EU gas supply security : challenges and opportunities

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EU gas supply security:

challenges and opportunities

Name: Isa Yusibov

Student number: 6043097

Project: Energy and geopolitics in China and the European Union

University of Amsterdam

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Abstract

In an emerging energy market, energy security has become one of the priority issues for major powers. Especially, regarding to natural gas as a focal fossil fuel, worldwide consumption shows an increasing line. In European Union, the situation is not different. With growing consumption and deducing production, the EU is dependent on import of natural gas from outside of its borders. This thesis will look at the development of EU energy situation and its dependence on Russian resources. The aim of this thesis will be the definition of volatile position of EU gas security due to its dependence by focusing on economic, political and geo-strategic challenges. As the EU faces enormous challenges, related to its gas supply security, EU policy makers should come up with policies towards the Caspian region which has enough capabilities to become a main supplier for the EU. By deducing Russian import by emphasizing the importance of this area, EU will be able to tackle the challenges for its supply security of natural gas.

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List of figures

Figure 2.1 World energy production by region………….………12

Figure 2.2 World Gross Inland consumption by region………..12

Figure 2.3 Import dependency in EU by fuel……….14

Figure 2.4 Natural Gas import by country of origin………15

Figure 3.1 Projected routes of Nord Stream, South Stream and Nabucco ... 21

Figure 4.1 Caspian Sea region oil and natural gas infrastructure ... 26

Figure 4.2 Key Natural Gas Data Caspian Region (Russia and Iran not included) .... 27

Figure 4.3 Caspian Sea region gross natural gas production (2000-2012) ... 27

Figure 4.4 Prospective Non-Russian Soutern Corridor Pipelines………..30

Figure 4.5 Existing and projected gas pipelines from the Caspian region……….30

List of abbreviations

CIA: Central Intelligence Agency EC: European Commission

ECSC: European Coal and Steel Community EEC: European Economic Community EIA: Energy Information Administration ENP: European Neighborhood Policy EU: European Union

TCF: Trillion cubic feet TAP: Trans-Atlantic Pipeline TANAP: Trans Anatolian Pipeline USGS: United States Geological Survey

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Chapter 1:

1.1 Introduction:

The biggest oil crisis of 1973 set up a new environment for various states to come up with adequate energy strategies in order to be resistible against further disruptions and crisis. Almost 40 years later, the necessity for a coherent energy policy is embedded in foreign policy of both consumer and producer countries all over the world. In contemporary politics, main goal of both industrialized and emerging countries is to find solutions to access energy resources and to import them by minimalizing any problems which could shape disruptions and challenges for domestic energy consumption. In that sense, securing energy access is not only a domestic issue, but also an essential point of power in global politics. Conflicts and co-operation between the resource-rich and resource-demanding countries are main processes of energy security for any country.

Countries with energy resources export them to regions which are demanding natural resources such as gas and oil. Revenues, brought by the export can be invested in the society or diversification of economy in order to avoid negative one-sided dependency on energy sector in domestic economy. Consuming countries try to develop strategies and policies to maintain the secure access and supply.

In contemporary international politics, European Union, one of the successful intrastate unities, also tries to implement certain energy strategies in order to satisfy the growing demand for energy and gas in particular within the member states. The co-operation between European states on energy issues preceded the creation of European Union by EuroAtom and European Coal and Steel Community which was founded in 1951. With growing amount of member states and logically the demographic increase makes it inevitable for the European policymakers to set up certain strategies for the energy security of European Union by accessing resource-rich countries. This thesis tries to study EU gas supply security, its possible challenges and opportunities.

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As mentioned above, European Union is one of the biggest energy consumers with 28 member states. Due to the importance of European Union as an international actor on global politics and as a consumer in international energy market this research will tend to study European Union and the concept of energy security for EU’s gas supply. In that sense, main objective of this thesis is to study challenges and possible opportunities for the current energy security of European Union in terms of gas supply. Therefore this thesis aims to define challenges which are being faced by EU. By focusing on European Union and its strategy in order to secure the import of energy resources, natural gas in particular, this thesis will also include possibilities which can be created in order to reach the optimal forms of energy supply security for European Union.

Research question:

In order to study energy security of European Union and how EU policy makers try to implement a solid policy regarding this issue we have to look at the concrete aspects of EU energy security and in which way it can satisfy the growing demand for natural gas within the borders of European Union. Related to the subject and aims of this thesis, my research question is as followed:

“What are main challenges and opportunities for EU energy security in terms of gas supply?”

Sub Questions:

1) What is the current outlook of EU energy situation?

2) Which structural problems does EU face regarding to gas import?

3) Which possibilities are there for the European Union to enhance an improvement of its supply security of natural gas?

In order to answer this question, we have to study EU energy situation by using the scarcity model in order to categorize demand, supply and structural disruptions which still demonstrates huge problems for various member states in terms of gas supply.

Furthermore, due to the fact that Russia is the biggest partner of EU in terms of natural gas import to EU, we have to study the relations between EU and Russia in order to define certain challenges for EU gas supply security.

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Finally, it is important to discuss the possibilities for EU gas security by noting the geopolitical and economic benefits. In that sense, third sub-question will try to answer the second part of my main question which is related to the possibilities.

1.3 Problem Statement:

The EU currently imports about 30% of its oil from Russia, which represents approximately 28% of the EU oil consumption, while the 40.8% of natural gas imported from Russia to the EU represents more than 25% of the total gas consumption of the European Union (Paillard 2010, pp. 71-72). EU members are aware of the danger of being too dependent on Russia to meet their growing hydrocarbon demands, and in consequence have been actively seeking cooperation with other producing regions. And this type of diversification is one of the possibilities to resist the challenges.

Main hypothesis of this thesis therefore, is that the dependence on Russian gas is a growing source of challenge for the European Union. EU should access the Caspian region, which has sufficient gas resources to satisfy EU gas security and import. On 8 March 2006 the European Commission issued a new Green Paper entitled A European strategy for sustainable, competitive and secure energy. At the Green Paper's launch, Jose Manuel Barroso, the President of the European Commission, highlighted the need for a common strategy for energy: 'We are in a new energy century. Demand is rising and Europe's reserves are declining. There is under investment and our climate is changing.'3 The Green Paper puts forward suggestions and options that could form the basis for the shape and direction of the EU's future energy policy. This important document was intensely debated by European heads of state and government in their spring summit in March and by various European institutions in the following months (Bahgat, 2007: 962).

While the EU’s conception of the objective of ‘energy security’ includes demand management and environmental goals, secure access to physical supplies also constitutes a core motif. The EU has thus far been incapable of embarking on the path of militaristic energy security as pursued by the US government in Iraq (Williams 2006); yet, powerful imperatives suggest greater ‘securitisation’ of EU energy policy goals, in the sense of making them so ‘urgent and existential’ that they ‘should not be exposed to the normal haggling of politics but should be dealt with decisively by top leaders prior to other issues’ (Buzan et al. 1998, p. 29).

