Energy Security and energy policy are the modern world's main actual themes. Meantime of developing an economy and industry is increasing consuming energy resources and in future demand on crude oil and natural gas will increase (British Petroleum, 2019). As known natural resources are not in every country and therefore countries in the world are divided as an importer and exporter. That makes uneven and mostly unfear relationship between countries. The Eurasia continent's European side has a minimal amount of natural resources, contrary to the Asian side has a large amount. (CIA (US), 2019) That makes the European Union (EU) energy dependent on energy imports. Russia as an owner of the largest natural gas reserves in the world, (approx. 837 trillion cubic meters) (Reserves, Resources and Availability of Energy Resources, 2013 p. 23) and is one of the biggest exporters on Euromarkets (British Petroleum, 2019). The European Union is dependent on Russian energy resources, which should not be a problem if Russia acted as a reliable trade partner for Europe.
However, Russia uses its energy wealth as a primary means of political pressure against Western and neighbour states. That creates significant problems for EU's nations not only in energy security but also regarding foreign policy. There are two options for the EU: first, remain faithful to democratic values, be strict and very demanding on the Russian government's internal or external political behaviours. Second, is to close its eyes to Russia's unfair actions in the international community and maintain the status quo in trading with Russia. Definitely, the EU has chosen the first option. Therefore the EU has to make its energy security more resilient, by lessening the import of Russian energy sources and finding alternative supplier countries and supply routes. In Cold War-era eastern European countries were supplied with energy resources by the Soviet Union, after its demolish Russia as a Soviet Union’s successor, became a main supplier for the Central and Eastern European countries. After Germany’s unification and post-communist Central and Eastern European countries joined the EU in the late nineties and early two thousand, therefore the EU automatically became more dependent on Russia’s energy resources.
Furthermore, the Western European countries improved a relationship with Russia and gave it free access to the European energy market, believing its democratic development and becoming a European style democratic country. Because of before 2006, there were just minor interruptions of energy supply from Russia to Europe and therefore Russia was considered as a quite reliable energy source supplier partner country (The European Union: Energy Security and the Periphery, 2002 p. 10). That was economically beneficial for both sides, one decreased energy recourses deficit in the market and another gained profit. The EU and Russia became interdependent each other, that would diminish unfear relations between them. Nevertheless, Russia became not a democratic but autocratic country which is eager to regain the Soviet Union's sphere of influence. That means to rule not only all post-soviet states but also Central and Eastern European countries (Warsaw Pact).
The Russian government against its neighbour and interested European countries uses multiple tools to reach their imperial goals such as bribery, intimidations, inducements, wiles, and diversity of destabilizing activities. In its sphere of interest, the Kremlin always tries to weaken resistant governments, by obtaining control on main segments of the economy, corrupting key leaders, breaching of governmental security agencies, widely using propaganda via media and social channels (Bugajski, et al., 2016 p. 6). Kremlin tries to increase the dependence of the EU states on Russian energy resources which will give it not only financial benefit but also political power for influencing on economically vulnerable countries’ external and internal policies. In addition, holding pipelines, storage facilities, and refineries by the Russian energy companies, gives Moscow extra lever for pressing on capitals (Bugajski, et al., 2016 pp. 35-36). Some EU countries have already practised hardship of oil supply shutdown by Russia. Because of Riga's refusal to sell Ventspils Nafta export infrastructure to a Russian company, Moscow stopped pipeline oil delivery to Latvia in winter 2003. In summer 2006 after a Russian energy company could not gain Mazeikikiu Nafta refinery facility in Lithuania, Kremlin used the same technique of influence and shut down oil pipeline (Baran, 2007 p. 133).
To be dependent on Russian energy sources for the EU is not only the economic handicaps but also that harms its foreign policy. It also corrodes Western European support for partner countries in Eastern Europe and Central Asia, which are key countries in energy production or in transit potential. All those countries are under Kremlin threat. Rather than firmly react on these violations, energy dependence on Russia leads European leaders to be softer and careful against Moscow especially before 2014. Moreover because of significant energy reliance on Russia, from the west had the same attitude towards Kremlin even it harassed the EU member states. For example in 2006 when a Lithuanian oil pipeline was closed, except Poland and the Baltic countries very little protested Russian behaviour (Baran, 2007 pp. 133-134). Not like oil, Gas by tankers is hard to transport and more expensive to compare transportation through pipelines.
