson Center Press, 2005).

[11] Peters, S., “Courting Future Resource Conflict: The Shortcomings of Western Response Strategies to New Energy Vulnerabilities,” Energy Exploration & Exploitation 22:1 (2003): 30-55.

[12] Ibid., 64-67.

[13] Palonkorpi, M., “The Energy Security Complex in the Caucasus,” University of Helsinki Press (2007): 4-18.

[14] Correlje, A., and Linde, C., “Energy Supply and Geopolitics: A European Perspective,” Energy Policy 34:3 (2006): 534—40 and  Stern, J., “The New Security Environment for European Gas: Worsening Geopolitics and Increasing Global Competition for LNG,” Oxford Institute for Energy Studies (2006) and Sagers, M., “The Regional Dimension of Russian Oil Production: Is a Sustained Recovery in Prospect,” Eurasian Geography and Economics 47:4 (2006): 506-43.

[15] Ibid., 425-27

[16] Kennedy, M., “Culture, Power, History, and Energy in Global Transformations,” University of Helsinki Press (2007) and Kivinen, M., “Frames of Russian Energy Policy in Transition,” in Dussealt, D., The Dynamics of Energy in the Eurasian Context (Aleksanteri, 2007), 8-28.

[17] Giddens, A., The Constitution of Society: Outline of the Theory of Structuration (Cambridge Polity Press, 1984) and Wendt, A., Social Theory of International Politics (Cambridge University Press, 1999) and Sewell, W., Logics of History: Social Theory and Social Transformation (University of Chicago Press, 2005).

[18] Ibid.,Giddens, A., The Constitution of Society, 170-72.

[19] Ibid.,Giddens, A., The Constitution of Society, 190-95.

[20] Ibid.,Giddens, A., The Constitution of Society, 183-86.

[21] Ibid., Giddens, The Constitution of Society, 175-7.

[22] Ibid., Giddens, The Constitution of Society, 2-34, 110-119.

[23] Ibid., Wendt, Social Theory, 102-15.

[24] Ibid., Wendt, Social Theory, 109-13.

[25] Ibid., Kivinen, “Frames of Russian Energy Policy,” 11-13.

[26] Sewell, Logics of History, 133-41.

[27] Ibid., 146-53.

[28] Ibid., 10-16.

[29] Ibid., 76-81.

[30] Ibid., 5-9.

[31] Ibid., 156-59.

[32] Ibid., Sewell, Logics of History, 226-28.

[33] Ibid., Sewell, Logics of History, 220-23.

[34] Ibid., Sewell, Logics of History, 217.

[35] Ibid., Sewell, Logics of History, 234.

[36] Tsygankov, A., Pathways after Empire: National Identity and Foreign Economic Policy in the Post Soviet World (Rowman & Littlefield Publishers, 2001).

[37] Aalto, P., and Dusseault, D., “Towards a Social Structurationist Approach to Global Energy Politics: Russia’s Energy Relations in the East and West,” Center for European Studies UofMichigan (2008), 2-19.

[38] Ibid., 28-36.

[39] Ibid., 71-80.

[40] Simonia N.A., Energy Security of the West and Russia’s Role in it. Russia in the Global Politics 15:25 (2004).

[41] Grigoriev, L., and Chaplygina, A., “Looking into the Future: The Energy Dialogue between Russia and the European Union,” Russia in Global Affairs (2003)., 54-55.

[42] Ibid., 62-67.

[43] Simonia N.A., Energy Security of the West and Russia’s Role in it. Russia in the Global Politics 15:25 (2004).

[44] Ibid., 45-48.

[45] Ibid., 52-54.

[46] Ibid., 62-63.

[47] Rangsimaporn, P., “Russian Elite Perceptions of the Russo-Chinese Strategic Partnership,” Slovo 18:2 (2006), 129-45.

[48] Grace, J., Russian Oil Supplies: Performance and Prospects (Oxford Institute for Energy, 2005), 210-15.

[49] Ibid., 64-81.

[50] Ibid., 160-64.

[51] Ibid., 107-112.

[52] Ibid., 155-59.

[53] Ibid., 201-13.

[54] Allison, G., Essence of Decision: Explaining the Cuban Missile Crisis (Little, Brown & Company, 1971).

