Jack. D.

Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Russia-EU gas relations: the Russian perspective Jack. D. Sharples, University of Glasgow

Abstract Much has been written on energy security in Russia-EU gas relations, largely from a European consumer security of supply perspective. Natural gas has also been securitised in Russia, but it is framed differently. The economic, political, and social value of Russias gas exports has led to Russian conceptions of energy security as security of export, particularly to the strategic market of the EU. Yet Russia faces several challenges to these exports: The politicisation of Russias gas exports to the EU; Russias lack of short-term delivery route and export destination diversification options; increased supply-side competition on the EU gas market; and the development of EU legislation and Russias perceived exclusion from the EU gas market. In light of these challenges, the next decade should be regarded as a transitional period during which Gazprom must adapt to changing conditions on the EU gas market; the development of the Russian domestic gas market and the projected increase in gas exports to the Asia-Pacific region will reduce Russias dependence on exports to the EU; the diversification of delivery routes should reduce the impact of, if not the propensity for, disputes with transit countries. Such developments could pave the way for Russia and the EU to overcome the difficulties of the past decade and renew their mutually-beneficial energy relationship.

Introduction There is a prevalent opinion in academia (Finon and Locatelli, 2007; Gtz, 2008), business (CERA, 2007) and international politics (European Commission, 2009) that Russia and the EU are mutually dependent in the sphere of energy, especially with regard to the trade in natural gas. Unfortunately, such interdependence is often politicised and characterised as a negative phenomenon, which should be reduced through import and export diversification. As Belyi (2010) explains, when gas relations are conducted purely between Gazprom and European energy companies there is no securitisation. But once at the level of the European politicians there is a willingness to avoid Russia and on the contrary there are statements on the Russian side to diversify from Europe, that is securitisation Of course its an energy security dilemma, but not only. Its actually a negative interdependence. And the negative
-1-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

interdependence leads to mutual avoidance. As far as Karaganov et al are concerned, such securitisation is the greatest obstacle to building a positive model of energy interdependence, alongside the politicisation of attempts by Russian capital to invest in Europe, which is perceived as having political and geopolitical, rather than commercial, aims (Karaganov et al, 2009, p.104). European academic literature on the subject of Russia-EU gas relations has extensively examined the question of how the EU might reduce its gas dependence on Russia through gas import diversification, the development of the EU internal gas market, and a common EU external energy policy (Gtz, 2008, p.7; Finon and Locatelli, 2007, p.24-29). These views are reflected in the EUs Energy 2020 strategy (European Commission Directorate-General for Energy, 2011, p.5-7). European academic literature which considers the Russian perspective on EU-Russia gas relations and Russian approaches to energy security (Umbach, 2011, p.25, 36-38) is somewhat rarer. Yet despite the rhetoric and proposals for diversification, both EU and Russian policy documents suggest that Russia will remain a key supplier of natural gas to the EU over the coming decades ((Cox et al, 2011, p.15-16; MinEnergo, 2009, p.22-23). Therefore, in order to develop a deeper understanding of the dynamics of what will continue to be a strategically important Russia-EU gas relationship, the Russian perspective must also be considered. This paper not only explores Russian approaches to energy security, but also examines Russian perceptions of threats to Russias energy security, particularly with regard to Russias gas exports to the EU, and uses these insights to suggest potential future developments in the Russia-EU gas relationship.

Russian energy dependency Theoretical model of energy dependency and its application to energy-exporting countries Definitions of security in the political science arena are often based on the notion of an existential threat to the referent object1 (Buzan et al, 1998, pg. 25). In the post-Cold War period the Copenhagen School approach has led to a broader definition of security, which goes beyond the traditional military realm to include political and economic aspects (Buzan et al, 1998). Coupled with the broader definition of security has been a focus on the question of securitisation, and its occurrence through speech acts (Waever, 1995, pg. 55). In other
1

The referent object being the object which is to be secured, or which is under threat

-2-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

words, an issue becomes securitised by being successfully intersubjectively defined as a security issue. The phrase energy security is now so widespread, having entered the mainstream vocabulary of Russian political actors (Putin, 2009; Medvedev in Reuters, 2011; Shmatko, 2009), Russian academia (Belyi, 2003; Simonia, 2004; Romanova 2010a), and the Russian media (Shishkin, 2006; Antonov, 2009; Mitrova, 2011), that one can hardly deny that energy has been securitised at a discursive level in Russia. The theoretical securitisation of energy usually entails classifying energy supplies as the referent object, with the existential threat being the denial of such supplies, either due to supply interruptions or price increases which render those energy supplies unaffordable to the consumer. This approach is reflected in the International Energy Agency (IEA) definition of energy security as the uninterrupted physical availability at a price which is affordable, while respecting environment concerns (IEA, 2012). The manifestation of such a threat is most likely to occur when a state exists in a situation of vulnerability, or energy dependency, which Balmaceda defines as: a) more than one-third of a countrys total energy supply comes from foreign sources; b) more than 50% of a countrys annual consumption of a single major energy source (in most of the Central and Eastern European states, oil or gas) comes from foreign sources, or c) a country depends on a single external provider for more than 60% of its imports of a major energy source for that country or more than 45% of its consumption of that energy source. (Balmaceda, 2008, pg. 16) Many other mainstream approaches to energy security (Kruyt et al, 2009; Lschel, Moslener, and Rbbelke, 2010b) also examine the issue primarily from a consumer perspective, often with a focus on security of supply of fossil fuels, as noted by Jansen and Seebregts (2010). This is especially the case when European approaches to energy security are discussed (Constantini et al, 2007), and even more so when Russia is included as a factor in European energy security (Goldthau, 2008; Heinrich, 2008; Andres and Koffman, 2011). However, for an energy-exporting country, the opposing-directional flows of energy supplies and monetary revenues are reversed. For energy-exporting countries, the revenues gained from exporting energy supplies represent the referent object, whilst export supply interruptions or a collapse in price or demand for that countrys energy exports represent an existential threat to energy export revenues, and therefore a threat to the energy security of

-3-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

that country. If Balmacedas dependency model is reversed it can be said that an energyexporting country is energy-dependent if: a) Energy resources account for more than 50 percent of a countrys exports b) More than one-third of a countrys GDP or budget revenue comes from the export of energy resources c) A country depends on a single external market for more than 45 percent of its exports of all energy resources, or more than 60 percent of its exports of a single type of energy resource The extent to which Russia, as the worlds largest hydrocarbon exporter and the largest external supplier of hydrocarbons to the EU, may be defined as energy dependent can be demonstrated through the application of the reformulated Balmaceda model, thus providing empirical support for Russian conceptions of energy security as security of export. Russian energy dependency According to Dr Alexei Gromov, Deputy Director of the Institute for Energy Strategy in Moscow, the energy sector accounted for 67 percent of Russias export revenues in 2010, with the export of natural gas accounting for 12 percent. Gromov also states that Russia earned $255bn from hydrocarbon exports in 2010, of which only $46bn (18 percent) came from gas sales (Gromov, 2011). The first figure is broadly corroborated by the RosStat (The Russian State Statistical Service) statistic that mineral products (not including metals and precious stones) accounted for 68.4 percent of Russias exports in 2010 (RosStat, 2011a), although the EU Council suggest a slightly lower figure of 63 percent (EU Council, 2011). According to Russias Ministry of Finance oil and gas revenues accounted for 8.5 percent of GDP in 2010 (Ministry of Finance of RF, 2011). However, the share of energy in Russias GDP may be much higher. President Medvedev has stated that the energy sectors share of Russias gross domestic product is above 30 percent (President of Russian Federation (henceforth Pres. RF), 2010c). President Medvedevs claim is echoed by Gromov, who suggests that the energy sector accounts for 31 percent of Russias GDP, with the gas industry accounting for 12 percent (Gromov, 2011). The Ministry of Finance also claims that federal budget revenues were equal to 18.5 percent of GDP in 2010 (Ministry of Finance of RF, 2011), meaning that oil and gas revenues accounted for 46 percent of federal budget revenues in 2010. Again, Gromov suggests a

