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Energy policy of Russia

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Title: Energy policy of Russia  
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Energy policy of Russia

The Energy policy of Russia is contained in an Energy Strategy document, which sets out policy for the period up to 2020. In 2000 the Russian government approved the main provisions of the Russian energy strategy to 2020, and in 2003 the new Russian energy strategy was confirmed by the government. The Energy Strategy document outlines several main priorities: an increase in energy efficiency, reducing impact on the environment, sustainable development, energy development and technological development, as well as improved effectiveness and competitiveness.

On July 2008 Russia's president signed a law allowing the government to allocate strategic oil and gas deposits on the continental shelf without an auction procedure. On 17 February 2011, Russia signed a deal with China, stating that in return for $25 billion in Chinese loans to Russian oil companies, Russia will supply China with large quantities of crude oil via new pipelines for the next 20 years.[1]


  • Overview 1
  • Natural gas 2
  • Oil 3
  • Electricity 4
  • Climate change 5
  • Energy usage 6
  • Energy in foreign policy 7
    • Energy disputes 7.1
      • Azerbaijan and Armenia 7.1.1
      • Belarus 7.1.2
      • Czech Republic 7.1.3
      • Georgia 7.1.4
      • Lithuania 7.1.5
      • Poland 7.1.6
      • Ukraine 7.1.7
    • EU-Russia Energy Dialogue 7.2
    • Ratification of the Energy Charter Treaty 7.3
  • Controversies 8
    • Corruption 8.1
    • Oil-for-Food Programme 8.2
  • See also 9
  • Footnotes 10
  • References 11
  • External links 12


The economy of the Union of Soviet Socialist Republics was based on a system of state ownership of the means of production, collective farming, industrial manufacturing and centralized administrative planning. The economy was characterized by state control of investment, and public ownership of industrial assets. The Soviet Union invested heavily into infrastructure projects including the electrification of vast areas, and the construction and maintenance of natural gas and oil pipelines that stretch out of Russia and into every constituent nation of the USSR. This type of investment set the stage for Russia to become an Energy Superpower in the modern age.[2]

The idea of a Russian national energy policy was approved by the government of Russia in 1992. At the same time government decided to develop the Energy Strategy of Russia.[3] For this purpose the Interagency Commission was established.

In December 1994, the Energy Strategy of Russia (Major Provisions) was approved by the government, followed by the presidential decree from 7 May 1995 confirming the first post-Soviet Russian energy strategy On the Main Directions of Energy Policy and Restructuring of the Fuel and Energy Industry of the Russian Federation for the Period up to the Year 2010, and the governmental decision from the 13 October 1995 approving the Main provisions for the Energy Strategy of the Russian Federation.[4]

The strategy was changed under the presidency of Vladimir Putin. On 23 November 2000, the Russian government approved main provisions of the Russian energy strategy to 2020. On 28 May 2002, the Russian Ministry of Energy gave an elaboration on the main provisions. Based on these documents, the new Russian energy strategy up to 2020 was approved on 23 May 2003 and confirmed by the government on 28 August 2003.

The main objective of Russian energy strategy is defined to be the determination of ways of reaching a better quality of fuel and energy mix and enhancing the competitive ability of Russian energy production and services in the world market. For this purpose the long-term energy policy should concentrate on energy safety, energy effectiveness, budget effectiveness and ecological energy security.[5]

As percentages of the worlds total reserves, Russia holds 45% of the gas, 23% of the coal, 14% of the uranium, and 13% of the oil. Russian oil production and export has increased significantly since 2000, and in 2006 temporarily exceeded Saudi Arabia’s production. Currently Russia is the world’s largest energy producer. Russia is not a member of OPEC (Organization of Petroleum Exporting Countries) and repeatedly presents itself as an alternative to middle eastern energy resources, asserting that it is in fact a “reliable energy supplier and that it only seeks to use its position as an important supplier to enhance global energy security”.[6]

The energy strategy document defines the main priority of Russian energy strategy as an increase in energy efficiency (meaning decreasing of energy intensity in production and energy supply expenditures), reducing impact on the environment, sustainable development, energy development and technological development, as well as an improvement of effectiveness and competitiveness.[7]

