Russia has all the possible interests in selling gas to Europe.The Crimea controversy is just not enough to require an upheaval of the energy situation of Europe.
If one of the founders of the European Group of Countries could come back from Paradise to look at the structure they created sometimes ago, he would not recognize it. Europe was the few great countries, which created the idea and the first structure of “Europe”. Now, we have a large number of countries big and small, all of them tied up together. Some of them have quite shaky democratic constitution. The group is ran by a large number of non-elected and not responsible managers following devoutly the Gospel of the American extreme right, which is, of course, quite spurned in America.
What was created is not the happy democratic rich area of Europe, but an array of countries aligned as a containment of the “Russian menace.“ In fact, Russia is not a menace, but the main pillar of the European economy. It produces now about eleven per cent of all crude oil produced in the world; and it exports to Europe about thirty per cent of oil, gas, and coal used there. Whether the “closing in” of European Russia was the result of a definite strategy, or simply of a policy of increasing the number of the countries, is now a moot point.
The consequences are quite obvious. The border areas are often inhabited by a mixed population, and have therefore a mixed political structure. Usually, the cities are on a political side, and the countryside are often more conservative, and resents the efforts of the middle class to create their own Government. The minority of Russian speakers feel discriminated and unhappy. Once consolidated after the dissolving of the URSS, Russia seems to be trying to recall to the fold some of the areas lost when the URSS crashed, and was divided.
The military occupation of Crimea seems to be the first attempt. The weaker border area is Ukraine, a country somewhat politically and racially divided : moreover, the border between Russia and Ukraine is crossed by the longer and bigger gas pipeline in the world, which crosses every border existing in Europe, and supplies Russian gas to Western Europe, down to Italy, the country which actually built the pipeline together with the Russians.
Germany and Italy are the two main consumers of this gas. An additional problem comes from the fact that the Ukraine seems sometimes to be uncertain; and sometimes it has not the money to pay the gas it uses, and the situation becomes a strange mix of money and politics. It happened some years ago, when the flow of gas was stopped and the smaller countries supplied by the Russian gas were freezing for a part of the winter, having no possibility to get some gas from another source.
The large European countries found ways and means to get Russian gas from the other two existing pipelines, and the managers of European companies importers of Russian gas were trying to reduce the problems between two countries, Russia and Ukraine. Eventually, the problem was solved and gas started flowing again trough the border. The main European countries did not suffer much as their energy system is quite sophisticated, and with alternative practical solutions.
Years ago, at the dissolving of the URSS,. Crimea was incorporated in the Ukraine. Few days ago, Russia has in fact “conquered” again, without a single shot, a piece of land it had lost. An operation on a small scale, compared with the work done by Europe in rebuilding Germany on its previous borders. Now, the problem is not only the supply of gas, which usually Ukraine has no money to pay: it is first, the Russian character of the Crimea, and, second, the nature of the border country, Ukraine, which seems to be quite oscillating, as there are different areas which apparently do not feel the same towards Russia. The situation can be described in a simple way.
Russia is a country which lives on the sale of basic materials, especially the sources of energy, oil, gas, and coal. This is the flow of money that keeps Russia alive. Russia has all the possible interests in selling gas to Europe, and has built three pipelines of various size and length. The longer was the first built, that goes to Europe through Ukraine and reaches southern Europe, i.e. Italy. This operation has various problems. First, the price of Russian gas was found to be too high for the market, which felt the competition of gas coming liquid into Europe from the sea, to be made into gas again. The price of gas from the great pipelines did require some adjustments to avoid bankrupting the seller of pipeline gas in the European market. The problem was eventually negotiated with some reciprocal concessions. Second, the crossing to Europe at Ukraine border may, every now and then, became complex because Ukraine has no money to pay for the gas it uses, and because there is quite a number of people, especially in the capital, who fear Russia and would not accept a Russian supported Government.
The second pipe comes through Poland , and has never had any problem. The third, the one built last, goes directly to Germany with a line under the sea to supply Germany and connects with other pipelines in Northern Europe. These three pipes are important, but they are not the only ones. The Southern European Countries, Italy and Spain get gas from the Mediterranean with two pipes,. ENI is trying to build a new one, for Russian gas, to Southern and Eastern Europe, a Southern Stream.
Moreover, as we said, there are possibilities to get liquid gas from the international market. There is in Europe quite a number of ways to survive for some time without the Russian gas, due to a network of underground storages, in Italy and in other countries, which is used to satisfy the excess demand during winter, and can be considered as an additional guarantee.
As we said, the marginal supply of gas coming now in Europe from the sea drives the prices down and presents the Russian producer with the necessity to go down to the international price. In any case, the USA may decide to export some of its gas, which has been found in great quantities in the schists, and has produced cheap fuel and feed stock to the USA industry. Up to now, such gas has been considered as an instrument to increase the productivity and the competitivness of the USA manufacturing industry. Exporting gas in great quantity would require quite a lot of investments for ships and liquefactions plants. Of course, the gas from USA would not necessarily be on large volumes. A relatively small volume of gas from the sea would bring the price down, and present the Russians with the necessity to equal the American price.
In any case, exporting gas in large volumes from USA to Europe would require a reorganisation of the market, and a very large increase of the alternative ways to receiving gas. Exporting crude oil would not require anything, only the decision of the USA to sell it at competitive prices. If the USA decides to supply of gas and crude oil the European consumer, that would have an immediate effect, that of lowering the price of both, as a new competitor had appeared on the market . Russia will have sooner or later to reduce its prices, and that would be felt in Russia much more than any other political measure. One could also imagine that simply the menace of behaving in that way would have an immediate effect.
The conclusion is, I believe, that the matter of Crimea is just not enough to require such an upheaval of the energy situation of Europe. Buyer and seller can play the same old game of volumes and prices. The Crimea is just not new. Centuries ago, the “Crimean war” opened the way for the creation of Italy as a nation , and a European State. A little war that the Russian lost.