[55] Palonen K., and Parvikko, T., Reading the Political: Exploring the Margins of Politics (Finnish Political Science Association, 1995), 10-15.

[56] Soroos, M., Beyond Sovereignty: The Challenge of Global Policy (U of South Carolina Press, 1989), 18-20.

[57] Ibid., Soroos, Beyond Sovereignty, 22–23.

[58] Aalto, P., The EU–Russian Energy Dialogue: Europe’s Future Energy Security (Ashgate, 2007), 45

[59] Zeihan, P., “The Belarusian Crisis: An Opportunity for Germany,” STRATFOR (2007).

[60] Myers, A., and Manning, R., “Russia, Energy and the West,” Survival 44:2 (2001), 129-34.

[61] Ibid., 141-48.

[62] Ibid., 151-52.

[63] D’Anieri, P., Economic Interdependence in Ukrainian-Russian Relations (SUNY Press, 1999), 34-35.

[64] Ibid., 65-68.

[65] Dargin, J., “Emerging State Centralism in the Russian Energy Sector: Precedents from the Gulf,” Harvard University, Dubai Initiative (2007): 3-31.

[66] Tkachenko, S., “Decision-Making in Russian Energy Policy: Economization of Russian Foreign Policy towards Neighbors,” International Political Economy (2007), 12-17.

[67] Goldman, M., Petrostate: Putin, Power, and the New Russia (Oxford University Press, 2008).

[68] Remington, T., Politics in Russia (Longman, 1999), 165-75.

[69] Hedenskog, J., Russia as a Great Power Dimensions of Security Under Putin (Routledge, 2005).

[70] [70] Crooks, E., “Gazprom Looks to Fuel Growth,” The Financial Times (2008)

[71] Kupchinsky, R., “Russia: Tightening The Screws With Gazprom,” Eurasia Daily Monitor 6:1 (2005), 25-28.

[72] Ibid., 31-33.

[73] Hedenskog, J., Russia as a Great Power Dimensions of Security Under Putin (Routledge, 2005).

[74] Energy Intelligence “Top 100 Ranking the World’s Oil Companies,” Petroleum Intelligence Weekly, annual edition (2007).

[75] Perovic, J., et al., Russian Energy Power and Foreign Relations (Routledge, 2009).

[76] Tsygankov, A., Pathways after Empire: National Identity and Foreign Economic Policy in the Post Soviet World (Rowman & Littlefield Publishers, 2001), 30-34.

[77] Hedegaard, L., and Lindström, B., North European and Baltic Sea Integration (Springer Verlag and Nordegio, 2003), 119-126.

[78] Ibid., 126-28.

[79] Tkachenko, S., “Political Economy of Energy Policy of Russian Federation towards USA and European Union,” Russia, Energy and Eurasia (2008), 11-13.

[80] Ibid., 12.

[81] Stern, J., The Future of Russian Gas and Gazprom (Oxford University Press, 2005), 76-98.

[82] Mitrova, T., and Pappe I., “From The Big Pipe to Big Business: Examining New Strategy of Gazprom,” Carnegie Moscow Center (2006).

[83] Ibid., 12-15.

[84] Ibid., Stern, The Future of Russian Gas, 80-119.

[85] Locatelli, C., “EU Gas Liberalization as a Driver of Gazprom’s Strategies?” Russei.Nei.Visions n.27 (2008): 4-23.

[86] Ibid., 24-30.

[87] Ibid., 37-41.

[88] Ibid., 30-34.

[89] Mitrova, T., “Gazprom’s Perspective on International Markets,” Russian Analytical Digest n. 41 (2008), 2-6.

[90] Westphal, K., “Europe Held Hostage?,” EUISS (2009), 73-74.

[91] Ibid., 81-82.

[92] Ibid., 90-93.

[93] Ibid., 75-78.

[94] Ibid., 101-105.

[95] Ibid., 121-24.

[96] “Energy Strategy of Russia up to 2020,” (RU: Energeticheskaya Strategia Rossii Na Period do 2020 Goda) Adopted August 28, 2003, No. 1234-R. Ministry of Industry and Energy of the Russian Federation.

[97] Haass, R., and Indyk, M., “Beyond Iraq: A New U.S. Strategy for the Middle East,” Foreign Affairs, 88:1 (2009).

