Without the current supplies of Russian gas, EU member states would face serious energy shortages and economic turbulence. The extent to which gas is relied upon for power generation across Europe underlines this risk: the fuel accounts for 48 per cent of power in the Netherlands, 58 per cent in Lithuania and Latvia, and as much as 82 per cent in Luxembourg. Fossil fuels more broadly dominate the EU energy mix: oil provides 38.1 per cent of energy consumption, gas 23.7 per cent, and coal 13.8 per cent. Aside from carbon sources, nuclear makes up 11.1 per cent, hydro 4.0 per cent, and 9.0 per cent comes from other renewable sources. The EU imports 53 per cent of all the energy it consumes, and even higher proportions of its oil and gas demands.

This import dependency comes at a high price. In 2013, the EU spent 403 billion euros on fuel imports, which fell to 261 billion euros in 2015. The drop in spending was not, however, a result of lower demand; rather, it was due to the global fall in prices to which the EU is highly vulnerable. Russia supplies 27.7 per cent of the EU’s oil, followed by Norway, Nigeria, and Saudi Arabia. As for gas, Russia supplies the EU with 29.4 per cent, not too far above Norway at 25.9 per cent, but significantly more than other suppliers such as Algeria and Qatar. That, for both oil and gas, four countries are the source of critical amounts of energy raises security and dependency concerns in itself. In addition to the large size of Russia’s market share, current infrastructure does not allow for other suppliers to replace Russian gas.

From interdependence to dependence

Until recently, Poland and Ukraine were both hostages of the old gas transmission infrastructure that runs from east to west in Europe. Prior to the construction of the Nord Stream I pipeline, which flows under the Baltic Sea connecting Russia and Germany and which opened in late 2011, Poland and Ukraine were crucial countries for gas transit from Russia to Europe. Large quantities of gas continue to pass through both countries. In the political sense, the flow of gas built interdependence between Poland and Ukraine, the “old” European Union members, and Russia. However, this mutual dependency did not translate into favourable gas prices or contracts from Russia for Poland or Ukraine.

The construction of Nord Stream I shifted the strategic position of Poland and Ukraine, which both lacked the appropriate energy infrastructure to change the direction of gas supplies. Russia skillfully blocked the possibility of infrastructure investments by successive governments in Poland and Ukraine by using diplomatic, economic, and other, illegal tools. With Nord Stream I, the relationship with Russia changed from one of interdependence to dependence, and began to pose an intense threat to Polish energy security. This development was felt in gas contracts that began to be extremely unfavorable in price and terms for Poland. Poland’s response was to construct the Świnoujście liquid natural gas terminal, which opened in 2015, to allow the import of 5 billion cubic metres of gas annually from countries such as Qatar, Norway, and the US. At present, Russia too is developing alternative markets, seeking to increase exports to Asian countries and gain leverage over its “old” European Union markets.

the Ukraine crisis exposed how, in the context of import dependence on Russian gas and infrastructural shortages, the scope for the EU to act is very limited

Russian aggression in Ukraine from 2014 prompted a sea of change in the perception of Russia as a gas supplier in the west of the EU. Russian involvement in its neighbour undermined borders in Europe and violated the 1990s international agreements that guaranteed Ukraine’s territorial integrity in exchange for nuclear disarmament. The annexation of Crimea and support for the rebels in the Donbass shocked public opinion across the EU. At the same time, the Ukraine crisis exposed how, in the context of import dependence on Russian gas and infrastructural shortages, the scope for the EU to act is very limited. Moreover, Russia’s investment of revenues from oil and gas into its military puts pressure on NATO members to match it and increase their defence spending to at least 2 per cent of GDP. In this way, the conflict demonstrated how reliance on Russia harmed Europe’s security in both energy and classic military terms, as well as strained government spending. The academics who had warned against Russian expansion and the statements of Polish government representatives and politicians once regarded as “Russophobe” turned out to be fair reflections of real threats.

A second pipeline

The building of Nord Stream II, a second gas pipeline between Russia and Germany, has only increased the energy security risks facing Poland and Ukraine and stressed the need to pivot away from Russian gas supplies. Construction of the Nord Stream II pipeline is ongoing and close to completion. Despite the risks for the EU’s energy security, the German government has blocked dialogue with other EU members over the pipeline on the basis that it is a mere business project. Poland has reacted by reviving long-stalling plans for Baltic Pipe, a gas connection to Norway that will transport 10 billion cubic metres of gas annually and will also benefit from EU funding. At the same time, works are underway to expand the liquid natural gas terminal in northwestern Poland from 5 to 7.5 billion cubic metres of gas. These investments, after their implementation in 2022, will allow Poland to cease importing gas from Russia. From the EU perspective, it is difficult to understand the German government’s support for the Nord Stream II project. Germany is often considered a leader in the energy transition and overall the expansion of renewables will strengthen security of the entire EU, in addition to environmental imperatives, but the project is going ahead. While Poland plans for its alternatives, Ukraine faces a very difficult situation, at once subjected to military pressure from Russia and possessing limited financial, legislative and regulatory capacity for changes in the energy sector.

The insecurities of power dependency

The relations of Poland, the Baltic states, and Ukraine with Russia are shaped by their supplier’s ability to use oil and gas imports to exert economic and political pressure on them. Gas supplies can be suspended and resumed to enable Russia to enforce arrangements beneficial to itself, as in the case of the lease of the Russian military base on Ukrainian territory in Sevastopol in 2007. High and unstable gas prices can weaken economic growth and drive inflation and worsening current account balances, as in Lithuania where prices have at times been higher than those recorded in Japan. Control over energy supplies gives Russia the tools to threaten the economic security of these countries. For the entire EU, the problem of importing oil and gas is crucial both in terms of energy security and economic security, i.e. maintaining a stable and competitive European economy.