-4-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

slightly higher figure, with the energy sector accounting for 49 percent of budget revenues in 2010, and the gas sector accounting for just 6 percent (Gromov, 2011). The small share of gas in Russias federal budget revenue is confirmed by Igor Prokopenko of the Russian Ministry of Finance, who claims that taxes paid on oil production and export accounted for 92.5 percent of federal budget oil and gas revenues in 2010, with taxes on natural gas production and export accounting for just 7.5 percent (Prokopenko, 2011). Given the discrepancy between varying sets of figures, such statistics should be viewed with a degree of caution. Kuboniwa et al have discussed the potential for the oil and gas sector to be underrepresented in RosStat figures (Kuboniwa et al, 2005). The identification of oil and gas revenues in Russias economy became more challenging following the 1st of October 2010 amendments to the Federal Budget Code2 which stated that separate accounting of oil and gas revenues for the federal budget, reserve fund, and national wealth fund will be suspended until 2014 (Rossiyskaya Gazeta, 2010, Ministry of Finance of RF, 2010). Gazprom has held a legal monopoly on Russian gas exports since July 2006 (Rossiyskaya Gazeta, 2006). In 2010 the company exported a total of 218 billion cubic metres (bcm) of gas, of which 130bcm (59 percent) was delivered to the EU-27. However, due to the higher prices at which Gazprom sells gas in the EU, sales to EU countries accounted for 62.4 percent of Gazproms export revenues (net of excise tax and customs duties) in 2010 (Gazprom, 2011b). The EU Council suggest that the EU accounts for 88 percent of Russias oil exports, 70 percent of its gas exports, and 50 percent of its coal exports (EU Council, 2011). The figures above suggest that, according to the reformulated Balmaceda model of energy dependency, Russia is energy dependent given the share of energy in exports and budget revenues, and is close to dependency regarding the share of energy revenues in GDP, depending on which statistics are used. Furthermore, Russia meets the criteria of depending on a single market (the EU) for more than 60 percent of its exports of a single energy resource (natural gas). The under-representation of the gas sector in Russian exports, GDP and Government budget revenues is partially explained by the argument that Gazprom benefits from low taxes in exchange for supplying the domestic market with gas at low, regulated prices. Quite simply, the economic benefits of the Russian gas industry are not fully monetarised, with the Russian Government foregoing tax revenues in order to maintain low domestic gas prices.
2

Federal Law of 30 September 2010 N 245-FZ "On Amendments to the Budget Code and other legislative acts of the Russian Federation"

-5-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

However, such tax breaks are not enough to enable Gazprom to make a long-term marginal profit (where revenues are greater than current operating costs plus projected future investments) from gas sales to the Russian domestic market. Rather, Gazprom relies on gas sales to the EU to allow the company to make a long-run marginal profit on its overall operations, domestic and external.

The EU as a strategic market for Gazprom and Russia Gas sales to the EU enable Gazprom to subsidise domestic gas prices Domestic gas sales accounted for 56 percent of Gazproms sales by volume, but just 29 percent of total sales by revenue in 2010 (Gazprom, 2011b), meaning that the domestic market was under-represented in Gazproms sales revenues. Conversely, gas sales to EU-27 accounted for 26 percent of sales by volume, but 44.2 percent of Gazproms total sales by revenue in 2010 (Gazprom, 2011b), meaning that the EU is over-represented in Gazproms sales revenues. The reason for this imbalance is the difference in price between the destinations of Gazproms exports. Gazproms official figures divide the destinations of Gazproms gas sales into three groups: domestic (i.e. Russian); the Former Soviet Union (FSU); and the far abroad (countries beyond the FSU in this case EU-27 minus the three Baltic states, plus Turkey and Former Yugoslavia). In 2010 Gazprom earned just over 1099.2bn Roubles selling 148.1bcm of gas to the far abroad at an average price of 9166 Roubles per million cubic metres (mcm). This figure also includes 2.5bcm of LNG exports, mainly to the Far East. Using the far abroad average price, gas sales of 130.2bcm to the EU in 2010 would have generated 966bn Roubles for Gazprom. Sales to the Former Soviet Union (including the three Baltic states) amounted to 70.2bcm and earned Gazprom approximately 450.1bn Roubles at an average price of 7039 Roubles per mcm. Finally, Gazprom earned 636.8bn Roubles selling 277.3bcm of gas to the domestic Russian market at an average price of 2296.8 Roubles per mcm (Gazprom, 2011b). Thus, the price of gas sold by Gazprom on the domestic Russian market in 2010 was a quarter of that sold to the far abroad and a third of that sold to the countries of the Former Soviet Union. The result is that gas sales to the EU are crucial for Gazproms ability to sell gas at low prices domestically, and for Gazproms ability to invest in new gas production. As Dusseault puts it, Gazprom needs export profits to recoup the losses they make on the Russian market

-6-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

(Dusseault, 2010). Therefore, Gazproms gas sales to the EU are crucial not only for Russias external energy security, but also for Russias internal energy security. The role of energy in Russias broader economic and political relations with the EU The EU does not only represent a key market for Russian gas exports. The EU is also Russias most important economic and political partner on the international stage. According to the European Commission, the EU-27 accounted for 43 percent of Russian imports and 49 percent of Russian exports in 2010 (European Commission Directorate-General for Trade, 2011a, pg. 4), and it is estimated that 75 percent of Foreign Direct Investment (FDI) into Russia comes from EU Member States (European Commission, 2011). For comparison, China is Russias second-largest import and export partner, accounting for 18.1 percent of Russias imports and 5.3 percent of Russias exports (European Commission DirectorateGeneral for Trade, 2011a, pg.6). The extent to which energy forms the basis of this relationship is seen in the fact that, according to EU statistics, mineral fuels accounted for around 75 percent of Russias exports to the EU in 2010. Of these mineral fuel exports, petroleum and petroleum products accounted for 85 percent and gas 11 percent (Ottens, 2011, pg. 3). In 2010 Russia had a positive trade balance of 68.1bn Euro, based on exports worth 138.6bn Euro, with the EU. Of these exports, oil and petroleum products accounted for 100.5bn Euro, while gas, electricity and coal combined accounted for 19.4bn Euro (European Commission Directorate-General for Trade, 2011a, pg. 10). However, these figures seem to slightly underestimate Russias revenues from gas sales in 2010 Using an exchange rate of 37 to 43 Roubles per Euro (XE, 2012), the figure of 966bn Roubles used above should have given Gazprom revenues of 22.526.1bn Euro for EU gas sales in 2010. Whilst gas sales are significant in that they represent around a third of Russias positive trade balance with the EU, it would clearly be impossible for Russia to maintain a positive trade balance with the EU without oil exports. However, while oil may be more important economically, gas is arguably more important politically. In the context of a more regional market still largely based upon a fixed pipeline network, Russian state control over Gazprom, which has both a monopoly on Russian gas exports and a significant role in EU gas imports, means that gas exports to the EU bring far greater influence and political value to Russia than oil exports. As well as being Russias most important economic partner, the EU also represents Russias most important political partner. When interviewed, various Russian experts, and

