Saving Europe with Natural Gas

Courtesy CartoonStock.com

On New Year’s Day, 2009, a dispute over payment between Russia and Ukraine led to Russia cutting off all Ukraine bound gas, which included 25 percent of the European Union’s gas supply.1 To make things worse, Europe was in the middle of an especially harsh winter. Even though most countries had prepared for a gas shortage by stockpiling natural gas, their efforts were not enough, as few European countries had more than a month’s worth of reserves, and many lacked any reserves. The crisis hit Europe hard: Bulgaria was forced to shut off industrial production to save fuel for heating, thousands lost heating and electricity, and tiny Slovakia even declared a national state of emergency.1
This is not an isolated event. Russia has halted Europe’s gas supply in 1999, 2006, 2009, and 2012, each time in the dead of winter. The 2009 shortage cost €1 billion in Ireland alone2, and the 2012 shortage caused 650 deaths in Central and Eastern Europe.3 Although the EU as a whole gets only 31 percent of its gas from Russia, many Eastern European countries get 90-100 percent of their gas through Ukraine, and Germany, the EU’s de facto leader, gets 42 percent.4 Besides denying thousands of people heat for the homes and offices and severely injuring economies, these gas crises have broader geopolitical implications. Ukraine gave half the ownership of its gas pipeline, its biggest source of revenue, over to Gazprom (the Russian state-owned energy agency) after the 2009 crisis. Further, Russia took over most Ukrainian mines and power stations, has sent in many Gazprom security police to guard the pipeline (actually heavily armed soldiers and drones), boosted cooperation between Russian and Ukrainian defense ministries, has secured not only a more favorable Ukrainian government but also a much longer lease on its critical Black Sea base in Sevastopol, and, most ominously, has begun implementing political reforms in Ukraine to make Ukraine more like Russia. Russia has also exploited the total reliance of Eastern Europe on Gazprom’s natural gas in mid-2009 when it set up a number of security and economic alliances that heavily favored Russia (think Warsaw Pact part II).5 When Turkey lost 67 percent of its gas in 2009, it cozied up to Iran to get gas from them. Turkey helped Iran build a major pipeline through Turkey, a pipeline that until very recently continued to operate despite sanctions on Iran.
Further, Russia is not nearly as dependent on the EU as the EU is on Russia. Russia is building new pipelines to China and the Koreas, and has recently completed pipelines to China in 2010, and to Turkey and the Caucus region in 2006.6, 7, 8 Demand from Turkey and China nearly equals demand from Europe,8 meaning that Russia can make up lost gas revenues from Europe by simply increasing gas supply to other countries.
Europe’s reliance on Russian gas stems largely from the fact that Europe has little gas of its own. However, it seems puzzling that European nations continue to rely on authoritarian and unpredictable Russia in light of recent events in the gas market. 2011 was a record year for U.S. natural gas production, which now outstrips domestic demand by 119 billion cubic meters.9 This is excess is far greater than European demand, which currently amounts to 65 billion cubic meters.1 American shale gas is cheap, too: it is at the lowest price in a decade. This boom and low price is largely attributable to recent advances in shale-gas mining techniques that have opened up billions of cubic meters of gas up to drilling.10 Exporting this excess gas to Eastern Europe would be beneficial for gas companies and U.S. foreign relations: gas companies would make greater profits while the U.S. would keep Eastern Europe out of Russia’s sphere of influence. Further, Europeans citizens would benefit from U.S. gas: American natural gas costs $30 per 1,000 cubic meters11, while Russian gas shipped to Western Europe costs $500 per 1,000 cubic meters and gas shipped through Ukraine costs $250 per 1,000 cubic meters.12 If natural gas prices were lowered this dramatically, Europe’s economic recovery would speed up rapidly.

