Eastern Europe’s energy independence is the work of generations
Eastern Europe has made significant economic gains since the fall of the Berlin Wall more than 30 years ago. At that time, the economic “pull of gravity” for many of the countries was towards Moscow — centrally-planned economies, limited economic options, poverty, and authoritarian government. Today, nearly all have successfully transitioned into thriving multiparty democracies.
There is some backsliding, but the region as a whole has made vast improvements.
However, one of the strong pulls of gravity toward Russia that remains is the energy network. Both now and in the past, Russia has used its dominance in the energy sector as a weapon of coercion. For example, in 2004, Russia shut off its natural gas supply to Ukraine following the Orange Revolution that brought a pro-Western government to power. Though Ukraine has since weaned itself of Russian natural gas, many power grids continue to be completely oriented towards Moscow. Of all the natural gas consumers in the region, only Azerbaijan, with plentiful natural gas reserves of its own, is completely energy independent. Croatia still relies on Russia for two-thirds of its natural gas imports, Moldova for nearly 100 percent. Even the European Union as a whole still counts Russia as its largest energy supplier, accounting for nearly 30 percent of petroleum imports and nearly 40 percent of natural gas.
The good news is that, over the past 25 years, Eastern European countries have implemented several generations of reform that have strengthened the region’s local energy capacity, providing the foundation for greater energy independence in the future. In the 1990s, the energy sector of the region was in chaos. The central planning of the Soviet era had led to overbuilt grids, endemic corruption, skewed profit incentives, and shoddy infrastructure. USAID’s involvement since then has helped rehabilitate the systems in most countries. Electricity availability has greatly improved, as has reliability. System capacity and regulatory frameworks also now operate on market principles, even when supply comes entirely from Russia. Most importantly, local citizens now have the technical expertise necessary to run and improve energy systems independently.
As these countries continue to slowly gravitate towards the European Union, a key aspect of cementing a full economic divorce from Russia will be to secure full energy supply independence in the long run. That is why USAID’s Energy Bridge program is so interesting. USAID’s work over the past three decades hasn’t been glamorous — big pipelines grab the headlines, not nuanced regulatory reforms, local delivery systems, and supply chain management improvement. However, building energy independence isn’t just a matter of putting up poles, and it doesn’t happen overnight. The soft stuff — standards, regulation, management, human capital — that’s what has given nations the foundation they need to fully diversify their supply.
In this sense, Energy Bridge is the third generation of USAID’s decades-long engagement with Eastern Europe, building on this foundation to empower U.S. allies to finally break free from Russian energy dominance and make their own choices. Why is this important? For one, choices make consumption cheaper. Monopolized supply leaves importers vulnerable to supply shocks, but also to price gouging. Greater energy independence is also more secure — with Russia still able to “flip the switch” on many of its neighbors, it retains powerful leverage with which to demand submission, encourage corruption, and promote economic and political authoritarianism. Finally, by connecting local authorities with U.S. private sector expertise and investment, Energy Bridge will encourage renewable energy development. As the undisputed leader in building the infrastructure needed to handle the surges that come with renewables, U.S. involvement is vital to making more sustainable energy sources a reality in the region.
The past 25 years have seen Eastern Europe make considerable progress, and in governance, economy, and values, many are firmly reoriented towards the E.U. Energy Bridge presents the final step in the pivot towards Europe and would free countries from the last major element of Moscow’s attraction. Even more importantly, by offering countries choices about their energy suppliers, economic structure, and governance, Energy Bridge would cement a final element in these countries’ journey to self-reliance, the ultimate goal for all sovereign nations of the world.
However, just like in the past, Energy Bridge doesn’t boast any quick fixes. Just as the improvements made so far have taken decades, achieving a full economic divorce from Russia will take sustained and widespread effort over at least 10 to 15 years. To that end, the incoming Biden administration should make Energy Bridge a U.S. foreign policy priority. USAID can’t do it alone — accomplishing the program’s overarching goal will take the concerted effort of the White House as well as other development agencies like the USTDA, Ex-Im Bank, and DFC. Given the larger regional stakes, regional development players like the EBRD and EIB also have a role to play. Ultimately, the success of Energy Bridge, and of the region in general, will come down to whether the U.S. and its allies can develop a shared strategic vision to finalize Eastern Europe’s energy independence, whether from malign actors like Russia, or from crony capitalists at home.
Daniel F. Runde is a senior vice president and William A. Schreyer chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.