Failure to sign the association agreement between the EU and Ukraine was primarily caused by Russia’s actions.
I agree with the corresponding assessments of German member of the European Parliament Elmar Brock and Swedish Foreign Minister Carl Bildt and many other experts.
In my interviews, comments, and statements in Ukraine and Europe, I have repeatedly pointed out that Russia conducts a systematic policy of nullifying the EU’s Eastern policies. (Here is one of my remarks made at Radio Liberty on March 22, 2013:http://www.radiosvoboda.org/content/article/24936207.html.)
Prime Minister Mykola Azarov government’s decision to suspend the association agreement on Nov. 21 is a moral, psychological and political defeat for the EU. This is an enormous failure for the entire EU Eastern Partnership policy. The EU should not leave it at that, and without a proper reaction as well as appropriate counter-actions. The EU “swallowed” the Armenian defeat, blaming it on Yerevan.
As a result, it now also faces a Kyiv fiasco which can be described as catastrophic considering the place and status of Ukraine on Europe’s geopolitical map. A similar scenario may now be in store for Moldova and Georgia. Therefore, the EU should attack in response to Russia’s actions.
Russia is guided by the assumption that its role as an EU trading partner is unique and irreplaceable, especially in the sphere of energy resources: oil, gas, coal, and nuclear energy. It was high time for the EU to show Russia that it can be replaced (especially after the gas crisis of 2009); moreover, 50% of Russia’s foreign trade is dependent on EU markets.
Russia rejects, in principal, such concepts of international affairs as “compromise,” “balance of interests,” “win-win strategy,” etc.
It always aims to force its own interests through. Doing so, it uses an all-purpose tool – energy resources. The efficiency of the gas leverage for the settling of accounts in favor of Moscow is perceived in Russia as being beyond question. The report “Optimization of the Russian Federation’s Military Policy for the Purposes of National Energy Security Provision” published by the Center for Military-Political Studies of the Institute for U.S. and Canadian Studies, Russian Academy of Sciences, in November 2012, for instance, states it bluntly:
“The countries of Eastern, Central, and Western Europe are the primary consumers of Russian raw materials. Even countries with rather diversified economies, such as Germany, are critically dependent on Russia. 40% of the total gas export volume and 20% of exported oil are delivered to Germany. This is one of the factors which allow Russia to attain certain political goals including suspension of NATO expansion, strengthening ties with Ukraine by means of support for a pro-Russian candidate in the presidential elections, etc.”
Now, this list of Russian “trophies” can be complemented with the EU-Ukraine association agreement.
At the same time, the export of Russia’s energy resources is vulnerable, as it is focused mainly on the EU market, where Russia receives the lion’s share of foreign currency earnings. According to the estimates of the Russian Ministry of Economic Development, “based on the results of 2012, the structure of Russian exports to the EU countries predominantly included supplies of mineral products. 62% of total Russian exports of these products in the amount of 231.6 billion dollars goes to EU countries, while import of Russian minerals constituted only 32% of total European imports…. Energy resources make up about 80% of Russian exports to the EU (in 2012: 3/4 of total oil export volume, 70% of natural gas, and 50% of coal).
“According to the Russian Federal Customs Service, export of energy products in 2012 constituted 69.8% of the total revenue of Russian exports, which is $366 billion of the total volume amounting to $524.7 billion. Export of oil brought in $180 billion, oil products – $100 billion, gas – $63 billion, coal – $13 billion, and electricity – $ 1billion. Based on Eurostat data for 2002-2010, we may conclude that Russia almost doubled its share in coal supplies to the EU (from 13.1% to 27.1%) and significantly increased oil supplies (from 29.2% to 34.5%).
While providing a third of EU needs in coal and oil imports, Russia has no powerful “coal” or “oil” leverage, as these products are exchange commodities.The situation is different with the supply of gas where market forces are not as efficient as in the case with coal or oil sectors. This is due to the specificity of the pipeline infrastructure supplying gas, which strengthens monopoly, does not facilitate the emergence of new players in the market, and encourages the Kremlin to turn natural gas into a political weapon.