[98] Simsek, A., “Nabucco Highlights Turkey’s Strategic Importance to the EU,” Southeast European Times (2008), 13-27.

[99] Ibid., 36-39.

[100] Ibid., 43-48.

[101] Schaffer, J., “US, Europe Need Collective Energy Security Strategy,” US Mission to the European Union (2008), 116-21.

[102] Ibid., 150-52.

[103] Aslund, A., The Russia Balance Sheet (Peterson Institute for International Economics, 2009), 85-100.

[104] Glenny, M., “Gas and Gangsters,” New Statesman (2008), 1-4.

[105] Mankoff, J., “Eurasian Energy Security,” Council on Foreign Relations Press (2009).

[106] Tkachenko, S., “Actors in Russia’s Energy Policy Towards the EU,” in Aalto, P., The EU—Russian Energy Dialogue: Europe’s Future Energy Security (Ashgate, 2007), 46-47.

[107] Ibid., 17-19.

[108] Zeihan, P., “The Belarusian Crisis: An Opportunity for Germany,” STRATFOR (2007), 1-7.

[109] Ibid., 10-12.

[110] Ibid., 22-24.

[111] European Commission, “Proposal for a Regulation of the European Parliament and of the Council,” (Amending Regulation (EC) No. 1775/2005 on conditions for access to the natural gas transmission networks), (2007), 6-8.

[112] Ibid., 13-16.

[113] Ibid, 19-20.

[114] Blagov, S., “Russia’s Pacific Oil Pipeline Seen as Double-edged Sword,” Eurasia Daily Monitor 2:8 (2005).

[115] Ibid., Blagov, S., “Russia’s Pacific Oil Pipeline Seen as Double-edged Sword”.

[116] Wien International (WI), “Gas Routes: Nabucco Struggling for Survival,” (GER: Gaswege: Nabucco kämpft ums Überleben) Compress VerlagsgesmbH (2008), 65-66.

[117] Ibid., 71-72.

[118] Pannier, P., “Georgia-Russia Conflict Changes the Energy Equation,” RFE/RL (2008), 13-21.

[119] Ibid., 23-25.

[120] Blagov, S., “Russia’s Pacific Oil Pipeline Seen as Double-edged Sword,” Eurasia Daily Monitor 2:8 (2005)

[121] Pannier, P., “Energy: Caspian Pipeline Projects Resemble Gordian Knot,” RFE/RL (2008).

[122] Gabuev, A., “No Nabucco without Russia,” Kommersant Publishing (2008).

[123] Simsek, A., “Nabucco Highlights Turkey’s Strategic Importance to the EU,” Southeast European Times (2008), 103-12.

[124] Ibid., 115-18.

[125] Ibid., Simsek, A., “Nabucco Highlights Turkey’s Strategic Importance to the EU.”

[126] Nanay, J., “Russia and the Caspian Sea Region,” in Kalicki, J., and Goldwyn, D., Energy and Security: Toward a New Foreign Policy Strategy (Johns Hopkins University Press, 2007).

[127] Ibid., 12-14.

[128] Lobjakas, A., “Turkmenistan: Gas-Export Offer Seen as ‘Breakthrough’ by the EU,” RFE/RL (2008).

[129] Shepherd, M., “Turkmenistan Continues to Play the Gas Game,” The Institute for the Study of Conflict, Ideology, and Policy (ISCIP) Analyst 14:15 (2008).

[130] Lobjakas, A., “Turkmenistan: Gas Export Offer Seen as Breakthrough by the EU,” RFE/RL (2008).

[131] “Turkmenistan Offers More Gas to China,” Interfax (2008) and “Iran, Turkmenistan to Hold Negotiations on Gas Imports,” BBC Worldwide (2008) and Neff, A., “Gazprom Agrees on Investment Projects, Gas Pricing Principles with Turkmenistan,” Global Insight & World Markets Research Limited (2008), 72-74.

[132] Glenny, M., “Gas and Gangsters,” New Statesman (2008), 95-96.

[133] Ibid., 125-31.

[134] Ibid., 141-45.

