Europe’s Eurasian Opportunity

BERLIN – The global energy system is changing fast, fueling widespread anxiety about so-called “energy insecurity,” particularly in Europe. The problem is not that the world is running out of energy resources. On the contrary, oil scarcity is less of a concern today than ever before, owing not only to energy-efficiency initiatives, like the European Union’s nearly zero-energy buildings policy, but also to rising competition between shale producers and traditional oil exporters. Continued technological progress suggests that renewable energies – from wind and solar to, perhaps, planetary winds – may ultimately supplant fossil fuels, anyway.

Instead, the insecurity is political in origin, with short-term considerations, especially with regard to Russia, overwhelming a coherent energy – and, to some extent, foreign – policy. This shortsightedness is generating serious security risks, fueling geopolitical instability, and undermining economic growth. It is time for a new approach that leverages the interconnectedness of our energy systems, economies, and strategic relationships to build a more stable, efficient, and prosperous world.

The first step is understanding how these issues are related to one another. The Kremlin’s annexation of Crimea and its support for violent separatists in eastern Ukraine prompted the United States and Europe to impose increasingly stringent economic sanctions against Russia. The ruble fell by more than 50%, fueling inflation and forcing Russia’s central bank to hike interest rates, impeding economic growth. The credit-rating firm Standard & Poor’s has now cut Russia’s credit rating to junk status, pushing the ruble even lower.

But, though cheaper Russian energy imports should benefit Europe, the effectiveness of Western sanctions is not entirely good news. A financial crisis in Russia, together with collapsing energy prices, would crash the Eurasian economy, with serious repercussions for EU members that depend heavily on exports to the region.