But if a provider country or company rejects delivery of gas or prise will be irrationally increased, it is not easy for a consumer to find an alternative source in a short time. Nowadays the EU has only one supplier of oil and especially gas via pipelines and that is Russia. If this circumstance does not change the EU will be in danger. In 2006 after Russian - Ukrainian gas dispute and cut-off natural gas to EU member countries, the EU commission started to pay more attention to Energy Security. Even though it was an economical quarrel between those two non-EU member states, it caused gas delivery interruption for several EU countries. This increased consciousness about that Europe becomes geopolitically more vulnerable because of Russia dependency (Baran, 2007 p. 132).
The European Commission realized that ‘Europe has entered into a new energy era’ (European Commission, 2006). In green paper was emphasized on importance of open energy markets based on fair competitiveness among energy companies. Russia’s Aggressive Energy Policy Russian energy companies: In the contemporary environment, Russian strength should be measured not in military power, but in the number of pipeline lengths and volume of oil and gas trade. Kremlin already started annexation of the EU's energy assets (Baran, 2007 p. 132). For reaching its future goal to increase the EU's dependence on Russia, Kremlin by its proxy energy companies such as Gazprom, Rosneft, and Transneft, is purchasing shares in the main energy supply companies and energy distribution infrastructure of the European countries (Baran, 2007 p. 134). All of them are worldwide energy companies. Their economical positions are strengthened by the Russia government support, which uses its not only political influence but also military provocations to make them more powerful in energy markets. The companies by themselves are perfect weapons in the Russian government's hand for playing ‘dirty political games' in international relations. The Public Joint Stock Company Gazprom is a worldwide energy company. It is mainly concentrated on discovering, manufacture, transfer, retention, supply, and trade of gas and oil.
The company owns the largest natural gas reserves (17 per cent share in global, 72 per cent share in Russia; Natural gas output is 12 per cent in global and 68 per cent in Russia) and the longest gas transmission system in the world (172.1 thousand kilometres). Gazprom’s strategic objective is to become front runner between international energy companies, by differentiating energy markets, ensuring uninterrupted deliveries. It distributes natural gas to more than thirty states excluding former Soviet Union countries. Gazprom is the biggest manufacturer and seller of liquefied natural gas (LNG) in Russia and aims to become more competitive in the global LNG market. In Russia, the company also is among the top four oil producers. It holds about 16 per cent of Russia's power-generating system. Gazprom shareholders are Federal Agency for State Property Management (representative of the Russian Federation) 38.37% Rosneftegaz 10.97% (fully owned by the Russian Government) Rosgazifikatsiya (fully owned by the Russian Government) 0.89% ADR holders 25.20%, Other Legal Entities and individuals 24.57% (Gazprom, 2019). Gazprom owns major shares of energy companies within the most post-Soviet Republics. It is one of the largest stakeholders in the three Baltic countries.
Besides Gazprom amplified its expansion into the internal gas delivery system of western European countries. Its commercial partners are German companies E.ON Ruhrgas and BASF, Eni (Italy), Gaz de France and Gasunie (the Netherlands) (Baran, 2007 p. 133). The Public Joint Stock Company Rosneft is one of the biggest energy company in the world, which is focused on exploration, production, refining and selling of gas, oil and oil products. Its 50.00000001 per cent of shares hold JSC Rosnevtegaz (fully owned by the Russian Government), 19.75 per cent of shares holds BP Russian Investments Limited, 18.93 per cent of shares holds QH Oil Investments LLC, 10.4 per cent of shares holds National Settlement Depository, 0.58 per cent of shares hold Other Legal Entities, less than 0.01 per cent of shares hold Federal Agency for State Property Management (representative of the Russian Federation), 0.34 per cent of shares hold individuals, less than 0.01 per cent of shareholders are unknown. Rosneft operates in the whole territory of Russia and also in foreign twenty-two countries. Its oil production share is about 40 per cent in Russia and 6 per cent in global. Rosneft owns thirteen large and several mini oil refineries in Russia and also has its shares in Germany, Belarus, and India. In Germany it owns from 24 to 54 per cent of shares in three refineries, in Belarus indirectly holds 21 per cent, in India 49 per cent of shares in the second largest refinery.
