Russia, Poland and the USA. Exercising Structural Power within the Field of Energy Policy

Table of Content

1. Introduction

2. Theoretical Approach
2.1 Energy Security and its Relevance in Foreign Policy
2.2 The Concept of Structural Power

3. Method & Data

4. Analysis
4.1 Russia
4.2 Poland
4.3 The USA as Outside Option
4.4 Impacts on Poland's Dependence on Russian Gas Supply

5. Discussion

6. Conclusion

Bibliography

1. Introduction

“Regardless of how the standoff over Ukraine develops, one lesson is clear: excessive dependence on Russian energy makes Europe weak.”¹ With this quote Donald Tusk, former prime minister of Poland and current president of the European Council, alluded to the annexation of Crimea by Russia in 2014 and questioned Russia’s reliability as energy trading partner. For decades, Russia is the main gas supplier of the European Union (EU). Due to the Russian-Ukrainian crisis, the issue of EU’s dependence on Russian gas imports has once again raised public attention (Bardt & Schäfer 2018: 4). Since member states located within the post-Soviet region, such as Poland, are particularly dependent on Russian gas supply, they perceive Russia’s power dominance as a threat to their supply security. As a result, securing and diversifying gas supplies was given a higher political priority in those countries (Grabau 2016: 1). In this respect, Poland particularly emphasized the objective to cut-off gas supplies from Russia. However, for a long time there has been no legit alternative that could have met Poland’s gas consumption, which automatically led to a much more favourable position of Russia in negotiations with Poland. Interestingly, this structural power constellation seems to be challenged for the first time. Since the shale gas boom in the USA², Liquid Natural Gas (LNG) is becoming an increasingly important new import option. The USA as another “emerging energy superpower” (Mitrova & Boersma 2018: 33) not only opens up the opportunity for Poland to obtain gas from another source but is apparently able to weaken Russia’s structural power position. Consequently, the question arising for this paper is the following: Can the concept of structural power explain the tripartite relationship of Russia, Poland and the USA with regard to the gas supply sector and what is the impact of the USA as an Outside Option on Poland’s dependency on Russian gas?

In order to answer these questions, this paper is divided into six sections. The first section presents Andrej Pustovitovskij’s approach of structural power, which serves as the theoretical framework for this paper. Secondly, the method and data used in this paper will be discussed. The analysis, forming the fourth section, aims at answering the research question. It firstly examines the relation between Russia and Poland in the field of gas supply and assesses whether the USA represents a credible Outside Option. The second part of the analysis evaluates the impact of current developments within the tripartite relationship on Poland’s dependence on Russian gas. Within the fifth section the results are summarized and discussed. The last section briefly considers potential future perspectives of the Polish and European gas supply sector and points out the limitations of this paper.

2.Theoretical Approach

This section firstly aims to briefly examine the connection between energy security and the exercise of power in international relations, while the second part presents the theoretical approach of structural power.

2.2 Energy Security and its Relevance for Foreign Policy

Energy security has no universal definition, as there are various ways of approaching the term, reflecting, for instance, different interests or energy-related challenges (Weiner 2018: 2). However, the term is shaped by a wide variety of definitions attempting to pay tribute to its multidimensionality (Lenzen 2018: 4; Krämer 2011: 26). Within the traditional understanding energy policy is often considered to be a part of economic policy and defined in terms of “reliable supplies” at a “reasonable price” (Proninska 2007: 70; Umbach 2018: 9; Checci et al. 2009: 1-2). However, a purely economic conception of energy security by means of trade is insufficient (Baumann 2008: 4). Consequently, the concept of ‘energy security’ can also be differentiated according to whether a state is categorized as a consumer, producer or transit state (Umbach 2018: 9). While consumer countries are primarily interested in security of supply, producer countries’ main goal is to ensure demand security. In contrast, for transit states, both forms of supply play a decisive role due to their own need of energy and as a continuous source of income through transit revenues (Krämer 2011: 26-27). The definition provided by the United Nations Development Programme (UNDP) adopts the perspective of transit and consumer states. In this respect, energy security is described “as the availability of energy at all times in various forms, in sufficient quantities, and at reasonable and/or affordable prices” (UNDP 2000: 113). Thus, stable energy supplies are regarded as a precondition for security (Krämer 2011: 28; Umbach 2018: 9). In line with this understanding, this paper uses security of supply synonymously to energy security.

