Re-interpreting EU-Russia Energy Relations

When we think of EU-Russia energy relations these days we often hark back to areas of conflict: the 2006 and 2009 gas transit disputes, Russia’s return to ‘resource nationalism’ and their refusal to ratify the all important Energy Charter Treaty (ECT).  Russia is portrayed a difficult, in that the state takes a far greater role in energy governance now, unstable and no longer a secure source of energy supplies for Europe – whilst Europe is, at the same time, importing more and more Russia gas.  This explanation of deteriorating energy relations tends to paint the EU as ‘correct’ in their adoption of a more liberalised energy governance programme and Russia as ‘wrong’  and as pursuing a different political agenda.

 A new academic paper re-examines this increasingly conflictual relationship and explains it rather differently – in essence by highlighting the extent to which different ideas and norms inform energy policy-making in both Russia and the EU.  If we look at EU energy policy since the 1980s it is clear that an attempt to move in a more marketised direction has been made – as has, of course, been the case for much EU policy most notably the Single Market Programme.  The UK has been central to the campaign to liberalise EU energy markets.  Before the creation of DG Energy, in 2010, energy policy was largely led by the Competition Commission which was responsible for the three Energy Packages that sought to liberalise energy in Europe.

 The EU has also based its external energy relations, including with Former Soviet Union (FSU) countries like Russia, on the transfer abroad of liberal market policies.  When the Cold War came to an end Russia privatised and liberalised its energy markets on the advise of US and EU delegations (albeit not in ways envisaged by these advisors).  The Partnership and Co-operation Agreements signed between the EU and Russia in the 1990s, and the Energy Charter Treaty (ECT), were designed to support the liberalisation of energy markets internationally.  The transfer of market liberal policies abroad lay at the heart of a number of other influential institutions such as the International Monetary Fund (IMF) and the World Bank (WB).  These institutions claimed a certain degree of ‘knowledge authority’ on the basis that market liberal ideas work and other approaches to economic management had been resolutely discredited.  They, furthermore, had money to offer those that were willing to privatise and liberalise their energy, and other, markets. 

Just as market liberal ideas have influenced both the direction and content of EU energy policy so too have more recent Russian changes to its energy governance been informed by different sets of ideas – based on geopolitical and state perspectives.  Privatisation and liberalisation in Russia ultimately ended up in asset stripping of energy assets by oligarchs and others.  In his much-referenced dissertation Putin claimed, however, that as natural resources are so important economically and politically to Russia that they should be controlled by the state.  This would (theoretically) help to avoid asset stripping, ensure taxes were paid as well as re-affirm energy as a national asset.  Interestingly China, Venezuela and Argentina have also all taken a statist approach to how they manage their energy assets.  Decisions by these countries to take a distinctly non-market liberal approach is interpreted by some as a challenge to Western liberal ideas and to the position of the EU as inhabiting the intellectual high-ground.

The EU’s claim to knowledge authority in energy is also challenged by the increasing number of competing ideas within the EU about how to govern energy.  The influence of a more environmental perspective has led to calls for a ‘post-industrial revolution’ to secure transition to a sustainable future as well as calls for a greater role for state intervention in energy markets to support innovation.  On the other hand perceptions that supply security is diminishing, due to Russia becoming a less reliable supplier, are underpinned by a rather geopolitical, zero sum game understanding of energy trade and relations.  This interpretation has resulted in EU political and economic support for the Nabucco pipeline – a project underpinned by geopolitics in its attempts to bring gas to Europe whilst avoiding Russia.  The duality of the EU encouraging others to become more market liberal whilst at the same time undertaking geopolitical policies has not been lost on Russian observers.

This re-interpretation of EU-Russia energy relations suggests that the EU is less influential in its international energy relations due to its diminishing ability to employ soft power based on knowledge authority.  It also suggests that pejorative references to Russian ‘resource nationalism’ as the reason for conflictual relations miss the point that the EU is also guilty of geopolitical policy and reasoning.  What would help, perhaps, is a greater acknowledgement by the EU (and the UK for that matter) of the variety of ideas that inform energy policy within the EU.  One other way of reducing tensions, and arguably the EU’s negotiating position with Russia, would be a more profound understanding of the full range of motivations for state led energy in Russia.

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