Why Russian Gas Diplomacy Fails: The Geopolitics-Energy Nexus in Ukraine and Turkey
Filippos Proedrou
Abstract
The paper argues that Russia’s foreign policy vis-à-vis Ukraine and Turkey severely compromises its gas diplomacy. In utilizing the concept of issue-salience, it attempts to show how, by means of prioritizing geopolitical benefits in both cases, Russia has failed to serve its energy security goals in two distinct ways. Firstly, it has not managed to resolve transit-related impediments to its export strategy, by both failing to break transit dependence on Ukraine and damaging relations with prospective transit state Turkey. Secondly, it has jeopardized its customer base in two significant markets. This brings severe repercussions not only for its energy industry, but also for its grand strategy. The paper thus proceeds to suggest ways in which Russia’s energy and geopolitical interests can come to be served together, rather than undermine each other, as is currently the case. This is essential if Russia is to retain its political clout and international standing, given its strong dependence on energy-born revenues.
Keywords
Crimea, Syria, Turkish Stream, EU, gas markets, geo-economics
Introduction
The energy landscape is undergoing constant change and fluidity due to tectonic market and geopolitical changes. Market developments were of decisive impact on the energy sector in the post-crisis period (Henderson and Pirani 2014; Goldthau and Boersma 2014, 15). Russian energy goals have been hit hard by the shale gas revolution and OPEC’s ensuing decision to maintain production at high levels, which have together produced an unprecedented gas glut, at the same time that liberalization and regulation of the EU market have raised crucial obstacles to Gazprom’s preponderant role and position in the European market. Geopolitics, meaning the spatial and geo-centric aspects of international relations (Parker 1985, 1998), made an impressive comeback since 2013 and has catalytically reshaped the energy field. Geopolitical developments, and in particular the Ukrainian and Syrian crises, have amplified market-induced consequences, building up an even less amiable environment for Russia’s energy diplomacy.
It is important, though, to acknowledge that Russia has not been so much on the receiving end of geopolitical developments as much as in the position of an active stakeholder and player in both crises. Its geopolitical interests have driven specific policies that impacted unfavorably on its energy interests. Such an understanding brings home the point that, contrary to market developments, geopolitical maneuvers have not been external variables, but, to the contrary, internal variables to Russia’s gas diplomacy. They also underline the incongruence between Russian geopolitical and energy goals. Instead of the two sets of goals reinforcing each other, as envisaged in the consecutive Russian energy strategies, they seem to undermine and work against each other. This remains a weakness of Russian foreign policy.
The paper is underpinned by the assumption that the Kremlin has systematically prioritized geopolitical over energy interests. It utilizes the concept of issue-salience and the weak cognitivist framework to provide a consistent analytical framework within which Russia’s deteriorating relations with Ukraine and Turkey and its deficient gas diplomacy can be understood together. With this conceptual and theoretical grounding, it identifies Russia’s main geopolitical and energy interests in Ukraine and Turkey and argues that a common thread unites the Russian tactics vis-à-vis both states, and that thread is the discernible prioritization of geopolitical over energy interests.
The paper scrutinizes primary resources, Russia’s energy strategy documents since the 2000s, and extensive literature on Russian foreign policy and energy strategy, including scholarly work encompassing interviews with policy-makers and energy policy analysts which allows us to exploit a wealth of insights (Godzimirski 2013a; Skalamera and Goldthau 2016). A broad theme that stands out is Russia’s sub-optimal commercial gas policy, which more often than not is subordinated to geopolitical considerations, rather than guides the state’s energy strategy (Larsson 2006, 177; Liuhto 2010; Proedrou 2012; Goldthau and Boersma 2014; Pascual 2015).With ample empirical evidence across cases supporting such a thesis, and none making the case that commercial energy concerns drive Russia’s energy strategy irrespective of or against its geopolitical interests, one could speak of specific patterns that arrange the geopolitics-energy equilibrium and inform Russian foreign and energy policy. While commercial concerns are present, our major assumption in the study of the Ukrainian and Turkish case studies is that they do not overarch geopolitical ones, but, to the contrary, are subordinated to them. While dissenting voices, arguing for a more market-based and commerciallysound energy strategy, are presentwithin the decision-making structures, they remain steadily and effectively marginalized (Proedrou and Frangonikolopoulos 2010; Godzimirski 2013a); as a result, an entrenched geo-politically biased rationale seems to be at play, allowing us to spot regularities across the Ukrainian and Turkish cases.
In particular, we find that Russia’s reactions to perceived threats to its sovereignty and security, as well as its intent to retain allies and military bases, outweighed its concerns for energy security, defined as security of demand in foreign markets at competitive prices that will guarantee significant profits for the exporter (Proedrou 2012, 4). This has been the case both in terms of transit-related problems and market share in foreign markets.Whether geopolitical issues are indeed more salient than energy ones is open to discussion and one could well argue for or against this. The point we make here is that this specific consistent prioritization, while possibly well-grounded, is counter-productive and ineffective in the mid-term in that it undermines Russia’s geopolitical goals it aims to serve.