Thus, the EU has a unique opportunity to use the increased dependence of Russia on the European market as part of coercion against Moscow in response to its attempts to ruin the association agreements with Eastern Partnership countries. The EU should decide to reduce the import of Russian gas, oil, oil products, and coal. The EU must perform a special operation to force the “gasocratic” regime of the Kremlin into standards of civilized behavior. As the example of Iran shows, such pressure can be effective.
The EU should not disregard the punitive actions of Russia and should take rigid steps in response. Angela Merkel’s appeals to Russia “to overcome the last vestiges of the Cold War” are unlikely to produce any effect on Putin, who is well aware that the EU’s reaction is limited to verbal means not followed by any actions.Over 70% of Russian gas export goes towards the EU. It is still not too cold now. There are some gas reserves in underground gas storages of the EU countries, so a demonstrative act, like an “EU Week without Russian Gas,” could be easily carried out, warning the Kremlin about a possible future policy of minimizing gas purchases in the East, in 2014.
In addition, 87% of Russia’s oil export is closely linked to Europe. The EU has a 90-day supply of oil. Therefore, it could declare another “peaceful lesson,” announcing an “EU Month without Russian Oil.” In the past, the EU has been easily able to do without Iranian oil.In 2013, Russian coal exports became unprofitable due to a drop in coal prices globally. 70% of coal production in Russia is located in the Kuzbass, away from the ports of the European and Asian parts of Russia. Therefore, even if Russia wants to redirect its European coal exports to the East, namely to Asia, it would not succeed, as it lacks the necessary railway capacities. Moreover, its coal would not be competitive against Australian and Indonesian coal, which is more calorific and requires low logistics costs. In 2012, the main importers of Russian coal in Europe were the United Kingdom (20 million tons), Germany (11 million tons), the Netherlands (7.5 million tons), and Poland (6.5 million tons).
In the EU market, Russian coal can be replaced by American coal the supply of which is growing due to the shale gas revolution in the U.S. Thus, it is also possible to declare even a “Year without Russian Coal.” Finally, the EU could ask the United States to speed up their decision-making concerning plans to export LNG from the US to the EU currently scheduled to begin in 2016.The EU sanctions against Iran – refusing to purchase oil from it – inflicted significant economic damage to the regime and served as an impetus for transformative changes in the country.
Yet, Iran had the opportunity to redirect its oil exports to China, as the oil transportation is technologically more flexible due to tanker with sea terminals. Russian exports of gas, oil, and largely petroleum products are focused mainly on pipeline facilities and terminals that are directed to the EU. They cannot make a U-turn to Asia. It would be necessary to build entirely new gas mains. Despite loud declarations, Moscow before 2030 will not be able to create pipeline facilities in the east of Russia similar to those in Europe.
Therefore, their export will remain firmly attached to the EU. Based on the results of a recent 2-year investigation, Gazprom is to be immediately fined, without waiting for spring 2014, and this fine should be of the maximum possible amount. Under no circumstances should the EU allow any exemptions for Gazprom within the Third EU Energy Package for the gas pipelines OPAL, NEL (the extension of the “Nord Stream” through Germany), and the “South Stream,” on which Russia is insisting.
The European Commission should consider freezing all construction projects for nuclear power plants of Russian design in EU member states. Russian state-owned companies such as Rosneft and Gazprom should be of central focus and investigations of their activities on the EU market as well as their compliance with EU laws should be launched. Finally, a boycott of the 2014 Olympic Games in Sochi would be a powerful psychological blow to the regime of the Kremlin.
If everything is left as it is, and all blame is put on the Ukrainian kleptocracy (which is justified), this will only whet the appetite of Moscow. Russia will continue its actions against weak EU countries and potential EU members. The states that may follow include Bulgaria, Croatia, and the Balkan countries. The Baltic states will also feel increased pressure.
Mykhailo Honchar is with the Nomos Center, a Ukrainian think tank. The article was translated from Ukrainian by Lyudmyla Bilyk and edited by Iryna Vushko, William Risch and Andreas Umland. It was originally published in Ukrainian by the Center for Global Studies “Strategy XXI” at http://geostrategy.org.ua/ua/analitika/item/237-es-%E2%80%93-rosiya-vidpovisti-ne-mozhna-ignoruvati, on Nov. 28, 2013.