The company's share in oil refining in Russia is about 35 per cent. In Russia Rosneft ability in oil-refining is 118.4 million ton per year. Rosneft’s export goes through Transneft’s pipelines and ports (Rosneft, 2019). The Public Joint Stock Company Transneft is the largest oil pipeline company in the world. Which is mainly concentrated on the transportation of oil and oil products through a pipeline system inside Russia and abroad. The company owns more than 68.000 km trunk pipelines, more than 500 pumping stations, more than 24 M cubic meters of storage tanks. Its share of transportation oil extracted in Russia is 84%. JSC Transneft’s 100% shares hold Federal Agency for State Property Management (representative of the Russian Federation) (Transneft, 2019). Russian Energy Supply Projects: Druzhba is one of the largest oil pipeline system in the world. Building the pipeline was decided in 1958 to supply the USSR's ally socialist states with crude oil from the Soviet Union. The construction started in 1960 and in 1964 the pipeline became fully operational.
The pipeline network's total lengths are approximately 5500 km. Its capacity is 1.2 to 1.4 million barrels per day and has the potential to increase up to 2 million barrels a day. It lays from Almetyevsk which is interconnector of Ural, (Russian Federation) to Mozyr (Belarus), where it is split into northern (through Belarus and Poland goes to Germany) and southern (via Ukraine split into two branches in Uzhgorod goes to Hungary and Slovakia, where it is split again and one branch goes to the Czech Republic, another branch goes to Hungary) directions (International Association of Oil Transporters). In Unechna (Russian Federation) on the main pipeline also is connected to another branch which goes to through Belarus to Lithuania and Latvia. But as mentioned above the branch is not operational since 2006. Operating Druzhba pipeline decreased the price of oil transportation approximately 20 – 25 per cent (Pipelines International, 2009). In January 2018 according to Reuters Rosneft is interested in constructing a new pipeline branch connected to the Druzhba in Germany, which would supply more oil refineries there.
The company also declared that had planned to invest about 600 million Euros in Germany within the next five years (Reuters, 2018). Via Ukraine Russian gas export conducts through pipeline systems: Brotherhood (Bratstvo) and Union (Soyuz). 4.451 km length pipeline Brotherhood is the largest gas transport system that goes from Russia via Ukraine to Slovakia where it is divided into two branches: one goes to the Czech Republic, another to Austria (From Austria Russian gas is delivered to Italy, Hungary, Slovenia, and Croatia) (Gazprom, 2019). That is operational since 1967. After the collapse of the Soviet Union owners of the pipelines became in Russia ‘Gazprom’, in Ukraine UkrGazProm. Union (Soyuz) pipeline is linked to Russian internal and Central Asian gas pipeline networks.
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That gives more volume of natural gas. On Union (Soyuz) pipeline in 1986 was added another branch Trans Balkan that goes via Moldova to Balkan countries and Turkey. By those pipelines, 80% of Russian gas was exported to Europe, but after constructing North Stream pipeline, this amount decreased to 60% (Vermaat, 2015 p. 57). For exporting Russian gas to Europe is used also gas pipeline Yamal-Europe, which is about 2000 km length and goes through four countries: Russia, Belarus, Poland, and Germany. 402 km is the Russian section’s length and owned by Gazprom. Belarus part of the pipeline is 575 km, which also fully owned by Gazprom. In Poland, the pipeline's length is 683 km and owned by Polish company EuRoPol GAZ s. a., of which 48% shares hold Gazprom (EuRoPol GAZ s. a., 2019). In Germany, the pipeline ends near Frankfurt an der Oder (near Germany-Poland border), where it is connected to YAGAL-Nord gas transmission system. German segment of the pipeline is owned by WINGAS which shareholder is Gazprom (WINGAS, 2019). Gas pipeline Yamal-Europe was constructed in 1994-2006 years and its capacity is 32.9 bcm per year (Gazprom, 2019).
