Excerpt
Contents
Introduction – ‘Geoeconomics’, energy security and TTIP
Counteracting the EU’s energy supply dependencies – TTIP as a ‘geoeconomic’ tool?
Possibilities and limits of US energy exports to the EU
Conclusion – US energy exports: untapped potential to diversify the EU’s supply but not a secured and definitive solution
Bibilography
Introduction – ‘Geoeconomics’, energy security and TTIP
Since the end of the Cold War, military capacities as a means of geopolitical power have been considered to become less important in favour of economic issues.[1] But even though the latter do not have the same obvious striking force as gun power, certain economic aspects can also represent a fundamental element of national security.[2] One concept that seeks to comprehend the “various connections between international economics, geopolitics and security” on a theoretical level is the idea of ‘geoeconomics’.[3] Pascal Lorot defines geoeconimics as:
“[…] l’analyse des stratégies d’ordre économique – notamment commercial –, décidées par les États dans le cadre de politiques visant à protéger leur économie nationale ou certains pans bien identifiés de celle-ci […].“[4]
For the European Union, one of those ‘well identified areas’ in order to protect the economy is energy supply, respectively energy security.[5] The International Energy Agency defines energy security “as the uninterrupted availability of energy sources at an affordable price”.[6] Since the European Union is highly dependent on energy imports due to a lack of raw materials, especially in terms of petroleum and natural gas (which both make up however 55% of its energy mix)[7], it relies extensively on other international actors to guarantee an ‘uninterrupted availability’ of energy.[8] Pricewise its destiny is affected strongly by a sharp increase of global demand for energy resources, mainly caused by strong economic growth in emerging markets.[9] Furthermore, since the number of countries that deliver most of the oil and gas to the EU is very small and some of them are involved in geopolitical quarrels, the EU seeks to diversify its energy supplier structure (see next chapter).[10]
One opportunity to do so might be the Transatlantic Trade and Investment Partnership (TTIP), a planned bilateral free trade agreement between the EU and the United States of America for which negotiations started in 2013.[11] Its objective is to facilitate trade and investment flows between these two economic areas and, going along with that, to strengthen the strategic alliance between the EU and the US.[12] A reinforced cooperation on energy issues, for instance the delivery of US oil and gas to the EU, might be one component of this aspiration.[13] This in turn brings up the question to what extent TTIP respectively closer EU-US energy ties could contribute to a diversification of the EU's energy supply and to enhance its energy security.
In this paper, I argue that TTIP is supposed to be, among others, a geoecomomic tool of the EU in order to diversify its energy suppliers and to reach more energy security, but this will only work on a medium to long term perspective and to a limited extent.
Counteracting the EU’s energy supply dependencies – TTIP as a ‘geoeconomic’ tool?
The EU is the most significant energy importer worldwide in absolute terms, going along with an energy import rate of 53%.[14] Especially crude oil and natural gas come from outside the EU, by far the most from Russia which is responsible for more than 30% of the crude oil and 37,5% of the natural gas imports to the EU.[15] Other major energy suppliers for the EU are Norway, Nigeria, Algeria, Saudi-Arabia, Libya and Qatar.[16] The EU has acknowledged this situation as problematic since a dependency on these few external actors, most of them situated in unstable regions of the world, concerning such a vital issue like energy supply makes the EU more vulnerable, both economically and politically.[17] This is especially problematic in the case of Russia, the most important supplier.
Tensions have increased tremendously with Russia ever since the country has annexed the pen-insula of Crimea from Ukraine in 2014 and has been involved in a war in the east of the country since the same year.[18] In addition to that, Russia has already used its strong market position as gas supplier to suspend its gas deliveries to Ukraine, thus affecting also EU member states, triggering fear among Europeans that this could happen again any time.[19]
Looking for alternative “sources, routes and suppliers” is therefore key for the EU when it comes to the objective to diversify its external energy supply.[20] Indeed, one alternative lies on the other side of the Atlantic, ever since the United States have become one of the largest oil and gas producers worldwide, thanks to the “shale revolution”[21], and have started to export its newly gained resources.[22] Up to now, the US as an energy exporter to the EU does not play a role.[23] The high dependency on Russia and the rapidly increased oil and gas production in the US can be seen as the main reasons why many EU deciders have declared themselves in favour of a distinguished TTIP chapter on energy.[24] This could include, among others, opportunities of oil and gas deliveries from the US to the EU.[25] Great hopes rest especially on Liquified Natural Gas (LNG) which can be transported via vessels (instead of pipelines), hence also across the Atlantic.[26]
The EU’s aspiration to lower its energy dependency on only a few actors (mainly Russia to which the relations are marked by severe political tensions) and to diversify its supplier structure by taking into consideration imports from the US, demonstrate the geoeconomic dimension of TTIP because the motivation behind this planned agreement intermingles economic, geopolitical and (energy) security aspects. Yet, even though the EU seeks to use TTIP as an instrument to increase its oil and gas imports from the US, one has to consider the question how far this would actually be feasible and what are possible obstacles for this ambitious endeavour.
