The EU-Russian Gas Interdependence and Turkey

By Arinc, Ibrahim S. | Insight Turkey, October 2007 | Go to article overview

The EU-Russian Gas Interdependence and Turkey


Arinc, Ibrahim S., Insight Turkey


The EU depends highly on Russian gas and this dependency is expected to increase in the following decades. Conversely, natural gas export revenues significantly contribute to the Russian budget, making it dependent on gas sales to Europe. The relationship between the EU and Russia is therefore one of interdependence. Turkey's impact on this relationship has the potential to benefit all parties, as its strong ties with both the EU and Russia give it a unique position in the region. For the EU, Turkey could contribute to the diversification of supply, and secure transit pipelines connecting Middle Eastern and Caspian reserves to the EU. For Russia, Turkey could provide an export outlet for Russian gas to the Mediterranean and an alternative transit route to Europe.

The EU-Russia Trade Balance and the Significance of Natural Gas

According to the Statistical Office of the European Communities (Eurostat), Russia is the third largest trading partner with the EU, and the EU is Russia's largest trading partner, accounting for more than 52 % of its overall trade. In 2006, the goods exported from the EU to Russia were valued at 72.4 billion euros, while the exports from Russia to the EU were valued at 140.6 billion euros. (1) It is obvious that the trade deficit between the EU and Russia is almost 70 billion euros. In 2005, the Foreign Direct Investment (FDI) made by the EU in Russia was 8.9 billion euros, while Russian FDI in the EU was 4.1 billion euros. (2)

Russian imports from the EU primarily took the form of medicine, motor cars, communication equipment, and electronics, while the EU looked to Russia for raw materials such as oil, gas, coal, nickel, aluminum and copper. (3) The Russian energy exports to the EU were valued at 99.7 billion euros. In the EU's total energy imports from Russia, natural gas has a very strategic position. Therefore, the asymmetry in the trade balance between the EU and Russia involves not only a trade deficit, but an imbalance in the significance of the goods themselves. The EU's increasing dependence on Russian gas is expected to affect the trade deficit in the following decades. Therefore, the EU is trying to establish a strong dialogue with Russia to reach a common interest in this asymmetrical, yet interdependent relationship.

The natural gas issue is the determining factor fostering Russian-EU interdependence, and a predominant concern in their developing relations. On the one hand, the Russians wish to secure the future of European gas demand, while decreasing its own dependence on transit routes through Ukraine and Belarus. On the other hand, the Europeans seek to improve the security and diversification of their supplies, thereby decreasing their level of vulnerability and dependence on Russian gas. Turkey's strategic role intersects the interests of both the EU and Russia. Therefore, Turkey could contribute to the rehabilitation of the more positive aspects of EU and Russian interdependence. Via Turkey, the EU could reach alternative gas sources in the Middle Eastern and Caspian regions, and Russia could decrease its dependence on its problematic transit routes by constructing new pipelines via Turkey to the European gas market.

The Natural Gas Supply and Demand of the EU

The European Union is a net importer of natural gas. In 2006, the natural gas proven reserves of the EU were nearly 2% of the world's total (4) and the total supply of natural gas in EU was 511.1 billion cubic meters (BCM). (5) The EU's indigenous production was 208.6 BCM, the imports were 377.1 BCM and the exports were 74.6 BCM. (6) The EU's major indigenous suppliers are the United Kingdom and the Netherlands. In 2006, the indigenous supply came from the Netherlands (50 BCM) and the UK (6.2 BCM). (7) According to the International Energy Agency (IEA), total EU gas production is expected to decrease to 225 BCM in 2010 and 147 BCM in 2030, respectively. (8) However, natural gas demand is estimated to increase within the EU in the following decades. …

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