Coordinator Specialist in Energy Policy
Paul Belkin Analyst in European Affairs
Jim Nichol Specialist in Russian and Eurasian Affairs
Steven Woehrel Specialist in European Affairs
Europe as a
major energy consumer faces a number of challenges when addressing future
energy needs. Among these challenges are a rapidly rising global demand
and competition for energy resources from emerging economies such as China
and India, persistent instability in energy producing regions such as the
Middle East, a fragmented internal European energy market, and a growing
need to shift fuels in order to address climate change policy. As a result,
energy supply security has become a key concern for European nations and
the European Union (EU).
A key element of the EU’s energy supply strategy has been to shift to a greater
use of natural gas. Europe as a whole is a major importer of natural gas.
Russia is Europe’s most important natural gas supplier, accounting for 34%
of Europe’s natural gas imports. Europe’s natural gas consumption is
projected to grow while its own domestic natural gas production continues to decline.
If trends continue as projected, Europe’s dependence on Russia as a supplier is
likely to grow. And, while it could be in Europe’s interest to explore
alternative sources for its natural gas needs, it is uncertain whether
Europe as a whole can, or is willing to, replace a significant level of imports
of Russian natural gas. Some European countries that feel vulnerable to
potential Russian energy supply manipulation may work harder to achieve
diversification than others.
Russia has not been idle when it comes to protecting its share of the European
natural gas market. Moscow, including the state-controlled company
Gazprom, has attempted to defeat Europeanbacked alternatives to pipelines
it controls by proposing competing pipeline projects and attempting to
co-opt European companies by offering them stakes in those and other projects.
It has attempted to dissuade potential suppliers (especially those in
Central Asia) from participating in the European-supported plans. Moscow
has also raised environmental concerns in an effort to stymie other
alternatives to its supplies, such as unconventional natural gas.
Successive U.S. administrations and Congresses have viewed European energy
security as a U.S. national interest. Promoting diversification of
Europe’s natural gas supplies, especially in recent years through the
development of a southern European corridor, as an alternative to Russian natural
gas has been the mandate of the State Department’s Special Envoy for Eurasian
Energy. The George W. Bush Administration viewed the issue in geopolitical
terms and sharply criticized Russia for using energy supplies as a political
tool to influence other countries. The Obama Administration has also
called for diversification, but has refrained from openly expressing concerns
about Russia’s regional energy policy, perhaps in order to avoid jeopardizing
the “reset” of ties with Moscow. Additionally, a change in tenor from the
Obama Administration towards the Nabucco pipeline project may indicate
waning interest in the southern corridor strategy.
This report focuses on potential approaches that Europe might employ to diversify
its sources of natural gas supply, and Russia’s role, as well as
identifying some of the issues hindering efforts to develop alternative
suppliers of natural gas. The report assesses the potential suppliers of
natural gas to Europe and the short- to medium-term hurdles needed to be
overcome for those suppliers to be credible, long-term providers of
natural gas to Europe. The report looks at North Africa, probably the most
realistic supply alternative in the near-term, but notes that the region will
have to resolve its current political and economic instability as well as
the internal structural changes to the natural gas industry. Central Asia,
which may have the greatest amounts of natural gas, would need to
construct lengthy pipelines through multiple countries to move its natural gas
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