-7-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

European experts on Russia, agreed that a desire not to be excluded from Europe was a crucial aspect of Russian foreign policy (Morozov, 2010; Dobronravin, 2010; Potmkina, 2010; Moshes, 2010; Smith, 2010). Yet this desire not to be excluded does not equate to desire for integration or inclusion. Morozov describes this as a struggle for recognition versus a struggle for independence, where recognition as member of the family comes from accepting the rules of the family. Russia doesnt want EU membership, but does want to be a normal European country. Therefore, Russias energy policy in relation to Europe can be interpreted as a desire for leverage, to be heard, and to be important (Morozov). In essence, Russias political leadership appears to be seeking a strong relationship with the EU, rather than inclusion into the EU. In order for this to be possible, the Russian logic runs, it is necessary for Russia to have sufficient status on the international, or regional, stage to be deemed important enough to be a partner of the EU. Thus, an equal partnership with the EU represents confirmation of Russias status on the international stage. Whilst the phrase energy superpower has fallen out of use due to the perceived negative connotations (Smith, 2010), experts agree that what Russia seeks is great power status (Cameron, 2010; Saari, 2010). Trenin describes such great power status as a combination of strategic independence and equal treatment in Russias relationship with major international players such as the US, the EU, China, India and Japan. In particular, financial independence is a necessary (although insufficient by itself) condition for strategic independence, and Russias ability to come through the financial crisis of 2008-10 without applying for external financial assistance was proof of Russias independence (Trenin, 2010). During the crisis the Russian Government relied heavily on the Stabilisation Fund of the Russian Federation, which had been established in 2004 as a means of absorbing excessive liquidity, reducing inflationary pressure and insulating the economy from volatility of raw material export earnings (Ministry of Finance of RF, 2007). Therefore, oil and gas export revenues can be said to underpin Russias strategic independence. Furthermore, from a Russian perspective, Russias role as the European Unions largest external energy supplier means that the EU must take Russias interests into account, and prevents Russias exclusion from Europe, without committing Russia to too much integration. As Zagashvilli suggests, for Russia energy exports to the EU represent not only monetary profit, but also influence and status (Zagashvilli, 2010). Thus it can be seen that a strong and equal partnership with EU is vital for Russias regional economic and political status, and that energy exports not only underpin such a partnership,

-8-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

but also form the basis of Russias strategic independence. However, despite the importance of the EU as a strategic market for Russian gas exports, it represents an increasingly challenging environment for Gazprom.

Challenges for Russian gas exports to the EU There are several reasons why gas exports to the EU are currently an area of specific concern for Russia. These may be termed structural, since they provide the context, or conditions, in which Russian discourses on energy security are constructed. Politicisation of Russian gas exports to the EU Until the beginning of the 21st century the Soviet Union, and then Russia, was regarded as a reliable supplier of gas to Western Europe. Even during the early 1990s, when the Russian economy was going through a difficult transition, the gas flows from East to West continued uninterrupted. However, during the first decade of the 21st century, Russian gas exports to Europe became increasingly politicised. Terterov argues that such politicisation would not have happened but for two events: a) The expansion of the EU in 2004; and b) The gas transit dispute with Ukraine in January 2006, which received a significant amount of media attention and captured public imagination at a time of high oil prices and Western political discourses of resurgent Russia (Terterov, 2010). Meanwhile Belyi suggests that Russian opposition to the Energy Charter and Gazproms monopoly on gas exports also contributed to the politicisation of Russian gas supplies (Belyi, 2010). To these points, this author would add that Western perceptions of Russia following the arrest of Khodorkovsky and dismemberment of Yukos in 2003, and the reassertion of Russian state control over Gazprom in 2005, contributed to the broader Western discourses on resurgent Russia and fears of an increasingly authoritarian and assertive Russia wielding the energy weapon (BBC, 2006; Economist 16 December 2006). Such politicisation of Russias energy exports also occurred in Russian literature on the subject, with references to Gazprom as a new Russian weapon (Panyushkin and Zygar, 2007), and to Putin as a gas emperor (Grib, 2009). The expansion of the EU in 2004 brought into the Union three former Soviet states (Latvia, Lithuania and Estonia), and four former members of the so-called Eastern Bloc (Poland, Hungary, Czech Republic and Slovakia), all of which, to a greater or lesser degree, were united in their occasionally difficult political relations with Russia, and their high levels of dependency on Russian gas imports (see table below).

-9-

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Table. 1. Russian gas dependency in 20103

Gas imports (Bcm) 8.51 9.64 10.90 5.97 0.70 1.12 3.11 Gas consumption (Bcm) 9.28 12.05 17.20 6.26 0.70 1.82 3.12 Russian gas imports (Bcm) 7.46 6.77 9.76 5.97 0.70 1.12 3.11 Import Dependency (percent) 91.70 79.96 63.35 95.27 100.00 61.69 99.78 Russia in imports (percent) 87.66 70.26 89.55 100.00 100.00 100.00 100.00 Russia in consumption (percent) 80.39 56.18 56.73 95.27 100.00 61.69 99.78

Country Czech Rep Hungary Poland Slovakia Estonia Latvia Lithuania

Data source: International Energy Agency (IEA), 2011.

Russias gas transit dispute with Ukraine in the winter of 2005/06 was the result of the failure of the two sides to agree new contracts for both the sale of Russian gas to Ukraine and the transit of Russian gas across Ukrainian territory. With no new contracts in place by the time the previous contracts expired, Russia halted gas deliveries to Ukraine and Ukraine halted the transit of Russian gas to the EU. Whilst the details of the dispute have been considered in detail elsewhere (Stern, 2006), what is significant here is the effect the dispute had on (specifically Western) European perceptions of Russia as a reliable energy supplier. The dispute gave a substantial boost to the development of EU energy policy, as seen in the Green Paper (European Commission, 2006) which was published in March 2006, just months after the dispute. In Europe the dispute was interpreted as Russia bullying its smaller neighbour, and seeking to punish the Ukrainian Government for its Orange Revolution (Andres et al, 2011). In Russia the interpretation was quite the opposite. Ukraine firstly failed to pay its gas bill and then, when Russia halted the supply of gas to Ukraine, Ukraine began stealing gas intended for Europe, forcing Russia to halt deliveries via Ukraine entirely (RIA Novosti, 2006). The Western reaction struck Russian commentators as double-standards, given that compliance with Russia's WTO accession obligations was among the reasons that a decision was taken in 2000 (with active EU participation) to gradually eliminate discount prices charged to former Soviet republics. This decision was publicized by Russia, but initially largely ignored by its neighbours with Ukraine wanting to maintain the best of both worlds regarding integration with the West and discounted energy from Russia (Liakhov, 2009).

