Putin Opens Up Europe’s Energy Fault Line Along Oder-Neisse

  • Date: 12/03/14
  • Stefan Nicola and Marek Strzelecki, Bloomberg

Vladimir Putin’s play to wrest control of Ukraine is accentuating divisions in the European Union over how to balance climate and energy policies, driving a wedge between Germany and its eastern neighbor Poland.

By moving forces into the Crimea region, the Russian president caused a jump in natural gas prices from the U.K. to Germany, highlighting Europe’s dependence on gas piped through Ukrainian territory.

Polish Prime Minister Donald Tusk has turned on Germany, saying its appetite for Russian gas as it shifts to clean energy is “a threat to Europe’s security and sovereignty.” Tusk said he’ll deliver that message to Chancellor Angela Merkel when they meet in Warsaw today.

The German-Polish split underscores a broader dilemma over the direction of Europe’s $13 trillion economy and the energy model that powers it. Merkel is focused on cutting pollution and closing German nuclear reactors, consuming more Russian gas in the process. Tusk, more concerned with energy security, is pushing coal and atomic power, and yesterday backed a law to speed up hydraulic fracking to get at domestic hydrocarbons.

“Germany and Poland in many ways represent a fault line when it comes to defining Europe’s future energy mix,” William Pearson, London-based director for global energy and natural resources at the Eurasia Group, a political-risk consultancy, said in a March 7 telephone interview. Both, he said, “enjoy the support” of other EU nations.

Oder-Neisse Line

The divergence has implications for businesses as well as consumers on both sides of the Oder-Neisse Line, the post-World War II boundary first proposed by the Soviet Union at the Yalta Conference in 1945 and which still forms the present-day border between Poland and Germany.

Tusk is buoyed by Poland’s shale gas reserves, ranked as Europe’s biggest by the U.S. Energy Information Administration. Polish authorities have granted about 100 licenses to foreign and domestic companies to drill for unconventional gas and have sought to revive investments from companies including Marathon Oil Corp. and Exxon Mobil Corp.

About 20 kilometers east of the border in Lubsko, Poland, Baltic Ceramics SA Chief Executive Officer Piotr Wozniak plans to begin building a $20 million factory this year to supply the nascent fracking industry. He is betting that Europe will try to emulate the shale-gas boom that has brought the U.S. closer to energy-independence.

Across the river in Germany, Merkel is closing reactors by 2022 as she pursues the biggest transition to renewable energy of any developed country in history. With her Social Democratic Party coalition partner opposed to fracking, Merkel’s government has imposed a moratorium on new drilling using the technology.

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