In the study, I tried to explore how characteristics of energy supply in each of the four global superpowers (EU, US, Russian Federation, People’s Republic of China) influences their foreign energy policy, which out of the three elements of energy policy (competitiveness, security of supply, sustainability) primarily reflects it and how and if different forms of foreign energy policy regional initiatives can be explained with the theory of neofunctionalism.
The first chapter aims to present the neofunctionalist theory as a theory of regional integration. It first analyzes Jean Monnet’s attempts for European integration, at that time illustrated by the European Communities: European Economic Community, Euratom and the European Steel and Coal Community. Later, it was further developed to be able to explain processes like territorial growth of a regional integrated area and also processes of its shrinking, i.e. Brexit.
Neofunctionalism is a theory explaining the process of integration on a regional level with reference to growing reciprocal economic relationships in-between nations. It also analyzes capacity of a regional organization in dispute resolution and creation of international legal regimes, within which the supranational market rules may replace national regulatory regimes. It explains also integration by positive spillover effects as necessities to cooperate in sectors, which are indirectly related to the sector where regional cooperation first started. I briefly present also intergovernmentalism as an alternative theory.
The first chapter also briefly presents 130 years of history of regulation to protect competiveness on energy markets, some 80 years of security of supply challenges and their translation into political decisions and some 70 years of history of creation of sustainability in modern energy policy.
The second chapter presents the structure of energy supply and the market structure in each of the analyzed global superpowers. It is evident that energy markets (oil, gas, electricity) in the US and the EU are highly competitive and efficient. Both superpowers strive also towards sustainability and are constantly decreasing harmful emissions from fossil fuel power plants as well as transport and other energy consuming activities. While the EU is highly import dependent (in 2017 imported more than 55% of all energy sources), the United States in the last 15 years developed from the biggest importer of energy sources globally into a net exporter, reaching energy self-sufficiency in 2018.
Russia has a net energy imports index at -84%. It is one of the biggest net exporters of oil (some 10% of global production) and gas (close to 20% of global production), according to data from 2014. In 2018, it exported almost the same amount of energy as was consumed in the country. Despite its energy abundance, Russia has heavily regulated and inefficient gas, oil and electricity markets. Among the four analyzed superpowers, it has far the least energy efficient use of its energy resources. The position of Gazprom, which enjoys a monopoly on pipeline gas exports to Russia’s neighbors, has been increasingly challenged. Consequently, pressures on Moscow to reform its energy (particularly gas) sector have been rising. So far, the Russian government has shown reluctance with regard to implementing structural reforms in its energy sector and has rather been trying to adjust, react and adapt to created circumstances.
China is slowly liberalizing its gas market. Reform that attracted new private investors into electricity generation in the 1990s has backslid. Gas, coal, electricity generation and oil sectors are primarily controlled by state-owned companies and do not allow much room for competition. China in 2017 consumed 22% of all energy sources globally and was by far the biggest energy consumer worldwide. China extracts and burns around half of all coal being extracted worldwide and is heavily unsustainable. Its harmful emissions from power plants remain high and stable, while CO2 emissions are in constant ascent. However, in recent years, the country has been focusing much more on services-based economy and renewable energy. Additionally, taking into account the combination of effects of factors like structural changes in the economy, growing efficiency within the energy industry and demographic changes, total growth of the energy demand up until the year of 2040 will be comparable to the one that China experienced from 2008 to 2016. Its net energy imports index is 15% and shows moderate dependence on import.
The third chapter aims at analyzing the EU’s emerging foreign energy policy in a global context of imperfect energy relations. Energy, being an increasingly politicized sector, still remains closely linked with state sovereignty and national interest. Consequently, Brussels’s efforts to shape a coherent foreign energy policy, while sharing competences with the Member States and taking into account the carefully drafted compromise of article 194 of the Treaty on the Functioning of the EU, has proved to be increasingly challenging. Moreover, Europe, being highly dependent on foreign energy suppliers (among which Russia, with its contrasting vision of energy policy, plays the most important role) has been further undermining the EU’s aspirations of introducing universal, market-based norms in global energy relations. Against this backdrop, the EU managed to make some achievements in its foreign energy policy, particularly, by the means of the European Economic Area and the Energy Community, which was a successful example of what Europe aspired to achieve globally. In recent years marked by the decreased role of multilateralism and the increased role of bilateral relations, also the EU introduced elements of dominance into its foreign energy policy despite opposition to such behavior when performed by other superpowers. The neofunctionalist theory explaining European integration by spillover effect has proven to be usable also in explaining processes of creation of EU foreign energy policy in the years from 2015 on and increased role and autonomy of the European Commission in it.
