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Reducing EU dependence on Russian Energy Supply

Energy and world economics is a major subject which has drawn the attention of all nations and states. In fact, all economies of the world rely so much on energy for their growth. This research paper seeks to take a study on the relationship that has existed between the European Union and the Russian economy in matters of energy. The paper highlights the advantages as well as the disadvantages of utilizing Russian energy provision in the European Union. The paper also seeks to find out solutions to the present energy supply of Europe and try to establish which would be the most efficacious solution to adopt. Having had a close study on Russian business as well as some background information about the economy of Russia, interest in carrying out a study on the same arose as it was found an area of interest in world economics (Robert et al, pp. 67-90).

Choosing research questions for this paper required a full description concerning the supply of energy from Russia. Currently, it has been reported that Russia has been aggressively using the position of energy superpower as a tool of politics against its partners in business, and more especially the members of the European Union. This spark interest in writing on energy dependence as well as intense more in the topic to find out a better understanding and knowledge of the current situation and to get a better idea other than the position and opinions held in the media sources. This research paper therefore seeks to find out the answer to the main objective in the study of whether it is possible to reduce this dependence by European Union on Russia for the energy needed in their economies (EU-Russia Energy Dialogue, par. 1-6).

PART TWO

2.0 Background Information

Enough amounts of energy are the most significant ingredients of the recipe for any economy that is expected to make progress. Where energy is hard to come by, production is made difficult. This affects other factors like research and may lead to the absence of convenience. The abrupt and rocketing growth of economy of the developing nations and countries amounted to increased demand for the sources of energy. In an effort to strike a balance by meeting the increased energy demand, non-renewable resources of energy such as coal, oil, nuclear energy and natural gas together with renewable resources like water, wind, sun, biomass and so on can be put into use (Robert et al, pp. 67-90). Currently, developments have seriously embarked on the application of ways and means of using renewable resources. This has found a greater potential in the present times and even great opportunities in the future. However, renewable resources have been faced with the greatest challenge of initial capital which is very high (Smith, pp.7-23).

As a result of this, the renewable resources have been limited in their application and use. Owing to these facts, the universe still depends on non-renewable energy sources than the renewable sources of energy which are by far much friendly to the environment. For instance, the European Union is not rich in non-renewable sources of energy while it is in dire need of supply of energy. The European Union imports about 82% of its oil fuel and another 57% of gas. In fact, the European Union is the leading importer of oil and gas in the world. The major supplier of non-renewable energy to the European Union is the Russian Federation. It has been very easy for the Russian Federation to meet the requirements of energy of the European Union. Russia has the biggest reserve for natural gas of any state in the universe along with the second biggest reserves of coal and coming number eight in oil reserves. Moreover, Russia is very close to the members of the European Union than any other State or Nation which has huge deposits of non-renewable sources of energy like countries of the United of America and the Middle East. Owing to the geographical position of Russia to the European Union, the transportation expenses incurred are made cheaper. Eventually, a very good infrastructural facility was constructed to link the European Union members to the Suppliers in Russia (EU-Russia Energy Dialogue, par. 1-6).

The factors mentioned above made Russia the main supplier of natural energy to the European Union members. Today, Russia provides the European Union Members with natural gas mainly through transit through the country of Ukraine and Belarus where there is the Yamal-Europe pipeline. The main members of the European Union in these imports are Ukraine, Italy, Hungary, France, Germany and Turkey. Another crucial importer is Norway although not a member of the European Union. Norway has a lot of fame when it comes to using the renewable sources of energy like water and wind although it exports huge amounts of oil at the same time. All the same, Norway, the green Scandinavian nation endeavors to be carbon neutral by the year 2030 together with her government she sets aside huge amounts to arrive at this goal. The manner in which Norway deals with the policy of energy is very commendable and worth to be emulated by the European Union. However, this energy from Norway can never be enough to suffice European’s energy demand (EU-Russia Energy Dialogue, par. 1-6).

Mutual Dependence

The European Union members need to acquire reliable and sustainable supply of energy with reasonable prices. Import by the European Union from unpredictable and unstable regions as well as from unreliable suppliers led to the increasing dependence of energy. A number of the top consumers and producers use energy as a tool of politics. On the other side, energy as an economic sector of Russia is both significant and very important to her and the entire European Union because 80% of the export of Russia is basically under energy resources sector (Koszalin, pp.11-51). According to Vladimir Milov, of Carnegie Endowment for International Peace, the concept of “energy superpower” is an illusion which is not substantiated in reality (EU-Russia Energy Dialogue, par. 1-6).