One of the newest offshore Russia gas exporter pipelines is 1224 km length Nord Stream. The pipeline goes from Russia directly to Germany through the Baltic Sea. That avoids not only extra transit fees but also any possible political tensions by transit countries. On Russia side, the offshore pipeline is linked by 917km length onshore pipeline (constructed by Gazprom) to Russia's internal gas transmission system. On the German side from Greifswald the pipeline is connected by approximately 900 km length onshore pipeline (constructed by W&G and E.ON SE) to the European gas transmission system. Nord Stream was constructed by consortium Nord Stream AG in 2010 – 2012 years and its capacity is 55 bcm per year. Shareholders of the consortium are Russian Gazprom – 51%, German companies: Wintershall Holding GmbH – 15.5%, PEGI/E.ON-15.5, Dutch company N.V. Nederlandse Gasunie – 9% and French company ENGIE – 9% (Nord Stream AG, 2019). Another offshore gas pipeline project is Nord Stream-2 that construction is ongoing and is planned to be finished in late 2019. The pipeline’s route is the same as Nord Stream-1. It will connect through the Baltic Sea Russia to Germany, laid parallel to the existing pipelines. Nord Stream-2’s capacity is 55 bcm annually. This gives Russia the capability to export 110 bcm natural gas per year to Germany via one route that bypasses all transit countries. That amount is about 70% of Russian total gas export.
The project partners are Gazprom, Royal Dutch Shell, French Engie, Austrian OMV, German Wintershall and Uniper (Assenova, 2018). Another important project for Russian gas export to Europe was building gas pipeline ‘South Stream', which aimed to transport natural gas into the Southern and Central European countries. The pipeline’s planned route was from Russia to Bulgaria offshore (Anapa – Varna section under the Black Sea) 900 km length pipeline. 1455 km. length onshore North-West section would go from Bulgaria via Serbia, Hungary, and Slovenia to Northern Italy, and by its extension to Austria. Also was planned to construct from Serbia two additional branches that would provide natural gas to Croatia and Republic Srpska. (Gazprom) Another South-West route would go from Bulgaria through Greece to Southern Italy. In every section of the pipeline, ‘Gazprom' had at least a 50% share. ‘South Stream’ capacity would be 63 bcm per year.
The pipeline’s cost was approximately 15.5 bn Euros. This project was the main competitor to another alternative energy supply project for Europe - ‘Nabucco’ and finally caused its termination. In 2015 the pipeline was supposed to be fully operational, but because of the European Union's objections, in 2014 the project was cancelled. After termination of the ‘South Stream' project, Russia switched its attention to ‘Turkstream' pipeline project, which sea route remained mostly in the same corridor as was planned for the ‘South Stream'.
Only a small part changed route towards Turkey (Hydrocarbons-Technology). The ‘Turkstream’ is a 930 km length offshore two parallel gas pipelines, which goes from Anapa (Russia) to Kiyikoy (Turkey) and by onshore pipelines will be connected to Turkish gas network at Luleburgaz. The capacity of both pipelines is 31.5 bcm per year. The aim of this project is to provide with natural gas Turkey and Southern European countries. For the construction of offshore part of the pipelines was responsible ‘Gazprom' owned company ‘South Stream Transport B.V.’ (South Stream Transport B.V.) The building of offshore pipelines started in May 2017 and finished in November 2018. It is planned that in late 2019 year all work will be done (Gazprom, 2019). Russian energy companies because of handy connection with government follow tactics that make a small economic profit but assist Russian strategic goal.
For example, Nord Stream project costs approximately three times more than the land pipeline route via Lithuania and Poland. Rather than investing in developing its domestic oil and gas infrastructure and explore new energy fields, Moscow follows the violent policy for further enlargement and procurement in regional and global energy markets (Baran, 2007 p. 135). Russia's internal energy market is not stable and nor transparent for foreign energy companies, even they invest billions of US dollars. For example, energy companies Shell and BP were forced to give up their controlling shares in Sakhalin-2 (Shell) and Kovykta (BP) projects to Gazprom for a considerably low price than its real cost. Even though those companies easily discussed with the Russian government agreed to certain positions and invested a significant amount of money into those projects, Moscow later discarded these contracts (Baran, 2007 p. 142). The EU’s Energy Security Strategy As it showed above from the economic view Russian Energy Projects towards Europe are quite attractive and mutually beneficial.
