The New Map: Energy, Climate, and the Clash of Nations

by Daniel Yergin

These crises put a new emphasis on energy security for both Russia and Europe.

Until recently, we assumed that the energy security regime that had come into existence in Europe was an optimal one,” reflected then–Russian president Dmitry Medvedev soon after the gas crisis. “It turns out that it wasn’t.”1

In 2011, Russia’s new concept was made clear. The setting was Lubmin, a seaside resort on the northeastern coast of Germany that advertises its beaches as “a paradise for families.”

Gerhard Schroeder, Merkel’s predecessor as chancellor of Germany and now the chairman of a new pipeline company, Nord Stream.

They were obviously not there for the seaside amenities but rather to turn the valve on a $10 billion pipeline called Nord Stream—actually twin 750-mile natural gas pipelines that ran under the Baltic Sea directly from Russia to Germany.

The gas that arrived at Lubmin had been injected into the pipeline two months earlier, at the port of Vyborg, northwest of St. Petersburg. While pushing the button to start the flow, Putin had been more explicit about Russia’s view of energy security.

Yamal-Europe,

Blue Stream,

For Europe, energy security means something quite different—greater flexibility and diversity of supply. For years, the EU had been searching for a common energy policy. But that was very hard to come by with twenty-eight different countries, with different interests, different endowments, different needs—and different attitudes toward Russia.

As European energy policy evolved, it had two main objectives. The first, dealing with natural gas, was to build resilience and greater energy security into the natural gas system and push for the formation of a single gas market for the entire continent.

European policy also aimed at doing away with the traditional rigid contracts that ran twenty years or longer and in which price was indexed to oil.

The second major thrust of the EU was around climate, aiming at decarbonization and efficiency and making a rapid march to renewable energy. At the forefront was Germany. Under the rubric of its Energiewende, or “energy turn,” Germany provided extensive subsidies for wind and solar development.

In March 2011, a giant tsunami, set off by a massive earthquake, inundated a nuclear power station at Fukushima in Japan, resulting in the worst nuclear power accident since the Chernobyl reactor in Ukraine blew up in 1986.

For the entire EU, natural gas comprises about 25 percent of energy consumption. That means that Russian gas, at about 35 percent of total gas consumption, provides 9 percent of Europe’s overall energy.

Groningen field in the Netherlands

British sector of the North Sea.

24 percent of the ...

9 percent comes from North Africa, ma...

The debate about the political risks of importing energy from the Soviet Union and now Russia has been going on for a long time. The surge of Soviet oil exports to Europe in the late 1950s and ea...

In the early 1980s, in the first years of the Reagan administration, dissension between the United States and Europe again erupted over Soviet energy exports—this time not about oil, but about natural gas.

When Germany and the other Europeans showed no signs of stepping back from the deal, the Reagan administration slapped an embargo on exports from Europe that used American technology and know-how that was required for the proposed pipeline.

The sanctions, meanwhile, had proved to be what Secretary of State George Shultz called “a wasting asset.”

Two decades later, Nord Stream, under the Baltic Sea, revived the controversy over pipelines. There was much criticism in Central European policy circles and the media over the political influence that, it was argued, Russia would gain from the deal.

In the face of all the agitation and criticism that came with Nord Stream, Moscow had a message for the Europeans. At the St. Petersburg International Economic Forum, Gazprom CEO Alexey Miller told a room largely full of Europeans, “Get over your fear of Russia, or run out of gas.”

On June 23, 2013, whatever remained of the post–Cold War comity began to unravel. On that day, Edward Snowden, a disgruntled contractor for the U.S. National Security Agency, boarded a flight in Hong Kong for Moscow. He was not carrying a valid visa, but the Russians let him in.

The theft was a shock to the U.S. government, and the results devastating. A minor amount of what Snowden had taken related to communication between intelligence targets and U.S. “persons”—the reason he gave for the theft.

Snowden’s presence in Moscow was facilitated by the Russian government. The source of that information was none other than Vladimir Putin.

Others, however, thought otherwise—that the Russians must have gotten quite a lot of fleece from Snowden.