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Some of these key imperatives stem from the nature and dynamics of EU–Russian energy relations. From one angle, Russia appears just as dependent on European markets to earn necessary foreign currency reserves as Europe is reliant on Russian gas, especially since leading Russian energy firms lose money in heavily subsidized domestic retail markets. By the same token, foreign investment, which may be crucial to upgrading the productivity of declining fields and mitigating likely output shortfalls, cannot be cheaply excluded from Russia’s upstream sector. Thus, the externally dependent profile of the Russian Federation’s domestic economy and energy sector may seem intrinsically compatible with EU energy security (Tekin & Williams, 2009: 338).

1.4 Research Method:

As this thesis aims to study challenges and possibilities of EU gas supply security it is reasonable to use a mix method of qualitative and quantitative designs. First of all in chapter 2 I will discuss the energy situation of EU based on statistical data. Focusing on the increasing consumption I will provide quantitative data to discuss the growing gas dependency of EU from producer countries like Russia. These data will be gathered from various statistical databases such as Eurostat, Euractiv, BP annual reports, CIA, and EIA.

Qualitative part of this thesis will follow where I will try to explain challenges and give an introduction to chapter 4, which will discuss the geopolitical opportunities for EU and its gas supply security. This information will be analyzed and gathered from various papers on future strategy, such as European Green Paper. Furthermore, I will make use of various scientific essays on geopolitical challenges of European gas policy and how these could be tackled in a way that it favors the supply security of gas for the whole EU.

1.5 Theoretical Framework

Issues of energy security have often been researched on the base of a geopolitical approach, now that energy security is an international issue related to globalization that will always involve more than one state. Especially, the collapse of the Soviet Union in 1991 led to a significant shift in the political landscape of South Caucasian geopolitics (Amineh 2003, 2). For these two reasons, a geopolitics approach is considered to be useful regarding the research topic, as the emphasis of this thesis

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will focus on EU, its dependence on Russia and possible diversification by the Caspian region (excluding Russia and Iran). The framework of geopolitics would therefore be a useful tool in order to fulfill my thesis about the gas supply security and the Caspian basin. In this research, I will use the approach of geopolitics developed by Amineh. The author introduces a new form of geopolitics: neo-geopolitics: “neo-geopolitics synthesizes orthodox geopolitics and the geo-economic discourse. It strives for a new understanding of geographic arrangements that are changeable over time. It offers a more complex vision of world politics, characterized by states, which are themselves caught up in transnational techno-economic power structures and technological systems that threaten the conditions of habitation and survival in the world as a whole” (Amineh 2003, 2). By looking into neo-geopolitics issues, the research will among others deal with the role of Russia in particular and the existence of transnational corporations in relation to the EU gas security. The increasing “expansion” of Russian Gazprom’s is a suitable example for the role of transnational organizations in this particular case.

1.5.1 Rather a model than theory: explaining energy situation

Before framing the traditional theoretical framing on energy security (including gas) it has to be mentioned that the study of energy security has been neglected by various scholars for a long period. After the 1973 – 4 and 1979 oil crises, political scientists and economists produced various works approaching the subject from different perspectives.

However, this literature has been resistant to theoretical development. Various works based on different theoretical and methodological perspectives were not successful in adequately conceptualizing the issue at hand, which is fundamental to the new international patterns of power and economic relations. The literature on energy security has been unselfconscious and uncritical in the following regards pinpointed by Ernst J. Wilson: “There is little if any sustained intellectual give-and-take in the field of international energy policy studies over the most appropriate ways to analyze the phenomenon. A thorough search of the literature reveals only a mere handful of review articles or monographs which seriously debate the relative explanatory power of competing paradigms for the world oil market. Given the immense practical importance of the subject and the interest shown by social scientists, and in light of potential intellectual payoffs, the quality of theoretical literature is meager at best. A void exists at what should be the center of the field” (Wilson 1987:126).

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In this thesis I will use a certain theoretical concept to define the challenges for the European Union in terms of gas supply security. The framework behind this research is the one about scarcity model which explains various dimensions of energy situation, its impediments and structural challenges. On the one hand the problem of demand scarcity will be examined for consuming powers like the EU which is the central actor in this thesis; while on the other hand, the emphasis of this theory is based on supply scarcity, where the role of Russia according to this thesis fits in. And the latter stage of this theory is so called structural scarcity which indicates that competitors for energy resources (thus, powers which try to satisfy their demands by securing the supply of energy resources) are contesting each other in geopolitical terms to gain or secure the access to resources. This model is introduced by Amineh and Houweling to frame the geopolitical aspects and to understand the relations between various actors in energy geopolitics in terms of producers, consumers and essential actors. (Amineh & Houweling, 2007: 374-375)

1.5.2 Principles of energy security

Yergin notes that there are 4 principles on the construction of energy security which will be a key concept of this thesis.

• Supply security

• Back-up supplies in times of disruptions • The importance of information

• Integration to a world market (Yergin, 2006: 76).

Focusing on current geopolitical problems of energy security it will be important to concentrate on the first principle as I will study the challenges of supply security for natural gas resources from elsewhere to Europe.

Based on theoretical framework I argue that EU energy policy is based on a mix of neo-realism and liberalist approach. With a growing demand for energy resources which are diminishing in stocks and in terms of supply, states, in this case the European Union is seeking to satisfy its “self-interest” and pursue strategies to secure the energy supply from resource-rich countries. Besides this “self-interest” EU tries to liberalize energy markets, to stimulate competition and co-operation and looks after

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new possible investments in energy sector for diversification of both energy resources and energy routes.

According to De Haas, energy security is the guaranty for the producer for unhindered winning, transportation supply and payment of oil and gas. For the consuming party, it is the certainty of receiving expected amounts of energy resources for reasonable and agreed prices. For both the producing and consuming party, energy security is of vital importance for stability of the state (De Haas 2006, 164).

