Wojciech Kardas, Agencja Gazeta / Courtesy Reuters The Gaz-System gas distribution station in Gustorzyn, central Poland, September 12, 2014.

How to Beat Goliath

An EU Energy Union to Fight Russia’s Gas Monopoly

In April, former Polish Prime Minster Donald Tusk published an article in the Financial Times, urging Europe to create an energy union to safeguard against possible energy blackmail by Russia. Reminding readers of disputes in 2006 and 2009 between Moscow and Kiev over gas prices that led to temporary shortages and sharp increases in prices in Europe, Tusk argued that “a dominant supplier has the power to raise prices and reduce supply.” He continued that “the way to correct this market distortion is simple. Europe should confront Russia’s monopolistic position with a single European body charged with buying its gas.”

Tusk, who is currently president of the European Council, puts forth a much-needed common energy policy, but his proposal would be difficult to implement for a number of reasons. For one, an energy union would initiate a diplomatic energy battle between Poland and Germany, whose energy policy, Energiewende, remains inextricably linked to a direct supply of Russian gas. Second, Tusk’s proposed structure abandons many of the ideas that provided a framework for considering an EU energy union in 2007 and 2008, such as lowering carbon emissions and diversifying energy suppliers. Finally, gas is much more complex than other natural resources, such as uranium, that Europe has previously tried to collectively manage.

UNEQUAL LEVERAGE

Russia supplies more than one-third of Europe’s oil, and slightly less than 30 percent of its gas, but some countries rely more heavily than others on Russian sources. The Baltic states such as Estonia, Latvia, and Lithuania, for example, as well as Bulgaria, Finland, and Slovakia depend on Russia for all of their gas consumption. Greece and the Czech Republic import 70 percent of their gas from Russia, whereas Austria, Germany, and Poland depend on Russian gas for just under half of their annual consumption. Belgium and the Netherlands import only five percent

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