 
So what is it that stops the U.S. from exporting more gas to Europe? As usual, the answer is money. Natural gas must undergo an expensive liquefaction process before sea transport, while it can be left in its natural gaseous state for pipeline transport. Further, after a sea journey, natural gas must be regassified, a process that can only be done at expensive terminals that usually cost more than $1 billion13 to build.
In the long run, it is worthwhile to make investments in building regasification terminals in Eastern Europe because the expected monetary payoff to gas companies and political payoff to the U.S. government is so great. In the short term, however, stop gap measures must be taken. The U.S. can assist European nations in acquiring machines called floating regasification and storage units (FSRUs), natural gas tankers converted to serve as regasification terminals. FSRUs can be leased for an average of $70 million per year, an inexpensive price considering that one FSRU can regassify 3.4 billion cubic meters of natural gas, or 125 percent of Lithuania’s natural gas consumption. FSRUs are also much quicker to build than regasification terminals. Already, Lithuania, one of the first European countries to lease an FSRU, has seen its negotiating power with the Russian leadership increase after it leased its FSRU earlier this year.14
To do its part, Europe can start developing its own shale gas reserves and diversifying its gas sources. The EU sits on 2.168 trillion cubic meters14 of accessible natural gas. If the EU were to build facilities for extracting this gas, it could hypothetically eliminate the need for foreign supplies of gas. Further, the EU could turn to other sources of gas, such as Qatar or Mozambique, both of which have made enormous natural gas discoveries recently.15
The process of weaning Europe off of Russia’s teat may be dirty and expensive. But the end result, a steep drop in Russian influence in Europe, particularly Eastern Europe, will be enormously valuable from a geopolitical standpoint. Once Russian influence is no more in Europe, true integration of Eastern Europe into the EU and the Schengen Area can begin, which will further bolster the EU and make it an effective counterweight to Russia. This would be particularly beneficial for the U.S., which has a prime opportunity to accelerate the recovery by bolstering the natural gas industry and to weaken its old foe. America would be a fool not to take it.








 Citations
1.. "FACTBOX - 18 countries affected by Russia-Ukraine gas row." Reuters 7 Jan. 2009:
    n. pag. Web. 13 Apr. 2012.
"Natural gas shortages slam many European nations." Tuscon Citizen 7 Jan. 2009: n. pag. Web. 13 Apr. 2012. .
2. Leahy, Eimear & Devitt, Conor & Lyons, Seán & Tol, Richard S. J., 2011. "The Cost of Natural Gas Shortages in Ireland, "WP397, Economic and Social Research Institute (ESRI).
3. Murray, Alina. "Cold Weather Snap in Eastern Europe Kills More Than 650." MSNBC 2 Feb. 2012: n. pag. MSNBC. Web. 13 Apr. 2012.
4.European Union. EU-Russian Gas Relations in Perspective: Challenges and Opportunities. N.p.: European Dialogue, 2012. European Dialogue. Web. 13 Apr. 2012. . 
5. United States. U.S. Army. Russian Influence on Ukrainian Strategic Policy. By Defek G.
    Webb. Charleston, SC: U.S. Army, 2011. Print. 
6. Stnagarone, Troy. "Russia's North Korea Gas Deal." The Diplomat 15 Nov. 2011: n. pag. New Leader Forum. Web. 13 Apr. 2012. . 
7. British Petroleum. “Southern Caucasus Pipeline overview."
8. Reuters. "New Russian pipeline replaces oil by rail." Global Times 10 Dec. 2010: n. pag. Global Times: Discover China Discover the World. Web. 13 Apr. 2012.. 
9. United States. Energy Information Administration. Natural Gas Overview. N.p.: Energy Information Administration, 2012. Department of Energy. Web. 13 Apr. 2012. 
10. Osborne, Andrew. "Why natural gas is cheap and gasoline isn’t." New York Times 30 Mar. 2012: n. pag. NYT. Web. 13 Apr. 2012. .
11.United States. Energy Information Administration. Quantity and Average Price of Natural Gas Production in the United States, 1930-2000. N.p.: Energy Information Administration, 2000. Department of Energy. Web. 13 Apr. 2012. . 
12. Osborne, Andrew. "Russia Firm Cuts Gas to Ukraine, But EU Hit Is Cushioned ." Wall Street Journal 2 Jan. 2009: n. pag. WSJ. Web. 13 Apr. 2012. .
13. "Lithuania leveraging a new LNG technology." STRATFOR 8 Mar. 2012: n. pag. Web. 13 Apr. 2012.
14. "European Union." CIA World Factbook. CIA, 2 Apr. 2012. Web. 3 Apr. 2012.
15.LeVine, Steve. " For Alaska (and Qatar and Mozambique and Russia) China is the hub of hope." Foreign Policy 12 Apr. 2012: n. pag. Foreign Policy. Web. 13 Apr. 2012.

