Speech by Erkki Tuomioja

Erkki Tuomioja MPPresident of the Nordic Councilformer Finnish Minister for Foreign AffairsEnergy supply and securityBaltic Sea Parliamentary Conference Visby 2.9. 2008Energy and security go together in many ways. In discussions like these the emphasis is usually almostexclusively on security of supply. I will also also address this, but to begin with I want to stress what in myopinion is the most important security issue linked to energy. This is the unstainable way mankind is gorgingenergy, devouring non-renewable energy resources and the effects of the continued emissions ofgreenhouse gases into the atmosphere.The recent surge of power politics notwithstanding climate change is and remains the most important threatto security that the world as a whole is facing. All of the Baltic Sea States are parties to the Kioto conventionand, at least those who are members of the European union, are also committed to much more far-reachingreductions in CO2 emissions to slow down and ultimately stop the advance of climate change.I shall not attempt any more through-going review of all the policies needed to combat climatechange ranging from developing renewable energy sources and running down the use of fossile fuels, tousing nuclear energy as an interim solution to speed up the replacing of oil and gas with non-pollutingalternatives. I stress the interim nature of nuclear energy. Although nuclear energy may be preferable tofossile fuels, it also involves grave issues of safety and security, and it is not a renewable source of energyand thus does not fill the reguirements of sustainable development. Nor should nuclear energy be regradedas a purely national issues for those countries contemplating its use, as the risks involved with nuclearenergy, should they ever materialize, will inevitably have vast cross-border consequences.I also want to draw attention to the importance of increasing energy efficiency and investment in energysaving. It is a strange failure of all market economies, that investments in energy saving are expected to bemuch more profitable than investments in increasing energy production before they are taken intoconsideration. This psychological failure to take investment in saving seriously was of course as least asevident in Communist command economies, where the attitude toward investments was the bigger thebetter, resulting in huge environmentally deadly memorials to forced industrialization.Modern society is dependent on the smooth and uninterrupted supply of energy. Energy production andtransport are thus obvious targets for terrorists seeking to cause as much pain and disruption as possible.This is not, however, an energy-specific concern, but pertains to all and any vulnerable functions of oursocieties. The most important lesson here too is that broad-based multilateral cooperation between allcountries is the only really workable way of combating terrorist threats.Energy supply is a security issue which is highlighted by the fact, that the countries and regions which caterto the energy needs of those industialized countries which are not self-sufficient tend to be often the sameones where multiple political problems and potential and real conflicts occur threathening the security ofsupply, such as the Middle East and such as Russia and some of the former Soviet republics in Central Asia.The problem is not that these countries may have authoritarian or totalitarian regimes. The US and otherWestern democracies have been quite content to live and do profitable business with non-democraticcountries and leaders without being unduely bothered by their Human Rights records - Saudi-Arabia, theShah's Iran, Turkmenistan, Kazakstan and the like - as long as these countries are internally stable andexternally acquiescent. But when those endowned with natural resources turn uppity and begin to challengethe existing order - such as Chavez's Venezuela or Saddam's Iraq - they become grave threats to security indealing with which it is legitimate to "have all options on the table", meaning also military intervention.Indeed, while most countries without domestic energy feel insecure and may dream of suddenly beinganointed with oil and gas riches, it is not at all sure that these in excess quantities are actually a blessing.Weak countries with such resources may find themselves being preyed upon by energy-hungry great powersand subjected to strong outside pressures. Neither is it always evident that oil riches actually enrich thepeople. Even without outside interference or intervention not all countries have used their riches wisely anddeveloped their non-export sectors for the day when oil and gas production and the income it generatesstarts to fall.In short, there are not too many Norways around: small, unthreathening, environmentally conscious,assuredly democratic oil and gas exporters, who use their riches both domestically and intenationally in aresponsible manner. Who would feel any concern in Europe even if we were dependent on Norway for morethan 50 % of our energy needs?Instead we have been for a long time dependent on the Middle