Import dependency is the share of imports in consumption, express as a percentage

- 10 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Russia signed the Energy Charter Treaty (ECT) in 1994, promising provisional application until the Treatys expected ratification. However, that ratification did not happen, and in August 2009 Russian representatives informed the Energy Charter Secretariat that Russia no longer intended to ratify the Treaty, and that provisional application would cease in October 2009 (Energy Charter, 2012). This refusal was seen by European politicians as a Russian refusal to play by the rules of the game, and further reinforced the image of Russia as noncooperative. However, it should be noted that the second and third largest external suppliers of gas to the EU are Norway (signed but not ratified) and Algeria (not signed-observer status) (Energy Charter, 2012) have also failed to ratify the Energy Charter Treaty. While Kaveshnikov (2010) suggests that during the 2006 Russo-Ukrainian dispute the ECT failed to achieve one of its main goals regarding security of supply through dispute resolution, Belyi (2010) suggests that governance mechanisms cannot work when one or both sides refuse to utilise that mechanism. Lack of short-term diversification options for Russia Earlier it was mentioned that the EU accounts for approximately 60 percent of Russias gas exports by volume. However, the regional nature of Russias gas exports is much more apparently when it is considered that the Energy Community (EU-27 plus Ukraine, Serbia, Croatia, Bosnia-Herzegovina, Montenegro, Macedonia, Albania and Moldova) (Energy Community, 2011) accounted for 80 percent of Russias gas exports (175bcm) in 2010, while exports to geographical Europe (EU-27 plus Turkey, Ukraine, Belarus, Switzerland, Serbia, Croatia, Bosnia-Herzegovina, Montenegro, Macedonia and Moldova) totalled accounted for 97 percent (213bcm) of Russias exports in 2010 (Gazprom, 2011a, pg. 53-58). Crucially, Russias gas exports to Europe remain locked into a fixed network of pipelines. Russias only Liquefied Natural Gas (LNG) terminal is located in the Russian Far East at Sakhalin, and is used for deliveries to the Asia-Pacific region (which accounted for around one percent (2.5bcm) of Gazproms exports in 2010 (Gazprom, 2011a, pg. 53-54). The fixed nature of Russias pipeline deliveries to Europe leaves open to the threat of transit interruptions, as happened in Ukraine in 2006 and 2009 (Stern, 2006; Stern, Yafimava & Pirani, 2009), and in Belarus in 2007 (Yafimava & Stern, 2007). Although the new Nord Stream pipeline circumvents Ukraine and Belarus and therefore reduces transit risks, it also represents an addition to the fixed network pipeline of Russo-European gas pipelines, and as such binds Russia and Europe closer in their supplier-consumer relationship. Kaveshnikov refers to this as a situation of interdependency, but adds that Russia depends on European

- 11 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

demand more than European Union depends on Russian supplies (Kaveshnikov, 2010), because in a crisis situation the EU would be able to find some, if not all, of its short-term gas needs from other sources (Babynina, 2010) such as an increase in LNG imports. Russias Energy Strategy to 2030 acknowledges Russian dependence on Europe, and proposes reducing this dependence by increasing the share of the Asia-Pacific region in Russian gas exports from currently less than 1 percent to 20 percent by 2030 (Ministry of Energy of RF (MinEnergo), 2009, pg. 141). However, five-year long negotiations with the regions largest market, China, show few signs of being concluded any time soon, with China refusing to pay European prices for Russian gas imports (Akin, 2011). In order to break into the Chinese and South Korean gas markets Gazprom would need to expand its LNG capacity or build new pipelines, such as the proposed Altai and Khabarovsk pipeline to China (Topalov, 2011) and the proposed trans-Korean pipeline (European Geopolitical Forum, EGF, 2011a). However, given the significant capital investment and long time scales necessary for the building of new pipelines and LNG terminals, Russias short-term options for diversification of gas supplies away from Europe remain extremely limited. Increase in supply-side competition on the EU gas market The EU gas market represents an increasingly challenging environment for Russia as a gas supplier. What was traditionally a fixed-pipeline based market with a small number of external suppliers (Russia, Norway, and Algeria) is becoming increasingly competitive with LNG supplies being imported from Qatar, Libya, Nigeria, Egypt, Trinidad and Tobago, and Oman (Kavalov et al, 2009). This increased competition has contributed to Russias share of EU gas imports declining from 47.7 percent in 2001 to 34.2 percent in 2009 (Eurostat, 2011). By the end of the decade, shale gas production in Europe could be a reality (Gloystein and Kahn, 2011). Even though a moratorium has been placed on drilling for shale gas in France and Bulgaria (BBC, 2012), commercial shale gas production is set to start in Poland in 2014, thus easing that countrys dependence on Russia (Dejevsky, 2011). Whilst it is unlikely that shale gas could prove to be a game changer in Europe as it was in the United States, and concerns remain about the cost effectiveness and environmental impact, shale gas certainly has the potential to make a major impact on European gas supply (Gas strategies, 2010, pg. 2-6). Any such increase in European gas supply represents a potential reduction in European gas imports, which therefore poses a challenge to Russias European gas exports. Such uncertainty over future European demand for Russian gas presents a difficult challenge for Russia as a gas supplier, as Yastrzhembsky explains:

- 12 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

We would need a common understanding of how much gas the EU will require in say, ten, 20 or 30 years, and how much of that it would expect to buy from Russia. Then we could align our plans accordingly. Instead, we hear panicky statements about the need to reduce Europes over-dependence on Russia. How can we develop and co-ordinate our energy strategy under these circumstances? (Yastrzhembsky, 2008, p.36) Romanova adds that Russian politicians have expressed the opinion that it is unfair for the EU to encourage Russia to build pipelines and become hostage to the European market, while at the same time pursuing diversification (Romanova, 2010b). However, it is not only the potential future demand for Russian gas imports which worries Gazprom and Russian analysts, but also the level and stability of prices at which that gas will be sold. Spot trading as a challenge to prices and long-term contracts Coupled with increased supply-side competition and the effects of the global financial crisis since 2008, the development of the European gas market and short-term spot market gas trading has exerted downward pressure on European gas prices (Melling, 2010, pg.120-124). This poses a challenge to Gazproms preferred system of long-term contracts, which indexlink gas prices to those of oil with a 6-9 month time delay and include take-or-pay clauses to ensure that consumers purchase at least a minimum amount for the duration of the contract, which can run for 10, 20 or even 25 years (Gazprom, 2012). This system is designed to share the risk between the supplier and consumer. However, the last decade has seen an increase in spot-trading, whereby gas is traded within the EU with prices based on supply and demand rather than oil prices. This has been made possible by the elimination of destination clauses which prevented countries from re-exporting imported gas (Melling, 2010, p.46). The combined effects of increased LNG supplies to Europe, economic downturn and the related slump in European gas demand relative to supply led to spot prices in the EU falling far below the prices in Gazproms long-term contracts. Following these developments European energy companies began to pressure Gazprom for a greater share of spot pricing in the LTC gas price formula, while several European companies also appealed to the Stockholm Chamber of Commerce (SCC) Arbitration Institute (a well-known centre for the resolution of international trade disputes) for arbitration on disputes over gas prices (SCC, 2012). In response Gazprom offered discounts on LTC gas prices in January 2012 (RIA Novosti, 2012). The question for Gazprom in the coming decade is whether it will be willing to

