Russia has started piping gas to China through a new pipeline, called Power of Siberia. After five years of construction, it will be able to send up to 38 billion cubic meters of gas to China per year.
The pipeline marks a reorientation of Russian energy policy away from the European market, which should give European policymakers some concern.
The EU as a whole imports 40 percent of its natural gas from Russia. Former Soviet client states in Eastern Europe are almost entirely dependent on it.
But the dependence goes both ways. Russia relies on Europe for more than half its exports.
The relationship can be characterized as an unhappy marriage. Neither side wants to be in it, but neither has an alternative.
Russia has been looking east for such an alternative. With demand for energy rising in China, it provides an ideal opportunity for Russia to hedge against worsening relations with the West. If Russia is able to redirect significant amounts of gas to China, it could charge the EU more.
This is unlikely in the short term, given how much the EU and Russia still need each other — and since China doesn’t want to end up in the same position as Europe — but the completion of the Power of Siberia pipeline should concentrate minds in Brussels.
Europe’s strategy is to diversify away from Russian gas. Russia has repeatedly used gas as a weapon, cutting off — or threatening to cut off — supplies to Ukraine, through which much of Russia’s gas flows west.
Russia’s annexation of the Crimean Peninsula from Ukraine, and support for rebels in Ukraine’s southeastern Donbas region, have only heightened apprehensions in Eastern Europe.
The EU has responded in various ways, including renegotiating contracts with Gazprom, the Russian gas monopoly, to remove clauses which prohibited the reselling of gas; constructing pipeline interconnectors, to allow gas sold to Western European states, like Germany, to be diverted to the East; and importing more liquified natural gas (LNG) from the Middle East and North America.
Other plans include decarbonization, investments in green energy and gains in energy efficiency, but those efforts will take longer to bear fruit.
There is an abundance of natural gas in the Middle East, although the bulk remains unexploited.
There are other problems in the region, not the least of which is political instability. This can cause interruptions in supply, as happened during the Libyan civil war.
Additional natural gas reserves have been found in the Eastern Mediterranean, but it will take several more years before they are ready to be exploited.
Shipping LNG remains more expensive than piping natural gas. And it’s not free of politics either. America is a major potential supplier. European countries wonder if its resistance to Nord Stream 2 — the expansion of the Baltic Sea pipeline connecting Russia and Germany — is motivated by geostrategic or commercial interests.
In any event, Nord Stream 2 doesn’t help if Europe wants to reduce its dependence on Russia. It must do so now while it still has the benefit of being its primary customer.