By Jackie Carpenter
MIA 2008

The East Central Europe’s (ECE) Energy Conference continues today, February 22, 2008, in IAB 1501 with discussants from other ECE countries, including Poland and Ukraine.

In 2004 ten countries in East Central Europe happily entered the European Union, believing that their membership in this elite club of countries secured their continued economic and political development.  On many fronts this has been the case, but on one very pivotal issue – energy security – these new members have been on their own.  The discussion at this evening’s “Energy Security Strategy for East Central Europe” conference hosted by SIPA’s East Central European Center underscored how precarious the positions of these countries have become, and how the sensitive issue of energy security is dividing the EU.

The discussants hailed from Hungary, Czech Republic and Germany.
Each stressed the need for European countries to reduce demand, and
Czech Ambassador Bartuska added, quite convincingly, that we cannot
expect developing countries like China and India to reduce demand when
we use the same amount of energy with mere fractions of their
populations. He made several convincing points that few would argue
with about the need to develop alternative and sustainable energy
sources, as well as the need to build LNG terminals in order to
diversify suppliers.

But then talk turned to Russia, and things became politely uncomfortable.

Both Dr. Anita Dorban of Hungary’s International Center for Democratic Transition and Ambassador Bartuska unequivocally cited Russia’s gas and gas transit monopoly as the biggest obstacle to their countries’ energy security.  Minister Georg Adamowitsch of Germany, however, defended Russia, and more specifically, Gazprom’s controversial collaboration with German firms to build a gas pipeline along the Baltic directly to Germany (bypassing Poland and the rest of Central Europe).  These plans have caused a great rift in the EU and disillusionment for new member states, who are dismayed by the Union’s (and especially Germany’s) utter lack of solidarity on such a pivotal issue.  Tensions that surely still exist in Brussels on this issue were faithfully reflected on the panel tonight.

But for all the controversy about Russia’s actions in the European energy sphere, a fundamental question about the nature of energy markets and energy security emerged for me while Dr. Dorban described Hungary’s long, arduous efforts toward even articulating a contemporary energy strategy.  She complained that Hungary is still operating under an energy strategy initiated in 1993 because there hasn’t been the sustained political will to update it.  While successive Hungarian governments have stalled and procrastinated in dealing with the country’s energy issues, Russia has moved quickly and authoritatively to buy up competitors and assert complete control over the few pipelines Central Europe has.   In my opinion, it has operated in the last decade like a cunning monopolist.

Which brings me to this thought.  Authoritarian-leaning governments seem to fare much better in the energy sector, which requires firm decision-making, significant up-front investment and long-term vision.  The pluralistic parliamentary democracies of Europe have not been as effective, and you could postulate that this has something to do with the political power turnover built into their systems of government.  Why invest a huge portion of your budget now to initiate a pipeline that won’t even be ready for about seven years, long after you are out of office?  It really is absurd, as Dr. Orban pointed out, that Hungary could be operating under the same energy strategy it had fifteen years ago, when the geopolitical reality of East Central Europe was very different. 

Since the EU is an integrated economic community, it makes sense for it to be an integrated energy community.  It needs to develop a comprehensive strategy for its entire membership, which would ensure its long-term growth and prevent outside suppliers like Russia from playing its members against one another.  But it seems to be far away from anything like this, and the energy security of the continent hangs in the balance.