- 13 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

continue discounting LTC prices to keep them in line with spot prices, in order to maintain its share of the EU gas market. The Third Energy Package and Russias exclusion from the EU gas market In a bid to maintain prices and demand for Russian gas in Europe, a key element of Gazproms European strategy has been to go downstream and participate in gas storage, gas transport, and gas sales to final consumers (Gazprom Export, 2012a; Gazprom Export 2012b). However, Gazproms ability to do so is under threat from the implementation of EU regulations and directives collectively known as the EU Third Energy Package, which are designed to liberalise the EU internal energy market on the basis that increased competitiveness leads to lower prices. In particular, Directive 2009/73/EC stipulates the unbundling of the production, transmission, and sale of gas. This refers to control (direct or indirect) by a single energy company over more than one section of the supply chain. Minority shareholding in more than one section, however, is still permitted. This legislation is scheduled to be transposed to the EU Member States by 3 March 2011, and implemented by March 2012-14. (European Parliament and Council, 2009). As Konoplyanik notes, this legislation applies to non-EU energy companies that wish to do business in the EU, with violations punished by penalties of up to 10 percent of that companys global turnover (Konoplyanik, 2011). Because Gazprom is a gas producer, this legislation prohibits Gazprom from control over pipeline infrastructure on EU territory or control over subsidiaries which sell gas to final consumers. The Russian interpretation is that Gazprom is being excluded from the EU gas market (Putin, 2012), and that such legislation represents a threat to Russian energy security, as it undermines guarantees of price and demand obtained through downstream participation. As an indicator of future developments, 2011 produced mixed results for Gazprom. At the end of September EU antitrust investigators raided 20 companies in 10 Central and Eastern European countries amid concerns over anticompetitive practices, especially concerning LTCs between Gazprom and European energy companies. Due to the size and complexity of the investigation, the results may not be known for at least a year (Euractiv, 2011). In the same week, the European Commission launched legal proceedings against Member States which had not adopted national laws transposing Third Energy Package legislation related to gas by the 3 March 2011 deadline (Oettinger, 2011). These developments indicate the intention of the European Commission to rigorously pursue the implementation of the Third

- 14 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Energy Package, and that Gazprom should be prepared for the consequences. On a positive note for Gazprom, the first line of Nord Stream was launched in November (Nord Stream AG, 2011). Then in December EU Energy Commissioner Gunther Oettinger announced the possibility of exemptions for Russias South Stream project from Third Energy Package regulations (RIA Novosti, 2011), whilst Socor suggests that Gazproms decision to bring the start of South Streams construction forward to late 2012 is an attempt to pre-empt the entry into force of the Third Energy Package in March 2013 (Socor, 2012). However, until an agreement is signed, the legal future of South Stream on EU territory will remain uncertain.

Conclusion From the Russian perspective the period 2001-2008 represented a golden era for Russian gas exports to the EU, with prices and demand rising, and Russias international status and economic growth following suit. However, despite the quicker than expected recovery of international energy markets, the period of 2008-2012 may be interpreted as the beginning of a transition period in the Russia-EU energy relationship. The development of the EU into a more liquid, competitive gas market will continue. Gazprom must adapt to these changing conditions through a combination of competitive pricing, more flexible contracts (regarding contract duration and offtake volumes) and assetswaps of minority shareholdings in partnership with downstream European energy companies, in order to retain market share and export volumes. Russias domestic gas market is expected to become more profitable and competitive, due to the gradual increase in state regulated prices and the liberalisation of gas sales. As independent Russian gas producers and Russian oil companies supply an increasing share of the Russian market, the need for Gazprom to use export revenues to subsidise domestic sales will be reduced. In the long term, post-2020 period, it is possible that increased Russian gas exports to the Asia-Pacific region in line with projections in Russias Energy Strategy to 2030 (MinEnergo, 2009, pg. ) could further reduce Russias dependence on the EU as an export market. Finally, 2012 should see both the completion of the second line of Nord Stream and the launch of the construction of the South Stream gas pipeline. If both projects are completed as planned, Ukraines share of the transit of Russian gas to the EU will be reduced from around 80 percent in mid-2011 to below 50 percent. Even if these projects do not reduce the
- 15 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

propensity for Russo-Ukrainian disputes, they will reduce the impact of such disputes on deliveries of Russian gas to the EU. Therefore, there is the distinct possibility that Russias gas exports to the EU will undergo a de-securitisation over the next decade as Russia and the EU reduce their negative interdependence. If this is the case, there remains the hope that Russia and the EU will be able to overcome the difficulties of the past decade and renew their mutually-beneficial energy relationship.

- 16 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

References Akin, M., 2011. Last stand for Russia in China gas talks. Reuters [online], 13 October. Available from: http://www.reuters.com/article/2011/10/13/us-china-russia-gasidUSTRE79C3AG20111013 [Accessed 23 January 2012]. Andres, R.B., and Koffman, M., 2011. European energy security: Reducing the volatility of Ukraine-Russia natural gas pricing disputes [online]. Washington, National Defence University Institute for National Strategic Studies. Available from: http://www.dtic.mil/cgibin/GetTRDoc?Location=U2&doc=GetTRDoc.pdf&AD=ADA545411 [Accessed 24 January 2012]. Andres, R.B, Kofman, M., and Loudermilk, M.J., 2011.Solutions for Russian-Ukrainian gas brinksmanship. Journal of Energy Security [online], 15 March. Available from: http://www.ensec.org/index.php?option=com_content&view=article&id=287:thinkingabout-solutions-for-russian-ukrainian-gasbrinksmanship&catid=114:content0211&Itemid=374 [Accessed 25 March 2012]. Antonov, M., 2009. Sammit ES-Rossiya v Shvetsii ostavil Rossiyskoye okno v Evropu otkrytym (The EU-Russia summit in Sweden kept the Russian window on Europe shut). Vesti [online], 18 November. Available from: http://www.vesti.ru/doc.html?id=326517 [Accessed 22 January 2012]. Babynina, L., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Institute of Europe, Moscow, 28 April. Balmaceda, M., 2008. Energy dependency, politics and corruption in the Former Soviet Union. London: Routledge. BBC, 2006. Russia wields the energy weapon. BBC [online], 14 February. Available from: http://news.bbc.co.uk/1/hi/4708256.stm [Accessed 25 January] BBC, 2007. Russia restarts Cold War patrols. BBC [online], 17 August. Available from: http://news.bbc.co.uk/1/hi/world/europe/6950986.stm [Accessed 24 January 2012]. BBC, 2008. Tanks rejoin Moscow V-Day parade. BBC [online], 9 May. Available from: http://news.bbc.co.uk/1/hi/world/europe/7391537.stm [Accessed 24 January 2012]. BBC, 2012. Bulgaria bans shale gas drilling with fracking method. BBC [online], 19 January. Available from: http://www.bbc.co.uk/news/world-europe-16626580 [Accessed 25 January 2012].

