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‘More to do’: Grigas speaks on European energy security

Grigas speaks on energy security

May 20, 2014

By Indra Ekmanis

This article is a summary of Agnia Grigas’ lectures at UW on May 6 and 7. To learn more about Grigas’ research on energy security, read her 2013 book, The Politics of Energy and Memory between the Baltic States and Russia.

“[Energy] matters for economists, it matters from a security perspective, it matters for well-being,” said Agnia Grigas in one of three University of Washington lectures May 6 and 7. Grigas, who served as an adviser to the Lithuanian government, discussed the impact of Russian energy monopolies in Europe during her visit to Seattle.

Grigas, an energy security specialists, focused on the institutional and infrastructural weaknesses of European states when it comes to establishing sustainable and reliable energy sources. The proportion of energy a country imports constitutes its energy dependence; in some cases, high energy dependence can lead to significant security concerns. “[Energy dependence] only threatens the security of a country when there are three factors at play,” Grigas said. That is, when energy sources are not diversified, when countries are dealing with weak institutions and economies, and when the exporting state is seen as a threat.

While the Baltic States import varying levels of their energy, all are 100 percent dependent on gas from Russia, where the gas industry leader, Gazprom, is largely tied up with Kremlin connections. According to Grigas, Estonia, Latvia and Lithuania meet the three risk factors of energy dependence and are energy insecure. The Baltic States depend solely on Soviet-era pipelines for their gas. Though now national gas companies own the pipelines, Russian company Gazprom still owns significant shares in these domestic industries.

In the Soviet and early post-Soviet period, the Baltic States paid less than market prices for energy imports from Russia — now they pay some of the highest prices in Europe, and, being 100 percent dependent on Russian gas, have little room to bargin. According to Grigas, while it may have been natural for prices to rise in accordance with market rates, gas price hikes often coincided with times during which Moscow sough political concessions from the countries.

But Grigas is adamant that the Baltics aren’t alone in their energy issues. “I don’t want you to think this is solely an Eastern European problem,” Grigas said. “[Germany] is also very much dependent on Russia for gas and it has a lot of the same vulnerabilities.” However, Europe has been slow to make huge shifts in energy policies dealing with Russian suppliers, largely because countries tend to benefit from negotiating one-on-one with Russia. “Russia has, very cleverly, tried to have bilateral relations [with European states],” Grigas said.

Still, some progress has been made. In 2009, the European Union launched the Third Energy Package, which stipulates ownership unbundling in the energy market. The goal is to discourage monopolistic practices; for instance, a single company cannot own both the supply of energy and the pipeline through which it flows. However, the intensity with which a country chooses to implement the directive is flexible. According to Grigas, only Lithuania has said pushed for the most stringent option of unbundling. But it has come with some consequences; Gazprom has taken Lithuania to court and has proven difficult when negotiating contracts.

But the problems with energy dependence often run deeper, Grigas said. According to Grigas, there are allegations that Gazprom cheaply sells its supplies to smaller local distribution companies, which can then resell gas in domestic markets for astronomical profits. The heads of such companies are popularly alleged to be ex-KGB officials, who can then influence politics in the importing countries with their profits. Though there have been some improvements in corruption management in the Baltics, Grigas said the corruption in the energy sector “is very established.” Like other large states, she said, “Russia has a policy and interest to maintain the countries of the former Soviet Union in their sphere of influence.”

Unless the European Union and European Commission make the effort, little gets done to assuage the energy security situation with regard to Russia, Grigas said. However, there has been a larger emphasis on American technologies, particularly in the liquid natural gas (LNG) industry. This is a potential “game changer,” Grigas said. In fact, Lithuania is hoping to have an LNG terminal running by 2015, although the project has been long in the works. Some rhetorical maneuvers in the EU have indicated that there may be more European consensus to further the energy security in the future, but these issues have lingered for more than 20 years, Grigas noted, and still, “not so much has been done.”

Though as a risk analyst Grigas focuses primarily on European problems, she did note that Russia is struggling with its own weaknesses. It lacks a comprehensive civil society and is overly dependent on a few economic variables. “[It’s] like the Soviet Union. At the end of the day, there was an overextension,” she said. “Raw resources run out eventually.”

Find Grigas book, The Politics of Memory and Energy between the Baltic States and Russia, for more on European energy security.