1.5.3 Neorealism

This study focuses on Neorealism which was developed by Waltz as a modern form of realism. Neorealism disregarded classical realists assumption about “human nature and focused on the effects of the international system” (Waltz, 1998:31). Neorealists claimed that the international 8 system contains numerous enormous powers and “competition between the major powers in international system is the normal state of affairs” (Glaser, 1994:50). Actors seek opportunity in order to gain benefit of others, due to the fact that there are no reasons to faith each other (Linklater, 1995:9). From the realist point of view the international system in anarchy and the states are the main actors in international relations. The lack of central control allows rational states to “maximize utility while minimize the cost” (Helén, 2010:16, Glaser,1995: 50). Waltz claimed absence of central authority leave states in “self-help” system; it means “they must rely on the means they can generate and the arrangement they can make for themselves”. At the same time make high risks and limit actors to use force, self-help “necessarily the principle of action in an anarchic order” (Waltz, 1979:111). In the “self-help” international system, states attempt to secure their individual survival, due to the fact that there is no supranational authority to defend them while threats ascend. The author also argues that the most important goal of the states is to ensure its survival “under anarchy by maximizing their power relatives to others”. The fact is that “the greater the military advantage one state has over other states, the more secure it is” (Mearsheimer, 1995:11-12). The international system comprises of a zero-sum game where one state tries to maximize its relative power and eventually faces others adversaries (Glaser, 1995:71). States compete for power in anarchic environment, however Waltz claims that the balance of power “prevail whenever two or more states coexist” in anarchic order “with no superior agent to come to the aid of states that may be weakening or deny to any of them the use of whatever instrument they think will serve they purpose” (Waltz, 1979:117-18).

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In these terms, I argue that EU is looking for self-help in anarchy of energy geopolitics. But other than state-centric approach of security studies, these efforts to gain access to various energy resources do not necessarily mean that this will result in a war between states.

Other important theory which is essential in this thesis is the fact of geography and geopolitics as a theory. The biggest part of energy resources is located in two regions: Caspian region and Persian Gulf. For Europe its geographical location is a positive point to reach both of these regions due to distance. The main reason for why I have chosen for geopolitics is because the geographical location of major powers trying to find and gain access to energy resources remains constant. And so does the regions with rich energy resources and natural gas in particular. So, this thesis will combine these two theories.

The main concept of this thesis is the concept of “energy security” which is an overarching concept for the whole energy sector. But what is it and why it is important for research? According to International Energy Agency “Energy security refers to the uninterrupted availability of energy sources at an affordable price” (Website IEA).

The European Commission defines energy security as “the ability to ensure that future essential energy needs can be met, both by means of adequate domestic resources worked under economically acceptable conditions or maintained as strategic reserves, and by calling upon accessible and stable external sources supplemented where appropriate by strategic stocks” (Skinner &Arnott, 2005: 23 ). In short, energy security refers to sustainable and reliable supplies at reasonable prices (Bahgat, 2007:965). It means that both affordable price and uninterrupted availability shape the concept of energy security. This is important for this thesis due to various aspects. First of all, as we have seen in recent political developments, supply security from Russia is not always uninterrupted. The gas disputes between Russia and Ukraine right after the Orange Revolution have shown vulnerabilities for various European countries when Russian side cut off the gas supply whilst most European countries could not get their gas from Ukraine which functioned as a transit hub. On the other hand the possibility of affordable prices can be reached by working on various suppliers of energy from various regions. Consequentially, according to my thesis, the European Union can handle the supply security of gas by

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focusing on non-Russian gas resources in its geopolitical proximity in the Caspian region.

1.6 Structure of the thesis

Based on the subject and sub-questions Chapter 2 will give an outlook of current energy situation of European Union. Main focus will be concentrated on natural gas, growing demands and increasing dependency of various European member states. In this chapter I will also discuss EU strategy on energy security.

Chapter 3 will define and categorize challenges which are being faced as a result of the strategy which will be set out in chapter 2. In this chapter I will study challenges which are tackling EU gas supply. In this chapter the main focus will be on Russia and its growing influence in European gas markets.

Based on the challenges discussed in the previous chapter, Chapter 4 will give an example of possibilities for EU to shape a solid and coherent energy security policy. In this chapter I will briefly look at the geopolitical possibilities for the EU to resist facing risks regarding to gas supply to its geographical boundaries. This chapter will emphasize the significance of the Caspian basin as a new and reliable alternative for the EU by bypassing Russian boundaries and its gas resources.

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Chapter 2: EU energy factsheet

2.1 Historical development of EU energy policies

The fact that the importance of energy resources, in this particular case the importance for EU is not a recent phenomenon, could be explained by even the creation of the European Union itself. After the Second World War the European leaders tried to co-operate to avoid bloody experience of the recent past. In that sense Jean Monnet, a French official, offered Germany to share natural resources which were located on the boundaries between two countries. This offer made a great step towards the creation of ECSC, European Coal and Steel Community which was established in 1952 after the Treaty of Paris in 1951. The creation of ECSC was signed by France, West-Germany, Italy, Netherlands, Belgium and Luxemburg and is being considered as a precursor of the current European Union with 28 member states. Such scale of post-war co-operation showed the first blossoms of EU energy strategy. The establishment of ECSC in 1951 and the European Economic Community in 1957 can be considered as the first integration in energy sector combined by economic co-operation. First solid step towards a coherent energy strategy came as answer to resource disruptions in 1973. Oil crisis of 1973 as a result of Kippur war between Israel and was the first biggest obstacle for the European Community as a supranational organization to tackle supply disruptions from the Middle East. During the war the Arab countries which were also the main exporters of oil decided to hike up the oil prices. Due to the fact that member countries did not have a common energy policy various member countries witnessed problems regarding to energy supply. First of them was the disruption of oil import, which definitely led to different measures by member states to reduce consumption. For example, famous car-free Sundays in the Netherlands can be considered as a measure to decrease consumption for a certain period. Another concern for the member-states in the 80’s was the increasing prices for crude oil in the global market. Nicholas Moussis gives an example of this abrupt in oil prices between Kippur war in 1973 and the war between Iraq en Iran in 1980. According to his assumption the prices reached twelve times their level before the dispute between Israel and Arab countries in 1973: in 1973, 3 dollars the barrel compared to 37 dollars the barrel ( Moussis, 2013).

As this oil crisis was a new unexpected challenge for the European states, the necessity of a common strategy occurred as a priority. This became an emphasis in

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1974 as the Council adopted a resolution “concerning a new energy policy strategy for the Community”. This resolution underlined the essence of coordination and co-operation to tackle disruption, instabilities and uncertain situations in the energy market.

Despite of this ambitious resolution further progress on common energy strategy was not realized. EU member states, especially those with energy resources vetoed any proposals regarding to energy policy in the Treaty of Maastricht.

In 1995 EU was able to adopt a new strategy named “White Paper: An Energy

Policy for the European Union”. Based on this paper EU underlined the emerging

importance of energy supply security, environmental measures for protection and also the possibilities to compete in a growing energy market.

A more recent treaty of Lisbon in 2007 emphasized the need for combatting the climate change by giving the European Parliament more responsibilities and cancelling the aspect of unanimity to adopt certain policies which was initialized to avoid further stagnation among the member states. In a time period of increasing energy consumption European policy makers are aware of the necessity of common strategy to tackle energy issues on the one hand and making EU maintaining its economic and political influence in contemporary international politics. In that sense next part of this thesis will explain the statistical situation of EU energy factsheets and new EU policies regarding to new challenges for the EU on energy and security issues.