In this context, Russia opted to follow a hard-poised stance in Ukraine, annexed Crimea, employed hybrid war tactics in eastern Ukraine and retains a belligerent stance against the new Ukrainian government. This led twice to a temporary halt in supplies to Ukraine, which translated into a loss of energy-born revenues, as well as Russia’s declining reliability as a gas supplier. Furthermore, Russia’s decision to intervene militarily in Syria in order to back its ally, Bashar al- Assad, and secure its only military basis in the Mediterranean raised eyebrows in Turkey and went against its own dilatory policy in the region. Also, the geopolitical friction after the downing of a Russian air jet by Turkey led to the indefinite postponement of the Turkish Stream pipeline, and has created an energy security dilemma between the two states. This, in its turn, severely compromises Russia’s posture, reliability, revenues and prospects as a gas supplier in the wider region. What stands out is Russia’s incompetence to manage its relations with pivotal transit states in the face of foregone failed arrangements for direct gas links with the EU.
Conceptual and Theoretical Framing: Issue Salience and Weak Cognitivism
The concept of issue salience is critical for the ordering of foreign policy priorities. It refers to the relative importance and prominence that policy- and decision-makers, as well as the public that functions as a pressure group for them, attach to given issues on the political agenda. Some specific issues resonate more with the public and decision-makers in comparison to others (Oppermann and Vries 2011, 4, 8). The theory of issuesalience has been applied in different domestic political settings, especially in terms of popular approaches to defense, as well as in relation to integration dynamics in national European politics (Oppermann and Viehrig 2009, 2011). In this paper, we utilize the concept to examine the ordering of the priorities of Russian foreign policy.
The process of attaching variable importance to issues can be grasped by the weak cognitivist framework (Hasenclever, Mayer and Rittberger 1997, 139-154; Goldstein and Keohane 1993), which allows for the study of both objective and (inter)subjective factors. While the Ukrainian revolt of 2013 and the Turkish downing of the Russian air jet in 2015 are irrefutable objective facts – brought about by concrete, socially constructed understandings of the actors - the understanding of the motives behind them, their consequences and the most appropriate counter-policies that they necessitate are better grasped as social facts that will take their exact form through the conceptual processes and deliberations of the main actors, in this case Russian policy-makers.
Within this context, the paper sets out to juxtapose the importance and policy relevance of geopolitical and energy issues. Geopolitics is an “approach to foreign policy analysis that understands the actions, relationships and significance of states in terms of geographical factors, such as location, climate, natural resources, physical terrain and population” (Heywood 2010, 407). It regards the influence of geographic factors in political action (Gottman1942) and bears close affinity with Russia’s grand strategy and geo-strategy (Gray 1988). In this context, geopolitical interests translate into the maintenance and increase of assets in the spatial dimension, such as military bases, alliances, and territory serving as a soft underbelly, that augment the country’s power and ensure its international prestige and standing, as well as safeguarding its borders, security and sovereignty.
Russia’s gas diplomacy, on the other hand, has a twofold goal. The first goal is protecting and reinforcing its energy security, in the sense of ensuring security of demand for its gas exports, and boils down to access to markets at profitable prices. This dimension encompasses transit security and favorable contractual arrangements with lucrative and reliable customers that are a match for the exportable production, and this way ensure the thriving of the energy industry itself (Müller-Kraenner 2008). Although Ukraine and Turkey are neither the most lucrative and stable, nor the most reliable trade partners, they represent a significant portion of Russia’s exported gas (around 40bcm have been destined for Ukraine, and around 25bcm for Turkey out of the 192bcm that make up Gazprom’s total exports) (Stern, Pirani and Yafimava 2015). Furthermore, dependence on transit states has rightly been seen as jeopardizing security of demand in terms of both actual flows and reliability (Proedrou 2012, 81-84). Ukraine has been the prime gas transit country for Russia’s major export destination, the EU, while Turkey has been featured as a potential future transit state for Russian gas (Bechev 2015; Stern, Pirani and Yafimava 2015). Ensuring a continuous flow of energy exports raises significant revenues, which bolster the energy industry and create available sums for new investments, both upstream and downstream. A virtuous cycle is created whereby a successful export policy becomes self-reinforcing. This has been the case of the EU-Russia gas trade, especially after the 1990s (Belyi 2015). Stable and amiable political relations are a necessary enabling background condition and a significant facilitator of gas trade, as, for example, the Russo-German energy alliance indicates.
