"Crisis of confidence" afflicts Russian-European gas relationship

A new study by Cambridge Energy Research Associates (CERA) says a growing "crisis of confidence" threatens the Russian-European natural gas relationship.

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LONDON -- A new study by Cambridge Energy Research Associates (CERA) says a growing "crisis of confidence" threatens the Russian-European natural gas relationship. This relationship has been integral to the economies of both Europe and Russia over several decades, CERA says.

The reason for this crisis is the combination of fundamental changes in Russia, Europe, and in the gas business itself that are unsettling the relationship, according to the study "Securing the Future: Making Gas Interdependence Work."

The CERA study is a comprehensive examination of the changes taking place that alter the basic assumptions that have underpinned the European-Russian gas relationship for many years. It focuses on the current stresses and threats and on ways to reduce the tensions to keep the relationship on a solid footing. Its timeliness is underscored by the new legislation on gas liberalization expected from the European Commission on Sept. 19.

"The crisis of confidence need not translate into a crisis of supply in the future," the report says. "It is important that the issues of gas interdependence between Russia and Europe be seen simultaneously through the critical lenses of competition, security, and environmental sustainability. While attention may focus at any given time on one source of tension or friction or another, a larger perspective shows why a strong spotlight is now on this relationship today."

The study examines issues at the core of the gas relationship between Europe and Russia, CERA says.

Although Europe accounts for almost one-fifth of the world's annual consumption of gas, its own reserves represent less than 2% of known global gas reserves. Russia is the world's biggest holder of natural gas reserves and provides 26% of Europe's total gas. Natural gas is Russia's second largest export earner.

"The broad conclusion is that the sustainability, efficiency, and security of European energy supply will best be achieved not by hastily deciding to reduce dependence on Russian gas, but through the creation of a carefully and cooperatively managed 'interdependence' between Europe and Russia," says Simon Blakey, CERA senior director, European research.

More information on this and other reports is available at http://www.cera.com.

9/11/2007

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