Due to an increasing importance of energy issues in international relations in the past decades, energy security has become more and more intertwined with foreign and security policy (Umbach 2018: 9, Cikovic 2008: 117). On the one hand, it turned out that the energy market does not function as a competitive market since prices seem to follow rather unpredictable trends (Cikovic 2008: 117). This led to reinforced monopolistic tendencies and thus to increasing power on the supplier side (Müller 2006: 6). On the other hand, some energy markets experienced security-threatening escalations and highlighted that energy resources not only serve as an economic and strategic tool but can also operate as political leverage (Lenzen 2018: 5; Cikovic 2008: 117; Müller 2006: 5). As a result, the growing asymmetrical dependency of consumer states on producer states distorts their negotiating positions (Cikovic 2008: 119). In the light of these events, the following concept seeks to analyse the power constellations between Poland, Russia and the USA.

2.2 The Concept of Structural Power

In the field of International Relations, various approaches have been developed to address the meaning of power, its conception and its use in international affairs. While the (neo-)realistic strand, regarded as the most influential school of thought, defines power in terms of ‘Hard Power’ and ‘Soft Power’ and assumes that the larger a state’s power resources, the greater the probability to achieve its pursued preferences (Nye 1990, Waltz 1990), a second strand of scholars theorizes power as a relational concept, presuming that actors in international relations are shaped by profound interdependencies (Keohane & Nye 1977).³

Against this background, the ‘ Concept of Structural Power’ by Pustovitovskij (2011) has been developed and is based on the critical evaluation and conceptual extension of these existing approaches in order to explain power structures of states. Thus, the concept does not constitute a completely new, overarching analytical framework, however, it provides a tool for a coherent and refined assessment of power in structural terms and serves as the underlying concept of this paper (Gurol 2016: 14). In contrast to the (neo-)realistic strand, the theorem of structural power asserts that the power of a state is not only determined by hard and soft power, but also by certain structural conditions that influence the interactions between actors (Gu 2012: 259). Furthermore, and in line with the presumptions of the theory of interdependence, states are perceived as being increasingly unable to meet the full range of their own needs unilaterally and therefore depend on cooperation, trade and negotiations (Kremer & Pustovitovskij 2011: 6).

Within the concept, states that are able to provide a good which satisfies a specific need, are deemed the main actors. In this context, goods are strictly distinguished from resources and characterized as anything that is exchangeable and able to meet an existent necessity, whereas resources are defined as anything an actor can freely access within its radius of action (Kremer & Pustovitovskij 2011: 7). Resources turn into goods whenever another actor formulates a corresponding need (Pustovitovsky 2016: 58-61). Three types of goods are identified: material, positional and ideationalgoods, whereby all goods can be exchanged in any combination. Material goods describe physical objects such as raw materials, money or manufactured products. The second type of goods are those with a convenient positioning, such as geographical locations for military bases and transport routes that are valuable from an economic point of view, or strategic positions in multinational organizations. In contrast to material or positional goods, ideational goods are of ‘virtual nature’ and emerge if a need for them is articulated. Hence, these goods only exist temporarily for as long as the need exists. The set of all goods available to an actor are summarized under the term "basket" (ibid.).

