Russia's Energy Policy: Opportunities and Risks for Russia and Europe
After the demise of the Soviet Union, Russia has transformed itself into a new energy superpower. Its major companies such as Gazprom and UES are influential players on the European and Asian markets. The recent discussions on Yukos have put a spotlight on the domestic struggles surrounding Russia’s energy wealth. At the same time, Europe’s dependence on oil and gas imports from Russia are increasing.
The GPPi expert discussion with Robert E. Ebel, head of the Energy Program at the Washington-based Center for International and Strategic Studies and one of the leading US experts on Russia’s energy policy, brought together 12 experts from government ministries, business, and think tanks to tackle the implications of Russia’s energy wealth for Europe and Russia itself.
In his opening remarks, Robert Ebel painted a sober picture of Russia’s oil and gas industry: While Russia might currently be the world’s leading oil producer, this is mainly due to Saudi Arabia’s production cuts under OPEC agreements. In fact, currently Russia is overproducing. Western technology that was brought in is rapidly depleting the fields that are currently on stream. At the same time, there is a lack of exploratory development. In terms of gas, Ebel expects additional production capacity to come less from Gazprom than smaller regional producers.
As Ebel pointed out, Russia’s energy policy is turning East for two reasons: First, most of Russia’s energy is in the East (in Eastern Siberia and offshore). Second, Russia’s growth markets in terms of customers are in the West: Japan, India, China, South East Asia. Bringing the new reserves to the market is technologically challenging and needs enormous up-front investments and cooperation with Western companies. However, as Ebel pointed out, the “welcome mat for foreign companies seems to have been brought back into the house” with the new rule that restricts foreign ownership to 49%.
A number of participants took exception with Robert Ebel’s claim that Russia has almost never played politics with its oil and gas and proved to be a reliable supplier. Participants stressed that while Russia might have never cut off its oil and gas exports to increase political pressure, there are many instances in which Russia has pressured its customers particularly in Eastern Europe. The discussion then focused on whether Europe needs to reduce its dependence on oil and gas imports from Russia. Some participants extended this critique to include reliance on oil and gas imports from countries such as Iran.
Robert Ebel stressed the need for a revived energy policy dialogue with Russia. As one participant observed, this needs to be a dialogue among equals. Russian companies and representatives will not engage in a dialogue where they become the “whipping boys” of the West. Both sides need to be prepared to listen.