"Attempts to discredit Azerbaijan as a reliable gas supplier for Europe are not ruled out"
Caliber.Az interview with ex-adviser to Ukrainian parliament speaker
INTERVIEWS 09 August 2022 - 10:52
Huseyn Safarov Caliber.Az |
International political scientist and former advisor to the Speaker of the Supreme Rada (Parliament) of Ukraine Vera Konstantinova answers Caliber.Az's questions about Europe's energy security and Azerbaijan's role in it.
- How realistic is it for Europe to completely stop using Russian gas by the end of this year?
- In short, if there is a political consensus in the EU, regarding the energy security of European consumers, it is quite possible to create the appropriate legal conditions for the complete rejection of Russian gas within a couple of years. But it is necessary to understand a few key points. Firstly, Russia represented by its monopolist Gazprom worked systematically for many years to increase its share in the European gas market by investing in the construction of gas pipeline infrastructure (Nord Stream-1, Nord Stream-2) with an obvious political implication. Secondly, Russia simultaneously created conditions for strengthening the energy dependence of some European countries by bribing their political elites. Third, Russian attempts to discredit the Ukrainian supply route and destroy the image of the Ukrainian GTS (gas transportation system) as reliable and functional. Since 2014, these efforts have become particularly aggressive.
After Russia began a full-scale invasion of Ukraine in February 2022, another factor was added: energy prices on the world market. The revenue side of the Russian budget through higher prices allows the Russian leadership to fuel a militarized economy by sponsoring a war against an independent state to please its imperialist complexes of the past, in particular in an attempt to restore the USSR for the 100th anniversary of the signing of the Union Treaty.
Everything points to the fact that we are now following the implementation of a gradual reduction scenario with further zero legal imports of Russian gas to the EU. The upcoming heating season 2022/2023 will be very revealing, and I think even the most problematic. European officials are preparing for a complete cessation of gas supplies from Russia. Although natural gas is not yet included in the package of sanctions against it, but as you know, discussions are underway. A political solution is needed, a unified consensus among the members of the European Union.
The timing of the refusal will depend on both the legislative initiatives of the EU, the speed of incorporation into the national legislation of each member of the association and further implementation, the availability of infrastructure capabilities, in particular the system of intra-European interconnectors, and their capacity, as well as weather conditions, etc. There will not be a complete failure by the end of this year, this is obvious. Unless Russia decides to behave like a gas terrorist and unilaterally turn the gas valve off. Although, frankly, such behaviour should not be excluded either, given the Russian tactics of blackmail and diktat.
- Which countries could make up for the missing volume of natural gas for the EU in the event of an interruption of supplies from Russia?
- Given that the diversification of energy imports is now a top priority for the EU, the existing infrastructure could provide additional volumes from some European countries, for example from Norway, provided, of course, that new production possibilities exist. Although a more likely option is LNG. This would involve North African countries, primarily Algeria, as well as the Middle East, particularly Qatar. Supplies from the US and the UK are also possible. And, of course, great hopes are pinned on Azerbaijan. A relevant agreement was signed on July 18, 2022.
- Which EU countries are most dependent on gas from Russia?
- The most dependent are Germany, Italy and France. They are the largest buyers of Russian hydrocarbons, which they use not only to generate electricity and heat, but also to supply their manufacturing industries. Before the invasion, for example, Germany depended on Russia for about 55 per cent of its gas imports. In the past few months, this figure has fallen to the regulated 30 per cent. Hungary has the highest individual dependence on Russian gas. Slovakia is another EU country heavily dependent on Russian gas.
- What could be the consequences for the EU economy if Russia unilaterally stops pumping gas?
- From the analysis I have seen of the consequences for the EU economy in such a situation, the experts, first of all, draw attention to the potential contraction of GDP. According to the EU's own estimates, cutting off Russian gas supplies to the EU can potentially reduce its gross domestic product by 1.5 per cent, if the next winter is cold and no preventive energy-saving measures are taken. In the case of the so-called "average winter" model, the cessation of gas supplies from Moscow would reduce GDP by 0.6-1 per cent. The baseline scenario includes a decrease in GDP of 0.4 per cent.
