Energy policy of Russia
|This article is outdated. (July 2011)|
The Energy policy of Russia is contained in an Energy Strategy document, which sets out policy for the period up to 2020. In 2000 the Russian government approved the main provisions of the Russian energy strategy to 2020, and in 2003 the new Russian energy strategy was confirmed by the government. The Energy Strategy document outlines several main priorities: an increase in energy efficiency, reducing impact on the environment, sustainable development, energy development and technological development, as well as improved effectiveness and competitiveness.
On July 2008 Russia's president signed a law allowing the government to allocate strategic oil and gas deposits on the continental shelf without an auction procedure. On 17 February 2011, Russia signed a deal with China, stating that in return for $25 billion in Chinese loans to Russian oil companies, Russia will supply China with large quantities of crude oil via new pipelines for the next 20 years.
- 1 Overview
- 2 Natural gas
- 3 Oil
- 4 Electricity
- 5 Climate change
- 6 Energy usage
- 7 Energy in foreign policy
- 8 Controversies
- 9 See also
- 10 Footnotes
- 11 References
- 12 External links
The idea of a Russian national energy policy was approved by the government of Russia in 1992. At the same time government decided to develop the Energy Strategy of Russia. For this purpose the Interagency Commission was established.
In December 1994, the Energy Strategy of Russia (Major Provisions) was approved by the government, followed by the presidential decree from 7 May 1995 confirming the first post-Soviet Russian energy strategy On the Main Directions of Energy Policy and Restructuring of the Fuel and Energy Industry of the Russian Federation for the Period up to the Year 2010, and the governmental decision from the 13 October 1995 approving the Main provisions for the Energy Strategy of the Russian Federation.
The strategy was changed under the presidency of Vladimir Putin. On 23 November 2000, the Russian government approved main provisions of the Russian energy strategy to 2020. On 28 May 2002, the Russian Ministry of Energy gave an elaboration on the main provisions. Based on these documents, the new Russian energy strategy up to 2020 was approved on 23 May 2003 and confirmed by the government on 28 August 2003.
The main objective of Russian energy strategy is defined to be the determination of ways of reaching a better quality of fuel and energy mix and enhancing the competitive ability of Russian energy production and services in the world market. For this purpose the long-term energy policy should concentrate on energy safety, energy effectiveness, budget effectiveness and ecological energy security.
The energy strategy document defines the main priority of Russian energy strategy as an increase in energy efficiency (meaning decreasing of energy intensity in production and energy supply expenditures), reducing impact on the environment, sustainable development, energy development and technological development, as well as an improvement of effectiveness and competitiveness.
Gazprom has a monopoly for the natural gas pipelines and has exclusive right to export natural gas, granted by the Federal Law "On Gas Export", which came into force on 20 July 2006. Gazprom also has control over all gas pipelines leading out of Central Asia, and thus controls their access to the European market. Russia has used Central Asia's gas, primarily that from Turkmenistan, on occasions where it has found itself unable to meet all its delivery obligations from its own production. Such circumstances in 2000 led to Gazprom allowing Turkmenistan to use its pipelines to supply gas to the Russian domestic market leaving Gazprom free to fulfil its obligations towards European customers. Other main natural gas producers in Russia are gas companies Novatek, Itera, Northgas and Rospan, and vertically integrated oil companies Surgutneftegaz, TNK-BP, Rosneft and LUKOIL.
The main export markets of Russian natural gas are the European Union and the CIS. Russia supplies a quarter of the EU gas consumption, mainly via transit trough Ukraine (Soyuz, Brotherhood) and Belarus (Yamal-Europe pipeline). The main importers are Germany (where links were developed as a result of Germany's Ostpolitik during the 1970s, and also Ukraine, Belarus, Italy, Turkey, France and Hungary.
As the Arctic ice cap shrinks due to global warming, the prospect of oil exploration in the Arctic Ocean is thought to be an increasing possibility. On 20 December 2001, Russia submitted documents to the UN Commission on the Limits of the Continental Shelf claiming expanded limits to Russian continental shelf beyond the previous 200 mile zone within the Russian Arctic sector. In 2002 the UN Commission recommended that Russia should carry out additional research, which commenced in 2007. It is thought that the area may contain 10bn tonnes of gas and oil deposits.
The Russian electricity market is dominated by Inter RAO and Gazprom Energoholding. While production and sale will be opened up to competition, transmission and distribution remain under state control.
Vladimir Putin approved the Kyoto Protocol on 4 November 2004 and Russia officially notified the United Nations of its ratification on 18 November 2004. The issue of Russian ratification was particularly closely watched in the international community, as the accord was brought into force 90 days after Russian ratification (16 February 2005).
