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Russia's Energy Leverage against the European Union in the Shadow of Sanctions

Since the takeover of Crimea to Russia and its military interference in Ukraine in ۲۰۱۴, the US and Russian governments have been involved in a geopolitical confrontation that has affected Russia-European Union relations in the areas of energy, economy, and security.
June 2020
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Mohsen Habibi/Ahmad Bakhshaishi Ardestani/ Seyed Ali Tabatabai Panah

Since the takeover of Crimea to Russia and its military interference in Ukraine in 2014, the US and Russian governments have been involved in a geopolitical confrontation that has affected Russia-European Union relations in the areas of energy, economy, and security. Alongside the US sanctions, the European Union has imposed a sequence of sanctions on Russia since the same year that its expanse and intensity is less than US sanctions. In addition to imposing unilateral economic sanctions on Russia, Washington has made a special effort to reduce its natural gas exports to Europe, and particularly it has begun halting the Nord Stream 2 pipeline project (between Russia and Germany across the Baltic Sea). In doing so, not only the Russian government's incomes but also Europe's dependence on energy imports from Russia will reduce. More importantly, the main obstacle to the advancement of American companies will be eliminated to be present in the European Union energy market.

The rise of geopolitical rivalry between Russia and the West since the start of the conflict over Ukraine in 2014, has forced Europeans to re-evaluate their method to the concept of energy security and increasing dependence on Russian hydrocarbon resources. As if Russia is also willing to reduce its dependence on European markets. But neither Russia nor the European Union has any other alternative in the short term.

Russia, as the world's largest holder of natural gas, has the opportunity to penetrate Eastern European countries and impose its demands on the European Union due to its rich energy resources and geopolitical dominance over Europe. Besides, approximately 78% of gas imports to European Union countries are transported through the pipeline which more than half of it is Russia’s share.

Russia uses its energy resources for three purposes:

  1. Achieving the economic benefits
  2. Keep, increase and, apply political influence on close countries (abroad)
  3. Apply political pressure on final consumers if needed

Without a doubt, the prerequisite for achieving these goals is the government's dominance on export companies and energy production. Therefore, since the early 2000s, shortly after Putin came to power, the reversal of the privatization of Russia's energy assets was on the agenda, the Gazprom and Rosneft oil companies became national champions and, if necessary, they put the interests of the government above the commercial requirements for profit. Thereby, Russia uses its energy resources as a foreign policy tool to increase its influence and promote its goals and interests in the region and the international system.

Russia's techniques of using energy as a tool of foreign policy pressure and leverage are diverse, but overall they include energy supply policy, capital controls, supply cuts, the terms of contracts, and alternative supply routes. The significance of the Russian energy weapons’ issue is because the relationship between Russia and the European Union is described by a noteworthy degree of asymmetric dependence.

Since Brussels severely suffers from an imbalance in Russia and European Union energy relations and there is no substitute for energy supply, at least in the short term, European Union members are forced to engage positively with Moscow even with their differences. Therefore, it is not accidental that European Union member states have refused to impose economic sanctions on significant Russian oil and gas sectors in response to Crimea annexation or intervention in eastern Ukraine. Germany's serious effort to complete the Nord Stream 2 pipeline project, despite Washington's explicit objection, could also be a sign of Russia’s gas exports preservation against Europe.

On the contrary, the United States, far from such considerations, wants to penalize Moscow for intervening in eastern Ukraine and this penalty will not be effective without targeting the Russian energy sector. Especially, after Trump came into power, Washington's position against Moscow intensified and Countering America's Adversaries through Sanctions Act (CAATSA), passed in June 2017, by imposing secondary sanctions, it specifically targeted Russia’s energy exports. Washington's extraterritorial sanctions policy not only poses a threat to the energy security of European Union members but also challenges the future of EU integration; because the US disagreement to the construction of the Nord Stream 2 pipeline shows the incapability of Germany and Europe to act independently in the national and continental welfares. The United States not only depends on Russian energy resources, but it also sees Moscow's share weakening in Europe's large energy market as an opportunity for American energy companies to step in and make up for their trade deficit with the European Union. Therefore, Washington's sanctions on Russia’s energy sector are considered as a win-win policy for the United States. 

In contrast, the increasing use of economic power tools in the US strategy for Russia has a negative impact on the benefits of the European Union, especially Germany, and as the role of the European-Russian energy trade in the Washington-Moscow conflict becomes more prominent, the direr the consequences for Europe's energy security will become. Nevertheless, both of Washington's goals in imposing sanctions on Russia have been unsuccessful because of Europe's dependence on Russian energy. Although Western sanctions have reduced the inflow of foreign capital and technology into the country's energy sector, meanwhile, the European Union's growing need to import gas from Russia during this period has reduced the influence of sanctions on Russia's energy armaments actions against Europe.

 

The full version of the article is available in the Central Asia and Caucasus Quarterly, No. 106, Summer 98.

 

(The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)

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