East and now increasingly also on Russia forour energy needs. Russia is already providing 24 % of the gas used in the EU and both gas consumptionand imports to Europe from Russia are forecast to grow substantially. This is also why we are alsoincreasingly worried about the security of our energy supply.Is this concern warranted? The growing interdependence of importers and exporters of energy should not beregarded in SWOT-analysis terms as falling solely under the T for threats category, but also as anopportunity with strengths and weaknesses to be found in all categories.I will not dwell too much on the threats involved as they have received ample and even exaggeratedprominence. They are real enough without being artificially magnified. Obviously it is never healthy to bereliant on too few sources of supply as well as transport routes for these supplies without real alternatives.The use of the energy trade for explicitely political ends should not be allowed to take place.But when some here in the Baltic region regard the North Stream gas pipeline project from Russia across theBaltic Sea to Germany as a grave threat to security, I beg to differ. The ecological concerns about thepipeline are legitimate and have to be taken seriously, as we are dealing with a particularly vulnerablemarine environment. But if state-of-the-art environmental protection procedures and technologies areapplied this should not be a threat, and certainly a much smaller one than if the equivalent amount ofenergy was transported in surface-vessels across the Baltic. After all, it is not as we were dealing with somecompletely unkown technology, as pipelines have been crisscrossing the world's many seas already fordecades, without any serious mishaps up to now. But I too agree with the European Parliament that allcountries around the Baltic Sea must ratify the Espoo Convention on transational environmental impactassesments before the projetct can receivet the go-ahead.Of course Russia will have an interest in safeguarding the smooth functioning of the pipeline, but Germanyand others on the receiving end will have exactly the same interest. This should make the pipeline more anobject for mutual security cooperation rather than a source of conflict.This is of course what interdependence is about: creating mutual interest in safeguarding the security ofsupply. Western Europe is not getting its energy imports for free, and Russia will have an equal interest tosee that the markets which buy their energy will not be distrupted thus cutting of the supply of money whichis now nourishing the Russian economy.Indeed, it should be noted that the most serious instances of problems with security of Russian energysupplies have occured where the principles of transparent market pricing and contacts have not beenapplied. I have always argued, that if you get your gas with a 50 percent rebate compared to world marketprices, you implicitely accept that the other 50 percent can be used for political purposes. And whilesubsidized cheap energy may look tempting, it has proven in the long term to be detrimental both for thesubsidized country's economic competitivety as well as the well-being of its environment. The more closelyand transparantly energy trade follows market pricing, the less there will be possibilities and risks for politicaldisruption.This is the best-case description of the benefits of interdependence, and we do not live in a world or dealwith a Russia where all the necessary conditions for this to apply are in place. Market pricing is not asufficient condition without equality and reciprocity. At present there is a serious imbalance on bothaccounts. Russian energy policy is highly centralized with Gazprom an awowed arm of the Russiangovernment, where as the European Union has so far notoriously failed to agree on any kind of meaningfulcommon energy policy. Even the principle of the Single Market which is fundamental to the EU, is notrespected and implemented for energy as it should be.Reciprocity is also sorely lacking. The downstream investments in distribution networks of Gazprom andother Russian energy companies would and should be welcomed in the West as an element whichstrenghtens mutual interdependence, but only if and when Western energy companies have the samepossibilities for investing securely in Russia. As we have seen this is not case; new investment is notwelcomed and older foreign investment in the energy sector has been subject to harassment on thinly veiledpretexes.The tragedy is, that this kind of policy does not serve Russia's long-term interests either. Without foreigninvestment gas and oil production in Russia will inevitably peak, creating a situation where Russia's ability tofulfill its contract obligations will be jeopardized. This is also an issue of energy supply security for itscustomers.The principles which should guide European energy policies in general and its policy towards Russia inparticular are not difficult to state, but they are much harder to implement. It would help, if there was first acommon agreement on these and a firm commitment by all to follow them.