[135] The Council of the European Union “Second Strategic Energy Review: An EU Energy Security and Solidarity Action Plan,” (2009)

[136] Belkin, P., “The European Union’s Energy Security Challenges,” United States Congressional Research Service (2008)

[137] Russia Refuses to Join the International Energy Charter. Echo Moskvy (2009).

[138] Ibid., 89-93.

[139] Barkanov, B. “Constructing the National Interest: The Energy Charter Treaty and Transformations in Russian Foreign Energy Policy” Paper presented at the annual meeting of the ISA’s 49th Annual Convention, Bridging Multiple Divides, Hilton San Francisco, USA, Mar 26, 2008

[140] Russia Refuses to Join the International Energy Charter. Echo Moskvy (2009).

[141] Ibid.

[142] Ibid., 121-124.

[143] Ibid., 116-20.

[144] Westphal, K., “Europe Held Hostage?,” EUISS (2009)., 31-32.

[145] Ibid., 40-48.

[146] Sherr, J., “Russia and the West,” Russia in Global Politics (2008).

[147] Beehner, L., “Energy’s Impact on EU-Russian Relations,” Foreign Affairs (2007).

[148] Ibid., 34.

[149] The Council of the European Union “Second Strategic Energy Review: An EU Energy Security and Solidarity Action Plan,” (2009).

[150] Schaffer, J., “US, Europe Need Collective Energy Security Strategy,” US Mission to the European Union (2008).

[151] Pascual, C., “The Geopolitics of Energy: From Security to Survival,” Brookings Institution (2008).

[152] Mankoff, J., “Eurasian Energy Security,” Council on Foreign Relations Press (2009).

[153] Coen, L., Accordo per Nabucco così l’ Europa dirà addio al gas russo. La Republicca (2009).

[154] Ibid.

[155] Ibid.

[156] Simonia N.A., Energy Security of the West and Russia’s Role in it. Russia in the Global Politics 15:25 (2004).

[157] Ibid., 27.

[158] Ibid, 23.

[159] Ibid., 35.

[160] Subbotin M., Assymetric Gas Policy of Russia. Russia in the Global Politics 48:15 (2008).

[161] Ibid., Subbotin M., Assymetric Gas Policy of Russia. Russia in the Global Politics.

[162] Latynina, Y., “We are taken seriously,” Russian Oil (2009).

[163] Ibid.

[164] Subbotin M., Assymetric Gas Policy of Russia. Russia in the Global Politics.

[165] Ibid., 31-36.

[166] Ibid., 41-43.

[167] Ibid, 42.

[168] Ibid., 87-90.

[169] The Council of the European Union “Second Strategic Energy Review: An EU Energy Security and Solidarity Action Plan,” (2009).

[170] Aslund, A., The Russia Balance, 43-50.

[171] Gritsenko, I., and Krylov, N., “Oil & Gas of Russia in the 21st Century: Forecast of Production and Development of the Resource Base,” Journal of Mineral Resources of Russia (2006).

[172] Sherr, J., “Russia and the West,” Russia in Global Politics (2008).

[173] Ibid., 20-21.

[174] Ibid., 25-27.

[175] Perovic, J., and Orttung, R., Russian Energy Power and Foreign Relations: Implications for Conflict and Cooperation (Routledge, 2009).

[176] Ibid., Perovic, J., and Orttung, R., Russian Energy Power and Foreign Relations.

[177] Ibid., Perovic, J., and Orttung, R., Russian Energy Power and Foreign Relations.

[178] Paramonov, V., and Strokov, A., “The Evolution of Russia’s Central Asia Policy,” Conflict Studies Research Centre (2008), 1-6.

[179] Ibid., Stern, Gazprom, 142-46.

[180] Monaghan, A.,“EU-Russia Energy Relations: The Need for Active Engagement,” EPC Issue Paper n.45 (2006), 13-21.

[181] Ibid., 25-27.

[182] Pascual, C., “The Geopolitics of Energy: From Security to Survival,” Brookings Institution (2008), 16-17.

[183] Ibid., 23-24.

[184] Ibid., 29-30.

[185] Gusev, A., “Energy Relations Between the European Union and Russia: Content, Problems, Prospects,” The Institut Européen des Hautes Etudes Internationales (2008).

[186] Ibid., Gusev, A., “Energy Relations”.