The Central Eastern European Region, including the Southeast of Europe, is heavily dependent on Russia’s energy resources. This includes gas, oil and nuclear technology. The ability to cement through physical infrastructure and human capital during Communism established a robust connected system of resources and expertise between the region’s countries and Russia. The headlines hold that gas security is the most contentious issue. But finding a solution to this dependency requires a complex and stable energy investment climate. Since the fall of the Berlin Wall and eastward expansion of the EU, diversification away from Russia was the overall most important headline issue. There are three stages I outline here demonstrating evolution of the region’s energy system and the political-economic strategies involving Russia and the CEE and SEE countries. Stage one, fully dependent on Russian resources and technology; stage two, building an energy system semi-independent of Russia; and stage three, ‘(in)Dependence’ on Russia’s energy wealth, the recognition of benefits gained from dependence coinciding with diversification of energy sources. The energy landscape of the region remains the same with traversing pipelines and Russian supplied power plants, but diversification with neighbors and other EU countries improves the energy security of the new EU Member States.

1. The Russian Rock: Re-landscaping
CEE energy (in)Dependence
Michael LaBelle, Assistant Professor
CEU Business School & Department of Environmental Sciences and Policy
Central European University
Presentation for:
ENERGY SECURITY AND DIPLOMACY IN 2013
August 26, 2013, Budapest

2. Outline
1. The era of dependence: Russian resources and technologies
2. The era of independence: Strategic shift away from Russia
3. The era of (in)Dependence: Rebalancing and realities
Political Technocratic

3. Energy Dependence: Setting the landscape
Dependency Characteristics
• Pipelines
• Electrical grid
• Nuclear technology
• State ownership
• Direct political control
Source: BBC

4. Energy Independence: Markets and security
Independence Elements
• Re-orientation towards EU – Away from
Russia!
• FDI and privatization of energy assets
• Establishment of energy market
• Institutional reform
• Exploring supply diversification (LNG,
interconnectors, storage – NETS!!)
• Market reforms – Markets for security?
• Nabucco vs. South Stream
Source: LaBelle 2009

5. Establishing a new energy market: Actors
ERRA member and
new EU Member State
Year regulator legally
established
Year first electricity or
gas distribution
company privatized
with EU member
company
Bulgaria 1999 2004
Czech Republic 2001 2002
Estonia 1998 1997
Hungary 1998 1995
Latvia 1996 1997
Lithuania 1997 2001
Poland 1997 1997
Romania 1999 2005
Slovakia 2001 2002
Source: REKK 2008

6. The Shift:
Energy & Society
Bulgaria Anti-fracking protests
Bulgaria Electricity price protests
Hungary 10% electricity and gas cut
2009 Gas dispute
No Nabucco
The Russian Rock
Poland’s faltering shale gas
revolution
War of Independence Ends: Russia and CEE Settle Gas Dispute

7. Conclusion: Reaching Energy (in)Dependence
Market and Infrastructure Realities
• No mega-project
• Small scale diversification and
security of supply investments
• Political control remains
• Isolation of technocrats
• Out with complex market
structures
• Limitation: Overlooked regional
integration and trading hubs
International Relations: Trade-offs
• EU: transparency, competition and
technocratic approach
• Russia: existing infrastructure,
business and politics as usual
• Investors?
• No energy efficiency or RES
• Status quo hedges political-
economic risks
• Maintain historical relations and
infrastructure for greater political
control, including national and
international benefits

8. Energy Dependent Energy (in)Dependent
Regional Security
• Interconnectors
• LNG
• Shale gas
• Storage
Investors out
State financed
Price/Society
Risk hedging
IR considerations
Regional focus
(in)Dependent
Market
Security?
Technocratic
Privatization
Alternatives?
Complex
Independent
Transit
Centralized
Resource
Centric
Technology
Reliable
Dependent
The Russian Rock remains

9. Transition to (in)Dependence
Nabucco
strikes
out
Creating
Market
reforms
Building
Pipeline
network
Dependence
(1958 Druzbha
pipeline)
Independence
(early/mid 1990s)
(in)Dependence
(2009)

10. Additional slides

11. Expansions and Privatizations
Company Acquisition and Divesture Transactions by year in New Member States
0
2
4
6
8
10
12
14
16
1994 1996 1998 2000 2002 2004 2006
Year
Companiesacquiredand
divested
CEZ
EON
EDF
RWE
Gaz de France
LaBelle, Michael. “Expanding Opportunities: Strategic Buying of Utilities in New EU Member States.” Energy Policy 37, no. 11 (November 2009):.