The EU's other 'Union': Can energy unite Europe?

For the European Union's Energy Union to work, Brussels must convince member states to support a durable European solution to their energy challenges, writes Kristine Berzina of the German Marshall Fund – even if that means putting up with EU bureaucracy.

The conflict between Russia and Ukraine is putting Europe’s energy security at risk. Europe is highly dependent on Russia’s natural gas, and past disputes between Russia and Ukraine left Europeans in the cold. This year is different. The European Union is launching an ambitious solution for its energy woes – an Energy Union. The big question now is whether Brussels can convince its member states to cut old ties to Moscow for good.

The EU’s 28 member states have deeply fragmented energy systems. Some regions remain “energy islands,” disconnected from core European energy infrastructure. The Baltic States, for example, do not have connections to the EU but are tied to Russia through a Soviet-era network of grids and pipelines. These infrastructure challenges have broken the EU into small, weak energy markets, and thus far, the EU has not been able use its full weight as the world’s largest energy importer.

Last week, the European Commission announced its vision for a European Energy Union that would fix both structural and market challenges. The Energy Union aims to connect gas and electricity networks between European countries, improve the EU’s oversight of energy deals, and invigorate Europe’s energy sector through research and innovation. If successful, the Energy Union would allow the EU to speak with one, strong voice internationally.

Brussels has the money and political will to kick off these reforms. But is Moscow’s influence in Europe too deep for the Energy Union to take hold? Brussels needs the support of the national capitols to implement the Energy Union, and even Europe’s most vulnerable countries may be unwilling to give up sweetheart deals with Russia for the sake of European solidarity.

Infrastructure links and decades of business ties with Moscow are thwarting change in the energy sector. Hungary, for example, benefits from its close energy relationship with Russia. In February, President Vladimir Putin met with Hungary’s Prime Minister Victor Orban to discuss energy. President Putin nearly halved Hungary’s natural gas price – to $260 for 1,000 cubic meters of gas, down from $500 in 2009 – and is offering a nuclear deal between the two countries.

Of course, these goodies come with a price. Hungary could be the most significant EU supplier of natural gas for Ukraine. But as part of its deal with Russia, Hungary will not be sharing its cheap Russian gas with Ukraine. Other European nations have reversed their pipelines to help Ukraine lessen its perilous energy dependence on Russia.

 

The Energy Union would make deals like these more difficult to pass. Under the new energy plan, the European Commission wants new powers to oversee energy contracts between EU member states and supplier countries, including Russia. Naturally, Mr. Orban sees the Energy Union as an unwelcome addition. He recently told the press, “We will have a major problem [with Brussels]. I am expecting an escalating conflict” over the Energy Union.

For the Energy Union to work, Brussels needs to quickly convince member states to support a durable European solution to their energy challenges, even if it means putting up with the bureaucracy inherent to EU decision-making. Framing the Energy Union in terms of “true solidarity and trust” is not enough. Brussels needs to show concrete benefits.

Persuading Southeastern Europe will be crucial as the region is especially vulnerable to interference. This winter, President Putin scrapped plans to build the South Stream natural gas pipeline directly from Russia to Bulgaria because of EU regulations on competition and pipeline access. For Brussels, this was a victory – Russia recognized the EU’s terms. But for Bulgaria, the cancellation of the pipeline meant vanished construction jobs and lost political clout. An overture from Moscow with the promise of new economic opportunities, in exchange for opposition to the EU’s energy plans, could be very attractive.

The EU can prevent Bulgaria from becoming another Hungary by promising lasting investments and economic development. Whereas Russia offers construction contracts, the EU’s Energy Union can support research and innovation to build new energy-related industries in EU countries.

The EU Energy Union can provide cheaper energy prices for those willing to take part – it just means breaking old relationships. Under the EU’s energy plan, new natural gas suppliers such as Qatar or even the United States will have better access to European markets. This should be welcome news for small countries struggling to get better natural gas prices. For years, many former Eastern Bloc countries have paid higher energy prices than their Western European neighbors. This winter, Lithuania opened a liquefied natural gas import terminal, and immediately received a better price for gas. Lithuania’s cooperation with the EU and its Baltic neighbors on energy issues changed the long-term outlook for its energy security. The same transformation should be possible for all EU countries.

The stakes for improving Europe’s energy security have never been higher. The Ukraine crisis illustrates just how dangerous dependence on one energy supplier can be. The European Commission needs to tackle the allure of Moscow head on and build loyalty in its member states. This will not happen through rhetoric alone – swift and smart investment is required. If Brussels is able to convince vulnerable countries that the EU’s offer is better, the EU will never again have to worry about its gas being cut off in the middle of winter.

Kristine Berzina is a Brussels-based transatlantic fellow at the The German Marshall Fund of the United States, a think tank headquartered in Washington.