- 17 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Belyi, A., 2003. New dimensions of the energy security of the enlarging EU and their impact on relations with Russia. Journal of European Integration [online], 25 (4), 351-369. Available from: http://www.tandfonline.com/doi/abs/10.1080/0703633032000163193 [Accessed 22 January 2012]. Belyi, A., 2010. Interview on Russian energy policy. Interviewed by Jack D Sharples [in person], Higher School of Economics, Moscow, 27 April. Buzan, B., Waever. O., and De Wilde. J., 1998. Security: A new framework for analysis. London: Lynne Rienner. Buzan, B., and Waever. O., 2003., Regions and Powers: The Structure of International Security. Cambridge University Press. Cambridge Energy Research Associates (CERA), 2007. Securing the future: making gas interdependence work [pdf]. Cambridge, CERA. Available from: http://www.ihs.com/products/cera/multi-client-studies/european-natural-gas-security.aspx [Accessed 26 March 2012]. Cameron, F., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Brussels, EU-Russia Centre, 20 October. Constantini, V., et al, 2007. Security of energy supply: Comparing scenarios from a European perspective. Energy Policy [online], 35 (1), 210-226. Available from: http://www.sciencedirect.com/science/article/pii/S0301421505003009 [Accessed 24 January 2012]. Cox, D., Van Der Linde, C., and Semyonov, D., 2011. Roadmap of the EU-Russia energy cooperation until 2050 Progress report July 2011: Gas [pdf]. Brussels, EU-Russia Energy Dialogue. Available from: http://ec.europa.eu/energy/international/russia/doc/20110729_eu_russia_roadmap_2050_re port.pdf [Accessed 27 March 2012]. Dejevsky, M., 2011. Polands shale gas dilemma for Europe. Independent [online], 27 September. Available from: http://www.independent.co.uk/news/business/analysis-andfeatures/polands-shale-gas-dilemma-for-europe-2361570.html [Accessed 25 January 2012]. Dobronravin, N., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], St Petersburg State University, 25 March. Dusseault, D., 2010. Interview on Russian energy policy. Interviewed by Jack D Sharples [in

- 18 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

person], Helsinki, Aleksanteri Institute, 7 May. Economist, 2006. Dont mess with Russia. Economist [online], 16 December. Available from: http://www.economist.com/node/8413048 [Accessed 25 January 2012]. Energy Charter, 2012. Members and observers [online]. Brussels, Energy Charter. Available from: http://www.encharter.org/index.php?id=414&L=0#c1338 [Accessed 24 January 2012]. Energy Community, 2011. Stakeholders [online]. Vienna, Energy Community. Available from: http://www.energycommunity.org/portal/page/portal/ENC_HOME/ENERGY_COMMUNITY/Stakeholders/P arties [Accessed 20 January 2012]. Euractiv, 2011. EU raids Gazprom offices in antitrust probe. Euractiv [online], 30 September. Available from: http://www.euractiv.com/energy/eu-raids-gazprom-offices-anti-trustprobe-news-508007 [Accessed 29 January 2012]. European Union Council, 2011. Press Background Information for EU-Russia Summit of June 2011. EU Council [pdf]. Brussels, Council of the European Union. Available from: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/122459.pdf [Accessed 22 January 2012]. European Commission, 2006. Green Paper: A European strategy for sustainable, competitive, and secure energy [pdf] Brussels, European Commission. COM (2006)105. Available from: http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0105:FIN:EN:PDF [Accessed 24 March 2012]. European Commission, 2009. Press release: The EU-Russia Energy PPC underlines mutual interdependence in EU-Russia energy relations [online]. Brussels, European Union. Available from: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/688&format=HTML&lang uage=en [Accessed 26 March 2012]. European Commission, 2011. External Dimension EU-Russia Energy Relations [online]. Brussels, European Commission. Available from: http://ec.europa.eu/energy/international/russia/russia_en.htm [Accessed 30 December 2011].

- 19 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

European Commission Directorate-General for Energy, 2011. Energy 2020: A strategy for competitive, sustainable, and secure energy [pdf]. Luxembourg, European Union. Available from: http://ec.europa.eu/energy/wcm/fpis/ressources-ese/docs/22011_energy2020_en.pdf [Accessed 26 March 2012]. European Commission Directorate-General for Trade, 2011a. The European Union and its main trading partners: Russia [pdf]. Brussels, European Commission DG Trade. Available from: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113440.pdf [Accessed 20 January 2012]. European Commission Directorate-General for Trade, 2011b. Trade Bilateral Relations Russia [online]. Brussels, European Commission DG Trade. Available from: http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/russia/ [Accessed 20 January 2012]. European Geopolitical Forum, 2011a. Exciting business prospects on the Korean peninsula marred by political uncertainty. Gazprom Monitor [online], 10, Nov-Dec. Available from: http://gpf-europe.com/upload/iblock/f78/2011_10_egf_gazprom_monitor.pdf [Accessed 25 January 2012]. European Parliament and Council Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas. Eurostat, 2011. Energy Production and Imports [online]. Brussels, Eurostat. Available from: http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Energy_production_and_im ports [Accessed 30 December 2011]. Finon and Locatelli, 2007. Russian and European gas interdependence: Can market forces balance out geopolitics? [pdf]. Laboratoire d'Economie de la Production et de l'Intgration Internationale (LEPII), Dpartement Energie et Politiques de l'Environnement (EPE). Available from: http://halshs.archives-ouvertes.fr/docs/00/12/96/18/PDF/Cahier41bis.pdf [Accessed 26 March 2012]. Gas strategies, 2010. Shale gas in Europe: a revolution in the making? [pdf]. London, Gas strategies. Available from: http://www.gasstrategies.com/files/files/euro%20shale%20gas_final.pdf [Accessed 25 January 2012]. Gazprom, 2011a. Gazprom in Questions and Answers 2011 [pdf]. Moscow: Gazprom. Available from:
- 20 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

http://eng.gazpromquestions.ru/fileadmin/files/2011/view_version_eng_15102011.pdf [Accessed 22 September 2011]. Gazprom, 2011b. Gazprom reports its consolidated financial results under International Financial Reporting Standards (IFRS) for the year ended 31 December 2010. Gazprom, 28 April. Available from: http://www.gazprom.com/press/news/2011/april/article111782/ [Accessed 21 January 2012]. Gazprom, 2012. Gas marketing in Europe [online]. Moscow, Gazprom. Available from: http://www.gazprom.com/marketing/europe/ [Accessed 29 January 2012]. Gazprom Export, 2012a. Development of end-consumer sales [online]. Moscow, Gazprom Export. Available from: http://www.gazpromexport.ru/en/strategy/consumers/ [Accessed 29 January 2012]. Gazprom Export, 2012b. Storage [online]. Moscow, Gazprom Export. Available from: http://www.gazpromexport.ru/en/projects/storage/ [Accessed 29 January 2012]. Gloystein, H., and Kahn, M., 2011. East Europes shale gas push faces old foe Russia. Reuters [online] 7 December. Available from: http://uk.reuters.com/article/2011/12/07/ukenergy-shale-europe-idUKLNE7B600P20111207 [Accessed 25 January 2012]. Goldthau, A., 2008. Rhetoric versus reality: Russian threats to European energy security supply. Energy policy [online], 36 (2), 686-692. Available from: http://www.sciencedirect.com/science/article/pii/S0301421507004430 [Accessed 24 January 2012]. Gtz, 2008. Managing Russian-European energy interdependence [pdf]. Oslo Energy Workshop, 12-13 December. Available from: http://www.swpberlin.org/fileadmin/contents/products/arbeitspapiere/Oslo_Dec_13__ks.pdf [Accessed 26 March 2012]. Grib, N., 2009. Gazovyy imperator (Gas Emperor). Moscow, Kommersant Publishing House. Gromov. A., 2011. Russian gas market perspective. Presentation at Energy Delta Institute, 14 December 2011 [PowerPoint presentation]. Available from: www.energystrategy.ru/ab_ins/source/Gromov_14.12.11.ppt [Accessed 01 January 2012]. Heinrich, A., 2008. Under the Kremlins thumb: Does increased state control in the Russian gas sector endanger European energy security? Europe-Asia Studies [online], 60 (9), 1539-

