{"id":29755,"title":"The EU and the Middle East: Exploring Alternatives to Russian Energy","link":"https:\/\/bst-europe.eu\/de\/economy-security-trade\/the-eu-and-the-middle-east-exploring-alternatives-to-russian-energy\/","date":"15. M\u00e4rz 2022","date_unix":1647340889,"date_modified_unix":1759825670,"date_iso":"2022-03-15T10:41:29+00:00","content":"

In yesterday\u2019s blog post, Nathan Crist rightly argued that all efforts for the EU to become energy independent<\/a> should be matched with green goals. While this is certainly the case, the EU also needs to identify potential substitutes for Russian energy imports in the short run. In this blog post, we look at the EU’s oil and gas-rich neighbours across the Mediterranean. To sum up: they can supply the EU with a limited amount of additional fossil fuels in the short term, but this will not be enough to offset dependence on Russian energy imports. In the medium and long term, Europe can overcome its dependence if, along with the Middle East, it invests in developing a common infrastructure to facilitate the trade and production of gas, oil, solar, wind, and hydrogen.<\/span><\/b>\u00a0<\/span><\/p>\n

On the 8<\/span>th<\/span> of March 2022, the EU Commission published its <\/span>plan proposal<\/span><\/a> for disentangling the EU from Russian energy imports. The proposal mentions several countries in the Middle East and North Africa (MENA) like Algeria, Qatar and Egypt.<\/span>\u00a0<\/span><\/p>\n

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Source:Eurostat<\/figcaption><\/figure>\n

It is no secret that the EU is reliant on Russian hydrocarbon imports. According to Eurostat, the EU27 imported around 25% of its crude oil and 38% of its natural gas from Russia in 2020. MENA countries taken together amounted for 18% and 12.4% of the EU\u2019s crude oil and natural gas imports respectively. More specifically, Saudi Arabia makes up around 7.8% of the EU\u2019s crude oil import, followed by Iraq at 6.6%. The main MENA partners for natural gas are Algeria (7.2%) and Qatar (4.09%).<\/span>\u00a0<\/span><\/p>\n

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Source: Eurostat<\/figcaption><\/figure>\n

Algeria ready to increase gas exports<\/strong><\/h2>\n

Algeria and Libya have been touted as possible alternative sources of gas for the EU. Algeria made up 7.2% of the EU\u2019s gas imports, third after Russia and Norway. Algeria\u2019s exports to the EU travel through two major gas pipelines (one directly to Spain, one via Tunisia to Italy), while a third pipeline to Spain via Morocco is currently inactive since November 2021 due to tensions between Algeria and Morocco. <\/span><\/p>\n

The CEO of Algeria\u2019s state energy firm, Toufik Hakkar has said that there is unused capacity in the Transmed pipeline to Italy and that gas supplies from Algeria to Europe could be increased. Former Algerian energy minister Abdelmajid Attar however pointed out that <\/span>Algeria can offer<\/span><\/a> a maximum of two or three billion additional cubic meters, which barely reaches around 1.6% of Russia\u2019s delivery of 152 billion cubic meters (bcm) of natural gas delivered to the EU in 2020. <\/span><\/p>\n

However, in the long run Algeria could increase its gas supply to the EU significantly\u2014as it has proven reserves of 4,500 bcm\u2014if urgent infrastructure investments are undertaken. There is some positive news in this regard, as Algeria’s state-owned energy firm Sonatrach plans to invest around $40 billion between 2022 and 2026 in its oil and gas production capacities.\u00a0<\/span>\u00a0<\/span><\/p>\n

Libya has excellent quality oil, but is unable to deliver more<\/strong><\/h2>\n

Libya, on the other hand, provides just 1.1% of the EU\u2019s gas imports, while its share in crude oil exports (2.08%) is almost identical to Algeria\u2019s 2.21%.<\/span> Libya is unlikely to provide additional exports, as the Libyan oil minister <\/span>said himself<\/span><\/a>. While Libya boasts proven gas reserves of 1,500 bcm and oil reserves of 48 billion barrels, years of civil strife and the current political and social instability have decimated Libya\u2019s infrastructure and rendered the country unable to even fulfill its current supply obligations. Moreover, the fact that Gazprom has a significant presence in the country only complicates things for the EU.<\/span>\u00a0<\/span><\/p>\n