President Putin had earlier decided in favour of the protocol in September 2004, along with the Russian cabinet, against the opinion of the Russian Academy of Sciences, of the Ministry for Industry and Energy and of the then president's economic advisor, Andrey Illarionov, and in exchange to EU's support for the Russia's admission in the WTO. As anticipated after this, ratification by the lower (22 October 2004) and upper house of parliament did not encounter any obstacles.
The Kyoto Protocol limits emissions to a percentage increase or decrease from their 1990 levels. Russia did not face mandatory cuts since its greenhouse-gas emissions fell well below the 1990 baseline due to a drop in economic output after the breakup of the Soviet Union. Because of this, despite its growing economy, by 2012 Russia will by no means exceed the level of emissions in 1990, which is the Kyoto Protocol's year of departure.
It is debatable whether Russia will benefit from selling emissions credits to other countries in the Kyoto Protocol, although Gazprom has already entered the market. "Russia is the Saudi Arabia of carbon [carbon emissions credits]," said its representative. "There is a tremendous bank there".
In terms of the Russian energy demand structure, domestic production greatly exceeds domestic demand, making Russia the world’s leading net energy exporter.
Energy in foreign policy
Russia's energy superpower status has recently become a hot topic in the European Union. Russia's overwhelmingly large reserves of natural gas have helped give it the title without much debate.
Russia has recently been accused in the West (i.e. Europe and the United States) of using its natural resources as a policy tool to be wielded against offending states like Georgia, Ukraine, and other states it perceives as hindrances to its power. According to one estimate, since 1991 there were more than 55 energy incidents, of which more than 30 had political underpinnings. Only 11 incidents had no political connections. On the other hand, Russian officials like to remind their Western partners that even at the height of the Cold War the Soviet Union never disrupted energy supplies to the West.
Russia, in turn, accuses the West of applying double-standards relating to market principles, pointing out that it has been supplying gas to the states in question at prices that were significantly below world market levels, and in some cases remain so even after the increases. Russia argues that it is not obligated to effectively subsidize the economies of post-Soviet states by offering them resources at below-market prices.
Azerbaijan and Armenia
Starting 1 January 2007 Gazprom increased the price of natural gas for Azerbaijan to 235 USD per thousand cubic metres. Azerbaijan refused to pay this price and the gas export to Azerbaijan stopped. On its side, Azerbaijan stopped oil export to and via Russia. A year earlier, pro-Russian Armenia was hit with the same 100% price hike as Western-oriented Georgia, Vladimir Socor has observed.
The Russia-Belarus energy dispute began when Russian state-owned gas supplier Gazprom demanded an increase in gas prices paid by Belarus, which has been closely allied with Moscow and forms a loose union state with Russia. It escalated on 8 January 2007, when the Russian state-owned pipeline company Transneft stopped pumping oil into the Druzhba pipeline which runs through Belarus. Transneft has accused Belarus of forcing the shutdown by stealing oil from the pipeline and halted the oil transport. On 10 January, Transneft resumed oil exports through the pipeline after Belarus ended the tariff that sparked the shutdown, despite differing messages from the parties on the state of negotiations.
On 9 July 2008, after signing an agreement between the United States and the Czech Republic to host a tracking radar for an antiballistic missile system, the flow of Russian oil through the Druzhba pipeline to the Czech Republic started to reduce. Although officially the linkage between reduction of oil supplies and the radar agreement was not claimed, it was suspected. Transneft denied any connections with radar agreement, saying that reduction was purely commercial as Tatneft and Bashneft started to refine more oil at their own refineries. Although Prime Minister Putin asked Deputy Prime Minister Igor Sechin to 'work with all partners to make sure there are no disruptions', in reality the supplies were reduced to 50%.
In the January 2006 alleged North Ossetia sabotage, two simultaneous explosions occurred on the main branch and a reserve branch of the Mozdok-Tbilisi pipeline in the Russian border region of North Ossetia. The electricity transmission line in Russia's southern region of Karachayevo-Cherkessiya near the Georgian border was brought down by an explosion just hours later. Georgian president Mikhail Saakashvili blamed Russia for putting pressure on Georgia's energy system at the time of the coldest weather.
On 1 November 2006 Gazprom announced that it will construct a direct gas pipeline to Georgia's breakaway region of South Ossetia. The work on the pipeline started just before South Ossetia's 12 November referendum on separating from Georgia. Starting 1 January 2007 Gazprom increased natural gas prices to Georgia following an international incident in an alleged effort to strongly influence the Georgian leadership's defiance of Moscow. The current price is 235 USD per thousand cubic metre, which is the highest among the CIS countries.
The August 2008 military conflict between Georgia and Russia over the autonomous region of South Ossetia, which has been de facto independent from Georgia since the early 1990s, is likely to shift the balance of power between the main players involved in the formation of the future of the Caspian and Central Asian energy sector, including:
• Producer and transit countries: Azerbaijan, Georgia, Kazakhstan, Turkmenistan, Uzbekistan, Turkey and Iran;
• Foreign corporations operating in the region's hydrocarbon sector;
• Major external players: China, Russia, the European Union and the United States.
