On July 13, 2017, the U.S. Helsinki Commission held a briefing on “Energy (In)security in Russia’s Periphery.” Energy security is an important topic that belongs to the OSCE’s Second Dimension. This briefing addressed energy security challenges in Eastern Europe and the Caucasus, in particular in Ukraine, Moldova and Georgia.
Panelists included Peter Doran, Executive Vice President and Interim Director at the Center for European Policy Analysis (CEPA); Edward Chow, Senior Fellow at the Energy and National Security Program of the Center for Strategic and International Studies (CSIS); Andrian Prokip, Senior Associate at the Kennan Institute of the Woodrow Wilson Center and Energy Expert at the Institute for Social and Economic Research; Lyndon Allin, Associate at Baker McKenzie; and Dr. Mamuka Tsereteli, Senior Fellow at the Central Asia-Caucasus Institute. The panelists provided a background on energy security both generally and in the regional context of the post-Soviet space, as well as in the specific case studies of Ukraine, Moldova and Georgia.
Mr. Doran stated that the energy security situation in Europe, and also in Russia’s immediate neighborhood, has fundamentally changed as a result of the end of energy scarcity in the world and the construction of new energy infrastructure in Central and Eastern Europe in a positive way. However, the bad news is that Russia is not willing to accept this game-changing market shift and is fighting back.
For instance, the panelists agreed on the key role that Azerbaijan could play for the supply of energy not only in the post-Soviet space, but also in other European countries. They noted, however, in order for world-class projects, like the ones operating or being planned in Azerbaijan, to become a reality, the achievement of market integration is critical.
Unfortunately, market integration in Southeastern Europe is exactly what Russia has been trying to prevent with the tool of energy corruption, which it uses to keep its neighboring countries dependent on it for energy supplies, and to obtain kompromat on various political leaders in the region. Mr. Doran specifically cited the case of the Nord Stream 2 pipeline project, which he argued is a political and not a commercial project for Russia to gain more influence over European, and in particular Ukrainian, energy security.
When it comes to ways of approaching energy security, panelists agreed that it must be achieved not by top-down but rather with bottom-up solutions, citing the specific example of Ukraine, which could easily become self-sufficient if it implemented crucial reforms that hinder much-needed private investment in its energy sector.
In particular, Mr. Chow observed that, while external challenges must be confronted and overcome, the implementation of crucial structural reforms in the energy sectors of post-Soviet countries is critical to meet the challenge that Russia poses. For example, he regards corruption in the energy sector in Ukraine as the key reason for the nation’s energy insecurity.
The panelists agreed that U.S. political leaders should be careful about making promises to politicians in the region, for example the oft-cited promise that U.S. LNG exports will be able to substitute for Russian gas and solve the energy security problems of the region. Instead, as the panelists pointed out, the emphasis should be put on supporting the energy market development of countries in the post-Soviet space.
Mr. Prokip stressed that the recently proposed reforms in Ukraine must go forward. In particular, progress must be made in implementation, which he argued could only happen if the West is willing to exert more pressure on the Ukrainian authorities, while continuing to provide advice and assistance. In both Chow’s and Prokip’s view, U.S. energy exports cannot serve as a substitute for structural economic reforms in Ukraine.
Following a similar line of argument, Mr. Allin pointed out that, in the case of Moldova, it is the Moldovans who need to make more effort to solve their own problems, rather than looking only to foreign partners for external solutions.
Finally, Dr. Tsereteli reminded the audience that structural reforms and the openness to trade and investment that accompanies them can lead to post-Soviet countries’ integration in the global economic system, as was the case in Georgia, which managed to improve its energy security significantly this way.