Militarism 2.0: South China Sea

Chinese destroyer Qingdao enters Pearl Harbor in 2006. The fact that she was able to make this long journey demonstrates the high endurance of Chinese warships.

A specter is haunting Asia – the specter of war. Across the continent, from India to Japan, formerly peaceful countries are pursuing aggressive and occasionally expansionist policies. While expansionism is not new in the region, this time is different. Previous conflicts in Asia tended to feature one modern and well-armed nation conquering smaller and weaker ones, as in the rise of Tang China in the 7th century or Imperial Japan in the 20th century. This time, however, there are several different sides involved in a potential run-up to war. Aggressive statements from political leaders are just the public face of the looming crisis. The region is haunted by nationalism, energy disputes, and, most ominously, an arms race.

Arms Race

Since the Pacific and Indian Ocean regions are defined by the sea, this arms race is primarily naval. Although military spending in Asia grew at a slower rate than usual because of the poor state of the economy, Asian military budgets grew by an average of 2.3 percent in 2011.1 While this may not sound like a very large increase, it is significant because military spending in the rest of the world has hit a plateau, which makes Asia the region with the second biggest increase in military spending, after the Middle East.2 Asia’s military buildup is more visible over the long term, as spending has risen 69 percent since 2000, compared to a global increase of 49 percent.3 This is especially concerning because the U.S. and most of its Western European allies are cutting their defense budgets to rein in rising deficits.4

The two countries largely responsible for this jump in spending are also the world’s largest: India and China. By 2030, India plans to spend $45 billion on its navy and add 103 ships to its fleet; China plans to spend $20 billion and add 135 ships. India is the world’s largest arms importer, accounting for nine percent of all global arms trade.5

   

More important than just the numbers of ships India and China plan to acquire, however, is the types of ships they will build and weapons they are buying. Both countries have explicitly stated a desire to own “blue-water” navies,” (fleets that can fight and project power more than 200 miles from their home countries) and are thus investing in power projection weapons, particularly aircraft carriers. India is currently building two new 40,000 ton carriers, is planning to launch a 65,000 ton carrier by 2017, and has purchased $700 million worth of MiG-29ks (Russian carrier-based fighters).6 China, meanwhile, has just launched its first carrier, a refitted 33,000 ton Gorbachev-era ex-Soviet vessel and plans to build four more.7

 

Carriers are useful for projecting influence and fighting conflicts a long distance away from their bases, which makes them exceptionally well suited to power projection and controlling regions. It is worrying that China and India are expressing increased interest in these vessels, since it shows that they likely intend to establish firm spheres of influence in the region using threats of force.

American and Indian aircraft fly over the Indian aircraft carrier INS Viraat.

India and China are interested in another power projection tool recently: amphibious warfare ships, which can transport Marines and launch D-Day style assaults on beaches. India bought its first amphibious warfare ship, an outdated U.S. Navy vessel, last year and plans to acquire four newer ships,8 and China owns two modern (circa 2006) and domestically built amphibious warfare ships and plans to build eight more.9

   

Both nations are also investing in the crucial yet inconspicuous aspects of power projection: support vessels (underway replenishment ships, oilers, tankers, etc) and foreign bases. The Indian Navy has just acquired two new tankers and two underway replenishment and ammunition ships, and it has reportedly conducted underway replenishment operations.10 China has owned an extensive fleet of tankers and support ships since the ‘90s and has been stepping up the rate of exercises involving them after 2005.11 Much has been made of China’s “string of pearls,” a string of new naval bases and deepwater ports from Pakistan and Sri Lanka to Myanmar and Cambodia.12 While the Indian Navy does not yet have as many bases as China, it has built a new base in Madagascar, has berthing rights in Oman and Vietnam, and is negotiating with the Maldives to build a base there.13

Although most emphasis is placed on construction of power projection weapons, offensive weaponry is also being stockpiled by both nations.

