Energy Security in Central and Eastern Europe: Towards a Common Approach
Energy security is of high importance to the EU, Russia and European transit states like Slovakia or Ukraine. Central and Eastern Europe has several options to diversify imports away from Gazprom: diversification of suppliers, increase in LNG imports, shift to a more short-term contracting (all undermining Gazprom’s dominant position), and extraction of ‘unconventional’ natural gas namely shale gas.
Drastic changes in production, transit and supply routes of natural gas to Europe open new possibilities and challenges for energy security. Recent developments include: new European gas market model; implementation of the EU 3rd Energy package; competition between already established gas transit routes and the new supply routes. Central and Eastern European countries could benefit from these new developments only in case of deeper cooperation between CEE gas transiters under conditions of new European gas regulation.
To prepare for a new era of short-term pricing Central and Eastern Europe should solve two main challenges. First, it has to define the funding mechanism of the new infrastructure. If Visegrad countries and Ukraine want to trade gas across borders and keep transporting most of the Russian gas to Europe, they need to invest into networks. But shorter contracts of liberalized market with a multitude of competitors make returns on investment quite difficult.
Second, the CEE countries have to develop spot markets to efficiently trade gas. Currently these markets are underdeveloped and can be easily manipulated, especially when the number of suppliers is limited.
Visegrad and Ukrainian governments should coordinate their national energy policies and name EU’s energy targets for the next decades. The CEE region supply security will be enhanced from the interconnection with the Ukrainian GTS and access of European gas traders to Ukrainian underground gas storage facilities. Establishment of the gas trading hub at the Eastern border of the EU on the basis of Ukrainian and V4 gas storage capacities under the 3rd Energy Package could further improve the energy security in the region.
To solve the gas diversification problem the CEE countries should incite national companies to coordinate large infrastructural projects (LNG terminals, interconnectors) and lobby together for EU funding. They could create a regional market along the European Gas Target Model prescribing liquid regional hubs and interconnectors and move towards harmonization of national market regulation. Better interconnection of pipelines will also benefit the unconventional gas production.
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Authors: Andras Deak, Pavol Szalai, Helena Schulzova, Dmytro Naumenko
The policy paper is written in the framework of the project 'V4-Ukraine think tanks networking for public discussion on EU integration and advocacy of reforms' supported by the International Visegrad Fund and the International Renaissance Foundation