There is a common feeling that the ongoing Ukraine political crisis could negatively impact European energy supplies, and therefore worsen the post-2008 European economic malaise.

This is somehow a false perception based on misinterpretations of recent trends in European energy markets, and is leading to miscalculations of existing and potential risks. Ukraine certainly plays a central role in transiting Russian natural gas to Europe. In 2013, 86.1 billion cubic meters (bcm) or 52 percent of Russian gas sold to Europe and Turkey went through Ukraine’s territory. Kiev is also an important client of Gazprom, purchasing significant volumes of Russian gas. In 2013, the country has bought 27.7 billion cubic meters (bcm) of gas. The issue of gas pricing and debt to Russia’s Gazprom has complicated bilateral energy relations between the two countries. This friction began years before the current political crisis. In 2009, there was a two-week long interruption of Russian gas supplies, preceded by another supply crisis in 2006. Tensions amidst the current political crisis and the inability of Ukraine’s national gas company Naftogaz to pay its bill could indeed potentially lead to a temporary full-scale interruption of gas supplies. But this is unlikely due to the complexity of economic links between Russia and Ukraine.

The likelihood of a European gas crisis from supply cuts is also low, and if it were to happen, it would be short-lived. Any cuts would not significantly impact Europe’s security of supply and economic growth. There are two myths to dispel regarding Europe’s economic vulnerability.

Myth 1: Europe is critically dependent on Russian gas.

ExxonMobil’s Outlook for Energy 2014 estimates that Europe’s gas imports from outside of the European Economic Area (EU plus Norway) will rise to 60 percent of Europe’s entire gas consumption. European countries will need to look for new pipeline and liquefied natural gas (LNG) supplies elsewhere in the world to satisfy its energy hunger.

LNG alone might be too expensive to cover the supply gap and the EU Member States will have to look for additional pipeline imports from the Caspian and Russia. On one hand, one might think that this trend will increase dependence on Gazprom’s supplies. Indeed, last year Gazprom managed to improve its position by cutting prices. The company set a new record by selling 162.7 bcm of gas to Europe and Turkey, thus raising its market share to 30 percent. This represented a 16 percent year-on-year increase in Gazprom’s sales outside the FSU. 

On the other hand, European buyers preferred Gazprom’s gas to non-Russian suppliers for price reasons only, not due to a lack of alternative supplies. Many buyers benefited from the price reduction and increased the share of Gazprom’s gas in their supply portfolios. The Gazprom price was 20-30 percent lower than the average LNG import price. LNG capacity built to contribute to EU’s energy security and to reduce dependence on Russian gas therefore stayed idle. Its utilization was also very low—well below 30 percent. In 2013, Europe had the lowest level of LNG imports since 2004—European countries imported only 46.5 bcm of liquefied gas, well below the record set in 2011 - 88 bcm of LNG imports. These dynamics prove the relativity of Europe’s dependence on Russian gas.

Myth 2: Ukraine transit is vital for Europe’s security of natural gas supplies.

While a significant portion of Russian gas supplies to Europe are still transported via Ukraine’s pipeline system, the importance of this transit route has significantly decreased in the past decade. This trend is likely to continue in the years to come as alternative pipelines have come on stream. 

The share of Russian gas supplies to Europe transiting via Ukraine already decreased from 95 percent in 2008 to 52 percent in 2013, mostly due to the construction of new direct pipelines such as the Blue Stream to Turkey, Nord Stream to Germany and Yamal–Europe to Poland and Germany. One of the routes, Nord Stream, is still half empty, mostly due to unresolved regulatory issues between Brussels and Moscow. The full utilization of direct pipelines might further reduce the share of Russian gas transiting via Ukraine to 35 percent of Gazprom’s sales in Europe and Turkey.