- 21 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

1574. Available from: http://www.tandfonline.com/doi/abs/10.1080/09668130802362292 [Accessed 24 January 2012]. International Energy Agency (IEA), 2011. Natural gas information [pdf]. Paris, IEA. Available from: http://www.oecdilibrary.org/docserver/download/fulltext/6111011e.pdf?expires=1327506507&id=id&accna me=oid018225&checksum=8BDE6FE104B1852E6263E9BAD50B5B3B [Accessed 25 January 2012]. International Energy Agency (IEA), 2012. Energy Security [online]. Paris, IEA. Available from: http://www.iea.org/subjectqueries/keyresult.asp?KEYWORD_ID=4103 [Accessed 18 January 2012]. Jansen, J. and Seebregts, A., 2010. Long term energy services security: what is it and how can it be measured and valued? Energy Policy [online], 38 (4), 1654-1664. Available from: http://www.sciencedirect.com/science/article/pii/S0301421509001293 [Accessed 24 January 2012]. Karaganov, S., and Yurgens, I., ed., Arbatov, A.G., Bordachev, T.V., Lukyanov, F.A., Karaganov, S.A., Kulik, S.A., Romanova, T.A., Suslov, D.V., Chernyshev, S.V., Yurgens, I.Yu., (Authors collective) 2009. Rossiya vs Evropa: protivostoyaniye ili soyuz? (Russia vs. Europe: opposition or union?). Moscow, Astrel. Kavalov. B, Petric. H, Georgakaki. A, 2009. Liquefied natural gas for Europe: some important issues for consideration [pdf]. Luxemburg, European Commission Institute for Energy. Available from: http://ec.europa.eu/dgs/jrc/downloads/jrc_reference_report_200907_liquefied_natural_gas. pdf [Accessed 30 December 2011]. Kaveshnikov, N., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Institute of Europe, Moscow, 28 April. Konoplyanik, A., 2011. The 3rd Energy Package and the concerns of non-EU gas producers: An interview with Dr. Andrey Konoplyanik. Eurasia Energy Observer [online], 8 March 2011. Available from: http://www.eurasia-energy-observer.com/news/new/interview-withandrey-konoplyanik [Accessed 29 January 2012]. Kruyt, D.P. et al, 2009. Indicators for energy security. Energy Policy [online], 37 (6), 21662181. Available from:

- 22 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

http://www.sciencedirect.com/science/article/pii/S0301421509000883 [Accessed 24 January 2012]. Kuboniwa, M., Tabata, S., and Ustinova, N., 2005. How large is the oil and gas sector of Russia? A research report. Eurasian Geography and Economics. 46 (1), 68-76. Liakhov., A, 2009. Russia Profile Weekly Experts Panel: Another Gas War with Ukraine. Russia Profile [online], 16 January. Available from: http://russiaprofile.org/experts_panel/a1232127362.html [Accessed 25 March 2012]. Lschel, A., Moslener, U. and Rbbelke, D., 2010a. Energy security: concepts and indicators [editorial]. Energy Policy [online], 38 (4), 1607-1608. Available from: http://www.sciencedirect.com/science/article/pii/S0301421509001657 [Accessed 24 January 2012]. Lschel, A., Moslener, U. and Rbbelke, D., 2010b. Indicators of energy security in industrialised countries. Energy Policy [online], 38 (4), 1665-1671. Available from: http://www.sciencedirect.com/science/article/pii/S0301421509002262 [Accessed 24 January 2012]. Melling, A.J., 2010. Natural gas pricing and its future: Europe as the battleground [pdf]. Washington, Carnegie Endowment for International Peace. Available from: http://carnegieendowment.org/files/gas_pricing_europe.pdf [Accessed 29 January 2012]. Ministry of Energy of the Russian Federation (MinEnergo), 2009. Energy Strategy of the Russian Federation to 2030 [pdf]. Moscow, MinEnergo. Available from: http://www.energystrategy.ru/projects/docs/ES-2030_%28Eng%29.pdf [Accessed 24 September 2011]. Ministry of Finance of the Russian Federation, 2007. Stabilisation Fund-About the Fund [online]. Moscow, Ministry of Finance. Available from: http://www1.minfin.ru/en/stabfund/about/ [Accessed 23 January 2012]. Ministry of Finance of the Russian Federation, 2010. Reserve Fund Accumulation [online]. Moscow, Ministry of Finance. Available from: http://www.minfin.ru/en/reservefund/accumulation/ [Accessed 30 December 2011]. Ministry of Finance of the Russian Federation, 2011. Ministerstvo Finansov Rossiyskoi Federatsii Osnovnye kharakteristiki Proyekta Federalnovo Byudzheta (Ministry of Finance Basic characteristics of the Federal Budget Project) [online]. Moscow, Ministry

- 23 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

of Finance. Available from: http://info.minfin.ru/project_fb_character.php [Accessed 30 December 2011]. Mitrova, T., 2011. European energy security: Lessons of 2011. RIA Novosti [online], 22 June. Available from: http://en.rian.ru/valdai_op/20110622/164760288.html [Accessed 22 January 2012]. Morozov, V., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], St Petersburg, 22 March. Moshes, A., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Finnish Institute of International Affairs, Helsinki, 11 May. Nord Stream AG, 2011. Nord Stream pipeline inaugurated Major milestone for European energy security. Nord Stream AG [online], 8 November. Available from: http://www.nord-stream.com/press-info/press-releases/nord-stream-pipelineinaugurated-major-milestone-for-european-energy-security-388/ [Accessed 26 January 2010]. Oettinger, G., 2011. The completion of the EU internal energy market "Getting to 2014" [online]. Brussels, DG Energy Internal Market Conference, 29 September 2011. Available from: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/11/614&type=HTML [Accessed 29 January 2012]. Ottens, M., 2011. EU-27 and Russia: statistical indicators and selected trade figures, 20002010 [online]. Brussels, Eurostat. Available from: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-11-069/EN/KS-SF-11-069EN.PDF [Accessed 24 January 2012]. Panyushkin, V., and Zygar, M., 2007. Gazprom: Novoye Russkoye oruzhiye (Gazprom: the new Russian weapon). Moscow, Zakharov. Potmkina, O., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Institute of Europe, Moscow, 21 April. President of Russian Federation, 2010c. Global energy prize award ceremony. President of the Russian Federation [online], 18 June. Available from: http://eng.news.kremlin.ru/news/458 [Accessed 19 September 2011].

