U.S. opposition to the natural gas pipeline from Russia to Germany is founded on the concern that, out of fear for its energy security, the Germans will make political concessions to the Russians. As US Ambassdor to the EU Gordon Sondland put it in a recent Financial Times piece, “If Europe allows new Russian gas arteries into the heart of the continent, it will find itself hosting a Trojan horse.”
This would seem to contradict the experience of the past few years; Germany has imposed economic sanctions on the Russians despite already getting half of its gas supply from them. Which highlights the degree to which policy-makers appear to have a poor understanding of both the industry and energy security.
Years ago, I was told that energy security in the United States referred to utilities stockpiling coal against a coal miners’ strike (which used to occur regularly). Of course, the U.S. army supposedly stockpiled anthracite in Berlin because a Congressman insisted they have energy security. Guess whose district produced the coal?
More political sins have been committed in the name of security than almost anything else. The 18th century deportation of the Cherokee peoples, the World War II internment of the Japanese (and some others), and the McCarthyite hearings in the 1950s are but a few examples.
Economic sins in the name of security have been plentiful as well. In the U.S., the government has sometimes favored domestic producers (of oil and ethanol) supposedly for reasons of energy security. The British government bought a controlling interest in Anglo-Persian Oil Company, later British Petroleum, now BP, to ensure oil for its fleet (not wanting to be dependent on those dastardly Americans). That proved less than useful when German submarines made it difficult to ship the oil to Britain, which relied instead on those untrustworthy Americans for oil.
In the 19th century, fears of access to resources were common particularly since much of the world’s commodity producers were controlled by the European imperialists and often heavily concentrated. (Exporting various plants was long illegal in a number of places to protect an area’s monopoly.) On the other hand, in the modern world especially post World War II, there are no obvious examples of a substance that can be successfully embargoed, lacking military force.
Modern embargoes are few and far between, and rarely of much impact. Case in point: when China decided to reduce its export quotas for rare earths in 2010, of which it was nearly the only supplier, fears of widespread disruption of high-tech products proved groundless. As Tim Worstall points out, new production replaced the lost supplies, and while chip manufacturers were inconvenienced, consumers were nearly unaffected.
Which demonstrates that the political use of resources is also a double-edged sword. Disrupting supplies to accomplish unrelated political goals can backfire, making consumers seek substitutes and other producers enter the market. Since Gazprom first cut supplies to the Ukraine in 2006, it has arguably seen a loss of 2 Tcf of sales to Europe (see figure), although the causality is hardly clearcut.
And a ‘disruption’ is far more complex than just the amount of natural gas lost, as if some consumers just didn’t get gas. The system in Europe includes numerous supply sources, large amounts of gas storage, and interconnectors so that most supply losses are coped with in a way that the public doesn’t even notice. The Gas Security Review, published annually by the IEA, provides excellent coverage of problems from the demand and supply side. The latest remarks: “On 12 December 2017 Europe’s oil and gas infrastructure suffered from a series of individual technical disruptions affecting fuel production and transport facilities. The combination of co-ordination between industry stakeholders (suppliers and system operators), demand response to price spikes in downstream markets and emergency policy measures enabled any physical shortage to be avoided in spite of major technical issues.”
It could easily be argued that Russia’s revenue needs mean that its gas sales to Europe make it more vulnerable than Europe is to its gas purchases. After all, Europe has many other sources of natural gas (and substitutes), but Russia has few other markets for its gas. And given the money spent on pipeline construction, the financial losses of alienating European customers are daunting.
Energy vulnerability is a thing, but it’s rather like nuclear power. The fear of radiation is usually more damaging than radiation itself, as the Fukushima accident shows. Similarly, politicians’ willingness to take steps out of their fears about energy dependence typically does more damage than the actual vulnerability. Certainly, if a small country like the Ukraine can resist Russian influence despite their dependence on Russian natural gas, surely Germany is in no serious danger.