Russian gas and the European identity crisis.

The study is co-authored with Andreas Goldthau from the University of Erfurt.

Energy, and especially gas, has an obvious strategic importance. Russia is Europe’s main supplier, and there is no real alternative. If supplies were cut, it would have a vast impact on everything from industry to private homes across the continent.

The crux of the matter is a gas pipeline under construction between Russia and Germany. Nord Stream 2 runs beneath the Baltic Sea, and will supply gas directly from Vyborg in Western Russia to Greifswald in Northern Germany. It has been controversial since the beginning, and increasingly so since the Russian invasion of Crimea in 2014.

The question for the EU is how to keep its identity as a liberal market actor, while responding to increasing geopolitical pressure from Russia. Traditionally, the EU has used regulation to build its Single Market and promote economic growth. EU rules have treated all non-EU countries exporting gas to the block equally, without recognizing the special strategic security importance of Russia.

Faced with growing Russian belligerence, Brussels now seems to take a different tack. One where it uses regulation as a strategic security policy tool to pursue its own geopolitical agenda. This not only breaks markedly with the EUs identity as a liberal market actor, but also creates tensions within the EU and with Russia.

Nord Stream 2 divides Europe

The dilemma of what EU gas regulation is for breaks down across geographic lines. Northern and Western states such as the UK, the Netherlands and France have taken a liberal free-market approach with economic growth as the main goal. Many of these countries were initially in favor of Nord Stream 2, but some are now growing increasingly skeptical. Recently, even Germany appeared to question the project after Putin allegedly poisoned Russian opposition leader Alexei Navalny.

Before Nord Stream, most of the Russian gas exported to the EU has passed through a pipeline in Ukraine. Nord Stream 2 would almost eliminate Russia’s dependence on this gas corridor. Germany has pressed for assurances that Russia will still use the Ukrainian corridor, but Poland, Ukraine and the Baltic States worry that Nord Stream 2 will improve Russia’s ability to use gas cut-offs as a weapon.

They are skeptical of the EU’s liberal free market approach, and have opposed Nord Stream 2 since the beginning because they see it as a security problem. In their zero-sum world view, Russia’s gain is their loss.

Conflict lines are not clear-cut between Eastern and Western Europe. Putin-friendly governments such as Hungary support the pipeline. A further complication is that the EU wishes to improve its relationship with Ukraine, which relies on income from the existing gas pipeline passing through its territory.

The EU must distinguish security from markets

Like all states, the EU has a grand strategy: it is a liberal actor. Accordingly, it has tried to solve the Russian gas problem by passing and enforcing rules on how gas companies may act in its internal market. EU market authorities have however become increasingly assertive, and singled out the Russian state gas giant Gazprom. For example, the Third Energy Package passed in 2009 contained a clause designed to prevent Gazprom from buying up EU gas transmission systems. Likewise, EU regulation passed in 2019 aimed directly at stopping Nord Stream 2.

In the long run, using regulatory power to deal with security problems is unlikely to be a sustainable strategy. It risks changing the EU into an increasingly geopolitical power, away from the traditional approach of “soft power with a hard edge” through building and operating markets. This would be incompatible with the EU’s liberal grand strategy. Worse, it risks undermining EU authority, based on the legitimacy of its liberal agenda.

As the EU explores ways to strengthen strategic autonomy, the way forward lies in a clear separation between market issues and security issues. Market issues must be dealt with through regulation, and security issues must be tackled with security tools such as economic sanctions. In short, the EU must find the political will to openly behave like a security actor.

Source: Goldthau, Andreas, and Nick Sitter. "Power, authority and security: the EU’s Russian gas dilemma." Journal of European Integration 42.1 (2020): 111-127.

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