- 24 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Prokopenko, I., 2011. Neftegazovye dokhody v Rossiyskom byudzhete: Dolya, prognozy, i administrirovanie (Oil and gas revenues in the Russian budget: share, prognoses, and administration). In: International Energy Agency, IEA workshop: Russian expert meeting on upstream oil and gas taxation. Moscow, 12-12 May 2011, Paris: IEA. Available from: http://www.iea.org/work/2011/tax_russia/3_prokopenko_rus.pdf [Accessed 20 January 2012]. Putin, V., 2009. Prime Minister Vladimir Putins speech at the opening ceremony of the World Economic Forum. Prime Minister of the Russian Federation [online], 28 January. Available from: http://premier.gov.ru/eng/visits/world/6095/events/3221/ [Accessed 22 January 2012]. Putin, V., 2012. Russia and the changing world. Russia Today [online], 27 February. Available from: http://rt.com/politics/official-word/putin-russia-changing-world-263/ [Accessed 12 March 2012]. Reuters, 2011. Medvedev wants Russian response to new European energy rules. Reuters [online], 14 October. Available from: http://af.reuters.com/article/energyOilNews/idAFL5E7LE1YR20111014 [Accessed 22 January 2012]. RIA Novosti, 2006. Ukraine tapped 400mln cu m of gas since Monday Gazprom. RIA Novosti [online], 27 January. Available from: http://en.rian.ru/russia/20060127/43221995.html [Accessed 25 March 2012]. RIA Novosti, 2011. Russia, EU to discuss 3rd energy package exemptions for Moscow in early 2012. RIA Novosti [online], 01 December. Available from: http://en.rian.ru/world/20111201/169212008.html [Accessed 29 January 2012]. RIA Novosti, 2012. Gazprom cuts prices for European consumers. RIA Novosti [online], 17 January. Available from: http://en.rian.ru/business/20120117/170802951.html [Accessed 29 January 2012]. Romanova, T., 2010a. Energy security without panic. Russia in Global Affairs [online], 2 (April-June). Available from: http://eng.globalaffairs.ru/number/Energy_Security_Without_Panic-14900 [Accessed 22 January 2012]. Romanova, T., 2010b. Interview on Russian energy policy. Interviewed by Jack D Sharples [in person], St Petersburg, State University, 1 April.

- 25 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Rossiyskaya Gazeta, 2006. Federalnyy zakon Rossiyskoy Federatsii ot 18 iyulya 2006. N 117-F Ob eksporte gaza (Federal Law of the Russian Federation of 18 July 2006 No. 117F3 On the export of gas). Rossyiskaya Gazeta [online], 20 July. Available from: http://www.rg.ru/2006/07/20/gaz-export-dok.html [Accessed 25 March 2012]. Rossiyskaya Gazeta, 2010. Federalnyy zakon Rossiyskoy Federatsii ot 30 sentyabrya 2010. No. 245-FZ O vnesenii izmeneniy v Byudzhetnyy kodeks Rossiyskoi Federatsii i inye zakondatelnye akty Rossiyskoy Federatsii (Federal Law of the Russian Federation of 30 September 2010. 245-FZ On amendments to the Budget Codex of the Russian Federation and other legislative acts of the Russian Federation), Rossiyskaya Gazeta [online], 01 October. Available from: http://www.rg.ru/2010/10/01/budget-kodeksizmenenia-dok.html [accessed 30 December 2011]. RosStat, 2011a. Commodity structure of the exports of the Russian Federation [online]. Moscow: RosStat. Available from: http://www.gks.ru/bgd/regl/b11_12/IssWWW.exe/Stg/d02/26-08.htm [Accessed 27 December 2011]. Saari, S., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Finnish Institute of International Affairs, Helsinki, 11 May. Shishkin, M., 2006. G8 leaders agree on energy security rules. Kommersant [online], 30 June. Available from: http://www.kommersant.com/page.asp?idr=527&id=686598 [Accessed 22 January 2012]. Shmatko, S., 2009. Pozdravleniye Ministra energetiki RF Sergeya Ivanovicha Shmatko rabotnikam energeticheskoy otrasli (Minister of Energy of RF Sergey Ivanovich Shmatko congratulates workers of the energy sector). Energeiya Moskovii [online], 38, December 2009. Available from: http://www.mosenergosbyt.ru/portal/pls/portal/docs/1/1078053.PDF [Accessed 24 January 2012]. Simonia, N., 2004. The Wests energy security and the role of Russia. Russia in Global Affairs [online], 3 (July-September). Available from: http://eng.globalaffairs.ru/number/n_3378 [Accessed 22 January 2012]. Smith, H., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Aleksanteri Institute, Helsinki, 14 May.

- 26 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Socor, V., 2012. Putin and Gazprom juggle South Stream project options after Turkish approval. Eurasia Daily Monitor [online], 9 (5), 9 January. Available from: http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5Btt_news%5D=38862 [Accessed 29 January 2012]. Stern, J., 2006. The Russian-Ukrainian gas crisis of January 2006 [pdf]. Oxford Institute of Energy Studies. Available from: http://www.oxfordenergy.org/2006/01/the-russianukrainian-gas-crisis-of-january-2006/ [Accessed 19 January 2012]. Stern, J., Yafimava, K., and Pirani, S., 2009. The Russo-Ukrainian gas dispute of January 2009: A comprehensive assessment [pdf]. Oxford Institute of Energy Studies. Available from: http://www.oxfordenergy.org/2009/02/the-russo-ukrainian-gas-dispute-of-january2009-a-comprehensive-assessment/ [Accessed 19 January 2012]. Stockholm Chamber of Commerce (SCC) Arbitration Institute, 2012. About the SCC [online]. Stockholm, SCC. Available from: http://www.sccinstitute.com/hem-3/om-oss-3.aspx [Accessed 12 March 2012]. Terterov, M., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Brussels, 21 October. Topalov, A., 2011. The gas jam to China. Russia Today [online], 18 October. Available from: http://rt.com/politics/press/gazeta-ru/china-russia-gas-putin/en/ [Accessed 25 January 2012]. Trenin, D., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Carnegie Centre, Moscow, 23 June. Umbach, F., 2011. Energy security in Eurasia: clashing interests. In: Dellecker. A and Gomart. T, eds. Russian energy security and foreign policy. Abingdon, Routledge, 23-38. Waever. O, 1995. Securitisation and desecuritisation. In: Lipschutz. R., eds., On Security. Columbia University Press, 46-86. XE, 2012. Russian Rouble to Euro currency converter chart 2007-2012. XE [online]. Available from: http://www.xe.com/currencycharts/?from=EUR&to=RUB&view=5Y [Accessed 22 January 2012]. Yafimava, K., and Stern, J., 2007. The 2007 Russia-Belarus gas agreement [pdf]. Oxford Institute of Energy Studies. Available from: http://www.oxfordenergy.org/2007/01/the2007-russia-belarus-gas-agreement/ [Accessed 19 January 2012].

- 27 -

Jack. D. Sharples: Russia-EU gas relations: the Russian perspective

BASEES 2012

Yastrzhembsky, S., 2008. Trust, not double standards: what Russia expects from the EU. In: Barysch, K., ed. Pipelines, politics and power: the future of EU-Russia energy relations [pdf]. London, Centre for European Reform. Available from: http://www.cer.org.uk/publications/archive/report/2008/pipelines-politics-and-powerfuture-eu-russia-energy-relations [Accessed 28 January 2012]. Zagashvilli, V., 2010. Interview on Russian energy and foreign policy. Interviewed by Jack D Sharples [in person], Institute of World Economy and International Relations, Moscow, 21 June.

- 28 -