India and China are building fleets of modern, stealth frigates and destroyers. These new surface ships are heavily armed and carry some of the most advanced electronics, including Active Electronically Scanned Array radars, which are nearly impossible to jam and can track far more targets than regular radars.14 The most important aspect of these new ships, however, is that they are high endurance: China’s Type 052 destroyers have a range of 4,000 nautical miles15 and India’s Delhi class have a range of 5,000 nautical miles.16

           Acquisition of silent diesel-electric submarines and better armed nuclear submarines, both of which are purely offensive weapons, is also a priority for both countries. India is currently buying the latest submarines from Germany and Russia and is planning to launch 30 new boats by 2030,17 and China has added 42 boats of increasing stealthiness to its fleet since 1995, and expects to add a total of 75 boats by 2020.18

Finally, both countries are upgrading their missile inventories: India has equipped all destroyers and frigates with the stealthy, supersonic, mid-range (290 km), and powerful (armed with a 300 kg warhead) BrahMos missile. It is also deploying the short-range Dhanush ballistic missile, which is armed with either a 500 kg armor piercing warhead that can be used against ships or a 10 kiloton nuclear weapon, onboard its submarines and patrol craft.19 China has built the famed DF-21D, the world’s first ballistic anti-ship missile, which has a staggering 1,500 km range and is considered a serious threat to U.S. carriers.20 China has also acquired hundreds of regular anti-ship cruise missiles, including the Russian SS-N-27N Sizzler which an American admiral has said the U.S. Navy has no known defense against, as well as several satellites to guide long range missiles and air operations.21

Almost all Asian countries have found themselves forced to respond to this arms race. The three making the most significant fleets, other than India and China, are South Korea, Japan, and Russia. South Korea is planning to build 128 ships by 2030, although some of those are just replacing outdated vessels.22 Despite its constitutional ban on war, Japan has the strongest navy in the Pacific region, and it is investing heavily in new fighters, expensive anti-ballistic missiles (ABMs), networking technology, and additional “helicopter destroyers” (a euphemism for aircraft carriers). In 2010, Japan announced that it would build its first foreign base since WWII, a navy base in Djbouti, on the Indian Ocean.23 Russia    China, Vietnam, and the Philippines is in the process of modernizing its navy to include two new amphibious assault ships, a new class of ballistic missile submarines (the largest ever built), and over 20 stealthy anti- aircraft frigates and corvettes. The Russian Navy’s latest strategic guidance document makes it clear that the focus of this buildup is the Pacific region, and most of the new ships will be deployed to the Pacific.24

The arms buildup is affecting all countries both in the heart of the region and far away from it; a few examples of this are listed below. The Royal Australian Navy, in the words of Australian Vice Admiral Ray Griggs, plans to “[Evolve] into a much more capable amphibious force, [bring] new air- warfare destroyers into the fleet, and [double] the size of the current submarine force,” in addition to plans to acquire the advanced and stealthy F-35 fighter and to potentially buy American Virginia-class nuclear submarines.25 Pakistan, understandably unnerved by the naval buildup conducted by its longtime enemy India, is investing in new basing infrastructure, more ships, and space and cyber weapons.26 Indonesia is rapidly increasing its military spending and is adding several new vessels to its fleet, including Chinese-built missile boats and ultramodern German diesel-electric submarines.27 Vietnam has begun stockpiling Russian anti- shipping missiles and Canadian maritime patrol aircraft, in addition to buying six very quiet submarines, two frigates, and a large troop transport.28 Even tiny Singapore is modernizing its fleet with the purchase of two Swedish submarines and upgrades to the rest of its submarine fleet.29

Rising tensions

 Rising Tensions

This arms buildup is made worse by the rise in tensions in the region. Most of these tensions center around the South China Sea. Half of the world’s merchant ships, carrying about $2.5 trillion worth of oil and $2.5 trillion worth in other goods, pass through the South China sea,30 meaning that any nation with control over the South China Sea controls world trade and East Asia’s supply of oil. Throw in the fact that the South China Sea is estimated to contain about 15 billion tons of oil and natural gas plus vibrant fishing and sea salt industries, and the South China Sea becomes even more of a prize.31 Naturally, this has led to several nations, namely China, Vietnam and the Philippines claiming overlapping portions of the South China Sea.32 In terms of claiming territory in the South China Sea, China is the worst offender: it claims the entire sea, as well as what it calls the “first island chain”: Taiwan, the Spratly Islands, and the Ryukyu Islands, which are part of Japan.33 Attempts to solve the boundary dispute diplomatically in the regional ASEAN (Association of Southeast Asian Nations) forum have failed,34 which has raised tension by making Chinese officials believe that force is the only way to resolve the crisis.35

