The Russian Federation is by far the most important exporter of gas by pipeline. Until recently, all Russian export pipelines were directed towards Western Europe, and Russian exports accounted for 35 percent of total gas consumption in the European Union, so Russia was by far the most important supplier of gas to the European Union. In the case of specific EU member countries, 100 percent of gas came from Russia. This has been the case for countries like Bulgaria, Slovakia, or Poland, or the Baltic Republics which have been tied to the Russian gas network, and had no other way of importing gas from any other country. This graph shows the importance of some countries as customers of Russian gas. You can see very clearly that the most important country is Germany that accounts for the vast majority of Russian gas export to the European Union, Italy is second, the other countries import lower volumes of Russian gas. Some countries are 100 percent dependent. That is shown by the red line, and others are almost marginally dependent. It has to do with geographic position within the European Union. On average, the European Union has a degree of dependency, which is shown by the yellow line in the middle. Russian pipelines to Europe were built under the Soviet Union, and they were designed and routed that the route was decided on the basis of political conditions existing at the time. So this is shown very clearly by several characteristics. First of all, the Russian planners gave no attention to borders within the Soviet Union, between the different republics which constituted the Soviet Union, and notably no attention to the border between the Russian Federation and Ukraine within the Soviet Union. All pipelines, all export pipelines, converged into the Ukraine, and moved towards Western Europe, travel towards Western Europe by transiting through Slovakia only. It was the only country through which all Russian gas transited, and that was because at the time Czechoslovakia was under Russian military occupation, and so it was the most tightly controlled component of the Soviet bloc. There were separate pipelines to serve East and West Germany, and also finally, all the gas which was destined to Western Europe was delivered at the border between Slovakia and Austria in a location called Baumgart. After the collapse of the Soviet Union, the political realities changed radically, and so we had several consequences, two main consequences. First, within the former Soviet Union, the newly independent republics became each master of the pipelines in their own territory, and that raised numerous conflicts about utilization of these pipelines because different republics control different pieces of the same pipeline, which only made sense if they worked together of course. The second major development was that countries that previously were members of the Soviet bloc became members of the European Union. This was the case with Slovakia, the Czech Republic, Hungary, Poland, and the Baltic Republics. Baltic Republic had been part of the Soviet Union itself, not just the Soviet bloc, and this all became members of the European Union. There were conflicts that rose. The most acute, where in between the Russian Federation and the UK. Conflicts were related not just to gas, but specifically in the case of gas relations we saw two interruptions to Russian gas exports towards Western Europe. The first one was in January 2006, and the second was in January 2009. The second in particular was quite serious because it lasted for the best part of one month and several importing countries suffered significantly, notably Bulgaria. Then in 2014, the Russia occupied Crimea, which is officially recognized to be part of Ukraine. Ever since, there has been a state of war, hidden war, or war by proxy between Russia and Ukraine. In this conflict, the European Union has tended to support Ukraine. Therefore, it has felt that acute dependence on Russia and gas was a problem, was a limitation. There was a feeling that the European Union could not quite adopt a foreign policy that they would have liked to adopt towards this conflict because they were implicitly subject to a blackmail from Russia or the danger of interruption of Russian gas supplies. Russia has over the years move to reduce its dependence from transit through the Ukraine by building several alternative pipelines. The first one that was built was the Yamal Europe pipeline, which you can see here in this map. It originates in Russia, travels across Belarus and Poland, and reaches a delivery point on the Polish German border at Frankfurt and other. This was the first alternative to transit through the Ukraine that was built. But the Russians were not entirely satisfied because there was still transit through two countries, and in particular relationship between Russia and Poland have not been very smooth. So Russia was not 100 percent happy about the solution. They therefore moved to establishing another two pipelines, Nord Stream 1 and Nord Stream 2. Nord Sream 1 and 2 are pipelines that reach Germany from Russia passing entirely under the Baltic Sea. So they do not cross the territory of any country. They touch the territorial waters of some countries, but mostly they are under international waters, and this has given Russia the possibility of reaching their major gas market, which is Germany without being subject to conditions or influence of any transit country. Of course, both the Balkan countries: Latvia, Lithuania, and Estonia and Poland very much resented this solution because it meant that they were marginalized, and still exclusively dependent on gas from Russia and not tied to the rest of Europe at all. Of these two pipelines, the Nord Stream 1 has been in operations for several years now. The Nord Stream 2 is being implemented with the support of several Western European importing companies, and also the support of the German government. How quickly and under which exact rules the Nord Stream 2 pipelines will be operating is something that is likely to be discussed for a long time. On the south side of Russia, a pipeline has been built in order to serve Turkey directly across the Black Sea. This is the Blue Stream pipeline, which is represented here in yellow, and this pipeline allowed Russia to export gas to Turkey, which is becoming rapidly the second most important customer for Russian gas, second only to Germany. Previously, all the gas that went to Turkey had to travel through Ukraine, Moldova, Romania, Bulgaria before it reached the Turkish territory. So this was a major difference having a direct pipeline into Turkey. The second pipeline is the so-called Turkish TurkStream, which is the successor of a project called the South Stream, which was originally meant to reach Bulgaria, but then there were disagreements on the rules to be applied to this pipeline. Bulgaria is a member of the European Union. The European Commission wanted to impose certain conditions to the operation of this pipeline, and Russia did not want to accept these conditions notably about openness to competitors and other important legislative measures. At some point, they decided not to land in Bulgaria, but rather redirected the pipeline towards the south, and you see that it bends at some point instead of following a straight line and land in the European side of Turkey. Turkey is not a member of the European Union, so there is no question about this pipeline being subjected to European Union rules. The intention of Russia is to use this pipeline to export more gas to Turkey, and also to bring additional quantities, additional volumes of gas to the European side of Turkey waiting for some European companies to build pipelines to take this gas to other European markets, which for the time being is not clear how it may happen.
