Is it too early to proclaim a failure of US and EU policy in Central Eastern Europe? An energy rich Russia is proving able to buy off the elite of the former Communist countries. Russia’s strategy, in place for years, is now paying dividends. Let’s list the Russian wins:
- South Steam – winner / Nabucco out
- The wreck of shale gas in Europe
- The failure to construct an LNG terminal in Croatia
- The scuttling of Hungary’s Emfesz by Russian interests and acceptance (if not assistance) by Hungarian authorities
- Russia wins the Paks expansion in a secret deal with Hungary’s Communist-like Prime Minister Orban
- Croatia kicks out Hungary’s MOL for Russia’s Rosneft then gives them another 20% as a ‘bonus’.
- Russia and Bulgaria continue their love-hate brotherly relationship. They build another nuclear reactor.
And, let’s list the EU’s failures:
- EU ‘liberalization’ fails to understand deep rooted state-elite ownership needs. “Stupid, it’s not the price that’s important but who controls the price.”
- Energy efficiency efforts fail miserably to be deployed which can reduce energy costs.
And, let’s list the failures by the United States:
- The United States fails in every way possible to even figure out a post 1989 strategy for Eastern Europe. The region became the Somalia of Europe.
So what if Russia owns the energy systems in Slovakia, Hungary, Bulgaria, Serbia and Croatia. I once wrote an article plotting the geographic growth of German, Italian and French energy companies. If I were to map the progress of the Russians in the past few months it would look like a war room of shifting take-overs and retreats. Russia is now positioned to control the economic backbone of Eastern Europe.
The sooner we return to using the term, ‘Eastern Europe’, the sooner we recognize the true state of democracy and economic development based on state run companies operating on subsidized energy costs from Mother Russia and taxpayers. Economic growth in Eastern Europe is now perceived to be based on energy prices, rather than financial capital from Western banks. Just as the elite in these countries made money from the entrance of private capital, energy is now emerging to be a money maker. (But first you have to remove the current money makers). Special deals will soon be done for selected favored industries and companies, subsidized by rate/taxpayers. Thus further distorting the true cost of energy.
The economists of the 1990s may have supported the growth of national elites, but they became bankrupt with our current financial crisis. Now it is the ‘national’ energy companies that are becoming the prized national assets; harking back to the era of electrification in the early twentieth century. They are the engines of economic growth that will dig each country from the pit of national economic depression. But it is Mother Russia that will finance and control this expansion. The populace of these countries will now be the serfs making Russia and the state elites profitable through their pursuit of centralized energy systems.
My response: Time to dust off the old international relations books. Time to unite IR and energy more closely. Time to welcome back Russia to Eastern Europe. The time is now.