It is mostly likely that the concept of energy superpower does not notice the mutual dependence that exists between energy consumers and Russia. As a result of conflicts in politics and a decline in production, supply disruptions in future to Europe are expected and cannot be ruled out. Due to this, a time will come when the European Companies dealing with gas will demand the elimination of take-or-pay situations in their contracts with Russia. This will pose a threat to the ability of Gazprom to borrow (Koszalin, pp.11-51). The attempt of Putin to use energy as a way of increasing the influence of Russia may however backfire at a later stage. This mutual dependency encouraged both parties to assure each other concerning their trust in the rest of the parties involved. Russia has never wanted to join the European Union’s policy of Neighborhood because there was fear that its independence would be betrayed and be treated as a weaker partner by the European Union (Smith, pp.7-23).

Russia is making an effort to be an equal partner of the members of the European Union and therefore the two parties formed four common spaces for unity and cooperation in the same economic space; in common freedom space, justice and security; a co-operation space in the area of external security; and in the space of education, research as well as cultural exchange. It is very important to note that one of the greatest and most significant issues of the common space of economics is the policy of energy. Again, Russia has in the recent past been accused for using the status of energy superpower as a tool of politics. The decision of Russia to cut off the supplies of gas momentarily to Ukraine in the 2006 winter or during the 2008 Georgian war apparently was a demonstration of the willingness of Russia to use energy as a weapon in politics. The “smaller disputes” are quite a number; the Azerbaijan gas export in 2007 came to a stop since she had not been ready to pay the inflated gas prices by Russia. Since 1991, there almost about 55 incidents involving energy resources of which about 55% (30 cases) had underpinnings of politics (EU-Russia Energy Dialogue, par. 1-6). From al these, the energy influence of Russia is a real menace for the members of the European Union.

Research Questions

Questions of research are basically the tools which give direction and the purpose for the study. The study included the examination of the possibility of reducing the EU’s dependence on Russia for the supply of energy. The satisfaction of the different economies in the European Union was also another variable to be measured. The research questions which guided the study were stated as follows:

Is it possible to reduce the dependence of European Union on Russia for energy supply?

What would be the steps needed in reducing the dependence of European Union on Russia for energy supply?

Research Hypotheses

The findings of the study in this research were anticipated to support at least one of the three hypotheses which were postulated having their basis on the questions of research. The first hypothesis targeted the possibility of reducing the dependence by EU on Russia for its energy supply. Even though energy supply in the EU entirely depended on Russia, emerging evidence confirmed that there was a possibility that this dependence could be reduced. The instrument of survey in this case was made to get a measurement of the degree to which dependence on Russia by the member states of the EU for energy supply were perceived by government officers in planning institutions. Generally, the following hypotheses were tested:

There is a possibility of reducing the dependence by the European Union on Russia for their energy supply.

The process of making a transition to beat this dependence would majorly rely on the choice of other alternative sources and alternative energy resources.

There is a high chance of the European Union to continue depending on Russia for her energy supply if the alternatives failed or if new energy policy was not established.

PART THREE

Research Methodology

The main purpose of this quantitative case study was to investigate the possibility of reducing the Russian dependence over energy in the European Union. In arriving at this purpose, the research design seeks to establish: 1) whether there is a possibility to reduce the Russian dependence over energy in the European Union; and 2) the steps that the European Union could take in dealing with the dependence on Russia for energy. From time in the past, the dependence on Russia for energy by the European Union has contributed a lot to the State of the EU economy. Policies in the energy sector like any other economic sector are very important in promoting good performance in the economy. In fact, the energy sector is the key economic drive in any county or nation that needs to develop. While a country would be required to provide for its citizens, the contribution of other nations cannot be overlooked. The European Union energy policy and dependence on Russia for energy supply cannot be regarded as a healthy position and a safe one for that matter both in present times and in the future.

Research Design

The quantitative research methodology was employed to investigate the possibility of reducing the Russian dependence over energy in the European Union. The research questions were pertinent to the perception of the held by Economics professionals of the member states of the European Union on the dependence of the European Union on Russia for their energy supply. The main issue in this study is the absence of information on the possibility of reducing dependence by the European Union on Russia for energy to drive their respective economies. This lack of understanding and misguided perceptions may be a very challenging fate and at times a very humiliating affair to the EU (Smith, pp.7-23). This is because their economies could be swayed to and fro by the so called Russian “energy super power”.

The possibility of reducing the dependency on Russia by the EU on energy supply as perceived the member states was a representation of the independent variable whereas the satisfaction with which these efforts were deemed to bring satisfaction to the respective economies represented the dependent variable. The variables of intervention took into account factors of demography, which included the level of employment in the respective government planning institutions among the member states. The figure below shows how these variables relate.