2.2 EU energy and gas situation

Issue of energy is an indispensable aspect of current international geopolitics. With a population of over 500 million, EU plays an essential role in the global energy market. Energy sector of European Union is primarily being dominated by fossils such as natural gas, oil, coal, renewable energy resources and nuclear power. According to the statistical pocketbook of European Commission, EU’s own energy production declined for almost 13 percent over the last two decades (EC key figures, 2013:7). Figure 2.1 shows the share of energy production in the global energy market.

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Given the current situation, it is quite reasonable to presume that with a share of 6.5% EU does not play a prominent role in the export phase in the global energy market. Within the given statistical example, we can easily observe the rise of China as the second biggest energy producer with a share of 17.5 %. One interesting aspect of this production is perhaps the fact that among the given regions, EU is the only one with declining production of energy, where all other regions, including Africa witnessed an increase in their production of energy. In terms of energy production, main proved EU reserves in 2011 were located in Norway, The Netherlands and United Kingdom (CIA factbook, 2013). However, the role of EU as importer is very different than its role as exporter. As we see in the next figure 2.2, EU plays an important role as a consumer in the global energy market.

Figure 2.2 World Gross Inland consumption by region.

Source: EU energy in figures, statistical pocketbook (European Commission, 2013). Note : *- Not including China.

Figure 2.2 shows the division of gross energy consumption by region. Gross inland consumption covers consumption by the energy branch, distribution and

Figure 2.1 World energy production by region

Source: EU energy in figures, statistical pocketbook (European Commission, 2013).

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transformation losses, and final non-energy and energy consumption (Europe in Figures, Eurostat yearbook 2009: 451).

Rather than previous one, it emphasizes the role of EU as a consumer: with a share of 13.4 % EU is one of the biggest consumers in the global market. Comparing these two figures raises the following question: how does the EU react to the current global energy situation as a lowest production and one of the highest consumption percentages? Therefore we have to look at the internal energy situation of the EU and consequently to the reaction of EU policy makers to tackle this gap in the global energy sector.

Internal energy situation of the EU has shown a slight difference within the past decades. In 1995 for example, the share of petroleum and oil products was 39%. 22% of inland consumption of EU was natural gas, followed by solid fuels (20%), nuclear heat (14%) and renewable resources with 5%. In 2011 petroleum and oil products showed a decline of 4 percent, compared to 1995. Gas consumption in EU increased with two points to 24%, followed by nuclear heat with no percentage difference and renewable resources with an increase of 5 points to 10 percent. The share of solid fuels declined with 3 points to 17 percent, compared to the situation in 1995.

2.3 EU and natural gas

Natural gas is one of the dominant energy sources of this century as it experiences a growing consumption in the global energy market. In terms of gas production and consumption, which is one of the important aspects of this thesis EU countries witnessed significant differences. For example, in 2012, gross inland consumption of natural gas in EU-27 decreased with almost 4 percent in comparison with 2011. This was mainly caused by falls in domestic consumption in Belgium 30.5%), Sweden (-12.7%), and Finland (-10.5%) followed by countries such as Portugal, and Greece with a significant fall in natural gas consumption. On the other hand, 4 countries witnessed an increase in consumption in comparison with 2011: Estonia’s consumption increased with 11,3 %, followed by Poland (+6.2 %), Germany (+3.4%) and Luxembourg (+1.5%). (Eurostat, 2013). The situation regarding to gas production is also being combined with increases and decreases over the past year. Total amount of gas production declined with 5.5 percent, compared to 2011. As mentioned above, the United Kingdom, one of the main producers registered a decrease with almost 15 % while Germany followed with 12.5%. In contrast,

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elsewhere, such as in Slovakia the production of gas increased with 30.4% in comparison to 2011. Spain followed with 14 percent (ibid). One of the concerning development in EU gas situation is the persistence of energy dependency. As we have seen, there is a gap between gas production and gas consumption which creates a challenge for EU to satisfy the consumption by looking for gas resources outside of its borders. Unfortunately, import dependency of EU related to fossil fuels is facing a growth (figure 2.3). Import dependency 1995 2000 2010 2011 Total 43.2 % 46.7 % 52,6 % 53.8 % Solid fuels 21.4 % 30.5 % 39.4 % 41.4 % Petroleum 74.3 % 75.7 % 84.1 % 84.9% Gas 43.5 % 48.9 % 62.4 % 67.0 %

Figure 2.3 Import dependency in EU by fuel.

This figure 2.3 shows the growing import dependency related to natural gas. In 1995 EU’s import dependency was 43.5 percent, while almost 2 decades later it shows a growth of 23.5 points to 67 percent as a whole. The fact that solid fuel, oil and gas dependency is growing, is caused by demographic and economic shifts within the borders of EU. Growing amount of EU member states, and also the fact that GDP of EU as an average keeps growing, creates a situation of increasing demand and increasing energy consumption and gas in particular. In that sense, without the capabilities of EU itself to produce enough natural gas, the current import dependency makes EU member states vulnerable. Unfortunately, in this particular case, predictions on import dependency regarding the consumption of natural gas are not positive for EU member states. If the current policy does not change, EU gas dependency from outside its borders will increase up to 80% in 2030 (EC: The world in 2025; 16). Even within the current framework of EU gas dependency, 15 member states are more than 90 % dependent on gas imports (Eurostat, 2013).

As the previous table shows, EU gas dependency on fossil fuels and especially on natural gas is increasing year after year. This heavy European dependence on fossil

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fuels reflects the pattern of global usage, which is unlikely to alter substantially. According to the International Energy Agency (IEA), fossil fuels will continue to dominate global energy use. Oil will remain the single largest fuel in the primary energy mix, even though its percentage share will fall marginally. Meanwhile, demand for natural gas will grow most rapidly, mainly due to strong demand from power generation (Bahgat, 2006:963).

As the main proved gas reserves are located in especially two regions, Caspian region and Persian Gulf, the problem of few suppliers and increasing import dependency is a huge challenge for EU gas security at this moment. Due to the close interlink between natural gas and electricity systems, the strong dependence of power generation on imported gas might create a domino effect on the power sector in case of gas supply shortages (Weisser, 2007:1). According to European Commission, there are 3 main gas suppliers for the European Union: Russia, Norway and Algeria (figure 2.4).

Figure 2.4 Natural Gas import by country of origin.