The volatility of these transit routes is likely to shape investment decisions of international oil companies involved in the development of Central Asian and Caspian hydrocarbons and their transportation to global markets. Governments of these resource rich countries are bound to have serious concerns about the safety of BTC, WREP and BTE pipelines, the railway networks and the oil terminals at the Georgian Black Sea ports of Batumi, Kulevi and Poti, all of which were halted by the Georgian-Russian hostilities. Although, the pipelines were only temporarily shut down for security reasons and were not targeted or damaged in the conflict, their future expansion and the construction of related new pipeline projects, such as the Kazakh-Caspian Transportation System, the Trans-Caspian gas pipeline and Nabucco are now uncertain. In this situation, Central Asian and Caspian producers may opt for traditional exports via Russia (providing Moscow successfully expands the capacity of its oil and gas export routes) and the new export pipelines to China.
On 29 July 2006 Russia shut down oil export to Mažeikių oil refinery in Lithuania after an oil spill on the Druzhba pipeline system occurred in Russia’s Bryansk oblast, near the point where a line to Belarus and Lithuania branches off the main export pipeline. Transneft said it would need one year and nine months to repair the damaged section. Although Russia cited technical reasons for stopping oil deliveries to Lithuania, Lithuania claims that the oil supply was stopped because Lithuania sold the Mažeikių refinery to Polish company PKN Orlen in an effort to avoid the refinery and infrastructure being bought out by Russian interests. Russian crude oil is now being transshipped via the Būtingė Marine Terminal.
There has been rapprochement with Mr Tusk's government in Warsaw, after two years of tensions with the conservative government of Mr Kaczynski. The cooperation on the Yamal-Europe pipeline is continued without serious problems. Nevertheless, some disagreements concerning control of Yamal-Europe pipeline and transit pricing remain. Despite attempts to relive tensions, consecutive Polish governments strongly oppose the Nord Stream project bypassing Poland and favour further development of overland alternatives. It remains a contentious issue that as a result of Russian-Ukrainian gas dispute in 2009, Polish PGNIG gas company did not receive contracted supplies of Russian gas from Ukraine.
At the beginning of 2006 Russia greatly increased the price of gas for Ukraine to bring it inline with market values. The dispute between Russian state-owned gas supplier Gazprom and Ukraine over natural gas prices started in March 2005 (over the price of natural gas and prices for the transition of Gazprom's gas to Europe). The two parties were unable to reach an agreement to resolve the dispute, and Russia cut gas exports to Ukraine on 1 January 2006 at 10:00 MSK. The supply was restored on 4 January, when a preliminary agreement between two gas companies was settled. Other disputes arose in October 2007 and in January 2009, this dispute again resulted in 18 European countries reporting major falls or cut-offs of their gas supplies from Russia transported through Ukraine. Gas supplies restarted on 20 January 2009 and were fully restored on 21 January 2009.
EU-Russia Energy Dialogue
The EU-Russia Energy Dialogue was launched at the EU-Russia Summit in Paris in October 2000. François Lamoureux, Director general for Energy and Transport at the European Commission and Viktor Khristenko, Vice-Prime Minister of the Russian Federation took up the responsibility as sole interlocutors. Christian Cleutinx, then Head of Unit at the European Commission was designated as the Coordinator of the dialogue. At the working level the Energy Dialogue consists three thematic working groups. The Energy Dialogue involves the EU Member States, energy industry and the international financial institutions. Projected gas pipelines originating in Russia and supplying Europe.
Ratification of the Energy Charter Treaty
Russia signed the Energy Charter Treaty in 1994, but flatly refused to ratify its current revision. Russia's main objections to the ratification revolve around the proviso about the third party access to the pipelines and transit fees. Notwithstanding the fact that Russia didn't ratify the treaty, Ivan Materov, State Secretary and Deputy Minister of Industry and Energy of the Russian Federation, serves as the vice-chairman of the Energy Charter Conference, and Andrei Konoplyanik as the Deputy Secretary General.
Russia and the European Union have also failed to finalize the negotiations on the Energy Charter Protocol on Transit. The main issue remain open is how, and to what extent, the Protocol will include mechanisms for establishment long term transit arrangements. Also the third party access to its pipeline infrastructure has remained Russia's main objection to the Protocol.
According to the estimation of Swedish economist Anders Åslund, 50% of the state-owned Gazprom's investments are lost through corrupt practices. For instance, the Russian section of Blue Stream pipeline was three times more expensive to construct per kilometer than the Turkish section of the pipeline.
- Economy of Russia
- Energy in Russia
- Energy policy
- Energy superpower
- Russia in the European energy sector
- Russie.NEI.Visions in English
- EU-Russia Centre
- Petroleum exploration in the Arctic
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