Search Penny Hill Press

Friday, April 2, 2010

Russian Energy Policy Toward Neighboring Countries

Steven Woehrel
Specialist in European Affairs

The Russian oil and natural gas industries are key players in the global energy market, particularly in Europe and Eurasia. Another trend has been the concentration of these industries in the hands of the Russian government. This latter phenomenon has been accompanied by an authoritarian political system, in which former intelligence officers play key roles. 

Russian firms have tried to purchase a controlling stake in pipelines, ports, storage facilities, and other key energy assets of European countries. They need these assets to transport energy supplies to lucrative western European markets, as well as to secure greater control over the domestic markets of the countries of the region. In several cases where assets were sold to non-Russian firms, Russian firms cut off energy supplies to the facilities. Russia has also tried to build new pipelines to circumvent infrastructure that it does not control. Another objective Russia has pursued has been to eliminate the energy subsidies former Soviet republics have received since the fall of the Soviet Union, including by raising the price these countries pay for natural gas to world market prices. 

It is not completely clear whether the pursuit of Russian foreign policy objectives is the primary explanation for the actions of its energy firms. Few would disagree in principle that the elimination of subsidies to post-Soviet countries is a sound business decision, even if questions have been raised about the timing of such moves. Even the pursuit of multiple pipelines can be portrayed as a business decision. On the other hand, many countries of the region are concerned that Russia may use their energy dependency to interfere in their domestic affairs or to force them to make foreign policy concessions. Countries of the region also fear that by controlling energy infrastructure in their countries, Russian energy firms are able to manipulate the internal political situation by favoring certain local businessmen and politicians. However, the current global economic crisis has hurt Russia's energy firms and Russia's international clout, as energy prices have tumbled. 

Bush Administration officials repeatedly criticized what they viewed as Russian efforts to use its energy supplies as a political weapon. The Obama Administration, like its predecessor, has urged European countries to reduce their dependence on Russian energy, but has said the United States is trying to cooperate with Moscow on the issue. The United States has strongly advocated the building of multiple pipelines from Central Asia and Azerbaijan to Europe. Members of Congress have expressed concern about the impact on European countries of their dependence on Russian energy. In the 111th Congress, committees have held hearings that have touched on the issue. Congress has also passed resolutions that refer to worrisome aspects of Russian energy policy.

Date of Report: March 22, 2010
Number of Pages: 25
Order Number: RL34261

Document available electronically as a pdf file or in paper form.
To order, e-mail or call us at 301-253-0881.