Relationship of variables

A very useful element is that the participants are recognized as experts through the experiences that they have in government planning institutions. The design employed in this research involved the collection of data through a validated instrument of survey. This was mainly done through a specific instrument of survey which was used in asking the participants to rate the items in the instrument concerning their perceptions on the possibility on reducing dependence on Russia for energy supply by EU as: Never, Seldom, Occasionally, Often, and Always. An instrument of survey is a very useful tool in measuring the independent variable of reducing Russian dependence by EU for energy supply as viewed by the participants of the study, the Economics Professionals for instance and the level of agreement with the items listed as reported solely by the participants.

Making use of a quantitative research design of correlation was suitable in making sure that the direction together with the level of association in between these variables existed without playing about with them (Creswell pp. 33-77). The design of the study also took into account an investigation concerning the effect of the efforts taken by EU to reduce energy dependence on Russia in the respective planning institutions of the member states. A random sample of 200 professional government economists from across Europe was targeted for participating voluntarily in the study.

Design Appropriateness

A quantitative correlation study takes into account either making an identification of the characteristics of an observable fact or may be making an exploration of the possible relations that exists between several observable facts or phenomena. This quantitative correlational study of research included both empirical data generation on the perceptions of professionals in the field of economics in looking at the possibilities of reducing dependence of the Russia by EU members for energy supply together with making a determination of any correlation existing between the efforts being made and the economic satisfaction that is realized with the implementation of these efforts. According to Creswell (pp. 40-49), quantitative methods are in most cases appropriate when the matter in question is making an identification of the factors influencing a result, an intervention utility, or even gaining the knowledge concerning outcome predictors.

Deductive analysis, testing of hypothesis together with the use of standardized instruments like the one used in the study is all characteristic of methods of a quantitative nature according to Creswell (pp. 46-53). These kinds of methods are both useful and most appropriate to any data that is observable, measured and also analyzed in a numerical way. The characteristics and the factors influencing economic performance are both quantifiable and perceptible. Therefore, the standardized instrument of survey which was made to determine the perceptions of the measures taken in reducing energy supply dependence by EU on Russia was utilized in gathering the required data for this study. A quantitative method of research was therefore best applied and suited than qualitative or mixed methods of approach for study for the reason that the hypotheses could not match well with them.

The first hypothesis needed the study to explore the possibility of reducing the dependence of EU on Russia for its energy supply as chances are that the EU can use alternative means apart from relying on Russia. While a qualitative method would collect data and information on perceptions of the professional economists pertinent to energy and economics, the amount of data needed determining representativeness as well as the creation of a sound analysis in a large government institution would be enormous. Practical matters which took into account sample size sufficiency, constraints of time, and the purpose of generalization of findings from the participants to the entire institutions of government planning did not allow making use of a qualitative technique. This is because qualitative research includes a search to make a study of a deep understanding and requires considerable time. An approach through mixed methods would involve both quantitative and qualitative techniques and eventually increase the requirements of time for completing the research study. However, a library search was necessary in developing the survey instrument.

The hypothesis in addition related to the way stable energy policy serves as a liaison between governments and their economic success. A quantitative approach offers the statistical testing and proving of the empirical hypotheses. This is achieved through the analysis of reliable, thorough and more so verifiably huge data aggregates. Data for a casual interrelation like studies of correlation is to be obtainable in a format which is quantifiable. The examination of statistical association measures is included under a research through a quantitative approach. The correlation design of research is a research of quantitative nature. A design of correlation is most suited in studying a matter which requires the researcher to identify the direction as well as the level of association that exists between two groups of scores as in the case which is currently under investigation. While an approach of correlation design does not establish the cause or even the effect as a design of experiment or quasi-experimental design, the potential casual factors can be determined from the range and direction of the relations of variables. The complexity of organizational surroundings perplexes the researchers’ ability to determine causation. Associated disparity or the happening of two observable facts or events varying together can be shown by a research of correlation clearly pointing out how the variables relate.

The second hypothesis focused on the transition that the EU has to make stating that the process would be a gradual one. In the research, the direction together with the level of these relationships of the anticipated changes to reduce energy supply dependence and the economic satisfaction the EU member states were determined. The measurement of these two: reducing dependence on Russia for energy supply as a variable and the satisfaction anticipated with the changes as the other variable took place concurrently by the application of a validated instrument of survey designed specifically for the study. The survey instrument was appropriate and at the same time a reliable tool for measuring the economic importance of redefining the EU energy policy while at the same time taking the measurement of economic satisfaction for individual member states within the Union.

The hypothesis also made an exploration of the energy policy and the setting. The simultaneous measurement of variables is suitable in the studies of correlation that look for relationships. Making use of the design of a correlation research helped in reaching the goals and the intentions of the study since studies of correlation are particularly useful in getting knowledge pertinent to the extent to which these variables under examination are associated. The analysis of correlation makes provision for a solution to the questions of research of if any relationship or correlation is in existence between both variables. A quantitative approach in research having subsequent analysis of data makes provision for an appropriate approach for the identification of trends, making a comparison for various groups or may be by linking variables.

