Below is an excerpt from the testimony of Zenyo Baran, Senior Fellow and Director of the Center for Eurasian Policy, Hudson Institute, made before United States House of Representatives Committee on Foreign Affairs “Central and Eastern Europe: Assessing the Democratic Transition”, July 25, 2007. The full testimony is available for download here. Zenyo Baran:
I believe it is not possible to have a meaningful discussion of political and economic reform in Central and Eastern Europe without also looking at the region’s energy situation—especially because Russia is currently using its position as the primary supplier for many countries to influence political and economic developments. I am grateful, Mr. Chairman, that you have already raised this issue before Congress: at a hearing in March, you declared that “[a]s long as Russia uses its energy sector as a foreign policy instrument, it will continue to enjoy the upper hand.” Accordingly, my testimony will focus on the vitally important question of energy security. In many Eastern and Central European countries, the energy sector occupies a dominant position in the economy. Ties between the energy sector and state tend to be very strong. More often than not, there is a single state-owned (or partially state-owned) oil and gas vehicle, which is the largest and most profitable company in the country. Corruption and a lack of transparency in the energy sector actively retard development in other sectors of the economy and in society as a whole. The task of reforming the energy sector—and therefore of securing the democratic transition—in such countries is made all the more challenging because of their overwhelming dependence on Russian oil and gas supplies. It is frequently argued—in Congress and elsewhere—that America’s dependence on foreign energy must be reduced if not eliminated altogether. More specifically, there is considerable fear that such dependence leaves America beholden to countries that might not share our values. In Eastern and Central Europe, the degree of dependence far outstretches our own. Oil from Saudi Arabia and Venezuela combined comprises 25 percent of American total imports. However, according to Eurostat, no fewer than 7 countries in Eastern and Central Europe rely on Russia for more than 90 percent of their total oil imports. Three more countries in the region receive more than 60 percent of imports from Russia—including Bulgaria, which is 89 percent dependent. The degree of dependence is just as significant, if not more so, for natural gas. Five countries in the region depend on Russia for their entire natural gas imports, while six others depend on Russia for over 60 percent of imported supplies. The natural gas aspect of energy dependency attracts little attention in the United States, since it is not really a concern for us—while over 90 percent of our natural gas supply comes from Canada, our northern neighbor does not represent a significant threat to American interests.