These tensions have occasionally led to crises and violence. In the most recent crisis, which is still ongoing, Chinese and Filipino warships have been in a standoff for over a month because the Philippines detained Chinese fishermen it claimed were fishing in its territorial waters. China is warning its citizens of a potential war, and has deployed five warships to the location of the dispute, including an amphibious transport dock.36 Previous disputes in the region of note include a 2010 incident in which a Chinese trawler rammed a Japanese Coast Guard ship and a 2009 incident where Chinese gunboats stalked an unarmed American surveillance vessel in the South China Sea and nearly collided with it. Notable violent clashes include a 2005 incident in which two Chinese warships fired on Vietnamese fishing boats China claimed entered their territorial waters, killing nine,37 and the 1974 Battle for the Paracel Islands between China and South Vietnam that resulted in South Vietnam losing a corvette and 53 sailors.38

 

Both the naval arms build up and the tensions in the South China Sea are attributable to two factors: rising nationalism and desire for national prestige in some countries, and the response to this nationalism by other nations. The best example of rising nationalism is China. The state-sponsored media regularly portrays the actions of other countries in a negative light, and occasionally calls for military action against foreigners, especially the U.S. and Japan. It tends to glorify China, and makes regular calls for reclaiming China’s “heritage” – hegemony in East Asia – from the West. Postings by Chinese civilians on social media, where nationalistic posts vastly outnumber dissident posts, even on social media not controlled by the government, show that the public buys into this sentiment.39 Japan is also experiencing a wave of nationalism,40 as very right wing candidates are gaining in power. Finally, Indian nationalism, particularly Hindu nationalism, is rising in the form of more Hindu terrorism and Mahanian calls for putting the “Indian” back in the Indian Ocean issued by members of Parliament and bureaucrats.41 Nationalism has led to a desire to assert the power of one’s country on the world stage, which partly explains the rise of aggressive, internationalist foreign policies in China and India. Most Asian nations have become alarmed by these aggressive policies and started arming, which has created the current situation.

Analysis

The United States needs to approach this situation with extreme caution. If the U.S. increased cooperation between its navy and one of its allies’ navies, or increased arms sales to an ally, it would just fuel more arms buildup from countries wary of U.S. influence tilting the balance of power in the region against them. It is thus in America’s best interest to act as a neutral arbiter in the region, deploying to any crisis zone to convince both parties to back down. Being a neutral arbiter of disputes would necessitate both strong offensive and defensive capabilities: offensive capabilities to crush the aggressors if a battle breaks out, and defensive capabilities to shield merchant vessels and allied warships from attack.

This also means that the U.S. will need to change the structure of the force it has in East Asia. Retaliation solely against enemy naval assets makes the most sense since it can quickly end a conflict without escalating it, so weapons that are primarily land-attack, namely Marines, amphibious warfare ships, and strategic bombers, should be moved out of harms way. This is why the Marine Corp’s new base in Darwin, Australia is so crucial: it is out of a potential combat zone, so troops and ships are completely safe there, yet it is close enough to the South China Sea, the heart of East Asia and the most likely location of a future conflict, that ships based there can deploy to a crisis zone quickly. If this base was expanded to include amphibious warfare ships, it could realize its full potential as a new, safe staging area for the United States in the Western Pacific.

The best policy is to not provoke war. The U.S. should pay attention to its actions in the region and be sure that they could not be seen as aggressive. However, these tensions demand a constant, strong show of force by the U.S. to prevent any armed conflicts from breaking out. However, the U.S. Navy alone has the power to police the waters of the South China Sea, cause tensions to cool down before they boil over and become wars, and protect our allies and defeat aggressors in the event of a conflict, so doing anything other than increasing American military presence in Asia is not an option.

Citations

1. “Military Spending 2011 Regional Infographic, Top 10 Military Spenders & More.” Army Technology. 16 Apr. 2012. Web. 17 May 2012.

