Escaping Putin's Energy Squeeze

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By Adrian Karatnycky
Sunday, July 1, 2007

As Presidents George W. Bush and Vladimir Putin meet in Kennebunkport, Maine, this weekend, Russia's leader has many reasons to smile. His country is increasing its strategic dominance over Europe's energy supplies while U.S.-led efforts to promote energy diversity for Europe are faltering and the European Union's energy policies are in disarray.

On June 23 Russia further eroded European energy unity when its state company Gazprom reached agreement with Italy's ENI energy conglomerate to build a gas pipeline connecting Russia to Southern Europe via the Black Sea. This could displace a similar, U.S.-backed project called Nabucco, which is important to achieving diversity in energy sources.

In May Russia reached an agreement (though not yet a binding treaty) with Kazakhstan and Turkmenistan to expand Russian control over the flow of vital Central Asian gas and oil to Europe. This followed on Russia's success of two years ago in getting Germany's chancellor at the time, Gerhard Schroeder, to support a Russian-German pipeline bypassing Poland and Ukraine. Putin later rewarded the former German leader with the lucrative chairmanship of the project.

Increased dependence on Russian-dominated energy routes and supplies poses the risk that Russia will be able to exert significant political pressure on Europe. Indeed, it has already demonstrated its capacity to do so. In the past 18 months Russia has twice shut off gas to Europe, first during a politically driven dispute with Ukraine and then in an energy dispute with Belarus early this year.

The European Union's response has been to commit itself to broad-based energy diversification, a policy championed by Vice President Cheney, who told a NATO summit last year: "No legitimate interest is served when oil and gas become tools of intimidation or blackmail, either by supply manipulation or attempts to monopolize transportation."

Yet, while European and U.S. rhetoric has been strong, action has been weak and unfocused.

Two major projects could help diversify European energy sources. The first is a proposed Caspian-Black Sea-Ukraine-Poland route, which would transport Kazakhstan's oil by tanker across the Caspian Sea, then through an existing pipeline across Azerbaijan to the Georgian port of Supsa. From there it would be shipped by tanker to Odessa and then through a Ukrainian pipeline (yet to be completed) ending in Gdansk, Poland.

The second major diversification initiative is Nabucco, a prospective pipeline that would ship Azerbaijani -- and eventually Central Asian -- gas via Turkey into Central and Western Europe. The European Union declared Nabucco a top priority at its March summit, and the European Bank for Reconstruction and Development is ready to finance 70 percent of the costs of a pipeline from eastern Turkey to Austria.

Unfortunately, little progress has been made on either project (despite determined efforts by E.U. Energy Commissioner Andris Pielbags). In the meantime, Russia, awash in gas and oil revenue, is busy enticing countries essential to both projects into separate deals that would undermine European diversification efforts.

But the coming months could bring a turnaround. Concerned by Western passivity, the presidents of Poland, Ukraine and Lithuania have taken the lead in two recent energy-focused summits that brought together leaders of the Caspian and Central European regions.

Their aim is to give new impetus to a route that would link Caspian and Central Asian oil to the Odessa-Gdansk pipeline. This regional initiative deserves more than rhetorical encouragement from Europe and far greater attention at the upper reaches of the Bush administration.

While capable U.S diplomats are trying to advance European energy diversification projects, these vital initiatives are being addressed primarily by deputy assistant secretaries of state and mid-level National Security Council staff. By contrast, when the Clinton administration sought to promote energy diversification through the now-completed Baku-Tbilisi-Ceyhan pipeline, that key initiative was spearheaded at the highest levels, by Stuart Eizenstat, then undersecretary of state and later deputy Treasury secretary.

There are two reasons for optimism on this matter. One is the diplomacy of the presidents of Poland, Ukraine and Lithuania and the increased interest of energy-rich Azerbaijan in reducing Europe's dependence on Russia. The second is the U.S. presidential campaign. With the next election likely to be decided in states such as Illinois, Ohio, Michigan and Pennsylvania, where millions of Polish, Ukrainian and Baltic Americans reside, the issue of a focused energy security policy for "Old" and "New" Europe is likely to get some attention.

It's not likely to be a major factor in the campaign, but as with NATO expansion into Central Europe in the 1992 election, it's a potential "side" issue that could resonate among tens of thousands of voters in states where such numbers might represent the margin of victory.

Perhaps the Bush administration will yet rise to the emerging opportunity. Perhaps the give-and-take of a presidential campaign will prod the United States to act. In either case, Vladimir Putin's recent run of energy triumphs is likely to come to an end.

The writer is senior fellow at the Atlantic Council and president of the Orange Circle, an international network promoting democratic reform in Ukraine.


© 2007 The Washington Post Company

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