2.4 EU gas strategy: focus on diversification

Growing demand, exhausting gas reserves elsewhere and the increasing aspects of import dependency for the EU, are contributing to development of EU energy policy to tackle the concerning issues regarding to gas security. In that sense, energy issue has been placed high on the European agenda. One of the important strategy objectives were mentioned in the Green Paper, A European Strategy for Sustainable,

competitive and secure energy, which was published by the European Commission in

2006. This Green Paper emphasized a new European strategy on energy security

30% 28% 13%

11%

10% 5% 1% 2%

Import of Natural Gas by

country of origin

( TJ-GCV)

Russia Norway Algeria Qatar

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issues which are becoming a serious subject of EU policies and also the European integration. According to Green Paper, there are three objectives for the European energy security:

1. Sustainability ( developing more renewable sources) 2. Competitiveness ( creation of new energy markets)

3. Supply security ( investments in infrastructure, security of routes and

It also emphasized various priorities for EU energy security such as the integration of internal European gas markets, a collective solidarity of EU member states regarding the common energy policy, establishing an energy mix and developing strategies to fight the obstacle of climate change (EC Green Paper, 2006: 5-15). A policy strategy which was adopted in 2010 under the name “EU 20-20-20 strategy” also emphasizes the need for energy efficiency to decrease EU dependency on imported resources (EC, 2010: 5; Langsdorf, 2011). While this latter strategy targets to reduce energy risks there are also some threats to EU gas consumption which could be affected “as demand could increase due to the need for gas-fired power plants to cover the demand when the wind does not blow” ( EP, 2009:13). According to the Green Paper, the intention of this strategy is not to maximize energy self-sufficiency or to minimize dependence, but aims to reduce the risks, linked to such dependence (ibid). Regarding to diversifying energy supply and natural gas in particular, European policymakers suggest some measures to secure the import on the one hand while accessing different gas-rich basins elsewhere. The necessity of diversification and secure supply should be highlighted, as many EU member states are dependent on one gas supplier, such as Russia (EC, 2007:10). In that sense the Green paper suggests to look beyond Russian gas resources to decrease the risks caused by a dependence on a single gas-export country. This vulnerability became visible when gas disputes between Russia and Ukraine occurred in 2006 and later in 2009. This politically motivated disruption in gas supply hit some EU member states which are highly dependent on Russian supply for more than 80 %. Based on the fact that EU wants to reduce overdependence risks it is essential to look at different gas-rich resources in order to maintain EU gas security for a long term. In that framework, the Green Paper emphasizes the importance of projects which could contribute to EU gas security. In a period of increasing consumption, unreliable dependence on a single

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gas-supplier from outside, and unexploited gas reserves especially around the Caspian region makes it inevitable for the EU to come up with certain policies in the region to secure its gas import on the one hand, to decrease its dependency on Russia on the other hand and to widen its infrastructural borders to Caspian basin on a long term to profit from rich gas reserves.

2.5 Conclusion

This chapter discussed the current energy situation of EU. As the given figures underline, there is a growing demand for natural gas in particular, due to increasing consumption. As a result of dependence on Russia which is unstable for EU gas security there is a need for diversification by looking beyond the non-Russian gas resources which are mainly not exploited yet in their full potential. As the main policy strategy, the Green Paper notes, it is important for the EU to reduce the risks of overdependence. As this chapter addressed the challenges regarding to growing import dependency and concerns about the future trends on gas situation, it is important to reconsider the relations between EU and Russia, which is the main gas exporter for the EU.

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Chapter 3: EU gas security and scarcity

3.1 Scarcity: a visible trend

In order to understand the possible risks to EU gas security we must consider the energy situation as explained above in the light of emerging circumstances in the global energy market. First of all, the provided data show us certain trends in energy: a) fossil fuels are still very important, b) measures taken by the EU to reduce the usage of crude oil and natural gas are not so effective, c) as EU becomes bigger in terms of member states, the size of population and consequently the energy consumption increases, d) EU is not the only actor in the energy market with increasing energy consumption.

Scarcity model, presented by Amineh and Houweling (2007) is in this case a suitable framework to understand scarcity and its geopolitical impacts in categorical divisions between (geo) political actors, producers, consumers and structural actors in totality. If we apply this model on EU regarding to its gas security, internal consumption, production for self-supply and dependence should be considered as the main aspects. Primarily, Amineh and Houweling make a distinction between three types of scarcity:

i. Demand-induced scarcity ii. Supply-induced scarcity iii. Structural scarcity

First two aspects of this scarcity model are to some extent connected with EU’s domestic energy situation. As mentioned above, with a population of more than 500 million, EU is remarkably important actor in global energy market. With emerging economy, growing population and increasing energy usage there is a definite threat of demand scarcity. On the other hand, this demand scarcity is connected to the second aspect of scarcity model, supply-induced scarcity. We have seen that EU’s own energy production is not enough to catch up the growing consumption. Indeed, with a growing dependence on external resources EU is becoming more vulnerable to the risks brought by actors outside its borders, their geopolitical influences and policy measures which it can’t directly influence in its own favor. With a shortage of self-supply, EU is doomed to co-operate with actors such as Russia in order to import natural gas. Structural scarcity should be the vital focus point for the EU as it “may

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be expected to provoke a process of competitive power protection by militarily capable and import-dependent nations aiming to gain control over stock or territory where stocks are located” (Amineh & Houweling, 2007: 375). For the EU the impact of structural scarcity is important to come up with measures which could resist the threats to its gas (supply) security. In accordance with the aim of this thesis, the role of Russia in this structural scarcity will be explained in this chapter preparatory to the possible measures by the EU to access gas resources and secure the transportation and import of them to its borders by bypassing Russian infrastructure. 3.2 EU-Russia gas relations

With a share of 30 percent, Russia is the main gas exporter to the EU. As the growing import dependence, the future of the relations between EU and Russia is also no more secure. First steps towards a co-operation were set in 1994, when both sides signed a treaty called “Energy Charter Treaty and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects” which entered into a legal force in 1998. According to this treaty, there were 5 focus points:

• The protection and promotion of foreign investments • Free trade in energy materials

• Freedom of energy transit through pipelines and grids • Reducing the negative environmental impact

• Mechanisms for the resolution of state-to-state or investor-to-state disputes. In short, the EU–Russia dialogue is based on a simple bargain—Europe’s investment in return for Russia’s oil and gas (Bahgat, 2006: 968-969). This relations has been shifted to a new dimension in 2000, the year when Putin became the president and the Russian Federation and the European Union felt the need the upgrade the cooperation on this key sector and decided, during the EU-Russia Summit in Paris of October 2000, to institute an Energy Dialogue, "which will enable progress to be made in the definition of an EU-Russia energy partnership and arrangements for it". Energy was considered as one of the most solid pillars of cooperation between the European side and Russia since the 60s, and as a key element for the further integration of the markets. The cooperation should include "the introduction of cooperation on energy saving, rationalization of production and transport infrastructure, European investment possibilities, and relations between consumer and producer countries" (EC, 2010: 4).

