Gas Trap

How gas causes geopolitical conflicts — An explainer

23 November 2020

By Thodoris Chondrogiannos

Gas is a geopolitical fuel. It requires a network — of LNG terminals and pipelines — to be delivered. Countries with access to gas reserves and infrastructure can acquire geopolitical advantages at the expense of nations which need gas imports. The importance of gas as a tool of geopolitical dominance has caused conflict between countries competing to gain control of the gas roads leading to Europe. These are the most important current clashes over gas:

A new “Cold War” over gas imports to Europe

Russia and the United States are competing to increase their gas exports to Europe. Currently, Moscow is the dominant supplier of gas to the EU. In 2018, 40% of the EU’s gas imports came from Russia. In 2019, Russian gas exports to Europe (under contracts of Gazprom Export) amounted to 199 billion cubic metres.

The US is fighting this dominance; Washington aspires to export its own liquefied natural gas thanks to an ever-increasing number of LNG terminals in Europe — from Italy and Greece in the South to France and Poland in the North. This is happening despite the heavy impact of LNG on climate. After a meeting between the then European Commission President Jean-Claude Juncker and US President Donald Trump in July 2018, there has been a steep increase in US LNG imports in the EU. American LNG exports to the EU skyrocketed from 3.3 bcm in 2018 to 17.2 bcm in 2019 — a 521% increase in just one year. In order to “accommodate” the US gas, new LNG terminals or the expansion of old ones have been planned in Croatia, Poland, Lithuania, Germany and Greece.

The US also supports new gas routes that could compete with Russian exports. It backs the Southern Gas Corridor — meant to bring gas from Azerbaijan into Europe through Turkey — and EastMed, which is projected to import gas from Israel and Cyprus. Italy has a crucial geo-strategic role in these plans, as both projects (with TAP and IGI Poseidon pipelines respectively) end in the Italian Peninsula.

The South Gas Corridor is made up of three pipelines: South Caucasus Pipeline (SCPX – Azerbaijan, Georgia), Trans Anatolian Pipeline (TANAP – Turkey) and Trans Adriatic Pipeline (TAP – Greece, Albania, Italy)

The US administration has also posed sanctions against Nord Stream 2, a pipeline projected to transport gas from Russia to Germany. Gazprom and its backers, including Royal Dutch Shell Group, say the pipeline will be absolutely necessary to meet increasing demand and to add flexibility to the European energy system. Opponents, however, say it will allow Russia to choke off flows through Ukraine — the primary route to market for much of Gazprom’s gas — bypassing Poland and the Baltic countries (Estonia, Latvia, Lithuania).

But there’s more. US President Donald Trump has said the pipeline could turn Germany into a “hostage of Russia”, and critics fear that Russia could use its gateway position to put pressure on Europe in the future. Such an occurrence is not without precedence; in 2006 and in 2009, Russia did exactly that, shutting off its gas supply to Europe.

American critics claim that Nord Stream 2 will make the EU overly dependent on Russia, and are vying for increased sales of their own product — what they call “freedom gas” — to Europe. “We want them to buy from us, not the Russians,” said Robert McNally, president of Rapidan Energy Group, a market research firm.

Germany is an important gate for the Americans to export their gas to Europe, as it’s been announced that new LNG terminals will be constructed at the shores of German cities Brunsbuettel and Wilhelmshaven in northern Germany. But despite America’s warnings, Germany wants to continue importing Russian gas. But in order to make Washington lift sanctions against Nord Stream 2 and pacify the Americans, Berlin expressed its willingness to invest up to 1 billion euros in the construction of two new LNG terminals that will import US LNG.

But American opposition has not relented. In November 2020, the House of Representatives and the Senate agreed to impose sanctions on insurers and technical certification companies working on the Nord Stream 2 project. The sanctions are contained within a defense bill that is expected to pass by the end of 2020. In this manner, the U.S. wants to make it harder for Gazprom to complete the Nord Stream 2 project.

This is expected to create more tensions between the US and Germany. This was evidenced in August this year when politicians in Berlin reacted angrily to a letter sent by three Republican senators —Ted Cruz, Tom Cotton, and Ron Johnson — who threatened the operators of the German Mukran port, located in the Baltic sea, with “crushing legal and economic sanctions” if they did not stop assisting the Russian vessels that were building Nord Stream 2.

Eastern Mediterranean in the brink of conflict over gas ambitions

Great expectations about gas reserves in the Eastern Mediterranean have caused high tensions in the region between regional countries and traditional superpowers.

