How Crimea affects Europe’s energy strategy

Stephen Stec and Alexios Antypas from the Central European University in Budapest write an excellent article in The Guardian on how Europe’s energy strategy must evolve. As they argue, the role of climate and energy policy in the ‘long game’ that will play out between Russia and the west has been overlooked. What is missing is the priority that needs to be given to increased energy efficiency to develop a truly sustainable energy strategy. Concerning energy efficiency and the Ukraine, Fiona Hall, MEP, spoke this week at an eceee workshop on energy efficiency targets for 2030 and stressed that shale gas and other supply options will not be enough to address this energy security problem and that there is a need to seriously reduce energy demand.

EU energy strategy must counter Putin’s fossil fuel-fed autocracy

Vladimir Putin’s land grab in Crimea has shocked the west into rethinking security strategy on the continent.

Michael McFaul, former US ambassador to Moscow, has rightly argued in the New York Times that Putin has made a strategic pivot, and has abandoned reform and partnership with the west for a campaign to consolidate autocratic power at home and erect an alternative to western liberal democracy for the nations in its “near abroad”.

In the efforts to gauge how far Russia will go and what it means for transatlantic institutions, however, a larger theme is being overlooked.

That is the role of climate and energy policy in the “long game” that will now play out between Russia and the west. Rather than being a choice between democracy and autocracy, the choice is actually one between patronage-based oil-and-gas oligarchies on the one hand, and adaptive and innovative low-carbon economies on the other.

Russia is a country that has fallen victim to the now quite well-understood “resource curse” – the seeming contradiction that countries with great natural wealth, especially in fossil fuels, tend towards autocratic government, systemic corruption and developmental stagnation affecting the general population, combined with extravagant wealth on the part of controlling elites. The leaders of resource-cursed countries rely on networks of patronage among the rent-seeking class that has gained control over natural resources and derivative industries, and such political systems do not change as long as the petro-dollars keep rolling in.

At the same time that attention is riveted upon Russian expansionism and efforts to negotiate its limits, the international community is busy working towards a global climate agreement in 2015 that aims to hold warming to 2C in this century. The Intergovernmental Panel on Climate Change has just issued its first report in seven years on the impact of global warming, showing that the impacts are real and that the world needs to redouble its efforts on climate mitigation and adaptation for at least the generation to come.

It is this viewpoint that Putin’s Russia is implicitly rejecting, for the reason that the world’s movement away from the carbon-based energy paradigm would deprive Russia of its immense wealth. Author Bill McKibben has estimated that to achieve this goal up to $20tn worth of fossil fuel reserves would need to remain in the ground, essentially worthless.

One can quibble with the numbers, but the conclusion in regards to the current geo-political situation is clear: in the long term the alternative to military containment of an oil-drunk Russian autocracy is authentic, internal reform of the Russian state and economy, which will only occur when the windfall profits that sustain Putinism cease to flow.

Now, the world has not devalued these assets yet, but Russia is behaving as if its natural wealth has to be leveraged through its military-industrial complex to convert devaluing assets into territorial gains. Putin’s behaviour is like that of individuals in an inflationary spiral. More and more oil and gas will translate into fewer goods and services. So the strategy is to convert the inflating assets into “real” ones as quickly as possible, before three-quarters of Russia’s natural capital becomes worthless. It will be a diminishing window of opportunity if the world gets serious about climate change.

There is enough progressive thinking in Russia today that Putin can be frightened by the threat of a Maidan-type uprising in Moscow. Currently the Russian leader and his cronies have sufficient resources to see off the threat, and the incorporation of new Russian citizens who owe their chance at prosperity to Putin’s decisive leadership provide him with an additional loyal column of support. But the resource curse can come back to haunt him, particularly if oligarchs start fighting among themselves. The west can help move things along by developing an energy security strategy that starves the regime of money.

The European Union, while taking a back seat to Nato on security strategy, must lead on a transatlantic alignment on energy and climate security that includes US as well as European shale gas as a bridge leading to a renewables-based economy. Until now the United States has been a laggard in international climate talks, and its domestic energy policies have propped up corrupt and authoritarian regimes around the world. This must change.

European countries have been loathe to incur the risks of exploiting their own shale gas resources, but member states should now reconsider their policies, keeping in mind that Europe has the capacity to apply the toughest environmental standards of any energy producing region in the world.

Even if Russian territorial ambitions are curbed, Putin has effectively declared a new ideological divide in Europe. If it would be an ideological divide, let it be one between rent-seeking oil and gas oligarchs and sustainability innovators; between closed societies with press controls and open societies with press freedom; between respect for partners and the aspirations of their populations and cynical leveraging of power.

In the meantime, let the United States join Europe in seriously engaging the climate negotiations and forging an energy strategy that is both more sustainable and more likely to empower the younger generation of Russians to create opportunities for reform that are currently closed by Putin’s fossil fuel fed autocracy.