Russia believes EU maintains co-dependent energy relationship

May 11, 2006 02:00 AM

by Ahto Lobjakas

The European Union's apparent dependence on Russian oil and gas imports has been the source of much debate in recent months, as Moscow has shown its willingness to wield its influence as an energy supplier for political gain.
But at a high-level conference on energy security held in Brussels on May 10, senior European officials noted that Russia will need massive injections of foreign capital to retain its dominant position as a supplier to Europe's energy market.

It is clear that when it comes to the energy trade, Russia and the EU are mutually dependent on each other. The EU looks to Russia for 30 % of its oil imports and about half of its imported gas. Russia's economy, meanwhile, is fuelled to a great extent by the revenue it generates by exporting energy to Europe's massive energy market.
Likewise, while recent threats by Russia to look east for future gas and oil exports have made EU legislators nervous, some attending the conference on energy security noted that Russia will require foreign investment to keep up with rising EU energy needs.

Among those in attendance was former Russian Prime Minister Mikhail Kasyanov, who said Russia must take "urgent action" to avoid a sharp decline in its output of natural gas. However, he said, Russia's recent efforts to establish greater central control over "strategic" assets have damaged the country's investment climate.
"That creates a big problem for [the] overall investment process, [for] those investments which [are] badly needed in Russia right now, so [as to] raise the production of energy to satisfy our internal and general European demand," Kasyanov said. "[The] lack of different foreign investment is much more risky for Russia since it badly needs capital to be invested in the national energy sector."

Senior European Commission official Christian Cleutinx estimated that by 2020, the EU's energy needs will rise by 200 mm tons of gas per year. But he says that according to Russia's most recent energy strategy, the country envisions expanding its total level of gas exports by just 50 mm tons by that time.
Cleutinx says that amount would meet only a quarter of Europe's future needs, not taking into account Russia's other export markets.

The EU's energy needs are expected to rise by 200 mm tons of gas per year.
"So, you see immediately the big difference there is between the exports that Russia on the basis of the current plan can deliver into the world markets -- because we're not talking about 50 [mm] tons of oil equivalent [going only] to Europe, it's to the CIS, to Turkey, it be might the United States, and we need an increase of 200 [mm tons]," Cleutinx said.

Cleutinx estimates that Russia would need $ 200 bn to meet its export targets.
Overall, the European Commission says Russia would need $ 735 bn to modernize its energy sector by 2020.

Source: Radio Free Europe/Radio Liberty
Alexander's Commentary

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