Back on Europe\u2019s screen: The oil and gas rich Gulf region<\/strong><\/h2>\n

The Gulf Monarchies are leading oil and gas producers and exporters. <\/span>Saudi Arabia is the world\u2019s top exporter<\/span><\/a> of crude oil, with Kuwait and the United Arab Emirates also in the top ten. Qatar, on the other hand, is <\/span>the second biggest exporter<\/span><\/a> of natural gas. However, the Gulf countries mainly export oil and gas to Asian markets, with Europe only being a secondary export destination.<\/span>\u00a0<\/span><\/p>\n

Gas giant Qatar can send some more LNG<\/strong><\/h2>\n

Qatar\u2019s spare LNG capacity in the short term is limited, and the <\/span>Qatari Emir has emphasized<\/span><\/a> that Qatar prioritizes serving its long-term contractual obligations with countries such as Japan, China, and South Korea<\/span>. Of the gas under contractual obligation, around 10%-15% could be diverted<\/span><\/a>. On the medium term, Qatar plans to raise its LNG capacity from 77 to 126 million tonnes by 2027. Europe needs the corresponding infrastructure to absorb this additional LNG production and steps are being taken, as Germany\u2019s recently announced construction of two LNG terminals in Wilhelmshafen and Brunsb\u00fcttel shows.\u00a0<\/span>\u00a0<\/span><\/p>\n

More oil from Saudi-Arabia is possible\u2026<\/strong><\/h2>\n

On the oil front, there is more spare capacity, Saudi Arabia and the UAE are among the few OPEC members that can quickly <\/span>increase their oil production<\/span><\/a>. Saudi Arabia has a spare capacity of around 1.3 million barrels of oil per day, while the UAE has around 1.15 million barrels and Kuwait 250,000. If the Emirates and, most importantly, Saudi Arabia were to utilize their extra capacity, they could alleviate the market\u2019s tightness and bring a drop in prices. However, OPEC, led by Saudi Arabia, has so far resisted western calls to sufficiently increase its oil production and has instead remained firm on upholding its OPEC plus (with the plus representing Russia) <\/span>agreement<\/span><\/a>.<\/span>\u00a0<\/span><\/p>\n

Iraq, a forgotten supplier<\/strong><\/h2>\n

Iraq possesses the fifth largest crude oil reserves but due to wars and conflict in the past 40 years Iraq\u2019s infrastructure has lagged far behind. Since recently, the authorities have started to invest in enhanced production and pumping capacities, while last year, <\/span>new pumping stations<\/span><\/a> were built in the port city of Basra, increasing oil export capacity. <\/span><\/p>\n

However, for those exports to reach Europe, corresponding ship capacities would have to be made available. There are some crude oil exports to Europe, but Iraqi crude oil exports are mostly destined for nearby markets, specifically Jordan (via trucks from southern Iraq), Turkey (from northern Iraq) and Asia (via Basra from southern Iraq).<\/span>\u00a0<\/span><\/p>\n

Iran is in the starting blocks<\/strong><\/h2>\n

Iran, a country possessing the 4<\/span>th<\/span> and 2<\/span>nd<\/span> largest oil and gas reserves respectively, has been operating under a heavy sanctions regime after the Trump administration withdrew from the 2015 nuclear agreement and its oil and gas exports subsequently fell. In 2020, Iran made up just 0.02% of crude oil imports into the EU, compared to an average of 4.1% in from 2016-2018. <\/span><\/p>\n

As negotiations for a new nuclear deal are underway, Iranian Oil minister <\/span>Javad Owji<\/span><\/a> argued that Iran has the capacity to supply Europe and neighbouring countries, but many analysts believe that even if sanctions against Iran were to be lifted, Iran <\/span>would need time<\/span><\/a> to increase its supply, rendering any immediate effect to the market unlikely.<\/span>\u00a0<\/span><\/p>\n

The Eastern Mediterranean gas field, so close and yet so far<\/strong><\/h2>\n

The Eastern Mediterranean has significant natural gas reserves, some of which are unutilized. The main natural gas producers are Egypt and Israel. However, both countries mainly serve their domestic markets. Egypt became a <\/span>net exporter only in 2019<\/span><\/a>, and the government is considering means of increasing LNG exports to Europe, this increase (around 2.5 million tonnes according to Egyptian authorities) would not be able to <\/span>substitute Russian Gas<\/span><\/a> significantly. <\/span><\/p>\n

Israel on the other hand has long sought to protect its energy security through domestic supply. Israel\u2019s aspirations, along with Greece and Cyprus, to export natural gas to Europe through the construction of the so called \u201cEast Med pipeline\u201d recently took a major blow after the USA decided to withdraw its support for the pipeline. <\/span><\/p>\n

