Wednesday, August 17, 2022

ENERGY INDEPENDENCE AS PROTECTION FROM ADVERSE IMPACTS

The state-owned gas company Gazprom is the largest gas supplier to European countries. Russia usually offers cheap gas and is easily accessible, which has led many European countries to phase out coal and nuclear power plants as an energy source.

But gas supply is not just a technical issue. A country’s dependence on Russian gas gives the Kremlin ample room for influence in that country’s internal affairs. Natural gas accounts for 22 percent of total energy utilized in Europe, with Russia being the largest supplier. This makes Europe more exposed to Russian influence, which often produces conflicts and clashes that align with Russian geostrategy.

THE BALKANS IN THE RUSSIAN GAS STREAM

The countries of the Western Balkans are also dependent on Russian gas. This region has traditionally been seen by Moscow as part of its sphere of influence. Like Europe, the six Balkan countries – Serbia, Kosovo, Northern Macedonia (RNM), Albania, Montenegro and Bosnia and Herzegovina – are supplied with gas mainly by Gazprom. Can Russia use this dependence as a means to increase its influence?

Bajram Rexhepi, director of the state-owned RNM company “National Energy Resources” says that energy is the key factor in the geopolitics of this century. But he points out that, apart from Serbia, other Western Balkan countries do not use much natural gas.

Bajram Rexhepi, drejtor i kompanisë shtetërore të RMV “Resurset Kombëtare Energjetike”

“Even this small amount that is used is completely gas from Russia”, Rexhepi emphasizes in a conversation for “The Geopost”.

“The Western Balkans region is less vulnerable than the rest of Eastern Europe and the EU as a whole. In recent years we have witnessed that powerful countries within the EU have shown an extraordinary lack of solidarity and disharmony with Eastern European countries. “This produces a high vulnerability in these countries and incalculable economic and geopolitical damage”, says Rexhepi.

However, many implemented projects have been aimed at diversifying gas supplies to Europe and the Balkans. The commissioning of South Stream – TAP and the construction of new LNG terminals in the region are estimated to have significantly reduced energy dependence on Russia. All these preconditions, however, have failed to neutralize Russia.

“I believe we are clear that energy is the most powerful geopolitical weapon today,” says Rexhepi. But, he adds, on the other hand the market economy is the fundamental value of democratic systems.

In the meantime, Rexhepi recalls that RNM as a country has agreed to meet the objectives of the “EU-Green Deal”, that by 2050 to get rid of the use of fossil energy sources. This requires large investments in new and ecological capacities, but also creates a vacuum in the energy market. “Russia will certainly not be only a spectator of this transition. In this polygon of interests, a long-term strategy and political mastery is more than necessary, but it is often insufficient “, says Rexhepi. “I believe that we as a country are well on our way to ensuring energy sustainability, but unfortunately we are a very small actor in terms of energy and we are directly dependent on the orientations of major actors”.

PRICE INCREASE FOR CRISIS

The energy crisis in Europe, which emerged in October, is the most visible evidence of Europe’s dependence on Russian gas flows. In parallel with the reduction of European reserves, standard gas prices went up to 162 euros ($ 188) per megawatt-hour. Compared to the beginning of 2021, when a megawatt-hour was only 20 euros, the price is now eight times higher. This happened after the “North Stream” of gas was put into use in September, which “Gazprom” began to charge the pipeline through Ukraine.

But, Rexhepi says that there are several factors that have influenced this crisis: “The first was the immediate increase in demand for energy resources in many European countries after the improvement of the epidemiological situation and during the longer-than usual winter. Second, this summer there was an unfavorable situation for the production of electricity from renewable sources, and especially wind ones. And the third, which is the main factor of the crisis, is the immediate reduction of the flow of Russian gas through Ukraine, as they began to fill the pipeline in the new Baltic flow.

In the meantime, the European Union is significantly reducing the use of coal and nuclear power for electricity generation.

“The main cause of this energy crisis must be sought here,” Rexhepi added.

According to him, the negative economic effects are now real, despite the subsidies and interventions made by most governments in EU countries and the region. “It is clear that in many countries there will be inflation even in double digits because most industries are directly dependent on electricity and natural gas,” said Rexhepi.

According to official data from last year, the RNM consumed about 7,400 GWh of electricity, and about 3,200 GWh of natural gas. The vast majority of natural gas is used for the production of electricity by the company “TeTo”. This company was owned by the Russian oligarch, Leonid Lebedev, who in 2019 led the company into bankruptcy. “TeTo” was a joint company of Lebedev and JSC “Toplifikacija” from Skopje, which, since 1997 has worked with positive balances. Because of this, experts have raised the alarm that it is a matter of false bankruptcy in order for Lebedev to withdraw more than 150 million euros from the company.

CONNECTION IN ALTERNATIVE FLOWS

RNM currently has only one interconnection line of gas supply from Bulgaria, with a capacity of 800 million m3 per year. The gas coming from Bulgaria is actually produced in Russia.

“This means that we are completely dependent on Russian gas,” says Rexhepi. “We are making every effort to start the construction of the interconnection line with Greece next year and thus we will create access for supply from many other sources. “Our plan is that by the end of 2023 this line will be in use and we will have many more supply sources.”

In the internal plan, where the primary and secondary pipeline network is to be built, there are many delays. The construction of the pipeline in North Macedonia has long been announced, but economies and households are still unable to use it as energy.

Rexhepi says that the planning and construction of energy capacities is not something that can be done in a year. “The nature of these projects requires long-term planning. Natural gas is still used today, but not on a mass scale. “Our plan is to have mass exploitation, but also to have economic rationality.”

He announces that about 270 km of the transmission network have been built and there are still about 10 km to be completed for the current projects. “We are still in a pandemic crisis and it is not good to make accurate predictions. However, I believe that, unless an emergency situation arises, next year all these axes will be put into use and we will have selected the company that will distribute gas in the cities “, says Rexhepi.

Announcement of the Government of Kosovo that it will suspend the construction of the gas interconnection line with RNM, Rexhepi assesses it as a reckless.

“I believe that it is necessary to clarify some important facts. The first is that through this interconnection Kosovo will be able to be supplied with gas by any supplier in the world, including American LNG. Second, in addition to gas transmission, this infrastructure could also be used for hydrogen transmission. So, it will be used even longer than in the next 30 years. “Third, gas is a way more ecological energy resource and will be the only way to balance the energy system that is claimed to be based on renewable sources”, says Rexhepi.

According to him, if Kosovo suspends this project, then in the next 10 years it will continuously increase the dependence of energy on electricity imports. “This can create economic instability and a significant increase in the inflation rate,” said Rexhepi.

 

By: Xhelal Neziri-Associate of The Geopost from Skopje

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