How the Russian bear took control of Europe

The single gravest political error committed by European nations in the past 10 years will turn out to be their failure to prevent Russia gaining control over energy supplies.  Now that we are well on our way into Cold War II, this failure will come back to haunt us in two forms: a lack of political leverage to influence Russia, and serious vulnerability to Russian threats, political or economic.

In spite of ample warning signs, significant academic analysis and continuous hectoring from the US on this topic, the EU -- riven by its usual divisions -- failed to enforce a common policy to diversify its energy sources.  And this is in spite of several EU-level resolutions to do just that, resolutions which were promptly contradicted by the actions of individual countries. 

Europe imports over 80% of its oil and and nearly 60% of its natural gas, and both figures are rising.  Half of the natural gas and 30% of the oil are imported from Russia.  Ever since Putin came to power, he has made it his (not explicit but obvious) policy to increase the dependence of Europe on Russian energy supplies.  He has done this in several ways:

• by consolidating Kremlin control over the supply through state behemoths like Gazprom and Lukoil, forcing out foreign investors (see the BP-TNK debacle) in order to take control of joint-ventures;
• by locking in long-term demand through bilateral agreements with European importers, with the added benefit of wrecking EU policy and dividing the continent;
• by extending government influence on downstream refining and distribution outside of Russia ('strategic investments' have been made in Poland, Lithuania, Estonia, Slovakia, Hungary, and Ukraine, as well as attempts to invest directly in Germany);
• by strong-arming neighboring countries (Ukraine, central Asia) into energy supply and transit 'clubs' that ensure their continued dependence on Russian supplies and transit fees;
• by promoting more pipelines that flow direct from Russia to the West, and sabotageing the development of pipeline projects that would avoid Russia (eg, in Georgia).

Yes, in Putin we have a man who can think strategically across a decade or more about how to increase Russia's leverage in the world.  This puts him in a strong position to undermine Europe, which is not capable of long-term strategic policy action.  On top of that, sustained high energy prices have enabled him to accelerate his plans.

France, Germany, Italy and Austria are all guilty of contravening stated EU policy and negotiating new, bilateral supply agreements with Gazprom.  This gives Gazprom long-term price stability and the Kremlin huge political leverage.  Is it any wonder that these countries can't form a united front in the face of Russian agression in Georgia?  Will they be able to stand up if Russia starts to pressure the Ukraine or the Baltics?

In 2007, Gazprom and ENI of Italy signed an MoU to run a gas pipeline (South Stream) from Russia to Italy via the Black Sea.  This directly undermines the only viable pipeline project -- promoted by the EU and the US -- that would reduce European dependence on Russia: the Nabucco pipeline that would have run from the Caspian via Turkey, Bulgaria, Romania, Hungary, and Austria, benefiting EU member countries.   With Russia's continued part-occupation of Georgia, the fate of existing oil and gas pipelines in that country is unclear.

I'm sure there is plenty of uncomfortable wriggling of bums in European parliaments now, but it is largely too late to undo this huge strategic error.  Russian President Medvedev has made repeated noises in the past 2 weeks about military retaliation against Poland if a US missile shield is installed there, and is likely to play very aggressive politics against Ukraine's accession to NATO.  (By the way, 95% of European gas imports from Russia go through Ukraine.) 

What is our leverage on Russia?  Delay Russia's entry into the WTO?  Kick them out of the G8?  Stop joint military exercises?  Block ministers' foreign bank accounts?  Whoop-dee-doo.  If we find a point of leverage that hurts or upsets Putin, he may just turn off the spigot for a week to see what happens...

[Good background material on this issue here, here and here.]