The cost quickly became apparent. President Obama was scheduled to meet Putin in September 2013, in Moscow, for their first summit in four years.

Putin believed that the United States was intent on frustrating his overriding objective—the restoration of Russia as a great global power with a “privileged sphere” in the “post-Soviet space.”

Meanwhile, Ukraine remained caught between East and West. Ostensibly, it was about trade. Moscow was promoting what was called the “Eurasian Economic Union,” which would tie together the new countries of the former Soviet Union under Moscow’s leadership, inside a common tariff system and a unified economic space.

But for Russia, Ukraine was, as Obama would later observe, a “core” interest. In Moscow’s narrative, it was part of Russia, going back to Kyivan Rus and the Cossack pledge of allegiance to the tsar of Muscovy in 1654.

Ukraine’s economy was a mess, and corruption endemic. The king of corruption was none other than the president, Viktor Yanukovych.

In 2013, Yanukovych was about to sign the association agreement with the European Union when the Russians suddenly realized that it would shut Ukraine out of the Eurasian Economic Union.

Ukrainians were enraged. In late 2013, half a million flooded into Maidan Square in Kyiv to protest the abandonment of the European Union agreement and against the rampant corruption and Russian influence.

In February 2014, police opened fire on the demonstrators, killing a hundred of them. Civil war seemed imminent. Three European foreign ministers hurriedly flew in and worked out a deal with Yanukovych and opposition politicians to hasten presidential elections.

While all of this was unfolding, the 2014 Winter Olympics was taking place in the snow-covered mountains above Sochi, in the south of Russia—a great celebration of Russia’s return from the abyss of the Soviet collapse.

At some point, amid all the glory and glitter of the Olympics, the Russian government—presumably Putin and an inner circle—made a decision. Shortly afterward, perhaps in accord with a preexisting contingency plan, “little green men”—paramilitary forces—appeared in Crimea, the large peninsula that juts out from Ukraine into the Black Sea.

Over the centuries, Crimea, with its balmy, semitropical weather in the summertime, had been the favored vacation spot for tsars and nobles, and then communist leaders, and also for millions of ordinary Soviet citizens.

Of course, the gift of Crimea did not matter in Soviet times. It did matter a lot, however, when Ukraine and Russia became separate countries, and not just for reasons of nostalgia and holidaymaking.

By the middle of March 2014, a Moscow-organized referendum in Crimea supposedly had 96 percent of the people voting to join Russia. The next day, Putin announced the “reunification” of Crimea with Russia.

The Ukrainians protested bitterly at the annexation. The Russians had been party to the Budapest Memorandum in 1994, which guaranteed Ukraine’s territorial integrity in exchange for its giving up its nuclear weapons.

Then separatists, paramilitary forces, and Russian soldiers “on vacation” started military operations in the Donbas, in southeastern Ukraine, the country’s great industrial heartland, still highly integrated with the Russian economy, most notably its defense industry.

On July 16, 2014, the United States ratcheted up sanctions on Russia’s financial, defense, and energy sectors.

One set of sanctions was aimed at specific individuals and organizations that were judged to be either close to Putin or active in Crimea and the Donbas. A second set restricted Russia’s access to the global financial system and its ability to raise money in international markets, and at the same time choked off foreign investment into Russia.

Yet there is a risk that the commanding position of the United States—derived from its capital markets and the dollar—could be eroded over time by the overreliance on financial sanctions, because nations will find alternatives.

The third set of sanctions was aimed at constraining Russia’s energy might. Care was taken to construct sanctions that would not hinder Russia’s current oil output, for fear of driving up the price of oil at a time when it was already high. Instead, they were aimed at the new growth areas that were deemed to require Western technology and partners.

Also targeted was shale oil and Russia’s immense nonconventional resources, including the huge Bazhenov formation, under the West Siberian basin.

But the shale revolution in the United States provided a possible solution for the Bazhenov—horizontal wells and multistage hydraulic fracturing.

Western partners, with their know-how and experience, could help a great deal. Finding and developing the “sweet spots” is a matter of patience, capabilities, data, and trial and error.