EUROPEAN FOREIGN POLICY SCORECARD 2014

European security issues

17 - Relations with Russia on energy issues

Grade: B+
Unity 4/5
Resources 4/5
Outcome 7/10
Total 15/20
Scorecard 2012: B- (11/20)

After a year-long investigation, the European Commission prepared charges in the anti-trust case against Gazprom.

Over the last few years, there has been a decline in the export of Russian gas to the EU – in part because of changes in the global energy market such as the emergence of shale gas and an increase in the production of Liquefied Natural Gas (LNG) and in part because of a decrease in demand for gas in Europe. In 2013, Russian gas supply to the EU increased for the first time since 2009. LNG has grown to 20 percent of European gas supply compared to pipeline gas. Russia is still responsible for around one third of the EU’s gas supply but most experts say this number will not grow in the foreseeable future. Because of the implementation of the Third Energy Package and the EU’s anti-trust case against Gazprom, the European Commission has put Gazprom and the Russian government under pressure to rethink its monopoly policy and its blocking of the EU’s unbundling process.

In 2013, after a year of investigation, the Commission started to prepare charges against Gazprom, which could cost the company up to €11 billion. Many EU member states are bringing their legislation in line with the Third Energy Package. The Commission launched infringement procedures against laggards, though it seems to accept that the Internal Energy Market objectives will not be achieved in 2014 as scheduled. If the EU maintains its unity and resolve as it did in 2013, this could have a fundamental impact on energy relations with Russia. New players on the Russian energy market such as Novatek and Rosneft have an interest in breaking Gazprom’s export monopoly, which could increase competition in the EU. The growing volumes of LNG will change the model of Russian gas sales from long-term contracts to spot market prices that make the EU member states more flexible.