Furthermore, the construction of interconnectors in the European Union allowed connecting “energy islands,” such as the Czech Republic, which exclusively depended on Russian gas, to the alternative gas supplies. This process is one of the key priorities of EU’s energy policy, and is expected to be completed within the next three-to-five years, so buyers will have the ability to choose from a large variety of supplies. New interconnectors will also allow customers to access Gazprom’s gas from alternative pipelines, avoiding Ukraine’s territory.

Last but not least: European energy companies also have enough gas in underground storage to survive a total interruption of supplies via Ukraine’s territory for at least a month.

There is also a commonly held belief that energy supply issues will worsen Russia-Ukraine relations. In fact, economic interdependence is more likely to contribute to conflict reduction.

Myth 3: Russia-Ukraine economic relations will be hostage to political turmoil.

Economics might indeed become hostage to political tensions. However, while political links between Moscow and Kiev are virtually nonexistent, business contacts continue even though they are not always smooth. Nagtogaz’s CEO Andrey Kobolev is in regular contact with Gazprom’s CEO Alexei Miller. Both managers recently met in Moscow. 

Despite the non-payment issue, Ukraine keeps receiving Russian gas. For numerous reasons, including internal non-payment issues and a (relatively) high price level set by Gazprom, Naftogaz accumulated substantial debt to Gazprom. The price discount agreed in December 2013—$268.5 per 1000 cubic meters or roughly 70 percent of EU average price—was conditioned, on timely payments of Ukraine’s gas bills. The lack of progress in repayment of Ukraine’s debt (currently $2.2 billion) gave Gazprom a formal pretext to cancel the discount beginning April 1, 2014. Nagtogaz is struggling to pay its bills at the discounted price and is currently unable to pay Gazprom. 

This has not lead to a cut in gas. As requested by the Ukrainians, from April 1 through April 12, Naftogaz received 0.81 bcm of Gazprom’s gas. This shows that even serious tactical disagreements between the two companies did not impact the economic relationship. Indeed, long-term commercial interests are more important than temporary disagreements. 

Economic interdependence has the potential to help Russia and Ukraine overcome political disagreements. Ongoing industrial cooperation in aeronautics, machinery and civil nuclear areas are key examples. “Fixing” the economy, urgently necessary for both Russia and Ukraine, will help to “fix” politics and promote more stable and prosperous societies. 

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Read an abridged version of the article on The Moscow Times. 

Read an abridged version of the article on Natural Gas Europe. 

Read an abridged version of the article on EurActiv. 

Photo credit: World Bank Photo Collection/Flickr 

"An autonomous authority must be set up for regulating and monitoring an industry that has grown phenomenally without commensurate and meaningful checks and balances," says Sehgal. Read the full piece here on The News International. 

Photo Credit: Benny Lin

Venema says, "The Mission of the EastWest Institute is to build trust among various nations for peace and stability around the work. This is done by mobilizing key state officials and parliamentarians to identify their common concerns and advance collective actions towards sustainable solution."

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Read the full article on the Islamic Consultative Assembly News Agency of Iran. 

Click here to read the article in the Islamic World Peace Forum. 

The Asia Pivot Needs a Firm Footing in the Middle East: 
Why Washington can't afford to neglect its friends in the Gulf.

President Barack Obama heads to the Gulf this week at a time of major geopolitical turmoil, with events in Crimea and Russia dominating the headlines. None of this disorder is American-made, of course, and none will be solved by America on its own. But as the U.S. president will hear during his visit, American leadership is still as important to global stability and security as it ever was, and nowhere more than in the Middle East.

Recently, that leadership -- and the security partnerships that bolster it--have been tested and strained. Now facing ever more complex regional challenges from Egypt's transition to a potential nuclear deal with Iran, the president can use his meeting with Saudi King Abdullah this week to signal a new phase of engagement with Saudi Arabia, the United Arab Emirates, and other regional allies of the United States.

"Those who used to chastise America for acting alone in the world cannot now stand by and wait for America to solve the world's problems alone. We have sought--in word and deed--a new era of engagement with the world," Obama said in his 2009 speech at the United Nations. We welcomed that sentiment then and embrace it as enthusiastically now.

