Viktor Yushchenko: Consumers of Russian gas must show a united front

Fueling European Cooperation. By Viktor Yushchenko
Consumers of Russian gas must show a united front.
WSJ, Feb 17, 2009

For those of us who lived under the Soviet Union, there is a certain irony about energy supplies. We may have been in a Cold War with the West, but Soviet gas always flowed uninterrupted across the Iron Curtain. Nowadays, thankfully, the Soviet Union is no more -- and yet Russian gas has become a strategic weapon. Those of us who are net importers cannot help but wonder: Is Moscow saying that gas supplies will be a problem unless it can have its sphere of influence once again?

So long as those countries which rely on Russian gas are divided, we put ourselves in a dependent position. Since 2006, though, alarm bells on the gas issue have been largely ignored. Of course Russia deserves a fair price for the exploitation of its natural resources, but the relationship needs to be rebalanced. The politics need to be taken out of the equation and a more normal commercial relationship established.

Whether Moscow is motivated by political concerns or simply a desire to increase the return on its assets, it is in the interests of all importing countries to coordinate our response. Only by cooperating can we maximize our collective bargaining power and secure our individual national interests.

As significant net importers of energy, Ukraine and the European Union have a clear common interest. Energy security for Ukraine, a major transit country, is also the best guarantee of energy security for our European neighbors. The energy security of the wider European space is therefore indivisible.

A strong response to the challenge we face must have at least three elements: liberalization, diversification and conservation.

By 2030, the International Energy Agency predicts, European gas imports will double because Europe won't be able to supply its own energy needs. Much of the extra supply could come from Russia if the necessary investment is made in new production. But unless action is taken now, importers could be in a very vulnerable position.

Liberalizing its energy industry would be in Russia's own best interests. But it will probably resist appeals to do so until the European Union leads by example: encouraging network operators to invest in interconnectors to build the energy grid and pipeline networks of the future, thereby reducing the risk of one customer being played off against another. Energy independence will come through energy interdependence. We all need international trade in energy to be open, transparent and competitive.

The current economic crisis is causing considerable suffering for both households and businesses. This situation provides an added incentive to solve the problem that arises from all of us, Ukrainians as much as our European friends, being at the mercy of a self-interested monopolist.

Working together, we can secure our mutual interests -- and, in the long term, reduce unnecessary friction with Russia. A single, competitive gas market would help depoliticize the EU-Russia gas relationship, with major foreign-policy benefits for Europe. It would also improve the security of supply for all European gas consumers.

The European Energy Community is the obvious building block for this approach, but its scope needs to extend beyond market liberalization and include more proactive and practical forms of cooperation. For our part, Ukraine is determined to reform our gas sector to encourage investment, increase efficiency by upgrading the pipeline infrastructure to minimize energy loss in transmission, and create a modern EU-compatible energy sector. The EU can further those aims by helping transit countries like Ukraine to reduce reliance on Russian gas, and hence vulnerability to energy blackmail.

One way to reduce reliance on Russia, and an important part of the policy package for any country planning for the long term, is diversification. In Ukraine's case, for example, our untapped Black Sea gas reserves needed to be quantified and exploited with European cooperation. But putting all of our faith in gas is not the answer: The emphasis should be on cleaner technologies. All of us in the European neighborhood can learn from each other to increase the proportion of renewable sources in the energy mix. In other words, limiting global warming and improving our energy security can go hand in hand.

Short-term deals between Moscow and any country, including Ukraine, are no substitute for this kind of comprehensive energy security strategy. Some of the measures will take time to implement, and so it is essential that the Transit Protocol of the legally binding Energy Charter Treaty is concluded as soon as possible. Agreement and ratification would reassure investors in the pipeline network that transit would occur, and our European neighbors that gas will be delivered.

Action, not further debate, is needed. The EU in particular has the capacity to change the entire dynamic of energy relations across Eurasia. But first it must unite and lead.

Across Europe, the pace of energy reform needs to be increased. Equally, we all need to be more forthright in reacting to the use of energy as a tool of foreign policy. Ending divisions in the European house is the only way to assure energy security for our citizens and industries for the decades to come.

European solidarity can bring warm homes -- and warmer relations with Russia.

Mr. Yushchenko is president of Ukraine.