Even though after the Kremlin started using those projects as the main tool for political influence on the neighbour and the EU member states, it became very essential to find alternative energy supply sources, with different routes that avoid Russia. To do this there are two interconnected issues to be solved: one find countries (regions) with enough volume of energy sources and second find secure routes for transportation energy sources from those countries (regions) to Europe that excludes territories of Russia and its satellite states. The potential countries which have the ability to relatively substitute Russian energy sources for Europe are Algeria and the Caspian Sea Region countries (Kazakhstan, Turkmenistan, Iran, and Azerbaijan). Algeria is the third largest gas supplier country for Europe (after Russia and Norway). It has 4.3 tcm proved gas reserve (British Petrolium, 2018). According to Algerian energy ministry, this decade the natural gas production will be doubled, because of thirty-two new gas fields with approximately 550 million tons oil equivalent gas reserves (Ministry of Energy of Georgia, 2014).
Iran is the second country in the world by its 33.2 tcm proved gas reserve that is 17.2% world share. (British Petrolium, 2018) By importing Iranian gas, the EU could be fully independent of Russian gas demand. Although because of nowadays the EU – Iran significant tensions in political affairs, deepening economic relations is a far future matter. Other good alternative suppliers could be the Caspian Sea Region’s post-soviet countries (Kazakhstan, Turkmenistan, and Azerbaijan). There is an adequate amount of gas for European countries. Kazakhstan owns 1.1 tcm proved gas reserve that is 0.6% world share. Turkmenistan is the fourth country in the world by its 19.5 tcm proved gas reserve that is 10.1% world share. Russia till 2009 was re-exporting the Central Asian natural gas to Europe for the price about 230 USD per thousand cubic meters (tcm), named it as a Russian gas. That gas was bought in the Asian states for the price of about 45 - 65 USD per tcm. Its monopoly in the European energy market, allows Moscow to manipulate with gas prices that gives it enormous revenue (Baran, 2007 p. 137). Azerbaijan owns 1.3 tcm proved gas reserve that is 0.7% world share (British Petrolium, 2018). Only the Azerbaijani gas volume is not sufficient for Europe, but it has a significant geographical location in the Caspian Sea Region.
For transporting natural gas from the Caspian Sea Region to Europe, has been discussed several projects. The most significant from them was American-European joint ‘Nabucco’ project, which planning started in 2002. Purpose of the project was to build 3900 km length gas pipeline from the Middle East and the Caspian Sea Region to Europe that route avoided Russia’s territory and would provide the European countries up to 31 bcm natural gas per year (Tanrikulu, 2018 pp. 161-162). This project would decrease by approximately 20% dependence on Russian gas import, considering Russia is exporting to Europe about 150 bcm natural gas per year (Nabucco Pipeline Suffers Setback As Rival Expected To Get Azeri Gas, 2013). In ‘Nabucco' project that was subsidized by the EU, in summer 2012 the eastern (Azerbaijan, Georgia, Turkey) part was excluded from the project. In the project was remained only western (Bulgaria, Romania, Hungary, and Austria) part and was named ‘Nabucco West’. Therefore pipeline’s length lessened to 1300 km rather than planned 3900 km. Instead of rejecting the Nabucco’s eastern section, Azerbaijan and Turkey financed the Trans Anatolian Pipeline (TANAP) project. 1900 km length TANAP was constructed by partner companies: SOCAR - 80%, BOTAS - 10%, TPAO - 10%. TANAP construction finished in 2018. In 2013 ‘Nabucco West' was finally rejected by Azerbaijan in favour Trans Adriatic Pipeline (TAP) project, which route is from Turkey via Greece, Albania through the Adriatic Sea to Southern Italy. This route is 400 km shorter than the Nabucco West’s one. (Nabucco Pipeline Suffers Setback As Rival Expected To Get Azeri Gas, 2013) In TAP consortium company’s shares are: Statoil – 42.5%, EGL – 42.5%, E.ON - 15% (Tanrikulu, 2018 p. 164). Despite the US's and the EU's significant support to the Nabucco project, it could not succeded, because of no ability to join into the project main supplier countries such as Turkmenistan, Iran, Iraq, Egypt. That finally undermined the project (European Union’s Nabucco pipeline project aborted, 2013).