Creswell argues that quantifying techniques have come to existence to give an emphasis of the collection of data for the reason of analyzing and making provision of a score or a number. The context of each and every participant is imperative while at the same time integral to the manner in which he or she frames the issue as well as ranking the information in the context in terms of how difficult it was. Even though the study would have taken into account a qualitative design of research, the research questions themselves with the knowledge of the perceptions of the economists were the determinants of the methodology of collecting the data required.

PART FOUR

Reducing Energy Dependence

The European Union has already realized the need of reducing the dominance of Russia and more especially in the energy sector. The following have been found most efficacious alternatives in reducing energy dependence.

Robust Energy Policy

In the first place, the European Union had to come up with a good policy of energy; even though the European Union originated from the European Steel and Coal community while legislations on policy of energy have been carried out on a continual basis, real energy policy of the European Union members was attained by the year 2005.

Renewable energy sources

Moreover, the development and the establishment of renewable source of energy and hereby the reduction of non-renewable energy resources became a very useful energy matter by the members of the European Union. At the European conference for renewable energy in 2004, a conclusion was made stating that the European Union would by the year 2020 attain 20% of its complete consumption of energy requirements by making use of resources which are renewable. This would profitably cut down on carbon dioxide emissions. Today, less than 7% of the European Energy mix comes from such resources that are deemed renewable (EU-Russia Energy Dialogue, par. 1-6).

Alternative pipelines of gas

To reduce dependence by the European Union on the supply of gas by Russia and thereby the insecurity of the practices of the Kremlin, the European Union has constructed a natural gas transport pipeline taking the resource from Turkey through to Austria, Bulgaria then to Romania and later to Hungary. This project has drawn major support from the USA and is called “Nabucco.”

All these efforts made by the European Union are in the effort of attaining an economic balance by considering the foreign sector. By considering the foreign sector in this case supports the idea that the economic performance of any country will depend on the other States and nations in matters of imports and exports. The European Union needed to strike a balance between the imports and exports in order to perform well economically. This is all in the effort of promoting an open economy; a situation where the government of the leading body like that of the European Union has to make considerations concerning the effects of the internal policies affecting the foreign sector for instance if a country is to increase its rates of interest, this discourages the out flow of capital and promotes capital inflow. This difference between capital out flow and capital inflow greatly influences the rates of exchange.

Russia’s state of energy superpower would manipulate the economies of the member states of the European Union if not dealt with. A sudden inflation of energy prices by the Russia causes a rise in price in the entire European Union economy. This will automatically amount to high rates of inflation which will increase the chances of an economic recession. It is very imperative for the European Union to have these measures established in order to have a stabilized economy. This will make it possible for the European Union to regulate its resources by either allowing inflation to rise and later fall hence facilitating a recovery to the recession by lowering the rates of interest. However, the EU may opt to lower the rates of interest instantly to avoid a recession. All the same, the choice of either of the two options depends entirely on the interest rate levels and the inflation of a given economy. Lowering rates of interests increases the aggregate demand shifting back the probable output to the initial level. This is very important for the EU economy to avoid a recession since inflation cannot be avoided.

Conclusion

From this research, it is very possible to reduce the Russian energy reliance by the European Union although not completely. If the Russian energy organizations and Companies are available in all areas which could be alternatives to the EU and more especially if the anticipated project of “Nabucco” failed, then there will not be any other choice left for the European Union other than making purchases from Russia or may be from firms having Russian interest. Getting these resources from Russia is up to date the cheapest way of energy supplies due to the geographical location and extant Russian energy infrastructure. It should also be noted that the energy supply from Russia to Europe has traditions with it whilst with a new major supplier, it is important for the EU to have an experience of new cultures and how to secure a safe relationship of business and dependable energy policy with other new partners.

From this study, the Russian approach to energy policy could have some changes by a well coordinated European energy policy. Having a secure energy policy is only attainable if both external and internal relations are coordinated by the EU. The members of the European Union have the right to take the choice of their supplier of energy where they would acquire their energy demand. The energy policies of the members of the EU do not correspond exactly with one another (Koszalin, pp.11-51). Therefore, a common external policy of energy would be considered desirable. This policy of energy should combine all the internal and external EU energy policies. This would be a good measure taken by the EU to fight more effectively against the dependence on the significant external suppliers of energy which destroy the EU internal market.

The European Union has altogether realized the need of making use of renewable energy resources in place of non-renewable resources and taken up the steps of creating a greener Europe. However, these steps are not yet fully developed. The governments of the members of the European Union should well emphasize the need of green economies, for example they must invest in technologies which are friendly to the environment, or spend extra funds on the establishment of public transportation to make sure that the cars used are few.

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