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EU wants to avoid energy ‘blackmail’

EU wants to avoid energy ‘blackmail’ thumbnail

“Concrete actions” from members of the European Union to diversify the gas market is the only way forward, the energy commissioner said Wednesday.

European Energy Commissioner Gunther Oettinger said EU member states need to develop stronger partnerships in the energy sphere in order to avoid falling victim to “political and commercial blackmail.”

Russia supplies about a quarter of the EU’s gas needs, though most of those supplies run through the Soviet-era transit network in Ukraine. In 2009, Russian energy company Gazprom cut gas supplies through Ukraine because of contractual disputes and recent tensions over Ukraine’s embrace of the West have added further strains to European energy security.

“We need to accelerate the diversification of external energy suppliers, especially for gas,” Oettinger said in a statement. “Only concrete actions will help.”

The EU said it spends more than $1 billion per day on energy imports. More than 60 percent of the region’s gas supplies come from foreign suppliers, notably Russia, Norway and Algeria.

Members of the EU have looked to Azerbaijan for sources of piped natural gas as well as liquefied natural gas from the United States.

The EU said it would maintain its relationship with “reliable” energy partners, but look for new partnerships and alternate supply routes.


12 Comments on "EU wants to avoid energy ‘blackmail’"

  1. Northwest Resident on Thu, 29th May 2014 10:21 am 

    Just hold on, EU. America is riding to the rescue. As soon as we get the Monterey Shale formation up and running, we’ll have plenty of NG to export to you. Oh, wait…

    In reality, Europe is screwed. Dependence on Russia is an unavoidable reality. George Soros in an interview last year spoke of the likelihood of major ethnic and civil conflict in Europe once the global economy starts unraveling in earnest. Not being able to heat their homes or cook is going to put Europeans in a very foul mood indeed, and the time is coming when Europe will need more than just NG from Russia to deal with their problems.

  2. rockman on Thu, 29th May 2014 11:40 am 

    “…develop stronger partnerships in the energy sphere in order to avoid falling victim to “political and commercial blackmail.” Which is why Russia cut that deal with China to “avoid falling victim to political and commercial blackmail.” The Russian economy is just a dependent upon fossil fuel exports as the EU is on those imports. The Ukraine has one at least two occasions threatened to cut off (and actually did for a short time) Russian access to the EU market. And has again threatened to do so. And now the U is talking about alternative supply markets which would reduce Russian revenues from EU sales.

    I think the blackmail term is being way overplayed. If negotiating for the best price they can get for their NG (let alone getting paid for what they’ve already delivered) is called political blackmail then how would one describe the sanctions that have been brought against Russia…a friendly nudge? LOL.

    Canada has become a major supplier of oil to the US and those companies make the US pay $X for that oil or they won’t ship it to us…is that blackmail? Mexico pays the US about 25% of their oil export revenue to buy refined products from US refineries or it won’t be shipped to them…is that blackmail?

  3. Northwest Resident on Thu, 29th May 2014 11:52 am 

    rockman — Excellent points. Yeah, those damn Russians, demanding to paid for their NG and oil exports. The nerve of those guys! How dare they threaten our pals in the EU like that. There must be consequences for unacceptable behavior of those commie bastards!

  4. J-Gav on Thu, 29th May 2014 12:47 pm 

    Of course Putin is going to play his energy card and of course the EU would like to avoid a blackmail situation. Who will blink first? The EU – they’ll surely do their utmost to limit any further sanctions the U.S. attempts to levy on Russia.

    Still, even with the Chinese deal (which will take time to materialize), the Russian economy cannot withstand doing without the energy income from Europe for any length of time.

    In the short term, however, they can match Kerry’s brinkmanship with some of their own. Anybody who expected Putin to just roll over and accept a Western (i.e. World Bank, IMF & Co) take-over of Ukraine doesn’t know their history.

    IMHO, the best ‘solution’ would to 1 – Forget about Crimea, it’s a done deal(and Putin will have his hands full just holding that together); 2 – Federalize the rest and let the ‘development’ chips fall where they may … if anybody has any money on hand for such endeavors, that is …

  5. rockman on Thu, 29th May 2014 1:04 pm 

    J-Gav: Yep like it or not Russia and the EU are dependent upon each other. The one advantage Russia might have is that their economy could suffer 100% loss of EU gas sales for a month or two…at lest initially. But I’m not sure how most of the EU countries could handle no Russian NG for two months in the middle of winter. But if the Russian hit were to do longer term economic damage to those EU economies their consumption might take a long time to return to pervious levels and thus deny Russia less revenue for a while.