Even though Nabucco project was terminated, an enlargement of the South Caucasus Gas pipeline system, constructing TANAP and TAP creates the Southern Gas Corridor for the EU. One of the most important segments of the Southern Gas Corridor is the Trans Caspian Pipeline project which would connect Turkmenistan to Azerbaijan (Turkmenbash – Baku). The project would enable transporting the Central Asian gas through the Caucasus Region (Azerbaijan, Georgia), to Turkey and Europe. There are two ways to transfer the Asian gas to Europe: one via Turkey (TANAP), second through the Black Sea from Georgia. According to Vladimir Socor Turkey undermined the Trans Caspian Pipeline project in 2002 by its decision to import Russian gas rather than Turkmen gas. At that time was planned to import 16 bcm per year from Turkmenistan that would be transferred through the Trans Caspian Pipeline, Azerbaijan and Georgia to Turkey. Even the Trans Caspian Pipeline project was supported by the US, Turkish influential authorities supported Gazprom's Blue Stream project. Therefore was built an offshore Gas pipeline in the Black Sea with a capacity of the same amount of gas. That was not a wise decision from the Turkish government because they have to buy more expensive Russian gas rather it was proposed from Turkmenistan.
The situation changed in 2012, Turkey with cooperation Azerbaijan declared about their intent to import some amount of gas for their own demand and rest amount transfer to Europe. That gas would flow via projected Trans Caspian and TANAP gas transport systems. Turkmenistan itself proposed willingness exporting to the EU 40 bcm per year. Therefore Ankara planned to increase TANAP capacity from 30 bcm up to 60 bcm per year (Turkey Sees Opportunity in Trans-Caspian Gas Pipeline Project, 2012). Nevertheless, mentioned above one of the main obstacles for accomplishment the Trans Caspian Pipeline project was more than twenty yearlong demarcation dispute on the Caspian Sea between the five coastal countries (Russia, Kazakhstan, Turkmenistan, Iran, and Azerbaijan). In summer 2018 those countries made the deal that seized dispute, but to completely solve the problem must be done a lot of work to clarify sea borders (Caspian Sea: Five countries sign deal to end the dispute, 2018). Another segment of the Southern Gas Corridor is 691 km length South Caucasus Pipeline (SCP), which lays from Baku (Azerbaijan) via Georgia to Turkey.
The pipeline connects Sangachal terminal (Baku) with the Turkish gas distribution system. Its capacity is 20 bcm per year (British Petroleum, 2019). Another alternative gas supply project for the EU is Azerbaijan – Georgia – Romania – Hungary - Interconnector (AGRI). The project designed for transportation of natural gas from the Caspian gas fields through the pipeline to the Georgian seacoast, where it will be liquefied and be taken by LNG tankers (2 tankers each 140 000 cm capacity) to Konstanca (Romania). After de liquefying the gas, it would be transported to Hungary by pipeline system (Romania 810 km, Hungary 110 km). Maximum capacity will be 8 bcm per year. In the project are involved Azerbaijani SOCAR, Georgian Oil and Gas Corporation, Romanian SNGN ROMGAZ S.A. and Hungarian MVM. Each has a 25% share. The projects accomplishment is planned in 2024. (AGRI, 2019) AGRI is the first project that includes LNG transportation on the Black Sea. Furthermore, it has a unique route that bypasses not only Russia but also Turkey that will make the EU's resilience better. In addition, mentioned above alternative energy suppliers and routes, another option for energy sources also is shale gas. After development technology, it is now possible to produce gas at an affordable price.
For example in the US increased internal shale gas production overflowed the domestic energy market and caused decrease gas prices. The prices on gas lowered so much in that period of time that in its domestic market Russian subsidized gas prices was bigger than the US prices (MITROVA, et al., 2018 p. 15). Even though this idea is not supported in the EU yet. Some of the member states banned shale gas production, in some countries was not founded enough amount of reserves and some countries are waiting for more researches on environmental issues (Boersma, 2015 p. 109).
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