Principled, stable Russia gas relations
DAVID KORANYI*What are the future risks for European energy supply?
Europe is in a paradoxical position with regard to its energy security. The EU made great strides towards a single European energy market and significant progress in transforming its energy sector to consume less energy and rely more on indigenous renewable resources. Yet the continent will remain dependent on external gas supplies for the foreseeable future as indigenous gas production declines and gas import demand further increases. The EU is in the midst of rethinking where those supplies will come from as the EU-Russian relations have deteriorated significantly in the wake of the Ukraine Crisis. Though Europe has multiple supply options in addition to Russia, including US LNG that will soon start flowing, Gazprom will remain an essential supplier for the foreseeable future. The key challenge is to stabilize the gas relationship without compromising the principled approach towards Russia’s aggression against Ukraine.
How does the instability in the Middle East affect the future of energy security?
The turmoil in the Middle East has so far not had a major impact on global oil or gas markets. Supplies that came offline due to the sanctions against Iranian, turmoil in Libya and the Syrian civil war were replaced by supplies from elsewhere. Yet continued instability in Iraq has the potential to upset global oil supplies. Furthermore, any major turmoil in Saudi Arabia would have a major impact on oil prices, triggering a genuine supply crisis.
How would an end to sanctions on Iran affect energy markets? Possible losers, winners?
Iran’s return to the global energy markets can have a significant impact, especially on the gas side, as the country has the second largest gas reserves in the world. Yet there are caveats. Iran needs foreign investment and technology to boost its oil and gas production and exports that may be slow to arrive even in the absence of sanctions due to a variety of factors including continued political unpredictability, and complex bureaucratic hurdles.
*Director, Eurasian Energy Futures Initiative, Atlantic Council