Russia’s energy hegemony

Recently, NATO officials announced that Russian tanks and armored vehicles have charged into the southern Ukraine, which is held by Russian rebels.

For most people, the announcement of Russia’s recent invasion is not a surprise but merely an escalation of what has been building up for months. Suspicions were aroused, after Russia attempted to send a humanitarian aid convoy into the war torn area without Kiev’s permission. Moreover, Russia has announced a second “humanitarian aid” convoy will be sent in next week.

Since the beginning of the year, pro-Russian militias have gradually taken control of the Crimea peninsula in Ukraine. Initially, Russian President Vladimir Putin disavowed any direct involvement with these militias groups only to later acknowledge that Russian Special Forces have played a role in assisting the militias groups.

Following a referendum that called for Crimea’s unification with Russia, Putin took steps to annex the region. Though the majority the international community considers the referendum invalid and Russia’s annexation illegal, Russia continues to exert its influence in the region.

Not only has Russia shown a strong interest in absorbing Crimea, it makes very overt statements regarding further territorial ambitions throughout Central and Eastern Europe. Ukraine is not the first former Soviet country that Russia has invaded. In 2008, Russian troops invaded the country of Georgia, where Russian troops remain to this day.

It has come to be that people stop asking if Russia will overrun another country and now spend their time questioning which country they will invade. Additionally, will the next country on Putin’s list, incur a military incursion by Russia and/or their puppet militia’s? Or will they be coerced in some other fashion into give up their sovereignty?

Energy security is a large and growing source of concern for many European lawmakers; especially those in Central and Eastern European countries which are heavily dependent on Russia for over 70% of their total gas consumption.

Currently, the Italian company Enel, which owns Slovenske Elektrarne that provides 77 percent of Slovakia’s power, is in the market to sell its majority stake in the Slovakian energy producer. From the looks of it, the Russian state-owned energy company Rosatom is a serious candidate for a majority stake in power supplier.

While some reports have announced that Enel will not sell to Russian companies due to the Ukraine crisis, other reports deny Rosatom’s exclusion from consideration. Purchase of Slovenske Elektrarne would further monopolize Russia’s control of European energy.

Through the routine exploitation of its position as the region’s primary energy exporter, Russia has been belligerently expanding their power and territory in the region. With so much control over the Europes energy supply, Russia will no longer need to dominate other countries militarily; it can simply turn off people’s lights. In fact, Russia has used this technique in the past. In 2009, the Russian gas company Gazprom halted natural gas exports to Europe, leading to shortages throughout the continent.

Energy exports compose approximately one-eighth of Russia’s total exports. Past sanctions have not had a wide impact on the energy industry. By imposing additional sanctions that target the Russian energy industry, would send a strong signal from the U.S. and other NATO countries that Russia should discontinue its territorial expansion.

Additionally, the French bank BNP Paribas, which was appointed to advise on the sale of the utility, has received heavy fines in the past for violating U.S. sanctions when the bank failed to cancel a Russian deal to purchase two Mistral-class naval ships from France. New sanctions would be a clear signal to BNP Paribas that it should not consider Rosatom as a potential purchaser of Slovenske Elektrarne.

While initial sanctions placed on Russia hasn’t stopped it from incurring in Ukraine, the potential cost to the Bank from future sanction violations will weigh heavily on any decisions they make regarding Slovenske Elektrarne’s sale. This in turn will help keep the lights on throughout Central European countries worried about their sovereignty.