The prospects of V4 energy cooperation in the shadow of the Ukrainian events

Vladimir Putin threatened the West to turn off the gas supplies to Kiev because of its unpaid debts as a response to the possible EU sanctions against Russia over its actions in the Ukraine. According to Eurasia Group, one of the world’s leading global political risk research and consulting firm, there is a 40% chance that this will happen. But at this time, Europe and the Visegrad countries seem to be more relaxed and less worried concerning this issue. How is it possible? My article would like to outline exactly this paradoxon.

The most affected countries by the above mentioned threat are the Visegrad countries (Hungary, Poland, Slovakia and the Czech Republuc due to their high dependence on Russian import. This dependence was created in the 60s on purpose by the Soviet Union first of all to tie its satellite countries to Moscow. According to Eurogas, Slovakia and Hungary are the most vulnerable to the Russian import from V4 countries. Poland and the Czech Republic are in a better position due to the fact that Poland possesses one of the largest coal reservoirs in Europe and the Czech Republic has managed to integrate more to Western grids.

Source: The Economist

Source: The Economist

In 2006 and 2009, as a result of the Russian-Ukrainian gas disputes, the suspension of gas export made Europe’s alarming weaknesses and the general problems with energy dependence clearly visible. Europe receives 28% of natural gas from Russia, two-third of which travels through Ukraine so the disruption of the gas flow would certainly have similar effects on the European markets.

Forrás: WPA Research

Source: WPA Research

But European countries seem less worried due to the following short-term (1) and long-term (2) influencing factors.

(1)   (a) Mild winter – although Russia could cause problems in the European market, it would not have an immediate effect because of the mild winter which led to

(b) high level of stocks in several gas reservoirs built after 2009.

(2)   Structural changes in the gas industry since the last gas disputes.

(a) Two new technologies have emerged to unlock resources which once were considered to be too expensive to exploit: horizontal drilling, which allows wells to penetrate horizontally bands of shale deep underground, and hydraulic fracturing, or fracking, which uses high-pressure fluid to extract gas and oil from rock formations.

(b) Less gas was necessary to come from Russia due to the increasing energy efficiency and

(c) the crises-induced lower energy consumption in the region. In 2011, the EU consumed 10% less natural gas than a year before.

Bruttó fogyasztás, EU27 (2012), ezer terajoulban

Gross Inland Consumption, EU27 (2012), in thousand terajoules

Goals of the V4 cooperation

 The events of 2009 showed the dangers of the energy dependency on Russia. V4 countries realized that they had to find another routes to reduce it and they came to the conclusion that it could only be achieved through cooperation. Although there are significant differences  among them in terms of the their energy mixes, the level of market liberalisation, progress in building physical infrastructure, their main aim is to diversify gas supply routes and suppliers as well. The plans include the development of new infrastructure, building new interconnectors and underground gas storage facilities, signing contractual and trade arrangements, promoting market liberalisation, and competition.

North – South Gas Corridor

Source: Pipelines International

Source: Pipelines International

Right now, the primary project is the realization of the North – South Gas Corridor which would create the possibility to receive gas coming from America, North Africa or the Middle East. The main goal is to let the gas flow from north to south, not just from east to west and connect the Baltic Sea with Central and Eastern European (CEE) countries. The North-South Gas Corridor aims to interconnect the Polish LNG terminal in Swinoujscie with the proposed Adria LNG terminal in the island of Krk, Croatia through southern Poland, the Czech Republic, Slovakia and Hungary. That is one of the reasons why the accession of Croatia to the EU was of such prime importance for Brussels. According to the proposed plans, several interconnectors should be built as well which would allow transporting the gas in both ways of the pipe, directing the gas wherever it is needed. Since 2009, Hungary has made the largest progress in terms of interconnectors. In 2010, an interconnection with Romania was commissioned. Next year one more was finished with Croatia and another is currently under construction with Slovakia. In 2011, the interconnector between Poland and the Czech Republic was opened; on the other hand there are only plans to connect Poland with Slovakia. Reducing dependency is important because next year, V4 countries will have to renegotiate continuously their long term gas contract with Russia, therefore by creating this corridor and diversifying the sources, they will have leverage to bargain a better price with Russia.

How can the USA help the V4 countries?

In the meantime, the USA has become a potential gas exporter due to the shale gas revolution which was taken place in the last five years. New technologies make the production of gas more beneficial which resulted in the phenomenon that the U.S. has become one of the largest energy producers in the world. As a consequence of the Ukrainian events, V4 countries have asked the USA to make it easier for them to import natural gas from the United States and reduce their dependence on Russia. It can be an alternative solution but several years are going to be necessary to start the import from the USA. But sooner or later, it could develop into an effective weapon against Russia.

Conclusion

The gas dispute in 2009 was a milestone in the life of the Visegrad Group because coupled with the current Russian-Ukrainian conflict proved that Russia is ready to use the gas weapon to achieve its goals. V4 countries understood that enhancing cooperation is a key factor concerning the energy security of this region. Although progress has been made, diversification still remained one the most important challenge for V4 countries.

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András Pleszel

About András Pleszel

My name is András Pleszel and I am currently studying International Relations and International Business in Budapest. I am writing my thesis on Dutch foreign policy and energy security.

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