25 Mar /14

Oil after Crimea

New energy map EuropeThe crisis in Crimea has especially significant implications for the world’s energy map. Europe’s heavy dependence on Russian oil and natural gas supplies is a major concern for E.U. politicians as they are struggling to formulate a response to Russian expansionism. More than 40% of Europe’s energy supply currently flows from the East, a fact that, some might say, prevents European politicians to enact harder sanctions against Russia. While the current political tensions show the potential diplomatic predicament unilateral energy dependence can create for a nation, it also shows the immediate need for E.U. members to reevaluate their energy policies and diversify their supplier portfolio. In the end, the crisis in Crimea might therefore lead to a substantial reorganization of Europe’s energy map.

European nations, such as Germany, who are especially dependent on Russian oil and gas, have, in fact, long been working on creating viable alternative. Extensive substitutions of renewable energies have helped to decrease dependency on conventional energy in Germany. However, reduction in nuclear power output and Germany’s decision to phase out nuclear power all together, will, in fact, prevent a more rapid decline in conventional energy demand. Secondly, continuing problems with pipeline efficiency and delivery bottlenecks has motivated European countries to develop alternative supply routes. One of the most obvious ways to achieve this goal is to jumpstart the construction of efficient and safe energy pipelines with other suppliers. Projects like the Pan-European Pipeline (PEOP) and the Trans-Adriatic Pipeline (also known as Nabucco West or TANAP) reroute Europe’s energy supply through the Caspian Sea, Turkey, and neighboring countries and thereby free Western Europe from the reliance on Russian pipeline’s. In the long run these measures will undoubtedly help to reduce dependency on Russian oil and gas, but what to do about the immediate present?

Increasing sanctions on Russia might cause the Kremlin to cut off deliveries to the West even though that would deprive Russia from its single most important source of export income. Simultaneously, it appears likely that Russia will also shut the door on energy deliveries to the Ukraine and thereby force the European Union to manage oil flow to the Ukraine from the West. None of these problems Europe can solve on its own. Salvation might be found in two places. First, Europeans might turn toward Saudi Arabia and the other Gulf States and increase their import of crude oil. In order to meet the demand for natural gas on the continent, Europe’s best option in addition to increasing their existing imports from outside of Russia, might be to turn toward the United States and import LNG via tanker ships. The U.S. certainly has the production capacity to supply Europe; however terminals and the number of existing export licenses are not yet designed to meet large external demand. Nonetheless, whatever direction governments will explore it seems certain that the energy map of Europe is bound to change in a fundamental way and just may change world politics in the process.

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