Possibilities and limits of US energy exports to the EU
To begin with, it can be noted that thanks to the considerably increased production of oil and gas in the United States – now the biggest oil and gas producer in the world and therefore expected to become one of the largest exporters – the merely material base to boost energy exports from the US to the EU is given.[27] Secondly, in December 2015 the US has lifted a ban that previously prohibited oil exports which had been considered as one huge obstacle for closer US-EU energy ties before.[28] Thirdly, there have been tremendous logistical enhancements on the US side (and in the EU) which help top facilitate, accelerate and cheapen energy exports across the Atlantic.[29]
However, it is exactly the complex and cost-intensive processing – due to the huge distance – that make energy exports from the US to the EU expensive to an extent, that in comparison to the prices which other suppliers (mostly geographically closer to the EU as Russia in particular) can offer is simply not competitive.[30]
Additionally, the infrastructure on both sides of the Atlantic must be further developed to make sure that oil and LNG, which is much more complex to transport, can be sent across the ocean on a large scale.[31] This would take both a lot of time and financial means.[32] Subsequently, huge amounts of oil and especially LNG exports from the US to the EU are not easily available and only in a medium to long term perspective.[33]
Thirdly, there is resistance in the US against energy exports due to concerns that US energy exports would raise energy costs for businesses at home, thus decreasing their competitiveness as well as pose a security threat to the United States which are still not self-sufficient in terms of energy supply.[34] Furthermore, the new US administration of President Donald Trump has shown signs of being little pro free trade oriented which could pose a danger to TTIP in general and therefore to expanded US-EU energy relations in particular.[35]
A fourth obstacle, this time on the European side, are the climate protection goals of the EU because they include the reduction of fossil energy consumption to decrease climate-damaging emissions.[36] However, since most of the oil and gas is exploited in the US by ‘fracking’, which is relatively harmful to the environment and climate (see footnote 21), an increased import of energy supply originating from such exploiting measures would be contractionary to the EU climate objectives and is therefore likely to cause resistance within the EU.
Lastly, and most importantly, the sheer amount which US oil and gas exports could potentially represent in the EU supply structure is not sufficient to dramatically change the EU’s high dependency on a few countries.[37] Yet, it would nevertheless represent a considerable economic alternative, strengthen the negotiation position of the EU towards its suppliers and thus make it less vulnerable in economic and political terms.[38]
[...]
[1] M. Thirlwell, “The return of geoeconomics: Globalisation and national security”, Perspectives, Sydney, Lowy Institute for International Policy, September 2010, p. 2.
[2] Ibid., p. 1.
[3] Ibid., p. 2.
[4] P. Lorot, “De la géopolitique à la géoéconomie. La géoéconomie, nouvelle grammaire des rivalités internationales”, Revue française de géoéconomie, no. 1, Paris, Institut Choiseul, 1997, p. 114.
[5] European Commission, “Communication from the Commission to the European Parliament and the Council: European Energy Security Strategy”, COM(2014) 330 final, Brussels, 28 May 2014, p. 2. & European Union, “Treaty on the Functioning of the European Union”, Lisbon, 2010, art. 194(1)(b).
[6] International Energy Agency, “What is energy security?”, unkown date.
[7] Eurostat, “National shares of fuels in gross inland energy consumption, 2014, percentage”, 11 July 2016.
[8] S. Keukeleire & T. Delreux, “The Foreign Policy of the European Union, Basingstoke”, Palgrave Macmillan, 2014, 2nd edition, pp. 223-224.