Another major distinction within the classification of these goods is the aspect of availability. Thus, the quality of goods is classified in terms of general availability, including wind or low-tech products, limited availability, such as oil or gas or the access to certain sales markets, and exclusive availability comprising, inter alia, certain technologies or geographical areas (Pustovitovskij 2016: 61). The scarcity of goods primarily depends on the actual quantity available for exchange, since a raw material might be a general good but if is only extracted in small amounts and cannot be increased in the short term, it becomes a limited good (Kremer & Pustovitovskij 2011: 8). Since the majority of goods are assigned to the categories of exclusive and limited goods, actors constantly compete for them. As a result, goods inevitability turn into trade objects as soon as one actor needs them due to the inability to produce them himself or replace them at a reasonable cost (ibid.). This consideration implies that actors can artificially limit the availability of goods for strategic reasons (Pustovitovskij 2016: 62). The significance of a good ultimately consists of the combination of its availability as well as the urgency and relevance of the needs (Kremer & Pustovitovskij 2011: 9). A combination that is disadvantageous for one actor (low availability on the one hand and high relevance and urgency of the needs on the other) results in the rarity of goods. Hence, rare does not imply the scarcity of goods per se but a great demand in contrast to the goods available (ibid.). It is assumed that the relations between goods and needs of all actors constitute a certain structure. The term “structure” within this approach determines the quality (more or less rare) of the goods in the actors’ basket and is defined as a “fluid network of interactions and relations” in which states act (Kremer & Pustovitovskij 2011: 11-13). On this basis, the positions of actors within the structure, viz. the states’ structural power, are determined. Furthermore, the quality of the goods is not only shaped by changing reciprocal dependencies of the states but also actively influenced by these actors both, directly and indirectly, and thus, provides the context for power-as-resource (ibid.).

Putting these considerations in practical terms means, that in a negotiation situation between two actors (A and B), where actor A articulates a certain need which is covered by actor B, actor B has power over A, as long as B is the only actor offering the good A urgently needs. Hence, A is in a significantly less favourable negotiating position (Pustovitovskij 2011: 70). However, these structural circumstances can be crucially changed by the appearance of a credible Outside Option (OO), which owns a good that also meets the need of A and is offered under comparable conditions (Pustovitovskij 2016: 67). Due to A’s emerged option to get the desired good from a reasonable OO, also referred to as actor C, strengthens its position vis-à-vis actor B within the negotiation situation, although A’s ability features remain unchanged (Kremer & Pustovitovskij 2011: 9). In this regard, it is crucial that actor C is perceived as being an OO for A by actor B, as this enables actor A to bluff in negotiations. Moreover, the more credible OO’s exist for actor A, the weaker is B's position. Hence, structural power can have a lasting effect on the actors’ (resources) power by relativizing the value of a good in a specific context⁴ (Kremer & Pustovitovskij 2011: 12). In other words, due to the emergence of credible alternatives, the value of B’s goods is relativized. As a result, “B is no longer able to use these resources effectively as a coercive mean towards A” (ibid.).

Taking common trade conflicts into account, reveals that such situations seem to constitute a great part within the daily routine of international relations (Pustovitovskij 2016: 15). Moreover, regarding the current relationship between Poland, Russia and the USA in the context of gas supply, the concept of structural power seems to provide an appropriate framework. For decades, the relationship between Russia and Poland in the area of gas supply is characterised by Russia's supremacy as a gas exporter and, vice versa, by Poland's dependence on gas supplies, whose enduring character particularly lies in the lack of alternatives (Krämer 2011: 129). This security issue has had a growing impact on Polish energy priorities and its diversification efforts in recent years, while, at the same time, the USA achieved one of its major foreign policy goals by becoming the world's largest exporter of natural gas (Lohmann & Westphal 2019: 6). These developments result in the practical relevance of the concept of structural power and give rise to the following hypothesis:

H1: The relation between Russia, Poland and the USA in the field of gas supply can be explained by the concept of structural power, where the USA represents a reliable OO for Poland vis-à-vis Russia.

Since it is assumed that structural power does not work per se but through the relativization of resources, the emergence of the USA as a reliable Outside Option is able to negatively influence the value of Russian gas in the negotiating situation with Poland. Furthermore, the fact that LNG imports by the USA display an alternative for Poland, Russia is no longer in the position to effectively use its goods to the same extent as political leverage, while Poland’s bargaining power is improved. Thus, following this reasoning, a second hypothesis arises:

H2: If the USA is able to seriously challenge Russia’s gas dominance in Europe, it is likely that Poland’s dependence on Russian natural gas is reduced.

