Trading Values for Gas

russia_gas.jpgIn recent months we have witnessed a fierce debate among scholars and politicians on the relations of the European Union with Russia. Two camps have emerged putting different emphasis on political conditionality, i.e. deepening the ties to the degree Russia implements democratic reforms and respects human rights and the rule of law.

Both positions do have its merits, but according to my view the EU should not mix vital interests in certain policy areas with human rights issues.

Any comment on these issues has to answer three questions. The first relates to the current state of affairs in Russia. Russia has developed over the past years into an authoritarian regime with the presidency abandoning all the constraints on its authority. While the 1993 constitution had made the presidential executive the powerhouse of the regime, the authority of Yeltsin had always been limited: Yeltsin never commanded a majority in the State Duma, the regions became increasingly assertive, pluralist albeit not free media put limits on Yeltsin’s reign and Yeltsin’s various illnesses kept him from daily political business.

Putin has done away with it all: Russia is recentralized, parliament has been transformed into a rubber-stamp organ, the electronic media renationalised or under control of state majority-owned companies like Gazprom, the state is encroaching on NGO’s and the courts remain under political control.

Putin’s rule is based on both economic liberals he had got acquainted with while he served in the city administration of Saint Petersburg and on security service personnel who had been on Putin’s side as a KGB/FSB-agent. In the second term the siloviki have encroached on the liberal camp and seem to dominate the ruling elites ever more. In addition to political offices they control the commanding heights of Russia’s economy: the oil and gas sector, the armaments industry, aircraft, steel and aluminium companies among others.

Putin’s Russia has turned into a police state where security personnel controls almost any social actor. Russia has turned into an authoritarian regime (with its limits defined by incompetence rather than by design).

This leads us to the second question: Does the EU have any strong instruments at hand to influence the domestic developments in Russia. Russia’s current political elite is highly ignorant of outside criticism; its leaders display growing self-confidence and assertiveness and brush aside outside complaints.

What is more important, however, is the fact that Russia lacks democratic features both on the supply and the demand side. As to the supplies: Russia does have numerous democratic and liberal forces; however, they have so far failed to unite in a single camp due to personal rivalries and animosities, ambition and vanity, less so due to ideological differences. Thus Russia does not have a united democratic front to challenge the regime. Russia’s political stage is monocentric – there is no one besides Putin, no one who could challenge his rule; he is without any rival or competitor.
But Russia lacks democracy also from the demand side. Russian society longed for stability, order and modest prosperity when Putin took over. A great majority had been tired of the economic decline, the social deprivation, the corruption, political clashes and semi-criminal privatisations in the nineties.

Democratization, therefore, is not on the top of Russian society’s agenda. Aside from small liberal-minded minorities – urban, educated and (moderately) wealthy people – there is not much demand for democratic rule.

Finally, EU governments and the US have lost most of their credibility with the Russians. These countries are perceived as collaborators of the Russian elite that looted Russia in the nineties.

Now, what does this mean for the relations of the EU with Russia: A realist approach recommends frank criticism to be levelled against the Russia ruling elites for transforming Russia into a police state. However, neither the EU nor the US should give in to the illusion this might have any impact on Russia’s domestic politics.

If it is useless anyway, the EU must not sacrifice vital interests in its relations with Russia for political conditionality reasons. This is particularly true for its energy relations with Russia. As of today, 25 per cent of EU-25 gas consumption is Russian gas, 26 per cent of its crude oil consumption is Russian oil. The EU’s dependence on imports of these energy carriers will increase dramatically over the next years. In 2025 the EU will have to import 90 per cent of its oil demand, and 80 per cent of its gas needs. This is due to growing demand, declining gas and oil extraction within the EU, insufficient measures to increase energy efficiency and make greater use of renewables and nuclear power.

Taking energy security serious the EU must diversify both her energy carriers and her energy suppliers. Among those relevant for Europe are Iran, Saudi Arabia, Libya, Algeria or Nigeria. All of these countries are even less democratic than Russia. Should Europe refrain from importing any gas from authoritarian regimes?

In addition, global competition for scarce energy commodities will radically increase. China, India, the US, Japan and the EU will increasingly fight for the same extraction sites. Russia therefore remains an important energy partner for the EU. It is however far from certain, that Russia will be able to satisfy EU demand for gas in the future. Energy agencies warn of a looming supply crunch with gas in 2010/2011. EU demand and Russian domestic demand for gas is growing faster than Gazprom is able to boost its production. Gazprom is not investing sufficient funds into the exploration and exploitation of new gas fields and repairing the ageing pipeline network. According to IEA assessments Russia needs to invest as much as 30 Bln. USD in the gas sector per year to sustain current production volumes.

Furthermore, Russia is currently waging options for alternative markets. As of today the oil and gas pipeline net is oriented towards European markets. This could change within a decade. Russia is heading for East Asian markets – China, Japan and Korea – and, using LNG, for Northern America.

The EU therefore needs to establish sound relations with Russia in the energy sector in order to meet its vital interests. In this regard, the Polish veto against the initiation of negatiotiations between the EU and Russia on a new framwork document for bilateral relations is political blunder. Political conditionality puts strategic objectives to risk. Therefore, it is highly questionable, even irresponsible, to mix up human rights issues with energy.

This blog was published on December 20th exclusively on Johnson’s Russia List # 285 and on www.russiaprofile.org.

2 thoughts on “Trading Values for Gas”

  1. To demand a more liberal human rights policy of Russia, as it has evolved into a corrupt entity, is superfluous. The EU should stop kidding itself into believing
    that those in power in Russia would ever be guided by such a demand. As Dr. Mangott had so aptly stated, it would be better for the EU to protect its own interests in the energy market.
    Yet, what will become of Russia as it slinks down its present slippery slope?
    It is discouraging to see what Yeltsin’s Russia has become. 

  2. Wasn’t it as much discouraging to see what Yeltsin’s Russia has been?

    Prof. Mangott – the next point is not on Russia, but you do not have a respective entry here – how about the recent news from Turkmenistan? The "sudden death" of Turkmenbashi…. what is next…. who is next… and, btw, what about gas issues and Russia vs. "West" in the future of this country?

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