The EU is actively working on a number of recommendations to member states, including reducing the use of heating and cooling systems and some market-based measures to offset the consequences of a possible complete disruption of supplies from Russia. For now, this measure will be voluntary, and governments should report on concrete steps in September 2022. The IMF estimates that potential GDP losses resulting from a complete disruption of Russian gas supplies amount to up to 6.5 per cent of GDP, depending on the member state, with Hungary being the most exposed. However, it seems to me that the EU should have enough margin of safety to withstand Russia's energy aggression.
- How promising could be the delivery of gas from Azerbaijan: the benefits and advantages?
- It should be noted that on July 28, 2022, the European Commission published the final version of the regulation "Save Gas for a Safe Winter", which sets out measures to prevent emergency power cuts in the event of further disruption of gas supplies from Russia. According to EU estimates, with an average level of demand, a complete cessation of Russian gas imports could lead to a gas deficit of 30 billion cubic meters by March next year. The conditions proposed in the regulation emphasize the reduction of consumption as the primary measure. The proposals are based on a 15 per cent demand reduction target for member states between August 1, 2022, and March 31, 2023, compared to the previous five-year average consumption for the same period.
I have no doubt that Azerbaijan can play the role of a contributor to Europe's energy security in the long term. It is primarily a strategic investment in stability. According to the recently signed agreement between the EU and the Republic of Azerbaijan, Azerbaijan has pledged to supply at least 20 billion cubic meters of gas to the EU annually by 2027. At the same time, it was said that gas supplies should increase from 8 billion cubic meters in 2021 to the expected 12 billion cubic meters this year through the Trans Adriatic Pipeline. And this is only the first stage in terms of replacing Russian gas with alternative options.
- Why did Europe allow such dependence on Russia, which the Kremlin has turned into a blackmail tool?
- Frankly, it's a rhetorical question. Certain Central and Eastern European countries (Poland and the Baltic states), which have had sad experiences with Russian energy blackmail and nontransparent pricing, have repeatedly warned other EU members about the risks to regional energy security. Moreover, since 2014, Ukraine has systematically drawn the attention of its partners to the fact that energy resources, as understood by the Kremlin, are an instrument of geopolitics. But at that time, "only business" was the dominant approach in the EU. By the way, if we look at the data, the share of Russian gas in the EU energy balance during the last 5 years made up 38-42 per cent, meanwhile, according to the European energy legislation, this share should not exceed 30 per cent of supplies from a single source. At the same time, it is important to note that in the framework of the implementation of climate initiatives of the European Green Deal, it is natural gas that the EU considered as a transit fuel that will ensure the transition to a decarbonized economy.
- How much natural gas does the EU need from Azerbaijan to meet its needs in replacing the Russian blue fuel?
- In fact, Azerbaijan should double its supply volumes by 2027. According to production data, about 44 billion cubic meters of gas were produced in Azerbaijan last year. At the same time, about 19 bcm of gas was exported, of which 8.2 bcm to European consumers via the Trans Adriatic Pipeline (TAP), the European section of the Southern Gas Corridor. As far as I know, Azerbaijan's natural gas reserves are estimated at 1.3 trillion cubic meters, but in order to extract them - further investments are needed to increase production and expand the capacity of pipelines leading to the EU. A surge in production is a problematic issue. With increased throughput capacity through TAP, it is technically impossible to replace the 155 billion cubic meters that Russia annually supplies to the EU under the given conditions. Additional infrastructure is needed. In the following five years, Azerbaijan will be able to supply up to 40 bcm of gas.
- Won't Azerbaijan face pressure from Russia in case of successful gas supplies to the EU?
- I think, it is inevitable. Even if we consider the experience of the countries that compete with Russian gas, we should not rule out attempts to discredit Azerbaijan as a reliable supplier for Europe. In addition, Russia and Azerbaijan have several issues on the bilateral agenda, where tension is potentially possible, for example, on the Karabakh issue.
Caliber.Az
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