ЕU and “Brussels sprout”

An interview of the President of the Union of Oil and Gas Operators of Russia, Yuri Shafranik, to the magazine “International Life”   

‒ Yuri Konstantinovitch, how would You like to describe the actual state of the relations between the Federation of Russia and the EU? What is the real damage caused by the sanctions to Russia?

‒ I’d like to cover this topic from some other side. In the first place you should correctly assess the foregoing trends. In 1990-th we were living through a great calamity, the disintegration of a great state. This had an enormous impact on us, as politically, as much as economically. But looking at 2000-th, in case of any aggravation of the relations and in controversies with the West all the opponents may put their signature under the phrase: “Russiawas consequently integrating into the political and economic institutions of the world”.  The process ranged from the tourist industry to some sizable joint projects and mutual investment. Though we found the dynamics of this trend insufficient: there had been some long disputes on visas and other issues.  We thought it was Europe who had been slowing the business down, but still the integration went on rather consequently including  the joining the WTO byRussia.

And here come the sanctions – on this background. You’re going to simplify the issue, the problem, if you assess just the damage suffered byRussia.  First of all, the sanctions stroke a blow on our mutual relations, on the process of integration. As a Russian citizen I’m sure that 90% of the population of our country think that Europe should answer to herself, whether it was her own will to stop the integration of Russia into all the spheres of the international activity – or not? Because inRussiathese sanctions  have been acknowledged as a serious blow, first of all, a political one.

If the intention ofEuropewas to interrupt the process of the integration, the mission has been actually carried out. But under the circumstances like this throughout the whole Russian history the country started to mobilize itself. And with the exception for the Mongol Invasion the danger toRussiaalways came fromEurope. And this “phantom pain” has consolidated its grip on our genes, and this is especially clear now in the year of the 70-th anniversary of the defeat of the Nazi Germany. Sharpens the recollection of the dead 30 million soviet citizens (since Russiais the legal successor of theSoviet Union).    

There were more than 600 from 2500 inhabitants of my native village inSiberiawho had left the battle front. 280 of them were killed in action, and many of those who came back had been mutilated. My grandfather perished near toKharkovand my uncle inZaporozhe, liberating theUkrainein 1943. And the missing of this historical intertwining of the fates of citizens of the two countries that takes place nowadays, may be either  malice or spiritual and moral degradation…

As for the sanctions, their impact will be visible somewhere in the end of2015, in2016 and further. For the time being their influence on our economy isn’t too strong.

 ‒ The ЕU has cancelled many joint projects with the participation of Russia including the energy ones. What may be expected now?

‒Russialived, live and will live. It will, as I’ve just said, mobilize itself which means a breakthrough improvement of the government administration with the purpose of enhancement of the efficiency of all the aspects of vital activity in the country, consequently with the purpose of growth of responsibility of high officials from the state structures. We’ll have to interact with other partners lamenting the loss of the well-established European relations. Being strongly against the isolationism I’m no way happy  with  the restriction of creative contacts.

However it is clear that the line followed by the administration ofBrusselsis too ideologized and idealized, and this it in contradiction with the interests of the people of the EU countries.  National governments stand much more closer to the people, because the vector of the political and  the economic development is adjusted in process of the election of the state administration. The loss of contact with the reality of life by the Euro Committee can be seen in various spheres, and especially – in the domain of energy. Thanks to the passion ofBrusselsadministration with “green” energy, the European gas consumers have to pay more than twice as much than theUSand the Russian ones. Here comes the “Brusselssprout”.

 ‒ Yuri Konstantinovitch, the head of German foreign policy,  Frank Walter Steinmeyer, said in his recent interview: “The US, Russia and China offer to Germany totally different relations in various spheres.     But in spite of our wishes to maintain and strengthen bilateral contacts with the countries-partners of importance, when we are talking about the formation of the global development, Germany won’t be able to act efficiently alone, but only in terms of some firm European structure”.  With an attitude like this, how much real would be the creation of a strategic axis “Moscow - Berlin”?

‒ Declarations of this kind stand for an elementary political maneuvering. The gesture of respect towards “some firm European structure”, i.e. the EU,  the ЕС, in no way could compensate the  scale of the strategic ambitions ofGermany. But trying to achieve their own purposes or solving their own problems sometimes would be more convenient to cover themselves with the flag of the European Union.

Meanwhile under the current circumstances the cooperation betweenRussiaand Europe and foreign policy interaction are carried out with the dominant influence of the German policy inEurope. It means that the relations betweenRussiaandGermanytend to become essentially basic. Yet Germany may not to have realized it completely, that’s why they should  expect its new status-quo in the EU and organize the bilateral relations basing on the total consideration of the most important hallmarks in our common history – reach, dramatic and tragic, - witnessing for an urgent necessity of a close and extremely responsible cooperation of the two countries.

 ‒ What strategic projects Russia should develop now?