Recent European legislation on gas supply is designed to overcome this vulnerability and introduces the solidarity principle: EU countries must help each other to always guarantee gas supply to the most vulnerable consumers, even in severe gas crises. The new security of gas supply regulation adopted in 2017 requires EU countries to cooperate with each other in regional groups to assess common supply risks and to plan joint preventive and emergency measures. The measure also ensures that decisions on whether pipelines should have permanent bi-directional capacity (reverse flow) take into consideration the views of all EU countries that could potentially benefit. European policies on energy liberalisation, infrastructure, and energy efficiency can all also make an important contribution to energy security. Ukraine, however, is not an EU member state and so does not fully benefit. And the Eastern Partnership – the EU’s programme for cooperation with its near neighbours such as Ukraine – is too weak financially to have much of an impact. The only way to change the position of oil and gas importers, especially Ukraine but also Poland and the Baltic states, in the long term is technological change: the development of renewable energy and energy efficiency.

the development of a distributed energy system based on small producers and a dispersed network would create much higher resilience in the face of interference

Plans to build nuclear power plants in Poland are politically unfeasible, while European experience indicates that cost control and deadlines for their implementation are a serious problem. According to forecasts from the Polish transmissions operator PSE, from 2023-2035 there will be a shortage of the required surplus power available that will impossible to compensate for through mitigating measures. These shortages will grow in subsequent years, from approximately 1000 megawatts in 2023 to 13 000 megawatts in 2035. In the period 2030-2035, not only will there be a shortfall in the required surplus power available to the transmission systems operator, but also of capacity in domestic power plants. There is no possibility of introducing nuclear energy to the system by 2023. Low flexibility of the energy system, slow development of renewables, and an unclear vision of energy policy (the 2009 energy policy has still not been updated) hinder investments, meaning that Poland will now need to import electricity, a tendency that will accelerate after 2025.[1]

Ukraine, which has post-Soviet technology and power plants, the potential for nuclear exists. However, the scale of expenditure means that external financing would be a necessity, which is not possible in the current political situation. Russia’s aggressive policy means, on the one hand, that Ukraine is struggling for survival and cannot pay due attention to energy policies and, on the other, that prospects for energy sector investment are burdened by the risk of war. Biogas could be one alternative, but weak biogas management is visible both in Poland and Ukraine. In Poland, there are no regulations regarding the introduction of biogas into gas networks, which would be the most effective way of managing the potential. Since 2015, the number of agricultural biogas plants in Poland has been stable at 98, which producers judge a success considering the difficulties that the sector has been facing for years. In Ukraine, the biogas alternative could be especially important as the country has some of the best land in Europe and could feed the entire EU by itself.

Both Poland and Ukraine are subject to a hybrid war on the part of Russia.[2] The energy systems of both countries are based on large-scale installations for electricity production and distribution – the kinds of centralised networks that are susceptible to hybrid war. From this perspective, the development of a distributed energy system based on small producers and a dispersed network would create much higher resilience in the face of interference. In Poland, this idea is translated in the form of energy clusters, energy systems that group local authorities. But regulatory weaknesses, especially the lack of ‘last mile’ liberalisation, mean that these programmes have not developed to their full potential. 

Renewables, efficiency and the road to security

The only rational, economically justifiable solution in the case of Poland and Ukraine in the short term is the development of infrastructure to connect with Russian energy supplies. But in the long term, a strategic improvement of energy efficiency and investments in renewable energy systems for Poland, Ukraine and the entire EU is crucial.[3] It is worth remembering that Poland has an infrastructure that allows it to source 100 per cent of its crude oil from places other than Russia, in the case of gas this will be possible after 2022. Infrastructure shortages in Ukraine put it in a much more difficult situation. The draft project presented by the Polish government on energy policy until 2040 assumes a reduction in the share of coal in the energy mix and the development of nuclear, solar, and offshore wind energy, although it does not pursue the potential for onshore wind. The lack of detailed calculations makes it impossible to refer in detail to this project, and it is amazing that the draft project does not contain an evaluation of current energy policy since 2009.

the development of distributed networks based on renewables is an important way forward for security and independence

Both in Poland and Ukraine there is a large potential for improving energy efficiency. In 2013, Ukraine achieved the same level of energy intensity as Poland did in the early 1990s. By 2016, its energy intensity decreased to 0.29 tonnes of oil equivalent per 1000 dollars, still much higher than in OECD countries and even higher than in Russia.[4] Generally, the economies of Poland and Ukraine are half as efficient as those in Germany or France. In Poland, a comprehensive modernisation of single-family buildings could bring a 4.4 per cent reduction in the demand for final energy. In Ukraine, the reduction of gas demand is a fundamental issue. In 2016, out of 33.2 billion cubic metres of gas, 17.6 billion were consumed by households. Most single-family and multi-family buildings in Ukraine were built before 1991, and therefore have low energy efficiency. The Ukrainian Ministry of Regional Development estimates that with comprehensive modernisation, the demand for gas can be reduced by 56 per cent.

While energy efficiency in the housing construction sector is crucial in Ukraine, biogas as a substitute for gas imports should also be dynamically developed. For Poland, a key problem is the generation of electricity, and shortages may appear by 2023. Renewable energy offers the only real chance to solve this problem. New solar plants, characterised by a short investment cycle and high generation in summer, should be built when electricity demand is rising and the generation of large coal plants is reduced due to cooling problems. For both countries, subjected as they are to various forms of hybrid war by Russia, the development of distributed networks based on renewables is an important way forward for security and independence.

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