If war is just politics by other means, then the same might be said of Russian energy politics. That Russia uses its energy resources as leverage in its foreign policy is no secret. Moscow exerts this influence and power most heavily in Europe, a continent almost completely reliable on Russia’s vast amounts of oil, gas and coal and its infrastructure to deliver these resources. But the relationship is interdependent. That is, importers depend on Russian energy, but Russia depends on them to be reliable customers.
But is Russia’s use of energy coercion a master plan, or a big miscalculation? Nearly one-third of Russia’s GDP, half of its federal budget revenues, and about two-thirds of its exports are energy-related. The importance of energy to import countries forces them to avoid conflict with Russia and keep their individual relations stable. Russia uses this state of affairs as a tool of political-strategic coercion, though arguably, it may not be doing itself any favors in the long-term. To be sure, Russia has the ability to heavily influence both availability of energy resources and market prices. As a producer and transporter it can easily block deliveries and has done so in the past. And as a non-member of OPEC, it exercises independent influence on the global market and does not need to apply their regulations. Russia can sell energy at subsidized prices, as it does for members of the Commonwealth of Independent States (CIS). Its influence could grow even stronger. For example, if the Shanghai Cooperation Organization (SCO) accepted Iran—currently only an official observer—into their ranks, the group’s accumulated resources would comprise 20 percent of global oil production and half of all gas production.
Yet, the energy policy of Russia, currently fifth in global oil consumption and second in gas consumption, continues to evolve. Previously the focus was on providing energy security within Russia itself. Its policy shifted to focus on reaping the economic benefits from energy exports as a primary goal. Increasingly, beside the economic benefits, Moscow sees its energy policy as a tool to achieve it political and strategic goals. Russia is not concerned with its own energy security because it has achieved it. Its goals now are economic, political and geostrategic in nature. Its energy resources are easily used as tools of coercion. That has put its clients in a vulnerable position. Daniel Yergin points out the objective of energy security is not only to assure supplies at normal prices, but to provide this security in a way that does not jeopardize major national values and objectives. This approach recognizes the importance of politics and strategy in the process of acquiring energy security and offers an approach that is not purely economic. It places just as much significance on the relationship between the supplier and the consumer.
For Moscow, energy policy essentially equals foreign policy. It has been successful at cajoling the energy-hungry states of Europe, which have few alternatives, but less so in Asia, where alternative suppliers do exist.
Energy disputes with Russia have most often been characterized by radical increases in prices that the consumer country refuses to pay. A case in point is the country that has experienced the most critical damage from Russian energy disputes to date: Ukraine. Major disputes caused major shortages throughout Europe in 2006, 2007 and 2009. Ukraine is the transit country for 80 percent of Russian gas. Ukraine plays a dual role: It is an import country, but more importantly, it is a transit country for European deliveries. The 2009 dispute resulted in Kiev agreeing to pay higher, European prices for their own consumption and caused divisions in Ukrainian political circles.
Following Yergin’s definition, Ukraine’s dependence on Russian energy did not provide it energy security. Quite the opposite: Kiev’s national objectives were jeopardized in the dispute. Its security as the consumer was placed in the hands of Russia as the supplier, making energy security heavily dependent upon external political relations. Achieving energy security can be understood not only as maintaining security of supply and affordable prices, but also as a move to reduce the possibility of external political coercion and increase internal energy independence capabilities. However, since Russia is the main supplier of resources for Europe, the space for political maneuvers to circumvent Russia is extremely limited. For example, since the present crisis began, Ukraine has been buying gas from Germany. But one-third of that gas is initially imported from Russia. The present Ukrainian crisis goes well beyond resources arguments, but the earlier energy cut-offs initiated large-scale political conflicts within Ukraine.
The case of Ukraine also exhibits another point: The EU, along with NATO members, gave significant support to Ukraine’s leadership. As such, the decision to defy Russia was easier to make. Ongoing disputes with Russia and its overreaction – i.e. military operations in eastern Ukraine-may well serve to push client states further into the arms of the EU and/or NATO. The present situation demonstrates the disregard Russia has for major international agreements. States looking outside of their own borders for energy should be very wary of dependence on Russia because of the outside influence it invites into their domestic and international politics.