So what should this engagement look like today? It starts with a strong U.S. reaffirmation of our shared vital interests in the Middle East. It is a long and difficult "to do" list that includes containing the Iranian nuclear threat, challenging extremism and fighting terrorism, stabilizing Egypt, ending the violence in Syria, advancing an Arab-Israeli peace, and protecting energy supplies and international shipping.

It also requires better communication. At a working level, there is a constant and productive rhythm of cabinet-level meetings and senior official visits. But relationships in the Middle East are built on personal contact, and maintaining a candid and vibrant dialogue with regular leader-to-leader contact is essential.

For our part, we understand that the path forward is close collaboration with the United States and other regional allies. A strong partnership is essential. In meeting shared threats, we will share the burden. Gulf defense capabilities have improved dramatically, and we are committed to investing even more. Gulf states have a range of sophisticated U.S.-made defense equipment on order; they are jointly deploying advanced missile defense systems; and our militaries continue to train and operate closely together.

In the United Arab Emirates (UAE), we know also that a security partnership can only be strengthened by constant interaction. The UAE has proved its value and commitment both on and off the battlefield, alongside the United States. As a five-time participant in multinational peacekeeping coalitions, we have been fighting together for more than 12 years in Afghanistan, and in Libya we conducted joint air missions. Ongoing UAE-U.S. intelligence cooperation has disrupted illicit money and arms flows. And joint naval and air operations maintain freedom of navigation in the Gulf.

U.S. relationships in the Middle East, of course, are rooted in more than just shared security interests. There are ever stronger cultural and commercial ties. In 2013, Gulf states imported more than $50 billion in U.S. goods and services, and they have hundreds of billions of dollars invested in America. U.S. universities and cultural and medical institutions such as New York University, the Cleveland Clinic, and the Guggenheim have outposts throughout the region. And tens of thousands of our students are attending colleges throughout the United States.

In short, there is a lot that binds us together. And we have to continue to count on each other to meet the challenges and opportunities ahead in what is still the most dangerous of neighborhoods. As friends and allies, we may not agree on every issue or every tactic, but there are urgent initiatives that we can work on together that set the stage now for more positive developments later. These include: cooperating on an economic stabilization plan for Egypt, shutting down money flows to the extremist opposition in Syria, building governance capacity in Libya, and joint planning for the "day after" the Iran talks conclude -- deal or no deal.

When Obama visits, the president will be reminded that in the Gulf we still see the United States as an irreplaceable pillar of regional security. With unsteady neighbors, expansionist dreamers, and violent nonstate actors all around us, we cannot go it alone. We need friends; and no friend is more important to us than Washington.

In turn, the United States should know that we are eager and willing to contribute to our collective security interests. While the talk out of Washington continues about a "pivot to Asia," U.S. energy independence, and new budget priorities, very few in the Middle East truly believe the U.S. commitment is waning. Even so, it is important for the president to reaffirm America's sustained commitment to the region during his visit.

Yet we are realistic--all partnerships must adapt with the times. But we also know that the vital interests that connect us--the threat of aggression and terrorism, the benefits of trade and commerce, the values of peace and moderation--remain as strong today as ever before.

By doing so, this global team of science, technology, engineering and mathematics professionals continues to set the fundamental tenets of a common language within the cybersecurity domain. This bilateral collaboration began several years ago and produced Critical Terminology Foundations, the first report, which contained 40 terms and was released in 2011. 

Valery Yaschenko, senior vice-director of Lomonosov Moscow University’s Security Institute, explained, “Our goal is to avoid technical and scientific arguments and offer clear and useful ‘political’ definitions.” Plans are underway for this work to extend to Chinese, French, Hebrew and other languages. 

EWI Senior Vice President Bruce McConnell emphasized the importance of further cooperation with the Russian team and suggested they jointly explore other critical areas, such as critical infrastructure protection and the cyber arms race.

Click here to download full report: Critical Terminology Foundations 2