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Europe Parries Russia’s Energy Capture in Nigeria

nigeriapipeline091708.jpgFollowing the bombing of Pearl Harbor, Japan’s Admiral Isoruku Yamamoto was famously quoted with the line that the attack had “awoken a sleeping giant.” Though one would hardly qualify Russia’s invasion and occupation of Georgia as an event of Pearl Harbor-like magnitude, the war has certainly been effective in awakening a sleeping energy competitor in the European Union, which seems to have spent the past five years since the takeover of Yukos unconscious to the advance Russian energy imperialism. It’s really quite amazing that it has taken this long for Europe to show awareness of what’s being orchestrated from Moscow. For several years now, this blog and many other sources have documented the innumerable aggressive moves, both political and corporate (often with Gazprom, one cannot separate the two), to staple down and co-opt alternative suppliers, businesses, and routes literally across the world with the universal goal of increasing Europe’s dependency on Russian state-owned or state-controlled oil and gas. Though the war in Georgia highlighted concerns of Russia’s increasing stranglehold over access to Central Asia’s energy, the first big move made by Europe is focused on Nigeria, where the Financial Times is reporting that the European Union has offered Abuja financial and political backing for a $21 billion trans-Saharan pipeline to pump its gas directly to Europe – posing direct competition to an alternative proposal from Gazprom.

EU Energy Commish Andris Piebalgs admits that Brussels has been very slow to the game: “In the EU, particularly after Georgia, there is also a lot of demand from member states to have diversification, real diversification, of supply. EU governments definitely are worried about having too strong a dependency on Russia.“But are these just more idle words from Brussels? After all, Piebalgs has long shown a strong awareness of Gazprom’s moves to form a pipeline curtain around Europe, but has not ever had the political power to do very much about it. After the Commission released its rather revolutionary competition proposal calling for the “unbundling” of suppliers and distributors, the initiative was eaten away from within by strong French and German opposition to include a wide variety of loopholes for Gazprom to set up alternative shell companies to make direct sales to the consumer (something that the Kremlin has hungered for politically for years – so far Italy is the only one who has given the Russian government that power). Not even attempts to set up some kind of “reciprocity clause” to ensure that European companies be given equal access to the Russian market have had much success.The Russians are running a powerful and effective strategy of disaggregation against European energy security, using something I call the “reverse comprador” theory – using proxies at the head of national champions such as BP, E.ON, Enel, Eni, and Total to lobby politically for their energy business interests in foreign capitals. After all, I think Berlusconi would feel more pressure from Paolo Scaroni and Angela Merkel from Wulf Bernotat than they would from a much larger delegation from Gazprom.Many observers in African energy are skeptical that Europe can effectively catch up to the Russians, or even the Chinese, who have been vying for years to lock down energy on the continent (earlier this year, Angola became a larger supplier of oil to China than the Saudis). Not only has Gazprom enjoyed tremendous success sewing up North African while the Europeans passively watched, they even capped off the summer with an offer to buy all of Libya’s natural gas as well as the signing of an important MoU with the Nigerian state-held company – likely prompting the EU action today as much as the war in Georgia.I am somewhat more optimistic about the chance for European success in Africa, but it will all depend on whether or not they can run a successful corporate foreign policy, which for Nigeria will require an intelligent engagement not only of the Yar’adua administration, but also with some of the outside, non-governmental community leaders. The Russians have established a long (and dangerous) pattern of nearly always defaulting directly to the unitary power of the central authority in their energy investments (Bolivia is a good example of this), and in many of these volatile states with weak rule of law, this is not a smart long term choice.The EU move in Nigeria is definitely a smart step in the right direction – but let’s see if they can summon the political will to remain united on the project, and not let it fall to pieces like so many other competing proposals. I can promise you that there will be plenty of resources thrown at exacerbating any disagreements about a common European energy strategy.