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In recent years, some doubts on these relations have been raised among European policymakers and scholars regarding to various issues. First of all, scholars like Bahgat argue that oil and gas production of Russia will not be sufficient in the upcoming years (Bahgat, 2006: 970). The combined effect of high energy prices and Putin’s largely successful efforts to regain control of the natural gas industry and much of the oil industry has enabled Russia to project itself again as a great power. (Harris, 2010:175). Other concerning issues are mainly about the increasing monopoly of Gazprom, a state-controlled company which is the largest extractor of natural gas in the world: according to the updated data, Gazprom Group owns 18 per cent of global and 70 per cent of Russian natural gas reserves (Website Gazprom, 2013). Main target of Gazprom is to establish itself as a leader among global energy institutions by entering new markets, to diversify its activities and ensure reliable supplies (ibid). At the current level of co-operation between EU and Russia two main pipelines are important: Nord Stream which is operational and South Stream which is being constructed now to be ready in 2015. The Nord Stream gas pipeline is a fundamentally new route for Russian gas exports to Europe. The target markets for gas supplies via Nord Stream are Germany, the UK, the Netherlands, France, Denmark and others (Website Gazprom, 2013). South Stream is a pipeline under construction to transport Russian gas to Bulgaria for further export to countries like Greece, Italy and Austria. It is being considered as an alternative for the famous Nabucco pipeline, backed by EU and US for its strategic importance, which intended to diversify the natural gas supply by bypassing Russian borders through Turkey and Bulgaria for being transported to Austrian borders.

The slow demise of Nabucco project is also an aspect of EU–Russian gas relations in a negative term. As EU tries to set up a common foreign energy policy to become efficient in the global energy market, the division between EU member states, also towards the intentions of Gazprom to take over some European gas companies are not unanimous. This shows the lack of common policy among EU states, while also dismantling the intentions of countries such as Germany to favor bilateral relations with Russian on energy issues, rather than an evolving EU policy. In that framework, the clash of interests became more visible as former German counselor Gerhard Schroder became the chief executive at Gazprom. His opinion about the strategic significance of Nabucco to decrease Russian import dependency was a concerning

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signal: he referred to Nabucco and Europe’s supply diversification to the Caspian Sea as “nonsense” (Norling, 2007: 16).

Figure 3.1 Projected routes of Nord Stream, South Stream and Nabucco Source: http://news.bbc.co.uk/2/hi/business/8607214.stm

3.3 Reconsidering the challenges of Russian dependence

Especially after the gas disputes between Russia and Ukraine in 2006 and in 2009, Russian- Georgian war in 2008, and the following global economic crisis have risen the questions about increasing gas dependency on Russian reserves and in which sense Russia can still remain as a reliable partner for the EU as its energy consumption is increasing combined with the depletion of domestic production. Scholars like Keppler argue that those challenges are linked with the inability of policymakers in the EC to set up a solid energy policy with reduced risks:

“The inability of policymakers in the European Commission and national governments to decide between competing – and sometimes contradictory – objectives adds to the objective difficulties Europe is facing” (Keppler, 2007:4). While scholars like Hudson favor the relations between EU and Russia by labeling it as a partnership of necessity which can’t change in the upcoming years (Website CSIS, 2013), one of the main advocates in this debate Zeyno Baran argues that EU should end the leverage of Russian gas for its own benefit in the short and long term. She notes the illiberal approach of Putin’s administration related to the energy issues,

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such as “state-privatizing” Gazprom which is nowadays fully operating beyond the Russian borders, even in Algeria which is one of the suppliers for the EU. In her opinion, which is also the red line of this thesis, Russia is not a reliable partner for the EU and its gas security in particular (Baran, 2007). But scholars like Keppler argue that the EU dependency on Russian gas should be inserted into a global commercial logic by a deepening co-operation. Keppler states that the co-operation between EU and Russia should not be based on political connotations as the EU’s gas dependence on Russia increases (Keppler, 2007:23).

By ending Russian supply EU could reduce certain risks related to its gas security. As discussed above first one is about the increasing dependence on Russian gas resources. In that sense I agree with Baran that EU should reduce its supply from Russia by looking for access to Caspian region in particular. As the next chapter will discuss, there are plenty of possibilities for EU to enhance the region to bypass Russian influence. Second challenge is related to economic aspects of this dependence. While overall gas prices are growing on the one hand, on the other hand Russian Gazprom is taking over stakes of various Eastern and Central European gas companies such as in Baltic states, Bulgaria and Greece, nota bene countries in deep economic crisis which are also for almost 100 percent reliant on Russian sources. In that sense, Gazprom’s shifting monopoly from domestic market to international market will cause certain problems in times of further dependence. The fact that Gazprom can’t operate independent from Russian government puts also a pressure on EU’s internal market and the investments of Gazprom (Belkin, 2008: 14).

This also creates further obstacles for common energy policy by EU member states by making it inevitable for separate states to negotiate with Gazprom as full partners, by ignoring EU policies. Current problems occurring related to the lack of common policy is being noted by Amineh and Yang in their article Secure oil and Alternative

Energy (2012): “Currently, the EU is still wrestling with the establishment of a

common energy policy. Although the European Commission laid down clear priorities (establishing an internal market for oil and gas from the fragmented national and sub-regional markets, creating links with energy-rich countries at its periphery and neighboring regions, especially Russia and Central Eurasia, etc.), many EU organizational issues remain. Overlapping competences of policymaking institutions within the EU and its member states, complex government-business ties and competing energy priorities all hamper the effective establishment and execution

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of a common energy policy”( Amineh & Yang, 2012: 16). Another aspect of insecure Russian supply refers to the disputes caused by Putin’s administration in last 8 years. Gas disruptions due to price wars between Russia and Ukraine, Russian invasion in Georgia have shown the political backgrounds of Russian perspectives as a tool of pressure. As Yergin states these future shocks which are unpredictable qua momentum and amount, is one of the main connotations of the concept of energy security (Yergin, 2006:81). If EU wants to minimize the risks regarding to this kind of unexpected cut-offs it should minimize its dependency as a whole.

One of the indispensable circumstances regarding to Russian gas supply to Europe is the unstable situation in the region where Russian pipelines begin. The political situation in the region, with extent to former Soviet regions in the Caucasus is not stable due to the persistence of authoritarian and moreover Russia-oriented regimes. As the region is one of the unstable and violent places with ongoing clashes for almost decades the security of Russian gas pipelines are under certain threats. The existence of religious extremist groups, especially in a time period of indirect Russian influence in Syria can create serious problems for secure gas supply. Regarding the geopolitical impediments of Russian supply, EU policymakers should also pay attention to the creation of Customs Union, or Eurasian Union, which is being presented as an alternative for European Union to resist its enlargement to the borders of Russia, by enhancing former Soviet republics Azerbaijan, Armenia, Moldavia, Georgia, Ukraine and Belarus in a project called Eastern Partnership. Recent demonstrations in Kiev against president Yanukovich’s intention to refuse agreements with the EU by joining the Putin-led Customs Union gave Russia a new opportunity to threat Ukraine and the West indirectly with supply disruptions, just in case Ukraine would reject to leave Russian hemisphere of political influence. Ukraine’s essential role as a transit land to many EU member states is in that sense also a political joker against EU itself. So, not only the problem of source country, but also the instabilities in and around transit hubs shape a deepening challenge for the EU security. But fortunately, there are other locations with enough gas resources to satisfy and secure EU gas supply for a long period. The final chapter of this thesis explores the importance of the Caspian region as a new source of gas resources which should be able to deduce the import dependency on Russia and the influence the Russian Federation and its half-state gas company plays in EU market, and also in markets which are vital for the EU in current situation.