The ambitious project, which would connect Israeli and Cypriot gas reserves with Greece and Italy, has long been criticized for its commercial unviability <\/span>and most analysts<\/span><\/a> did not believe that the pipeline\u2019s high construction and operational cost could be offset. Despite some <\/span>renewed interest<\/span><\/a> in the pipeline after the Russian invasion, the project is still unlikely to materialize.<\/span>\u00a0<\/span><\/p>\n

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\"Ouarzazate
\u00a9 Overflightstock – stock.adobe.com<\/figcaption><\/figure>\n

More joint investments in Green Energy the key<\/strong><\/h2>\n

While the EU-Commission and EU member states are on a frenzied quest for alternatives to Russian imports, they simultaneously recognize that disentangling from Russian energy imports overnight is impossible. Europe\u2019s Middle Eastern neighbours can help the EU secure a certain percentage of its import needs by increasing production, tapping into<\/span> unutilized capacity, or exports diversion. Algeria, Qatar, Saudi-Arabia, the Emirates, and Iraq are the most capable in the short run. <\/span><\/p>\n

In the medium term, new infrastructure can allow Europe to significantly reduce its reliance on Russian hydrocarbons but will also perpetuate Europe\u2019s dependence on hydrocarbons at a time when climate change is becoming ever more urgent. The EU should not abandon its goals of carbon neutrality, and in this the <\/span>MENA countries<\/span><\/a> can be suitable partners, due to their high potential for solar and hydrogen energy production, as well as their geographical proximity. <\/span><\/p>\n

The EU already supports projects in Morocco, Tunisia and Egypt. As the Gulf countries are also beginning to <\/span>come to terms<\/span><\/a> with the green transition, the EU could step up its efforts to invest in green energy, such as hydrogen production, and even connect its <\/span>electricity grid with the Gulf\u2019s<\/span><\/a>.\u00a0<\/span>\u00a0<\/span><\/p>\n

BIO NOTES<\/strong><\/p>\n

Vasileios Chronas is an economist, currently working as an intern at the Bertelsmann Stiftung\u2019s Europe team.<\/span>\u00a0<\/span><\/p>\n

Christian Hanelt is a Senior Expert for the EU Neighbourhood and the Middle East, working in the Program \u201cEurope\u2019s Future.\u201d His areas of expertise include the Euro-Mediterranean Partnership, the Israeli-Arab conflict, the EU\u2019s relations with the Gulf region, economic developments in the Arab world, and the causes of flight and migration.<\/p>\n

Read more on the geopolitical and economic impact of Russia\u2019s invasion of Ukraine:<\/strong><\/p>\n

Russian Sanctions Highlight Need for Green Transition for European Energy Independence<\/a><\/p>\n

What are the economic implications for the Russian and European economies? The Russian war against Ukraine<\/a><\/p>\n

Why more economic and financial sanctions against Russia are inevitable and energy tops the list<\/a><\/p>\n

SWIFT exclusion is fine, sanctioning the Russian Central Bank is better<\/a><\/p>\n

Europe\u2019s divided security<\/a><\/p>\n","excerpt":"

In yesterday\u2019s blog post, Nathan Crist rightly argued that all efforts for the EU to become energy independent should be […]<\/p>\n","thumbnail":"https:\/\/bst-europe.eu\/wp-content\/uploads\/sites\/24\/2022\/03\/Bild1.jpg","thumbnailsquare":"https:\/\/bst-europe.eu\/wp-content\/uploads\/sites\/24\/2022\/03\/Bild1.jpg","authors":[{"id":29589,"name":"Vasileios Chronas","link":"https:\/\/bst-europe.eu\/de\/blogger\/vasileios-chronas\/"},{"id":28398,"name":"Christian Hanelt","link":"https:\/\/bst-europe.eu\/blogger\/christian-hanelt\/"}],"categories":[{"id":596,"name":"Economic Security & Trade","link":"https:\/\/bst-europe.eu\/category\/economy-security-trade\/"}],"tags":[{"id":414,"name":"ENP","link":"https:\/\/bst-europe.eu\/tag\/enp\/"},{"id":202,"name":"eu","link":"https:\/\/bst-europe.eu\/tag\/eu\/"},{"id":389,"name":"Middle East","link":"https:\/\/bst-europe.eu\/tag\/middle-east\/"},{"id":420,"name":"Neighbourhood","link":"https:\/\/bst-europe.eu\/tag\/neighbourhood\/"},{"id":385,"name":"The War Against Ukraine & Europe","link":"https:\/\/bst-europe.eu\/tag\/ukrainianwar\/"}]}