The referent object of our analysis, the subject perceiving reality in a certain way and acting accordingly, is the Russian state. While this is evident for the geopolitical dimension, and for the energy-related geopolitical one discussed below, it merits further discussion for the energy security aspect. In particular, one could claim that a pluralistic approach is needed to account for energy security since there are a number of Russian energy players. The fact that Russia’s gas sector is extremely concentrated and run virtually by Gazprom, however, renders a reductionist assumption both feasible and valid (Aalto et al 2012; Kivinen 2012). In the domestic market, this boils down to Gazprom’s ownership of the truck pipeline system, its arbitrary ceding of third party access, and its holding the majority of gas reserves. Gazprom also crucially holds a monopoly on gas exports, this meaning that its competitors cannot have access to lucrative export markets (recent rights granted for LNG exports to other companies and a minor pipeline-gas export contract to Novatek do not as of yet undermine the broad picture of concentrative gas market dynamics,see Yafimava 2015; Belyi and Goldthau 2015; Stern 2014; Hendrson 2014). At the same time, Gazprom is majority-owned by the state; six out of its eleven-member executive board are state officials; and ample empirical evidence attests to the reasonable assumption of Gazprom’s submission to the Kremlin’s wishes (Larsson 2006, 177; Liuhto 2010; Proedrou 2012; Goldthau and Boersma 2014, 15). The example of Gazprom’s CEO Alexei Miller being allegedly caught by surprise when Putin officially announced Russia’s intent to build Turkish Stream, is illuminating (Skalamera and Goldthau 2016, 9). In exchange for retaining its dominant role and monopoly in the export market, Gazprom has agreed to sell gas at regulated, suppressed prices for domestic end-users, this way becoming the most important social policy pillar for the state apparatus, which thus retains high popularity and achieves social stability (Mitrova 2014; Nowak, Ćwiek-Karpowicz and Godzimirski2015; Natural Gas Europe 2015; Skalamera and Goldthau 2016). In particular, Moscow uses subsidized gas prices to keep control over its regions, including the most problematic ones, and ensures steady and affordable gas supply both to socially sensitive groups and domestic industries thus facilitating their competitiveness (Skalamera andGoldthau 2016). As Nesvetailova (2016, 115-116) alleges, the influx of energy-born revenues in the 2000s has translated into a dynamic state-centered secondary economy in Russia, which further enabled the regime’s consolidation of power. Gazprom’s role as a social absorbernotwithstanding, the rationale of profitability is important for both Gazprom and Moscow, since it allows the company to generate profits and sustain its operations and dominant position, and the regime to allocate dividends at discretion to consolidate its position. The Independents, a number of private companies, and state-owned Rosneft have risen to challenge Gazprom’s privileged position and acquired some benefits, without this however impacting the structure and dynamics of the Russian gas sector. While some authors view this as a potential game-changer in the future (Belyi and Goldthau 2015), it has as of yet born marginal impact on Russia’s gas sector dynamics. As a result, we not do deal here with the profitability rationale and interest of these companies, but with Gazprom’s and the Russian state’s wider energy business interests which also span over Turkey and Ukraine.
The second energy-related goal regards the added strength that the energy industry conveys to the geopolitical standing of the country. Gas contracts, shared infrastructure, and plans for new pipelines become themselves potentially important geopolitical assets, and at the same time provide Russia with significant leverage and promote its broader political goals. Energy pacts usually go hand in hand with security and defense pacts (as in the case, for example, of Armenia and Belarus), enhance the political power and geopolitical standing of energy producers and solidify alliances and diffuse patterns of political and economic cooperation (as is the case of the Russian-led Eurasian Union) (Balcameda 2012;Weaver 2013;Pascual 2015).
It is this latter aspect of energy politics that is socially constructed as salient. Together with geopolitical issues that speak to the national pride and global role of Russia, and are hence embraced by both the political establishment and the broad public, geopolitically-minded energy politics are the most pronounced foreign policy issues for the Kremlin (Godzimirski 2013b; Nowak, Ćwiek-Karpowicz and Godzimirski 2015, 1). Dominated by the security-military complex, or the siloviki, Russian decision-makers continue, by and large, to see the world through realist, competitive zero-sum lenses and analytical frameworks (Proedrou and Frangonikolopoulos 2010; Bateman 2014; Lynch 2016). In this context, the broad energy business interest of Gazprom and Russia, including staying and/or augmenting market shares and functional infrastructure routes, does not amount to much for the broad public, and is of secondary significance to the security-minded political establishment (Lindley-French 2014). Energy hence does not constitute a market commodity traded according to market rules, but is hailed as
a highly strategic good … [of] vital importance for welfare and national security… In [such] a purely geopolitical paradigm … energy is subordinated to larger national security goals, and becomes a mere means or an end of statecraft and foreign policy. Market arrangements … give way to more state dominated arrangements, in which energy trade is subject to a mercantilist approach and energy companies resume a key role in pursuing national grand strategy (Goldthau and Boersma 2014, 15).
Russia has made no secret of this geopolitical mindset, underlining time and again the linkages between its energy strategy and its geopolitical aspirations. In its Energy Strategy of 2003, it has been rather bold in stating that the role of the country in the global energy markets largely determines its geopolitical influence. In particular, it alleges that “energy constitutes an important instrument in Russia’s foreign policymaking, both in protecting national interests and [in] advancing them” (Government of the Russian Federation 2003). The Russian Energy Strategy of 2009 puts it much more mildly, but still allows much space for the use of energy for political goals. It states that