2. ibid 1

3. “Global Fund for Women.” Militarism Facts. Global Fund for Women, 2010. Web. 17 May 2012.

4. ibid 1

5. Keating, Joshua E. “Foreign Policy.” Foreign Policy. Dec. 2011. Web. 17 May 2012.

6. Scott, David. “India’s Drive for a ‘Blue Water’ Navy.” Journal of Military and Strategic Studies 10.2 (2008): n. pag. Print.

7. Thomas, Rich. “China Plans World’s Second-Largest Carrier Fleet.” Yahoo! News. Yahoo!, 25 July 2011. Web. 17 May 2012.

8. “India Looking for Amphibious Ships.” Defense Industry Daily. 27 Nov. 2011. Web. 17 May 2012.

9. Lague, David. “Analysis: New China Landing Vessels Point to Pacific Rivalry.” Reuters. Thomson Reuters, 14 Feb. 2012. Web. 17 May 2012.

10. ibid 6

11. United States. Congressional Research Service. China Naval Modernization: Implications for U.S. Navy Capabilities – Background and Issues for Congress. By Ronald O’Rourke. 2012. Google Docs. Web. 18 May 2012.

12. ibid 11

13. ibid 6

14. AESA Radar: Revolutionary Capabilities for Multiple Missions. N.p.: Lockheed Martin, n.d. Print.

15. “Type 052 (Luhu Class) Missile Destroyer - SinoDefence.com.” Sino Defense. 1 Mar. 2009. Web. 17 May 2012.

16. India. Indian Navy. Ships in Service of the Indian

Navy. 2012. Web.

17. ibid 6

18. ibid 11

19. ibid 6

20. ibid 11

21. ibid 11

22. ibid 5

23. Werthiem, Eric. “World Navies in Review.” Proceedings Mar. 2012: 36-41. Print.

24. Fedyszyn, Thomas. “Renaissance of the Russian Navy?.” Proceedings Mar. 2012: 30-35. Print.

25. Griggs, Ray. “The Commanders Respond.” Proceed- ings Mar. 2012: 16-17. Print.

26. ibid 23

27. ibid 22

28. ibid 22

29. ibid 22

30. United States. Center for Naval Analysis. Institute for

National Strategic Studies. South China Sea Oil Shipping Lanes. Print.

31. “Rich Resources in the South China Sea.” China Oceanic Information Network. People’s Republic of China. Web. 18 May 2012.

32. Bayron, Heda. “ASEAN Meeting to Examine South China Sea Dispute.” Voice of America. U.S.A., 11 July 2011. Web. 18 May 2012.

33. Sato, Koichi. China’s territorial Claims at Sea: The East China and South China Sea. N.p.: n.p., n.d. Google docs. Web. 25 May 2012.

34. Weissmann, Mikael. “The South China Sea Conflict and Sino-Asean Relations: A Study in Conflict Prevention and Peace Building.” Asian Perspective 34.3 (2010): 25-69. Print.

35. Thearith, Leng. Is ASEAN Still Relevant? Phnom Penh: n.p., 2009. Print.

36. McElroy, Damien. “Chinese Media Warns of War with Philipppines.” The Telegraph. 10 May 2012. Web. 18 May 2012.

37. “Vietnam Protests Chinese Firing at Fishing Boats.” Intellasia East Asia News. 15 Jan. 2005. Web. 18 May 2012.

38. Ha, Van Ngnac. “Battle For Paracel Islands.” Battle For Paracel Islands. VNAF MA, 2005. Web. 18 May 2012

39. Grammaticas, Damian. “China’s Rising Nationalism Troubles West.” BBC News. BBC, 17 Nov. 2009. Web. 18 May 2012.

40. Kumagai, Hiroshi. “H. Kumagai: Rising Nationalism in Northeast Asia.” Universal Peace Federation. 17 Sept. 2009. Web. 18 May 2012.

