Energy and (in)security

[originally published on qceablog.wordpress.com]

The current crisis in Ukraine, and the response of the European Union (EU), might prompt us to examine some of our long-held assumptions about well-being, the causes of conflict, and the overuse of the resources on which we base our economy and our prosperity.

Peace due to prosperity?

The EU developed from the economic bonds created by the European Coal and Steel Community. Energy has been a big part of that: the natural gas of the North Sea, for example, fed growing economies such as that in the Netherlands. The basic premise of the EU was that prosperity and human well-being make violent conflict unattractive or unnecessary. Growth and trade have long been a focus of the EU, and Member State national economies have grown considerably since the foundation of the union.

Economies outside the EU have also been growing: Ukraine, for example, with the change in ideology, had a growing economy. In 2013, unemployment was under 8%. But pay rates must be incredibly low: the CIA World Factbook estimated poverty to be at 50% in 1999, with a slow decline to about 35% in 2009. There is also a shadow economy, so it is said, which makes accurate estimations of jobs and pay difficult. A shadow economy can exist most easily in a corrupt country: Ukraine is rated by Transparency International as fairly corrupt – having a score of 25 on their corruption perceptions index (where 0 is very corrupt and 100 clean).

Economic growth is defined as the increase in the market value of the goods and services produced by aneconomy over time. Today, we know that endless growth is not sustainable: we use too much of our natural resources and emit too many climate-affecting gases. We are destroying the planet on which we live, through our fragmented view of the challenges facing the globe and therefore our piecemeal solutions. It is easy to forget that economic growth is based on the exploitation of people and the earth. Corporations follow low wages; energy is used to manufacture goods to sell – even though we know emitted gases and other waste are causing their own global crises. One part of the set of tools proposed for Ukraine today has been financial and economic assistance. However, we must first ask, is economic growth still the right solution ?

Resource dependency

A good deal of the energy used in the European Union is from Russia (nearly a third, according to Reuters, giving US$ 5 billion to the Russian state gas agency Gazprom) – creating a dependence which means that we (European politicians, for example) might fear sanctions from our gas supplier if we criticise it too much.

Earlier this month, Vladimir Putin sent a letter to the leaders of 18 countries, mostly EU Member States, claiming that Russia has been subsidizing the Ukrainian economy single-handedly by not charging the full price for gas. But, due to Ukraine’s failure to pay its gas bills, “…Gazprom is compelled to switch over to advance payment for gas deliveries, and in the event of further violation of the conditions of payment, will completely or partially cease gas deliveries. In other words, only the volume of natural gas will be delivered to Ukraine as was paid for one month in advance of delivery…. In order to guarantee uninterrupted transit, it will be necessary, in the nearest future, to supply 11.5 billion cubic meters of gas that will be pumped into Ukraine’s underground storage facilities, and this will require a payment of about 5 billion US dollars.… the fact that our European partners have unilaterally withdrawn from the concerted efforts to resolve the Ukrainian crisis, and even from holding consultations with the Russian side, leaves Russia no alternative.”

At first glance, this may sound like a threat to a third party, to which the EU should respond for humanitarian reasons, to help avoid deaths and illness due to lack of heat when the next winter comes along. However, Ukraine is also a place of transit – lack of Ukrainian gas is likely to mean a major reduction in gas supplies to the EU. Manuel Barroso’s reply to Putin points out that Russia is contractually obliged to honour supply contracts with other customers, including the EU Member States potentially affected. The EU, through Barroso, stated that Russia might wish to heed its reputation as a reliable supplier.

Giving away our power

This is not the first time gas and oil have been used by Russia to try to control other countries. When a post-Soviet separatist movement in Estonia was thwarted by the Estonian government, Russia’s response was to implement sanctions against Estonia, including the imposition of import taxes, and to threaten to cut off oil and gas. The use of such “non-violent” pressure tactics is problematic. The problem that the EU now faces is that Member States have allowed themselves to become heavily dependent on Russia, on a country where the rule of law is not implemented. Ukraine is also dependent: Russia and Ukraine used to have an agreement of discount gas prices to Ukraine in exchange for the lease of the Black Sea Naval port being extended beyond 2017. (Ukraine had mooted the possibility of not extending the lease due to the instability created by having Russian military in Crimea.) With Russia’s annexation of Crimea last month, Russia terminated the agreement unilaterally.

In 2009 the EU and Russia signed an Early Warning Mechanism memorandum which provided for early warning of risks and a rapid response to emergency situations which may disrupt the supply of gas, oil, and electricity to EU Member States. However, just as with other international treaties, adherence is voluntary – there is no stick to force a party to honour the commitment it makes by signing such an agreement. Reputation as a good treaty partner may not be sufficient to push Russia to honour agreements, just as joining the voluntary association of the Council of Europe does not stimulate Russia to follow the rules it agreed to honour by joining.

If the countries of the EU were to take energy efficiency and climate change more seriously, they could reduce dependence on fuels, permitting a more independent response to such crises. What do you do to reduce your dependence on fuels?