Energy Security Concerns and Options in Southeast Europe

Voice of America Video 

Lugar Institute’s Summary

Summary below by UMD International Policy and Diplomacy Fellows Brennan Hicks, Filip Jotevski, and Brooke Lee

On Friday, July 18, 2014, the Southeast Europe Coalition in conjunction with the Richard G. Lugar Institute for Diplomacy and Congress at the German Marshall Fund hosted a Congressional briefing on the energy concerns and options in Southeast Europe following the G7 summit.

Held in the esteemed Cannon House Office Building, and before around seventy registered Congressional staffers and guests, the Hill briefing was opened by United Macedonian Diaspora’s President Metodija A. Koloski who thanked the speakers for their attendance at the roundtable event. “In the last six months, especially due to the crisis in Ukraine, European countries have been focused on addressing the vulnerabilities of their energy sectors, researching efficient alternatives, and are now in the process of restructuring their dependence on classic sources of energy,” Koloski said.

“And though there has been collective action taken by the EU in response to possible disruptions to their energy consumption, there must also exist a unified infrastructure that extends beyond the Western borders into Southeastern Europe and even to other Eurasian regions…if Russia were to cut gas supply to Ukraine, Bulgaria and Macedonia would be most affected, and they already pay some of the highest prices in Europe,” he continued.

Moderating the event, Lugar Institute’s Neil Brown framed the discussion by confronting two main problems in the status quo: First, that energy policy is an inherent component of Russia’s political agenda. Second, that “there is no single Europe in terms of energy.”

In light of these issues, Brown emphasized that it is important to evaluate the policies already being instituted. Through the implementation of the 3rd Package to increase competition, the EU’s attempts to create a cohesive strategy, and the increase of physical integration, European countries have begun to increase their resiliency within the energy sectors. But given that energy is critical to sustain strong, independent allies, Brown underscored that it is also crucial to recognize that the European energy market is still a divided one. As such, Brown recommended that a response strategy should be one that aims to increase European leverage, not to stop trade with Russia. This can be accomplished by diversifying sources of energy flow, increasing regional interconnection, using more alternative energies, and tapping into US LNG capabilities.

Narrowing the focus to Southeastern Europe, Margarita Assenova, Director of Programs for the Balkans, Caucasus & Central Asia at the Jamestown Foundation, spoke second to address the problems and potential solutions. As noted by Assenova, 24% of all EU energy consumption is imported from Russia, which creates short-term problems for the region in the upcoming winter months. Many countries in the Balkans are even 100% dependent upon Russian supply, lacking regional interconnectors and falling short on storage capabilities.

“The answer is Caspian gas,” Assenova stated as she explained that the alternative for Southeastern Europe is the gas transiting through the Caspian Sea. Given that South Stream is no longer a viable solution, the Caspian region will be critical in gaining access to energy sources for many Balkan states. She emphasized that these new pipelines would likely stem from Azerbaijan and must be designed to diversify the flow sources and prevent ownership by a single organization, such as the Russian owned Gazprom.

David Koranyi, Deputy Director of the Dinu Patriciu Eurasia Center at the Atlantic Council, next discussed that all countries want to be gas hubs, but short-term ways of thinking are pervasive in the Balkan region, explaining, “These countries tend to act against their own self-interests.” The self-interests often promote national politics at the expense of EU goals. Stressing that the current situation must not fall into stagnate dialogue, Koranyi asserted that dysfunctional legal systems and corruption must be addressed in order to move forward with development and investment opportunities. He further underlined that Greek-Bulgarian interconnections and sources transiting the Caspian into Hungary will both be critical for the region, as well as LNG resources should be included in the same interflow system.

Rauf Mammadov, Director of the State Oil Company of Azerbaijan Republic (SOCAR) USA, next examined the status of the Southern Corridor and the role it can play within Europe. Comprised of three different pipelines from the Caspian, Mammadov elucidated that the Southern Corridor holds a logistical capacity of 16 bcm, compared to Europe’s entire consumption demand of about 500 bcm. Despite the relatively low volume capabilities, the Southern Corridor will remain pertinent for developing infrastructure capabilities, which will create opportunities for future expansion with Caspian countries. Mammadov urged that such expansion would also help to protect against monopolization and subsequent manipulation of energy markets.

The panel continued the roundtable discussion, emphasizing that the Southern Corridor will also remain key to reduce coal dependence in the regions. The completed project is estimated at $50 billion and will include six countries and eleven different companies. Investment will also mean the creation of approximately 15,000 new jobs within Eastern Europe and such economic assistance will prove critical to prevent Russian infiltration and influence within regional politics.

Posed with the question of the United States’ role within European energy strategies, each speaker gave a brief response. From the discussion, it is clear that Southeastern Europe must be secured in order to develop a cohesive action plan. Assenova advocated that the Greek and Macedonian dispute must be resolved and the U.S. needs to instigate Greek leadership on the issue. “Europe and the US need to weigh in Greece,” Assenova recommended, “It’s not about what Greece wants.” It was further suggested that Georgia must also be remembered in the talk in order to create a unified solution. In addition, U.S. policy must complement the needs of EU energy strategies to help create a market for LNG in an effort to reduce energy prices for Europe.

To support these goals, Mammadov contended that Congress must continue bipartisan support for energy policy reform and maintain public statements on the issue. Adding to the discussion, Brown defended that the U.S. should broker agreements between European countries and continue to push at the EU level. He also explained that it would need to promote unrestricted LNG exports for U.S. producers as well as confirm a new Assistant Secretary for Energy. Brown stressed that it will be important for the U.S. to provide alternative resources to Europe in the event that more countries are cutoff from Russian supply. In order to accomplish this, the current LNG bill should be rewritten to include equal treatment to all of our allies. Additionally, it will prove important that US Members of Congress actually travel into the countries that face stark possibilities of energy crisis in the upcoming winter months.

Supplementing U.S. action, Mammadov highlighted that companies must control consortium change within European energy markets and larger quantities of resources will need to be supplied. He concluded that there must exist regional interflow that will allow gas and oil to be sold to any country, unlike Russian gas, which cannot be resold. Domestic infrastructure and markets must be in place to support the expansion of interconnections for a successful response to the current energy crisis.

The Southeast Europe Coalition thanks Rauf, Ari Mittleman, Maia Comeau for their hard work in making the event happen, Congresswoman Candice Miller and her office, particularly Dena Kozanas, in arranging the room for the event, Margarita, Neil, David for their insight, and the Coalition members in reaching out to respective Congressional Caucuses handling the region.

 

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