Caspian Report - Issue: 08 - Fall 2014

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RADU DUDAU 72 Russia, which depends on hydrocarbon exports to Western Europe and on Western foreign investments). 3 This is likely to fuel power politics as applied by Russia in Mitteleuropa. Moreover, considering that there is no global but only regional market for natural gas, where the pipeline transit factor represents a hard security element, Moscow’s energy security policies regarding Central and Eastern Europe (CEE) are much more likely to be politicised. According to the Foreign Policy Concept of the Russian Federation (2008), the CEE region is “the area with the broadest geopolitical meaning for the Russian Federation”. In its relations with these countries, as a state with greater geopolitical clout, Russia has no particular motivation to cooperate. The exception is the circumstances in which CEE national interests are aligned with those of more significant players, such as the EU, Germany or the US. With regard to the transit states (members of the Commonwealth PRIOR TO THE DETERIORATION OF BILATERAL RELATIONS, RUSSIA PARTICIPATED IN THE STRUCTURED SECURITY DIALOGUE WITH THE EU. of Independent States), Russia has provided various benefits such as low gas prices, bilateral trade, movement of persons and employment, military security arrangements, diplomatic cooperation in international forums. These amenities, however, carry an implicit threat, namely retaliatory measures in the event those states do not remain within Russia’s sphere of influence. Russia’s strategy is to bypass them with transport infrastructure, while time keeping them in its political orbit. While gas demand was high during the pre-crisis market years, due to the post-crisis consumption slump, the economic and political power has shifted toward the hydrocarbon consuming countries. However, in the long run, the energy interdependence between the EU and Russia will probably become more complex and volatile. As Russia is lagging behind when it comes to economic diversification, its only remaining foreign and energy security policy asset is the Realpolitik card; namely, to attempt to establish a new regional and perhaps even global energy order (including in institutional forms, such as BRICS, the Shanghai Cooperation Organization and the Gas Exporting Countries Forum, GECF), without jeopardizing relations with the leading European customers. The complex dynamics of the Russia-EU energy security relationship, with areas of vulnerability within a relatively limited geographic space, have begun to strain Moscow’s political relations with Brussels. Moreover, the Ukraine crisis will further propel energy policy and market integration in the EU. Russia will find it more and more difficult to employ its usual divide et impera tactic. Indeed, the best approach to depoliticise energy trade is to build a liber- 3. At present, approximately 50% of the natural gas exports to the EU cross the Ukraine, out of which the highest share of end consumers is in Germany, France and Italy. The EU is Russia’s most significant business partner. 75% of the direct foreign investments in Russia come from the EU (the trade balance is inclined in Russia’s favour). However, while the Russian exports to the EU only consist of natural resources, Russia’s range of exports to the EU is diversified, meaning that Russia is more dependent on the EU than vice-versa. Moreover, in the event that the EU’s energy demand from Russia decreases, Russia would find it difficult to compensate by redirecting exports to Asia, a long term process with immense financial implications related to the necessary marketing and transport infrastructure.