‒ They have been already determined and will be carried out without fail though its terms may be adjusted. It is in the stage of elaboration the “Eastern Vector”, as I’d like to call it, which have been discussed for a long time. I.e. it  is being carried out some energy policy oriented towardsAsia.  During the last 15 yearsChinaincreased its consumption of coal in 5 times, increasing its own extraction from 1 to 3,5 billions tons a year.  I’m quite certain that this trend will stay, though maybe not at such rate. By 2030Chinamust be consuming some 600 billions cubic meters of gas a year, that is the following years it will surpass the consumption of gas inEurope. But it’s not onlyChinainterested as a consumer. The delivery of liquefied gas by sea will turn it possible some considerable increase of the market.  CNG is already being bought byJapanandSouth Korea(by the way,Japanstood against the sanctions longer than all the others and maintained the agreements concerning the shelf projects. 

Now here comesEurope. The business with the “Southern Flow” has reached a deadlock. In the West I was asked many times about the third energy package. And I asked for my turn: “What do you want inEurope? Do you need the third energy package or plenty of gas that would cost cheaper?” The EU has turned “the package tool” in a fetish of some kind. And I’d like to repeat, whileAmericahaving cut the price of industrial gas more than two times three years ago keeps it the same – 100 dollars for one thousand cubic meters, - inEuropethe price is more than 200 dollars.     

MeanwhileEuropeshould be concerned about the Americans coming to its energy markets (if they come, they won’t go out). They also should be concerned aboutChina, because it is an enormous consumer and, most important, an enormous manufacturer of goods. It’sChinawhere the declining European production is going to. (By the way, we get the money in Europe and spend it inChina.)

In principle,Europeshould have two goals. The first – to take hydrocarbons from different suppliers. Here is quite representative the example of  Qatar which had been delivering gas to Europe until it turned more profitable to deliver it to Japan. In the result the shortage of gas inEuropeachieved 25 billions cubic meters a year. What would the Old World do if there hadn’t been such tool of regulation as the gas supplied byRussiawhich without considering it for a long time quickly recuperated the “arrears” completely. Yes, the portion of the Russian hydrocarbons in the European market had increased, but the comments on that were not at all complimentary. For some strange reason they didn’t want to admit that it wasRussiawho had provided for the stability of gas supply to the enterprises and population ofEurope. I can understand its aspiration to diversify the supplies of hydrocarbons. But you should value a dependable partner to whom the countries of the EU are related by the pipelines and by a half-of-century  history of energy cooperation.

The second goal of Europe ‒ even more important  ‒ is an access to the Middle East not waiting for the situation there to become quiet, never mind contributing for its destabilization Firstly they had been punishing Caddafi then went for Assad... The essence of positive influence isn’t a punishment but the achievement of stability in the region. And thenIraqandIrancould be the principal suppliers of hydrocarbons (in addition, possiblySaudi ArabiaandQatar). But this goal yet hasn’t been announced in the EU. Instead we hear just the burden of the third energy package.

‒ For how long the price of oil will remain low?

‒ The Institute of Energy Strategy, where I am the president of the board of directors, for a long time already have been orienting the economy and business to 80 dollars for barrel. I think we’ll go back to 70 dollars this year, and in 2016 the price of barrel will vary between 75 and 85 dollars.   But there’re some possible variants: for now oil greatly depends on the state of the financial system; an enormous amount of money has been introduced into the economy of Americaand Europe. Pumping in of money will be kept on…  This is the reason why there make up financial bobbles with their unpredictable influence on the price of oil. 

‒ Will the question of the Ukraine be the “card” which, as they think in Europe and in the USA, that Russia has the intention to continue to play?

‒ At the time when they started to admit the countries of the Eastern Europe into the NATO, it was a serious attack onRussiawhich had been taking threats coming from the West for many centuries. The wars unleashed by the West carried away tens of millions of human lives causing irreplaceable losses for the State. And now the NATO men are going to take over theUkrainewhere they make fussy declarations like “we are going to enter – we are going to let them in – we are going to enter – we are going to let them in”.Russiamust be absolutely sure that theUkrainewill never enter the NATO (it is also inadmissible in line with the agreements concerning the closure of the Warsaw Treat). This is the thing for whatEuroperecently should have voted with the both hands. We think the “card” was on its side, andRussiaagainst its will had to take this “card” over doing it hard, with some excesses and taking into consideration the desire of a part of its people.  

We don’t have an energy “card” too. At the time when I was the Minister of Fuel and Energy, we signed a great deal of respective agreements with theUkraine. The Ukrainian part failed to fulfill any commitment concerning the integration of pipes, the transit, the prices… It was obvious thatRussia   had been to blame too guilty of connivance “for the sake of friendship and stability in theUkraine”. But everything had turned bad, and s0 were   created the “Northern Stream”, the “Southern Stream” and the “Turkish  Stream”. It wasn’t because of good life a great amount of money had been spent in vain.

And in general, under these circumstances theUkrainecertainly is the first loosing party,Russia– the second,Europe– the third (it refuses the pipelines for some weird reason). And it’sChinawho remains the winner.  Chinais the beneficiary on the geostrategic side of an aggravation like this.