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This chapter attempted to look at the bilateral relations between EU and Russia on the basis of energy. Despite some ambitious agreements made in 2000, the role of Russia and especially its oil and gas company Gazprom creates huge uncertainties for the European energy supply security. High prices, simultaneous disruptions in the winter seasons, the use of energy supply as a card on the negotiation table are aspects which damage the reliability of Russia towards the European Union.

EU policymakers should enhance policies in order to tackle these issues. And I argued that it can be reached by reducing the dependence on Russia. Geographically and also based on statistical data, there are different regions with rich gas reserves which could serve as a new turning point for the EU. The next chapter discusses one of those possibilities for EU gas security.

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Chapter 4: Caspian region as a new possibility

4.1: Geographical location and natural gas resources

As discussed above, there are certain challenges linked to EU gas supply. Those challenges are mainly geopolitical whilst gas dependency on Russia as a single major supplier is growing year after year. The financial dimensions of this dependency is also getting complicated as Gazprom is increasing its area of monopoly which definitely affects the prices and costs of Russian gas export to the EU. Given the fact that there have been various disruptions between Russia as a producer country and countries like Ukraine and Baltic states which are transit countries for Russian gas to European markets, it is highly recommendable for the EU to deduce the import of Russian gas. As this chapter will discuss, there are various possibilities for the EU to set up a diversification of gas routes for its own favor. This chapter argues that despite the challenges to EU gas security, there is a possibility to enhance a strategy for the EU. In both geographic and geopolitical sense, the Caspian region can become a new and reliable gas supplier to the EU. I will explicate that this region offers much more possibilities for the EU to conquer the challenges caused by increasing Russian influence on EU gas situation. Caspian region, geographically a location where West overlaps the East, has always been a focal point of world history due to its strategic importance. Broader regional influence has been noted by Harold Mac Kinder as he placed the region in his Pivot, a heart of the world according to his approach: “Who rules East Europe controls the Heartland. Who rules the Heartland commands the World-Island. Who rules the World Island commands the World.” (MacKinder cited in Brzezinski, 1997:61). The Caspian region geographically includes Russia, Azerbaijan, Turkmenistan, Uzbekistan, Kazakhstan and Iran. The emphasis of this chapter will be on non-Russian gas reserves in the Caspian basin.

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Figure 4.1 Caspian Sea region oil and natural gas infrastructure Source: U.S. Energy Information Administration (2013).

Traditionally, when those countries were a part of Soviet Union, Caspian reserves were mentioned for Moscow, while a certain share of oil and gas export fled to the Western markets. After the disintegration of Soviet Union, the emergence of the division of Caspian region raised, among the status of it as a sea of rather a lake. The fall of the Soviets created also a new situation on energy issues in the region as those countries became independent and the common market for energy consumption was substituted by a new necessity to the exploitation of reserves and the importance of finding new markets to deliver natural gas.As visible from figure 4.1 the region enjoys a variety to oil and gas reserves. EIA estimates that there is 292 trillion cubic feet (Tcf) of natural gas in proved and probable reserves within the basins that make up the Caspian Sea and surrounding area in 2012. Offshore fields account 36% of natural gas (106 Tcf). In general most of the offshore natural gas reserves are in the southern part of the Caspian Sea. In addition, the U.S. Geological Survey (USGS) estimates 243 Tcf of natural gas in as yet undiscovered, technically recoverable resources. Much of this is located in the South Caspian Basin, where territorial disputes over offshore waters hinder exploration (Website EIA). An interesting issue is that the gas reserves of Caspian countries (excluding Russia and Iran) are much more than the reserves in Russia. The next table shows the amount of reserves, production and their current export to the European Union.

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Countries Reserves* Production Export to EU

Azerbaijan 31.5 0.6 0.0**

Kazakhstan 45.7 0.7 0.0

Turkmenistan 618.1 2.3 0.0

Uzbekistan 39.7 2.0 0.0

TOTAL 735.0 5.6 0.0

Figure 4.2 Key Natural Gas Data Caspian Region (Russia and Iran not included) Notes: *- Trillion cubic feet (tcf)

**- Azerbaijan exports natural gas to Turkey, which sends some of it to Greece Source: BP statistical review of World Energy 2013.

According to the EIA the growing gas production in the region could sum up to Russia’s production alone. The following figure shows the increase of gas production in Caspian region within the last ten years (figure 4.3).

Figure 4.3 Caspian Sea region gross natural gas production (2000-2012) Source: U.S. Energy Information Administration (2013)

It is obvious that by focusing on non-Russian gas reserves in the Caspian region, EU can benefit from a possibility of huge reserves which are located in the region. Especially the role of Turkmenistan with huge reserves and Azerbaijan with its strategic capabilities to connect Caspian gas to Europe should be enhanced. On the other hand, if the nuclear negotiations with Iran will succeed, a window of new possibilities will go open for the EU: adding the gas reserves from Iran and Persian Gulf to export from Turkmenistan and Azerbaijan, EU would definitely be able to

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satisfy its gas supply and growing demand. So in that sense, EU should firmly support the rapprochement made by Iranian president Rohani towards the West.

