Ukraine crisis spurs EU to cut reliance on Russian gas

Ukraine is an important transit route for shipping Russian gas by pipeline to the EU

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Russia’s seizure of the Crimea region of Ukraine is spurring the European Union to renew efforts to end decades of dependence on Russian gas by developing its own energy supplies and pushing for greater access to abundant U.S. resources.

Ukraine is an important transit route for shipping Russian gas by pipeline to the EU, which relies on Moscow for about a third of its supplies.

Past supply disruption because of pricing disputes between Moscow and Kiev had already motivated EU leaders to seek alternatives to Russian gas.

Now Russia’s seizure of Crimea has increased the bloc’s focus on diversifying energy sources to reduce exposure to political risk, notably in those eastern member states that rely most on Russia’s gas.

“The European Council is concerned about Europe’s high energy dependency rates, especially on gas, and calls for intensifying efforts to reduce them, especially in the most dependent member states,” said a draft document prepared for a summit of EU leaders in Brussels on March 20-21.

“Europe needs to further diversify its energy supply, continue to develop renewable and other indigenous energy sources and coordinate the development of the infrastructure to support this diversification,” the document said.

The wording on energy dependency was not in an earlier version of the document circulated before Russian forces seized Crimea.

At the same time, at trade talks in Brussels this week, EU negotiators will press U.S. counterparts to agree a framework to make it easier for the country’s liquefied natural gas (LNG) to flow to the European Union, EU officials said.

“One of the solutions to the European Union’s energy dependence on Russia is the Transatlantic Trade and Investment Partnership,” EU trade spokesman John Clancy said. “The crisis in Ukraine can help to focus minds.”

The United States has begun granting licences to export LNG, but progress has been slow because of price concerns and industrial lobbying to keep most of the gas for domestic use in the United States.

The EU wants the trade deal with the U.S. to make licence approval for LNG exports to Europe automatic.

Solutions take time

How much U.S. energy will reach Europe remains to be seen as trade talks are likely to drag on for years and many politicians are wary of releasing supplies that could drive up domestic energy prices.

Asia would also get the biggest share of any upsurge in U.S. exports, analysts say, as LNG prices in Asia are twice as high as in Europe.

Other solutions to Europe’s energy dependence could be greater reliance on renewable energy from sources such as solar and wind, as well as development of its own shale gas reserves.

Energy Commissioner Guenther Oettinger is also pushing for completion of the single energy market to maximise available energy by shipping any surpluses across borders.

Single energy market rules state Russia’s Gazprom cannot dominate pipelines through which it pumps gas on EU territory.

That means Gazprom’s plan to build the South Stream pipeline to southern Europe breaches EU law known as the Third Energy Package.

The draft document, dated March 10, calls for “effective and consistent implementation of the Third Energy Package by all players in the European energy market.”

Russia pushes on

Previous European efforts to bring new gas suppliers to Central Europe have largely failed.

The Nabucco pipeline project, intended to bring Central Asian gas into the region, was ditched last year.

Instead the Trans-Adriatic Pipeline (TAP), which will pump around 10 bcm of gas each year from Azerbaijan towards the end of this decade, will go to Italy via Turkey, Greece and Albania, leaving Central Europe still mostly reliant on Russia.

Russia’s Gazprom, disregarding a European Commission announcement it had frozen talks, on Tuesday said it expected to sign deals this month on building the huge South Stream pipeline to carry gas to central and southern Europe without crossing Ukraine.

“South Stream is confidently moving ahead. Agreements on the laying of the first leg of the pipeline will be signed before the end of March, as well as agreements on the supplies of pipelines for the second leg,” Gazprom said after the South Stream consortium, which it leads, met in Switzerland.

While Europe relies on Russia to supply a third of its gas needs, Moscow depends even more on revenues from the European Union, which make up around 80 percent of Gazprom’s gas export sales.

The 2,400 km South Stream pipeline, which Gazprom says will be fully operational by 2018, would be able to supply over 60 billion cubic meters (bcm), or almost 15 percent of Europe’s annual gas demand.