Market is the Key for Energy Independence
By the Editorial Board of VoxUkraine
Energy is at the core of the
Russia-EU and Russia-Ukraine relationships. Since the 2009 gas dispute, which
led to a 13-day interruption of the natural gas exports from Russia to the EU,
European politicians have started publicly talking about reducing Europe’s
dependence on Russian energy supplies. A lot more has been said than done on
that front, admittedly. Yet, the issue has resurfaced recently, as Russia’s
blatant disregard for international law and its aggression against Ukraine
brought about fresh fears that the country will once again be leveraging the
energy as a “diplomacy tool”.
The good news for both Europe and
Ukraine is that a new player – USA – will be entering the European energy
scheme. The currently ongoing shale oil and gas boom in that country is turning
the United States into an oil exporter, and will likely bring US gas to Europe
as soon as the relevant infrastructure is ready. A possibility of increased gas
supplies from the Middle East could also change the balance in the European
energy sector. It is our belief that:
- The EU and Ukraine need to confront Russia’s energy bullying by uniting their forces;
- In the short run, the EU and Ukraine should appoint a single agent to negotiate with Gazprom, with the European Commission taking a leading role. A preferred solution will be to sell Russian gas at the Russia-Ukraine border;
- In the medium run, Europe needs to actively pursue and encourage shale gas exploration and development. This will require striking a balance with the active environmentalist lobby movement (or culture) on the continent;
- In the long run, the EU and Ukraine should review their gas pipeline network, with the view of creating a structure similar to that present in the United States. The end goal should be redesigning of this infrastructure to facilitate creation of a single European natural gas market. This market will allow for a better substitutability between the energy suppliers, and will diminish the abuse of market power by Gazprom (or any other entity, for that matter);
- Ukraine needs to actively utilize market mechanisms and incentives to encourage development of energy saving technologies throughout the economy.