  6. J-Gav on Thu, 29th May 2014 1:54 pm 

    Rockman – A number of EU countries have gas stocks of between 30 and 90 days – and they consider that to be an exceptionally high cushion … But we both know one hard winter could suffice to take that out.

    So EU and Russia seem to be both working on an energy/economy basis of one to three months. Increased tension wouldn’t appear to be particularly attractive for either.

    Russia currently supplies about a quarter of continental demand (circa $100 million a day), and a third of that goes through Ukraine. I’m sure they’ve all been calculating who would suffer what but I guess we’ll have to wait till next winter to find out …

    Good bet that there are some serious LNG negotiations going on these days too with, say, Qatar, eh?

  7. Juan Pueblo on Thu, 29th May 2014 3:26 pm 

    It will be hard for the EU to diversify its gas supplies. Increased demand for Russian gas is the most probable scenario. Europe is screwed big time.

  8. rockman on Thu, 29th May 2014 4:40 pm 

    Juan – True. The EU and Britain have been trying to diversify for years. Two years ago one Brit utility sign a 20 year LNG contract with Cheniere. The problem is that Cheniere won’t be able to ship the first load for another 18 months…still converting from import to export capability.

    Most of the LNG being delivered today is already on long term contract for many years and not available to the EU. There is a significant volume of NG being exported in the world especially from the ME close to the EU…and most of it already spoken for. The reason is that few if any will spend $10+ billion building an LNG facility without having purchase contracts signed in advance of the beginning of construction . IOW sign up for a 20+ year delivery of NG but wait 2 to 3 years for the plant to be built.

    But the EU could always buy spot market LNG in an emergency. That’s what a Boston utility had to do for a month or two last winter. And they paid $24/mcf…about twice what the Russian NG is selling for.

    And then there’s that foolish expectation of getting LNG from the US despite the US being a net NG importer as well as importing 7X as much LNG as we export. And most of our export LNG goes to Asia from Alaska. The EU can’t compete on a price basis with the Asian countries.

    The US, with our shale boom, infrastructure and deep pockets the US still has to import some NG to meet our consumption demand. So the plan is for the EU countries to do what the US hasn’t been able to achieve?

    Good luck EU!

  9. J-Gav on Thu, 29th May 2014 5:18 pm 

    That’s exactly the EU’s problem – it can’t compete with Asia. It’ll have to go spot in a pinch which means a high premium. Qatar’s ownership of EU soccer teams doesn’t translate into LNG generosity.

    Norway’s running down, Algeria doesn’t look like it’s going to be expanding much … Libyan doesn’t seem very realistic for the time being (and that would be for Italy if it ever does work out). The EU is soon to find itself in a nasty situation. They may have company in other parts of the world, however.

  10. Mike2 on Thu, 29th May 2014 6:44 pm 

    @All: Yes, EU NG consumers have a massive problem in the short term. Storages of ~40-90days don’t last for a hole winter! But spoken in longer terms I don’t see a serious energy problem for Europe(or at least even Germany). There is much of enough coal under the ground. Germanys brown coal can fire a lot of more homes, powerplants and industry furnaces as it does today. And you can do even more: gasifie this coal and you get wonderfull kind of gas!

  11. dissident on Thu, 29th May 2014 10:54 pm 

    Foaming at the mouth hypocrites. If some shopkeeper decides to stop selling to you because you burned down his best friend’s house, then it is your problem and not the shopkeeper’s. You, the EU, are free to shop around or shove hoses in your collective asses to get some other source of CH4. Endlessly screeching about blackmail without even using its proper meaning. Nobody is coercing you to buy Russian gas. You are paying $380 per thousand cubic meters which is less than what Norway charges. Following the “blackmail” logic it is Norway that is blackmailing the poor dear EU.

  12. rockman on Thu, 29th May 2014 11:41 pm 

    D – And another way to spin the story is to sub “market control” for blackmail. Market control in that commodities aren’t distributed on the basis of need but on what one can afford. Today the US and Chinese economies can afford to control a large portion of oil exports via Deep pockets. If those countries couldn’t afford $100/bbl oil it would be selling for less and thus more available to weaker economies. Germany might argue Russia is being unfair. But OTOH if Germany wasn’t willing to pay Russia the going rate the weaker EU countries would have lower energy costs. In essence due to the strength of the stronger economies they can force other economies out of the market place to some degree.

    So isn’t that as equally unfair as Russia demanding a certain price for its NG?

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