41. Kaplan, Robert D. Monsoon: The Indian Ocean and the Future of American Power. New York: Random House, 2010. Print.

How to stop Russia's rise with natural gas

On New Year’s Day, 2009, a dispute over payment between Russia and Ukraine led to Russia cutting off all Ukraine bound gas, which included 25 percent of the European Union’s gas supply.1 To make things worse, Europe was in the middle of an especially harsh winter. Even though most countries had prepared for a gas shortage by stockpiling natural gas, their efforts were not enough, as few European countries had more than a month’s worth of reserves, and many lacked any reserves. The crisis hit Europe hard: Bulgaria was forced to shut off industrial production to save fuel for heating, thousands lost heating and electricity, and tiny Slovakia even declared a national state of emergency.1

This is not an isolated event. Russia has halted Europe’s gas supply in 1999, 2006, 2009, and 2012, each time in the dead of winter. The 2009 shortage cost €1 billion in Ireland alone2, and the 2012 shortage caused 650 deaths in Central and Eastern Europe.3 Although the EU as a whole gets only 31 percent of its gas from Russia, many Eastern European countries get 90-100 percent of their gas through Ukraine, and Germany, the EU’s de facto leader, gets 42 percent.4 Besides denying thousands of people heat for the homes and offices and severely injuring economies, these gas crises have broader geopolitical implications. Ukraine gave half the ownership of its gas pipeline, its biggest source of revenue, over to Gazprom (the Russian state-owned energy agency) after the 2009 crisis. Further, Russia took over most Ukrainian mines and power stations, has sent in many Gazprom security police to guard the pipeline (actually heavily armed soldiers and drones), boosted cooperation between Russian and Ukrainian defense ministries, has secured not only a more favorable Ukrainian government but also a much longer lease on its critical Black Sea base in Sevastopol, and, most ominously, has begun implementing political reforms in Ukraine to make Ukraine more like Russia. Russia has also exploited the total reliance of Eastern Europe on Gazprom’s natural gas in mid-2009 when it set up a number of security and economic alliances that heavily favored Russia (think Warsaw Pact part II).5 When Turkey lost 67 percent of its gas in 2009, it cozied up to Iran to get gas from them. Turkey helped Iran build a major pipeline through Turkey, a pipeline that until very recently continued to operate despite sanctions on Iran.

Further, Russia is not nearly as dependent on the EU as the EU is on Russia. Russia is building new pipelines to China and the Koreas, and has recently completed pipelines to China in 2010, and to Turkey and the Caucus region in 2006.6, 7, 8 Demand from Turkey and China nearly equals demand from Europe,8 meaning that Russia can make up lost gas revenues from Europe by simply increasing gas supply to other countries.

Europe’s reliance on Russian gas stems largely from the fact that Europe has little gas of its own. However, it seems puzzling that European nations continue to rely on authoritarian and unpredictable Russia in light of recent events in the gas market. 2011 was a record year for U.S. natural gas production, which now outstrips domestic demand by 119 billion cubic meters.9 This is excess is far greater than European demand, which currently amounts to 65 billion cubic meters.1 American shale gas is cheap, too: it is at the lowest price in a decade. This boom and low price is largely attributable to recent advances in shale-gas mining techniques that have opened up billions of cubic meters of gas up to drilling.10 Exporting this excess gas to Eastern Europe would be beneficial for gas companies and U.S. foreign relations: gas companies would make greater profits while the U.S. would keep Eastern Europe out of Russia’s sphere of influence. Further, Europeans citizens would benefit from U.S. gas: American natural gas costs $30 per 1,000 cubic meters11, while Russian gas shipped to Western Europe costs $500 per 1,000 cubic meters and gas shipped through Ukraine costs $250 per 1,000 cubic meters.12 If natural gas prices were lowered this dramatically, Europe’s economic recovery would speed up rapidly.

So what is it that stops the U.S. from exporting more gas to Europe? As usual, the answer is money. Natural gas must undergo an expensive liquefaction process before sea transport, while it can be left in its natural gaseous state for pipeline transport. Further, after a sea journey, natural gas must be regassified, a process that can only be done at expensive terminals that usually cost more than $1 billion13 to build.