Another case of Russian energy coercion is the Czech Republic. In 2008, Poland and the Czech Republic signed an agreement with the U.S. to allow the placement of components of an antiballistic missile shield on their territory. Soon after, the supply of Russian gas to the Czech Republic was reduced by fifty percent. Though Russia claimed the issue was purely technical, it likely had the desired effect. The plans for the shield did not proceed from that point. In this case, even U.S. involvement and Czech membership in both the EU and NATO could not counteract the coercive effect depending upon Russian energy invites.
Energy Carrot or Stick?
Russia uses a ‘carrot and stick’ approach in its energy coercion. While cut-offs—the stick-are more overt and often cause as many problems as they actually resolve for Russia, selling gas to clients at subsidized prices—the carrot-has the possibility of inviting quieter consent. Armenian leadership is fully open about and aware of its dependence on Russia for cheaper resources and acknowledges that it falls under the Russian sphere of influence. The use of cut-offs often requires Russia to develop a vague political explanation framed as purely technical or financial problems in the media and in public. Russia’s control over prices is a stronger and more effective instrument of political coercion than the physical disruption of supplies. Russia can allow the decrease in prices for a period of time since it has an abundance of various resources and customers. However, the hike in prices and physical disruption has a greater deterrent effect on consumer countries.
One disadvantage to the ‘carrot’ approach is that it may create only ‘fair weather’ friends—those who disappear as soon as the price it has to pay, politically or financially, for energy becomes too high. For example, in 2007 Gazprom elevated the price of gas for Azerbaijan by a hundred percent and Baku refused to pay, thus stopping the transit of gas intended for other countries. Simultaneously, Russia hit Armenia with the same price increase. In political terms, Azerbaijan has NATO-membership aspirations, while Armenia is a firm Russian ally. The price increase forced the Armenian leadership to question the ‘strategic partnership’ with Russia since elimination of subsidized resources means that Russia deals with them the same way it deals with pro-Western countries. These countries are very conscious of being coerced into cooperation with Russia.
By establishing the SCO, which has improved energy cooperation throughout Asia, Russia has unwittingly damaged its ability to apply energy coercion there. The countries of Central Asia, most notably Kazakhstan, possess their own resources. Neither they nor China need be solely dependent on Russia. Kazakhstan and China cooperated in building a pipeline that connects China to the Caspian Sea and plans for enlargement estimate that China will satisfy 15 percent of its crude oil needs solely from Kazakhstan. The different Russian approaches toward Ukraine, Czech Republic, Azerbaijan, Armenia and Kazakhstan, among others, shows why any country which must look outside of its own borders for energy should be wary of entering into a dependent energy relationship with Moscow because of the outside influence it invites and the Kremlin’s spotty record in holding to its agreements. They also show Russia’s rather haphazard application of energy coercion, choosing to apply it in a heavy-handed, but often less effectual way.
Jimmy Carter called the energy crisis of the 1970s “the moral equivalent of war.” He might have said the same of Russia’s energy policy today. That is because for Moscow, energy policy essentially equals foreign policy. It has been successful at cajoling the energy-hungry states of Europe, which have few alternatives, but less so in Asia, where alternative suppliers do exist. Russia’s continued use of energy coercion in Europe may result in more, not fewer problems, if it drives its clients toward a closer partnership with the EU, NATO and America. Its Asian clients may also see greater benefit in cooperating with each other rather than Russia. The few pliant energy-friends Russia has could turn their back on Moscow if its energy becomes too expensive, financially or politically. Russia should reconsider if constantly playing their energy card might be an epic miscalculation.
Zoran Tihomirovic is a graduate of sociology and Russian language and literature from the University of Zagreb, Croatia. His primary interests include energy policy and security, Russia, and the post-Soviet political and cultural space.
[Photo courtesy of RIA Novosti.]