3. Method & Data

The methodology used to verify the hypotheses can be classified as single case study. However, two types of the selected methodology are used to pay tribute to the different character of the hypotheses.

The first part of the analysis employs a descriptive single case study as it deals primarily with the description of a phenomenon (Caramani 2011: 43). Accordingly, the relationship between Russia, Poland and the USA is examined under consideration of the concept of structural power. It is assumed that Poland represents actor A, as it is largely dependent on foreign gas supply, demonstrating the urgency and relevance of Poland’s need for gas (Proninska 2007: 70). Natural gas as a limited good is particularly suitable for the analysis as it has become a major concern for European countries. On the one hand, it is widely considered the ‘fuel of choice’ for the decades to come as it is comparatively cleaner than other fossil fuels (Howarth et al. 2012: 526). On the other hand, gas trade is a heavily politicised issue and frequently addressed from the viewpoint of supply reliability (Siddi 2017: 107). This consideration implies that actors can artificially limit the availability of goods to exert power (Pustovitovskij 2016: 62). Since Poland heavily depends on Russian gas, Russia is deemed actor B. Russian natural gas is not only the largest energy source, but also the cheapest one (Westphal 2018: 12). As a result, Russia clearly is in a better negotiating position which can only be changed by the emergence of a credible Outside Option. Even though there are several theoretically possible Outside Options, most of them seem to be practically unable to meet Poland's needs. The largest export countries in Europe are in the northern region, namely Great Britain, Norway and the Netherlands. However, gas production is declining in all three countries and additional gas sources are needed to supply Europe (Lang & Westphal 2017: 19). At the same time, countries from North Africa and the Middle East often involve a high risk for investors due to their political instability (Riley 2015: 3). Thus, this paper expects the USA to be the most credible Outside Option. In recent years, LNG from the USA has opened up a new import opportunity (Westphal 2018: 13). Additionally, the USA is not only interested in exporting its gas to Europe but is also recognized as a strong actor by Poland and Russia and therefore, seems to represent a reliable Outside Option, which might be able to cover Polish needs.

The second part of the analysis uses a causal single case study (Gerring 2016: 397) as it assumes that the emergence of a reliable Outside Option might have an impact on Poland’s dependence on Russian gas. This impact is evaluated by analysing the changes of Russia’s gas export to Poland, Poland’s (liquefied) natural gas import structure and Poland’s recently concluded contracts with U.S. LNG companies. The assessment is based on data provided by the official webpages of Poland’s state owned energy company, Polish Mining and Gas Extraction Company (PGNiG), the Russian energy company Gazprom, whose majority owner is the government, and three U.S. LNG companies, with which Poland concluded several contracts in the past years.

4. Analysis

This section aims to verify the hypotheses by examining the energy relation between Russia and Poland under consideration of the concept of structural power and assessing whether the USA epitomize a genuine Outside Option. Within a following step, the impact of this tripartite relationship on Poland’s dependence on Russian gas is discussed.

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¹ Collins, Gabriel (21 September 2017). Russia’s Use of the “Energy Weapon” in Europe. Energy Today. Retrieved from: https://www.energytoday.net/conventional-energy/russias-use-energy-weapon-europe/.

² The shale gas boom is the outcome of technological advances in oil and gasproduction and became a significant factor after 2008. The progress enabled increased production of these resources within the USA. See https://www.cfr.org/report/shale-gas-and-tight-oil-boom for more information.

³ Due to space limitations, this paper cannot pay tribute to these approaches in detail. See Barnett & Duvall (2005) for a more comprehensive examination of different power approaches.

⁴ In this respect, it should be noted, that the growth of structural power in one area does not automatically lead to a (structurally) more powerful state in general (Kremer & Pustovitovskij 2011: 14).