Dept. of IR & European Studies1
Energy geopolitics – main concepts, commodity
features and related concerns, consumer/supplier perspectives
Martin Jirušek, Ph.D.
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Any news?
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Geopolitics – features & terms
̶ Related to political geography
̶ Political geography: „What is happening in this area?“
vs.
̶ Geopolitics: „How this area influences what is happening there?“
̶ Bound to international relations
̶ Concerned with events and phenomena in the international environment
̶ Geographical determinism
̶ What we see/do is bound to a location within which the observed phenomena exist
̶ Politics conducted while looking at the map (physical and political – natural and man-made boundaries)
̶ Historically bound to land/sea/air dominance (Heartland, Rimland)
̶ Categories of states with geopolitically-determined status
̶ Powers/superpowers, hegemons
̶ Determined by resources, territory, population, economic output, etc.
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Geopolitics – features & terms
̶ Neorealism (structural realism) – states assume roles in the structured system
̶ Suppliers/transit countries in the energy sector
̶ Neoclassical geopolitics – geographical determinism in „modern era“
̶ Kissinger, Gray, Brzezinski, Kaplan
̶ Updating geopolitics for a globalized world
̶ Geography plays a role despite ICBMs & technological advancements
̶ Expanding geopolitics beyond the military and security sphere
̶ Geopolitical characteristics of (super)powers – given their geographical positions (focus on
the US & USSR during CW)
̶ naval & land powers
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Geopolitics – features & terms
̶ Conflicts as a feature of the international system
̶ Various forms (military, economic) and intensity
̶ Could be mitigated, avoided, delayed
̶ Differing views on conflicts by liberalism and realism
̶ Statism vs. Market approach (autarky vs. Interdependence)
̶ Classical geopolitics rooted in realism
̶ selfhelp, statism, sruvival, focus on independence and zero-sum game theory
̶ Market approach rooted in liberalism
̶ market-driven, interdependence, focus on absolute gains
Energy actors – misusing dependency…
̶ Strategic approach to energy security - based on realism and its offsprings
- State as the main player
- Frequent involvement of state representatives
- Justifies state interventions
- Market seen as unreliable
- Policies should be subordinated to a state´s needs and goals
- Energy as a legitimate tool
- Energy commodities as non-normalized commodities
- Undesirable dependency
̶ Usually implemented by producers for the crucial role of energy exports in their economies
… or sharing costs and reaping benefits
̶ Market-centered principle as an approach standing in opposition to the strategic approach
- Based on liberalism (antagonism of realism & liberalism in IR)
- Market as the main player, demand-supply nexus
- State interventions limited
- Energy commodities normalized
- Dependency is not a problem
- Cooperation is desirable
̶ Usually implemented by consumers – E.g., European Union
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Energy as a tool
̶ Features of supplies determine their suitability as a leverage
̶ physical features of the commodity (gaseous, solid,…)
̶ the way the commodity or service is traded (type of contract, flexibility, supply chain length,…)
̶ financing of the sector development (private, state involved)
̶ market foreclosure (conditions for entering the market)
̶ market concentration (no. of actors)
̶ Dependency increases vulnerability
̶ …regardles of the reason behind the supply cut
̶ supply chain vulnerability as a part of policy considerations
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Energy as a tool
̶ Oil
̶ + globally traded
̶ + different means of transport (pipelines, sea lines)
̶ + storability
̶ - partial dependence on physical infrastructure
̶ Natural gas
̶ - rigid infrastructure
̶ - partitioned market
̶ + ongoing market globalization (LNG)
̶ Nuclear energy
̶ - broad and long-term partnership offering plethora of
pressure points
̶ - high financial costs
̶ - concentrated market (limited competition)
̶ + highly regulated
̶ - need for expert counterbalance
̶ Natural resources
̶ occurence-specific (inequal worldwide distribution)
̶ need for processing
̶ long supply chains
̶ + friendshoring/nearshoring
̶ + stockpiling
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Oil
̶ fungible
̶ globally (-ish) traded
̶ supply curtailments cause short- to mid-term issues
̶ crude features determine processability
̶ refinery setting (e.g., Druzhba –CZ, SVK, HU)
̶ Importer can import the crude or/and the products
̶ Curtailments of shipments, transit fees, chokepoints
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Natural gas
̶ Structural dependence
̶ infrastructure
̶ contracts (T-o-P, LTCs)
̶ partitioned market
̶ market concentration
̶ Leveraging through infrastructure, price gouging (commodity, transit), policy condtitionality,
contractual conditions, …
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Nuclear energy
̶ Customers are NOT dependent on uninterrupted
flow of fuel
̶ Customers are NOT dependent on a rigid supply
infrastructure
̶ Highly competitive sector driven by economics
- applies for the construction as well as for fuel supplies
- limited number of opportunities for and contractors
- strict technical rules & principles
̶ No contractor has the ultimate comparative
advantage that would secure him contracts in future
Sources of concern
̶ Path dependence
̶ Complexity of procurement procedure
̶ Construction prices & financing
̶ Delays during construction
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Nuclear energy
̶ Path dependence
̶ Selection of a certain technology has broad long-term consequences – can be leveraged
̶ NPP as a producer of a large share of a country´s electricity - influences the whole economy
̶ affects many branches of a state economy – the decision is hard to change
̶ Russia in CEE, Akkuyu in Turkey (BOO business model)
̶ Procurement procedure – the most a sensitive stage
̶ Need for an ‘expert counterbalance’, leaving no room for ‘behind-the-scenes’ negotiations
̶ ‘Russia’ can offer individually-tailored deals (incl. “sweeteners”) given the wide variety of state-owned companies
̶ coupling with foreign policy discourse (e.g., Hungary)
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Nuclear energy
̶ Construction prices & financing
̶ High construction (fixed) costs
̶ Financing can become a leverage
̶ High initial costs must be repaid within the NPP´s
life-cycle to make it economically viable
̶ Different models of financing based on who pays
the construction
- state or state-owned company
- state or state-owned company in partnership with a third party
- contractor
- (future) consumer
̶ Construction delays
̶ an endemic issue
̶ reputational and financial damage (for everyone
involved)
̶ politically/financially motivated delays