[9] Ibid., p. 224.
[10] Ibid., pp. 223-224, 226-227.
[11] European Commission, “About TTIP”, 1 April 2015.
[12] D. Hamilton, “TTIP’s Geostrategic Implications”, in: Daniel Hamilton (ed.), The Geopolitics of TTIP – Repositioning the Transatlantic Relationship for a Changing World, Washington DC, Center for Transatlantic Relations, 2014, pp. vii-ix.
[13] Ibid., pp., xxvi-xxvii.
[14] European Commission, “Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank: A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy”, COM(2015) 80 final, Brussels, 25 February 2015, p. 2.
[15] Eurostat, “Main origin of primary energy imports, EU-28, 2004–14 (% of extra EU-28 imports)”, 28 July 2016.
[16] Ibid.
[17] European Commission, 28 May 2014, op. cit.
[18] E. Lucas, “TTIP, Central and Eastern Europe, and Russia”, in: Daniel Hamilton (ed.), The Geopolitics of TTIP – Repositioning the Transatlantic Relationship for a Changing World, Washington DC, Center for Transatlantic Relations, 2014, pp. 52-53.
[19] Keukeleire & Delreux, op. cit., p. 224.
[20] European External Action Service, “Shared Vision, Common Action: A Stronger Europe – A Global Strategy for the European Union's Foreign and Security Policy”, Brussels, 2016, p. 22.
[21] This term refers to a new exploitation technique for petroleum and natural gas named ‘Hydraulic Fracturing’ or shortened ‘Fracking’. Through the use of chemicals, sand and huge amounts of water it allows the extraction of oil and gas that is enclosed by shale rock and therefore difficult to reach. Fracking enabled the United States to increase dramatically its oil and gas production. This exploitation method is however contested due to environmental and climate concerns. (Sources: N. Butler, „The second shale revolution”, Financial Times, 13 March 2017 & E. Crooks, “The US shale revolution“, Financial Times, 24 April 2015).
[22] C. Squeglia & R. Matarazzo, “The US-EU Energy Trade Dilemma”, IAI Working Papers, no. 15/28, Rome, Istituto Affari Internazionali, 2015, pp. 2-3.
[23] Eurostat, 28 July 2016, op. cit.
[24] J. Crisp, “Mogherini pushes Kerry for energy chapter in TTIP”, Euractiv, 4 December 2014.
[25] Ibid.
[26] K. Rademaekers et al., “Study on TTIP Impacts on European Energy Markets and Manufacturing Industries”, Brussels, European Parliament's Committee on Environment, Public Health and Food Safety, Policy Department A: Economic and Scientific Policy, November 2015, pp. X, 18, 23.
[27] L. Doman, “United States remains largest producer of petroleum and natural gas hydrocarbons”, U.S. Energy Information Administration, 23 May 2016.
[28] “Oil’s well that ends well America lifts its ban on oil exports”, The Economist, 18 March 2015 & Squeglia & Matarazzo, op. cit., p.1.
[29] J. Krohn, N. Skarzynski & K. Teller, “Growth in domestic natural gas production leads to development of LNG export terminals”, U.S. Energy Information Administration, 4 March 2016, “Portugal to get US LNG cargo”, LNG World News, 3 February 2017 & K. Rapoza, “How Lithuania Is Kicking Russia To The Curb”, Forbes, 18 October 2015.
[30] M. Rostowska, “Energising TTIP: A Step towards Better EU Energy Security”, PISM Bulletin, no. 57, Warsaw, The Polish Institute of International Affairs, April 2014, p. 2 & Squeglia & Matarazzo, op. cit., pp. 9-10.
[31] Rademaekers et al., op. cit., p. 18 & Rostowska, op. cit.
[32] Ibid.
[33] Ibid.
[34] Squeglia & Matarazzo, op. cit., pp. 4, 6.
[35] P. Blenkinsop, “Trump victory could spell defeat for EU-U.S. trade deal”, Reuters, 9 November 2016.
[36] J. Vogler, “The Challenge of the Environment, Energy, and Climate Change”, in Christopher Hill & Michael Smith (eds.), International Relations and the European Union, Oxford, Oxford University Press, 2011, 2nd edition, pp. 363-364.
[37] Lucas, op. cit., p. 50.
[38] Ibid.