Over the past decade, Israel and Cyprus have found big offshore gas reserves in their Exclusive Economic Zones (EEZ), while Greece has created dozens of onshore and offshore blocks, hoping to find its own gas. Gas synergies were explored in January 2020, when the three countries signed the EastMed agreement with the blessings of Washington. Apart from profits, they hoped that gas would help them upgrade their role in the region; Athens thought gas would help Greece gain international support in the recognition of its rights in the Mediterranean and Nicosia estimated gas profits would help negotiate from a better position with Turkey for the reunification of the island.

However, Ankara reacted fiercely and claimed rights in areas which Greece and Cyprus recognise as their own EEZ. In the summer of 2020, tensions escalated. Despite de-escalation efforts by Berlin, Ankara sent the research vessel Oruc Reis to conduct seismic surveys inGreek EEZ and then sent a Yavuz drilling vessel into the EEZ of Cyprus. Greece deployed warships to protect its rights against Oruc Reis, which was being escorted by the Turkish Navy. In August, 2020, a Greek and a Turkish warship were involved in a mini collision, bringing the two countries close to open military conflict.

Because of its energy and geopolitical interests, Paris sent a Charles de Gaulle aircraft carrier to the Eastern Mediterranean in support of Greece and Cyprus. French President Emmanuel Macron called for EU countries to establish “red lines” for Turkish provocations. France reacted so as to also block Turkish efforts to expand its influence in the Mediterranean and in Libya, which could its own access to the rich gas reserves of the country at risk. France was one of the first countries to intervene in 2011 to overthrow the regime of Colonel Muammar Qaddafi, after his government reneged on a gas exploration deal in the Nalut Basin with Paris.

The US also showed its support to Greece — in September, US Secretary of State Mike Pompeo paid a crucial visit to the country. The US sees Greece as one of the EU’s gateways for American LNG, and as a “battlefield” in order to prevent Russia from getting into the Balkans through its gas exports to the region.

Despite European and American calls for de-escalation and dialogue, tensions have remained high for months between Athens and Ankara, as Turkey has continued energy surveys in areas encroaching (according to the United Nations Convention on the Law of the Sea) the continental shelf of Greece and Cyprus. On November 19, 2020, Greek Foreign Minister Nikos Dendias told his European counterparts that Ankara’s actions indicated that there is no room for a “positive” with Turkey, adding that the EU must be prepared to impose sanctions that will compel the country to fall in line with international law.

But Turkish President Recep Tayyip Erdogan seems to follow another road. On November 15, 2020, he visited Famagusta, a disputed territory in northern Cyprus occupied by Turkish forces since 1974, angering Cypriot and Greek leaders and stoking a decades-long conflict.

The Americans and Europeans seem also annoyed. On November 20, the US State Department asked Ankara to rethinik its decision to reopen Varosha, a beach resort in Famagusta, and described Erdogan’s visit as a “step in the wrong direction.”

“We consider the recent actions and statements by Turkey related to Cyprus contrary to the United Nations resolutions and further igniting tensions,” EU foreign policy chief Josep Borrell told a news conference, after a meeting of EU foreign ministers on November 19. “Time is running, and we are approaching a watershed moment in our relationship with Turkey,” he added.

The irony is, the tensions may be for nothing. So far, no gas has been found in the disputed areas, while there are concerns about the financial feasibility of EastMed. “Europe is moving away from fossils and there’s been a sharp drop in gas demand and prices due to [the] COVID-19 pandemic, forcing oil and gas producers to write down billions of dollars in assets and cut jobs. Gas prices will remain low in the longer-term. This will make it commercially difficult to develop and sell expensive-to-produce EastMed gas to markets”, said Charles Ellinas, Senior Fellow at the Global Energy Center Atlantic Council and ex-CEO of Cyprus National Hydrocarbons Company. “So the perceived riches locked-in at the bottom of these disputed and fiercely-contested seas may never materialise, as it would be quite difficult — if not at all impossible — to compete with cheap gas reserves already developed, especially the competitive Russian gas.”

There are also EU officials who are critical of the planned pipelines and projects in the Mediterranean. “EastMed is an over-dimensioned project. It would make more sense to use the regional LNG facilities than to bring natural gas in a long pipeline to Greece and further into our markets”, said Klaus-Dieter Borchardt, Deputy Director-General, Energy, at the European Commission. “And we are also trying to move towards other sources of energies, like renewable gases and renewable electricity.”