In the long run, it is worthwhile to make investments in building regasification terminals in Eastern Europe because the expected monetary payoff to gas companies and political payoff to the U.S. government is so great. In the short term, however, stop gap measures must be taken. The U.S. can assist European nations in acquiring machines called floating regasification and storage units (FSRUs), natural gas tankers converted to serve as regasification terminals. FSRUs can be leased for an average of $70 million per year, an inexpensive price considering that one FSRU can regassify 3.4 billion cubic meters of natural gas, or 125 percent of Lithuania’s natural gas consumption. FSRUs are also much quicker to build than regasification terminals. Already, Lithuania, one of the first European countries to lease an FSRU, has seen its negotiating power with the Russian leadership increase after it leased its FSRU earlier this year.14

To do its part, Europe can start developing its own shale gas reserves and diversifying its gas sources. The EU sits on 2.168 trillion cubic meters14 of accessible natural gas. If the EU were to build facilities for extracting this gas, it could hypothetically eliminate the need for foreign supplies of gas. Further, the EU could turn to other sources of gas, such as Qatar or Mozambique, both of which have made enormous natural gas discoveries recently.15

The process of weaning Europe off of Russia’s teat may be dirty and expensive. But the end result, a steep drop in Russian influence in Europe, particularly Eastern Europe, will be enormously valuable from a geopolitical standpoint. Once Russian influence is no more in Europe, true integration of Eastern Europe into the EU and the Schengen Area can begin, which will further bolster the EU and make it an effective counterweight to Russia. This would be particularly beneficial for the U.S., which has a prime opportunity to accelerate the recovery by bolstering the natural gas industry and to weaken its old foe. America would be a fool not to take it.

 
Citations 
1.. "FACTBOX - 18 countries affected by Russia-Ukraine gas row." Reuters 7 Jan. 2009:
    n. pag. Web. 13 Apr. 2012.
"Natural gas shortages slam many European nations." Tuscon Citizen 7 Jan. 2009: n. pag. Web. 13 Apr. 2012. .
2. Leahy, Eimear & Devitt, Conor & Lyons, Seán & Tol, Richard S. J., 2011. "The Cost of Natural Gas Shortages in Ireland, "WP397, Economic and Social Research Institute (ESRI).
3. Murray, Alina. "Cold Weather Snap in Eastern Europe Kills More Than 650." MSNBC 2 Feb. 2012: n. pag. MSNBC. Web. 13 Apr. 2012.
4.European Union. EU-Russian Gas Relations in Perspective: Challenges and Opportunities. N.p.: European Dialogue, 2012. European Dialogue. Web. 13 Apr. 2012. .
5. United States. U.S. Army. Russian Influence on Ukrainian Strategic Policy. By Defek G.
    Webb. Charleston, SC: U.S. Army, 2011. Print.
6. Stnagarone, Troy. "Russia's North Korea Gas Deal." The Diplomat 15 Nov. 2011: n. pag. New Leader Forum. Web. 13 Apr. 2012. .
7. British Petroleum. “Southern Caucasus Pipeline overview."
8. Reuters. "New Russian pipeline replaces oil by rail." Global Times 10 Dec. 2010: n. pag. Global Times: Discover China Discover the World. Web. 13 Apr. 2012..
9. United States. Energy Information Administration. Natural Gas Overview. N.p.: Energy Information Administration, 2012. Department of Energy. Web. 13 Apr. 2012.
10. Osborne, Andrew. "Why natural gas is cheap and gasoline isn’t." New York Times 30 Mar. 2012: n. pag. NYT. Web. 13 Apr. 2012. .
11.United States. Energy Information Administration. Quantity and Average Price of Natural Gas Production in the United States, 1930-2000. N.p.: Energy Information Administration, 2000. Department of Energy. Web. 13 Apr. 2012. .
12. Osborne, Andrew. "Russia Firm Cuts Gas to Ukraine, But EU Hit Is Cushioned ." Wall Street Journal 2 Jan. 2009: n. pag. WSJ. Web. 13 Apr. 2012. .
13. "Lithuania leveraging a new LNG technology." STRATFOR 8 Mar. 2012: n. pag. Web. 13 Apr. 2012.
14. "European Union." CIA World Factbook. CIA, 2 Apr. 2012. Web. 3 Apr. 2012.
15.LeVine, Steve. " For Alaska (and Qatar and Mozambique and Russia) China is the hub of hope." Foreign Policy 12 Apr. 2012: n. pag. Foreign Policy. Web. 13 Apr. 2012. .