4.2 Political and economic co-operation

Until quite recently, a relation with its Eastern neighbors was not an important priority for the European Union. The European Union had set up some attempts, but these have not been very successful (Smith 2005, 761). The situation became different in 2004, when several countries became new EU member states and the EU would benefit from a stable neighboring region (Smith 2005, 757-758). The European Neighborhood Policy followed the Partnership and Cooperation Agreement (Boonstra 2008, 4). The idea to implement the European Neighborhood Policy was initiated in 2002. Originally the Southern Caucasus was not part of the policy, but the Copenhagen European Council included these countries on the initiative (Smith 2005, 759) According to Smith, the ENP is primarily an attempt to create good neighbors: the kinds who conform to EU values as well as to EU standards and laws in specific economic and social affairs (Smith 2005, 763). A second purpose of the European Neighborhood Policy is to prevent the emergence of new dividing lines, through a variety of means like cross-border cooperation (Smith 2005, 763). With European Neighborhood Policy and the project of Eastern Partnership which includes Azerbaijan, EU will be able to access the utmost borders of its geographical sphere of influence to the Caspian basin. By taking a prominent role in the debates between Azerbaijan and Turkmenistan on the issue of Caspian Sea, EU could profile itself as a reliable negotiator on a long term. Furthermore, the advantages of connecting Turkmenistan with Azerbaijan by a trans-Caspian gas pipeline will not be limited to the geopolitical access to the region, but it also will have a commercial sense due to the increasing production, stable prices and the mutual benefits from an economic co-operation. For example, the EU could take part in the improvement of the regional gas industry, especially in Turkmenistan, which has the most reserves for exploitation, while investing in the local infrastructure of gas supply to its own borders. In this case EU policymakers should focus on the fact that Turkmenistan is a great opportunity and in the same way EU could mean too much for the country: “Turkmenistan is the sixth largest natural gas reserve holder in the world and was the second largest dry natural gas producer in Eurasia, behind Russia, in 2011. The

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hydrocarbon-rich country lacks sufficient pipeline infrastructure to export greater volumes of hydrocarbons” (Website EIA, 2013).

Another mutual benefit of this co-operation is related to Russian influence over the sea in former Soviet countries. EU has many tools, in terms of policy and economic luggage, to become an attractive option for those countries. New agreements, European investments in above-mentioned countries and the fact that EU could become the most important gas importer from the region, gives countries such as Turkmenistan and Azerbaijan great opportunities for their own development. A considerable advantage is also the fact that “it is controlled neither by Russia nor OPEC. This makes it one of a few sources of energy located both in proximity to Europe and outside of the control of these two dominant players. If Iran, another important actor in the region will achieve a rapprochement with US administration and the West on nuclear issues, it could mean that the Western veto on Iranian energy resources would be lifted. In that case, this would lead to a new opening for the European Union, as the gas reserves in the Persian Gulf, owned by Iran could be added to the Caspian resources for their export to the EU. On a long term, the co-operation with Iran can lead to further access to Middle-Eastern energy resources in a secure way where Iran can play a significant role. The same can be said for Turkey, in order to function as a corridor for non-Russian gas export to the EU.

There are quite many reliable possibilities for the EU to deduce Russian import on gas and to direct itself to resources in the Caspian region which also has the capability to connect Iranian and Middle-Eastern gas resources to the region for further export to Europe through the assistance of Turkey as a transit country.

4.3 From Caspian basin to EU energy market

We have seen that from a geopolitical view, the region offers a great possibility for the European Union to diversify its gas suppliers. Creation of a new non-Russian gas transport to the European Union is not only limited to the EU, but it also enhances the preferences of US administration. Based on Turkmenistan and Azerbaijan, the necessity of non-Russian gas pipelines has been an important point of the energy agenda. Besides the Nabucco project, which has been canceled at this stage, there are 3 projects which will transport non-Russian Caspian gas resources to the EU.

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30 Name Anticipated capacity Anticipated in-service date Partners Trans Adriatic Pipeline 350 2019 AXPO(Switzerland), EON ( Germany), Statoil ( Norway) Trans Anatolian Gas Pipeline 565 2019 BOTAS ( Turkey), Socar ( Azerbaijan), TPAO (Turkey) Nabucco West Pipeline

350 unknown BEH (Bulgaria),

BOTAS(Turkey), FGSZ (Hungary), OMV (Austria), Transgaz

(Romania).

Figure 4.4 Prospective Non-Russian Southern Corridor Pipelines Units = billion cubic feet per year (bcf)

Source: Cogressional Resarch Service (2013).

Figure 4.5 Existing and projected gas pipelines from the Caspian region Source: Website Pipeline Conference (2013).

As mentioned above, Nabucco project is facing political problems for its construction; especially Russia doesn’t want to see the project realized. With this on mind, pipelines such as TAP, TANAP and Nabucco West become important (figure 4.4).

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Trans Adriatic Pipeline connects Azeri gas with Italy through Greece and Albania. Trans Anatolian Gas pipeline is a gas pipeline, announced in November 2011, which will connect Caspian gas with Europe where Turkey will serve as a transit corridor. Nabucco-West, which was the priority for the EU but got outmaneuvered by TAP. Nabucco was intented as a 1,300-kilometer long gas pipeline, running from Turkey through Bulgaria, Romania, Hungary and Austria, and it was conceived as a way to wean Europe off dependence on Russian gas (Website Eurasia, 2013). As seen in figure 4.5, all those projects are mentioned to bypass Russian borders.

Given the fact that this figure only presents Azerbaijan-based gas resources, there can be additional pipeline infrastructures to connect Central Asian and in particular Turkmeni gas with Europe. Furthermore, from the South, Iran will become an important contributor to European gas supply if the EU takes its responsibilities to tackle the geopolitical obstacles between Iran and the West.

4.4 Conclusion

This thesis discussed the challenges of current energy situation in the EU. There is a growing demand, growing consumption and increasing amount of population due to further enlargement of the EU in the last 10 years. Especially, the direction of this enlargement to former Soviet countries creates a challenge in terms of energy security: new member states in the region are somehow dependent on Russian energy resources and natural gas in particular. In fact, EU is not able to satisfy its own gas consumption because of the lack of production capabilities. This results in an import of non- European gas resources to its borders. Given the fact that Russia is the main gas exporter to the EU, in an increasing trend, it was important to look at the relations between these two actors. Despite made agreements on energy co-operation, it still remains shaky. In that sense, this paper argued that EU policymakers should adopt more coherent strategies to tackle the concerning issues. Main aspect of this strategy has to be diversification of supply routes. I argued that Russia should not remain the first option for gas supply security of the European Union. First of all, despite the amount of Russia-based gas disruptions, Russia is still not a reliable partner with its realistic approach, combined with Gazprom’s growing influence outside the borders of Russia itself. Second threat in these relations is about the indispensable assumption that the growing dependence on Russian gas has a negative impact on (geo) political targets of the EU. As the disputes with Ukraine

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have shown, Russia, especially with Putin’s approach is not afraid to utilize the export as a political tool for pressure. Based on the statistical information that many EU member-states are fully relying on Russian gas, it is important to look for new emerging possibilities for maintaining the expected gas security for the EU.

In that framework, the Caspian region offers a great possibility for EU gas security with its proven and to some extent unexploited gas resources to satisfy EU consumption for a long period. As chapter 3 has shown the challenges for EU gas security, the final chapter discussed the geopolitical possibilities for the EU to access, secure and import non-Russian gas resources to its borders which can become an effective solution for EU set targets to reduce security risks. On a long term, the securitization of gas supply in terms of diversification of suppliers, and mainly the ones in the Caspian region will reduce EU’s vulnerable position in the global energy market and will certainly shift its importance as a political actor to a new level.

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