alised energy market: transparent, competitive, interconnected, liquid, and flexible. 2. THE NEW STATUS OF CRIMEA UNDER INTERNATIONAL LAW Right after the political change in Kiev, at the end of February 2014, unidentified military forces, supported by segments of the local population, took control of the political and administrative centres and critical infrastructure elements in Crimea. On February 28, the Supreme Council of the Autonomous Republic of Crimea voted for divestiture of the regional government and to hold a referendum on the republic’s extended autonomy. On March 6, the Supreme Council and the local council of Sevastopol made public the intention to declare Crimea’s independence from Ukraine as united national entity, its potential integration in the Russian Federation, and the plan for a public referendum in this respect. On March 11, the Supreme Council declared the Autonomous Republic of Crimea’s independence from Ukraine. On March 15, Russia exercised its veto right with regard to a draft resolution of the UN Security ACCORDING TO THE FOREIGN POLICY CONCEPT OF THE RUSSIAN FEDERATION (2008), THE CEE REGION IS “THE AREA WITH THE BROADEST GEOPOLITICAL MEANING FOR THE RUSSIAN FEDERATION.” Council declaring the referendum invalid. On the same day, Kiev decided on the dissolution of the Supreme Council of Crimea (regional parliament). On March 16, a referendum was organized in Crimea in which 97% of the population allegedly voted for independence and accession to the Russian Federation. On March 17, the parliament of Crimea declared independence and requested annexation to Russia. Thus, Russia “gained” two new entities, the Crimea Federal District and the federal city of Sevastopol. On March 17, Vladimir Putin issued a decree recognising Crimea as a sovereign and independent state. The Crimea annexation/ unification treaty was signed the next day. On March 21, Putin signed the laws formally acknowledging Crimea and Sevastopol as part of the Russian Federation. The UN General Assembly issued a non-binding 73 CASPIAN REPORT, FALL 2014 Russian Energy Minister Alexander Novak, EU Energy Commissioner Gunther Oettinger and Ukraine’s Energy and Coal Industry Minister Yuri Prodan signing an agreement.
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CASPIAN PUBLISHED BY CASPIAN STRATE
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Dear Readers, CASPIAN REPORT 2 It i
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CASPIAN CASPIAN REPORT 4 06 FATIH M
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FATIH MACIT, HOLLY REHM 6 THE U.S.
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FATIH MACIT, HOLLY REHM 8 shale rev
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FATIH MACIT, HOLLY REHM 10 in the 1
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FATIH MACIT, HOLLY REHM 12 SINCE TH
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FATIH MACIT, HOLLY REHM 14 these tw
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FATIH MACIT, HOLLY REHM 16 LNG’s
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FATIH MACIT, HOLLY REHM 18 kets, pa
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MANFRED HAFNER 20 THE SOUTHERN GAS
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Page 30 and 31: MANFRED HAFNER 28 by the Shah Deniz
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Page 34 and 35: MANFRED HAFNER 32 THE ESTABLISHMENT
Page 36 and 37: MATTEO VERDA 34 LNG MARKET: TRENDS
Page 38 and 39: MATTEO VERDA 36 traditionally accou
Page 40 and 41: MATTEO VERDA 38 bcm), Brunei (9 bcm
Page 42 and 43: MATTEO VERDA 40 for transport vesse
Page 44 and 45: MATTEO VERDA 42 of the global LNG m
Page 46 and 47: MUBARIZ HASANOV 44 AN OVERVIEW OF E
Page 48 and 49: MUBARIZ HASANOV 46 Figure 1. Primar
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Page 52 and 53: Figure 7. Price of transport fuels
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Page 56 and 57: Figure 13. Breakdown of electricity
Page 58 and 59: THE SOUTHERN GAS CORRIDOR - WINDOW
Page 60 and 61: NINO KALANDADZE 58 become comprise
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Page 70 and 71: RADU DUDAU 68 THE UKRAINE CRISIS: L
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Page 96 and 97: Figure II: Russian energy infrastru
Page 98 and 99: Kazakhstan President Nursultan Naza
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Page 102 and 103: Figure IV: China’s gas import sou
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Page 118 and 119: ARZU YORKAN 116 is 12 th in the wor
Page 120 and 121: Figure 4: Solar Energy Potential At
Page 122 and 123: ARZU YORKAN 120 Figure 8: The share
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ARZU YORKAN 122 THE STRATEGY PAPER
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ARZU YORKAN 124 TURKEY HAS NOT YET
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CASPIAN
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THE EU AGREEMENT ON THE 2030 FRAMEW
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EU Commission President Jean Claude
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ROMAN RUKOMEDA 132 THE PHANTOM OF R
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Russia’s gas giant Gazprom CEO, A
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CASPIAN CALL FOR PAPERS 136 Caspian
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Caspian Report - Issue: 08 - Fall 2014

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