The fourth chapter attempts to demonstrate that US energy policy has gone through multiple changes throughout history. While in the beginning of the twentieth century, the US pursued competitive access to energy sources to sustain the strong growth of its demand, after the Suez Canal crisis and the subsequent oil crisis in the mid-seventies, the US energy policy became centered on ensuring the security of supply. Since the mid-eighties, it became much more multi-sided, with growing concern about environmental issues, yet without detriment to the importance given to security of supply and competitiveness.
While American energy policy throughout the twentieth century has been driven by fears of energy scarcity, the so-called unconventional revolution of the past decade changed Washington’s attitude towards its foreign energy policy and also considerably impacted international oil and gas markets. An atmosphere of continuously growing competition for resources has, thus, been replaced by the age of energy abundance, where the Trump’s US administration has set the objective of the United States becoming energy dominant, supporting political interventions into the creation of prices on the oil market and moving away from multilateralism, which enabled global competition. Despite the fact that the US achieved the status of being the biggest producer of oil and gas in the world, Washington does not seem to withdraw the objectives traditionally pursued by its foreign energy policy. Namely, ensuring supplies on the global oil markets and minimizing disruptions; encouraging allies to diversify their own energy resources, where Europe has usually been the main focus of US efforts; and using its power to punish countries and to command them to change policies, using the possibility of imposing sanctions on gas and oil exporting nations. With latest Biden’s administration US seems to reposition its focus on sustainability and multilateral cooperation again. Despite that sanctions play increasingly important role in US foreign policy, since it is more and more questionable when and if at all to deploy military force. New energy abundant age enables the US to get on board other nations to collectively impose multilateral sanctions easier than in previous times. ON the other side it is very possible that US decision to become energy dominant and start using energy exports for political purposes could work against their interests and ability to achieve their objectives. The US never participated in any economic organization that would tend to transfer sovereignty over energy policy to a supranational structure.
The fifth chapter dealing with Russia explores how its vast energy resource base provides the fiscal basis for state spending, foreign exchange earnings, and leverage (especially for gas) in international relations. Thanks to the high oil prices of the pre COVID-19 pandemic decade, Russia managed to recover its economy and increase its geopolitical assertiveness. Nevertheless, due to its extreme dependence on energy revenues, following the unfavorable combination of low oil prices, financial sanctions of the West combined with the rising competition in production resulted in Russia’s gradually diminishing economic leverage.
Russia, with unlikely prospects to become a prominent player in Asian markets in the foreseeable future, has turned to expanding and refreshing its energy ties with Europe. Yet, in parallel, Moscow has been pushing forward its competing integrationist project of the Eurasian Economic Union (EAEU), which aims to conflict and overlap with the European integrationist projects, inter alia, in the sector of energy in order to safeguard its dominant position in the post-Soviet space. Despite the formal similarity of the EAEU with the EU, there is no spillover effect since it is an association of unequal partners with strong Russian leadership.
Country’s fast-growing economy and rapid increase in energy demand has lead China to gain more influence in global energy markets. The energy policy of the Chinese government has been strongly influenced by the increasing demand for oil and country’s dependence on oil imports. The oil and gas industry has remained a strategic asset for the Chinese government. This industry is responsible for ensuring supplies of oil and gas, for sufficient budget income as well as for employment. With closer integration into global markets, Chinese state-owned companies have been seeking to adapt their operations to global practices, yet, the room for maneuver has always been limited by state control.
Under the present leadership, Chinese companies have been engaged in large-scale outward direct investments. This process was recently soon packed as a Belt and Road Initiative (BRI). The fact that nearly 70 countries are participating in the BRI does not improve the perception that its label remains unclear. There is still no exact definition of the qualification of a BRI project
Yet, half a decade after the launch of one of the most ambitious geo-economic projects of recent history, some more things became clearer. To name a few, BRI is not only responsible for securing China’s trade routes and energy supplies, it is also accountable for the fact, that the country is being able to export worldwide several construction projects due to its industrial overcapacities. The BRI became a major component of China’s grandiose foreign policy agenda aimed at increasing Chinese influence in the BRI region and beyond. The past years have proven that the BRI project is to be understood as a long-term, global and not having only an economic goal. Yet, challenges regarding to the future success of the BRI are many and of different nature: technical, political, financial and regulatory, to name a few. Both suspicion and skepticism concerning its real motives and viability remain high, especially among those countries who have been the main designers of today’s global financial system and international trade rules. The Belt and Road Initiative is yet another form of international cooperation which is incomparable with the EU integration process and neofunctionalist theory cannot be used for its explanation.
The thesis confirmed that characteristics of energy supply in a country are directly and with the same attitude reflected in the foreign energy policy. Foreign energy policy is additionally held up by whichever tool of dominance being available to one of the four studied cases. The thesis also confirmed that Haas’ theory of neofunctionalism is still supportive in explanation of regional integration of all initiatives proposed in and by the four global superpowers. EU is creating its own foreign energy policy entering externalization as the last, fourth stage of regional cooperation, according to Nye.
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