Natural gas

Gazprom has a monopoly for the natural gas pipelines and has exclusive right to export natural gas, granted by the Federal Law "On Gas Export", which came into force on 20 July 2006.[8] Gazprom also has control over all gas pipelines leading out of Central Asia, and thus controls their access to the European market.[9] Russia has used Central Asia's gas, primarily that from Turkmenistan, on occasions where it has found itself unable to meet all its delivery obligations from its own production. Such circumstances in 2000 led to Gazprom allowing Turkmenistan to use its pipelines to supply gas to the Russian domestic market leaving Gazprom free to fulfil its obligations towards European customers.[10] Other main natural gas producers in Russia are gas companies Novatek, Itera, Northgas and Rospan, and vertically integrated oil companies Surgutneftegaz, TNK-BP, Rosneft and LUKOIL.[11]

The main export markets of Russian natural gas are the European Union and the CIS. Russia supplies a quarter of the EU gas consumption, mainly via transit trough Ukraine (Soyuz, Brotherhood) and Belarus (Yamal-Europe pipeline). The main importers are Germany (where links were developed as a result of Germany's Ostpolitik during the 1970s,[12] and also Ukraine, Belarus, Italy, Turkey, France and Hungary.

In September 2009, Prime Minister Vladimir Putin said Russia would try to liberalize the domestic gas market in the near future but would maintain Gazprom's export monopoly in the medium term.[13]


Energy was the backbone of the Soviet Economy. The 1973 Oil Embargo marked a turning point in Soviet Society. The increase in the price of oil around the world prompted the USSR to begin exporting oil in exchange for money, and western technology. Increasing Western reliance on Russian resources further bolstered the importance of Russia’s energy sector to the overall economy.[14]

As the Arctic ice cap shrinks due to global warming, the prospect of oil exploration in the Arctic Ocean is thought to be an increasing possibility.[15] On 20 December 2001, Russia submitted documents to the UN Commission on the Limits of the Continental Shelf claiming expanded limits to Russian continental shelf beyond the previous 200 mile zone within the Russian Arctic sector.[16] In 2002 the UN Commission recommended that Russia should carry out additional research,[16] which commenced in 2007. It is thought that the area may contain 10bn tonnes of gas and oil deposits.[17]


The Russian electricity market is dominated by Inter RAO and Gazprom Energoholding. While production and sale will be opened up to competition, transmission and distribution remain under state control.

In recent years there were several blackouts, notably the 2005 Moscow power blackouts.[18]

Climate change

Vladimir Putin approved the Kyoto Protocol on 4 November 2004 and Russia officially notified the United Nations of its ratification on 18 November 2004. The issue of Russian ratification was particularly closely watched in the international community, as the accord was brought into force 90 days after Russian ratification (16 February 2005).

President Putin had earlier decided in favour of the protocol in September 2004, along with the Russian cabinet,[19] against the opinion of the Russian Academy of Sciences, of the Ministry for Industry and Energy and of the then president's economic advisor, Andrey Illarionov, and in exchange to EU's support for the Russia's admission in the WTO.[20] As anticipated after this, ratification by the lower (22 October 2004) and upper house of parliament did not encounter any obstacles.

The Kyoto Protocol limits emissions to a percentage increase or decrease from their 1990 levels. Russia did not face mandatory cuts since its greenhouse-gas emissions fell well below the 1990 baseline due to a drop in economic output after the breakup of the Soviet Union.[21] Because of this, despite its growing economy, by 2012 Russia will by no means exceed the level of emissions in 1990, which is the Kyoto Protocol's year of departure.[22]

It is debatable whether Russia will benefit from selling emissions credits to other countries in the Kyoto Protocol,[23] although Gazprom has already entered the market. "Russia is the Saudi Arabia of carbon [carbon emissions credits]," said its representative. "There is a tremendous bank there".[24]

Energy usage

In terms of the Russian energy demand structure, domestic production greatly exceeds domestic demand, making Russia the world’s leading net energy exporter.

Energy in foreign policy

Russia's energy superpower status has recently become a hot topic in the European Union.[25] Russia's overwhelmingly large reserves of natural gas have helped give it the title without much debate.[26]

Russia has identified natural gas as a key strategic asset, and on July 20, 2006 President Vladimir Putin gave Gazprom the exclusive right to export natural gas. The Russian government is the largest shareholder of Gazprom, and has been accused of manipulating prices for political reasons, particularly in CIS nations.[27]

Energy disputes

Russia has recently been accused in the West (i.e. Europe and the Ukraine, and other states it perceives as hindrances to its power. According to one estimate, since 1991 there were more than 55 energy incidents, of which more than 30 had political underpinnings. Only 11 incidents had no political connections.[18] On the other hand, Russian officials like to remind their Western partners that even at the height of the Cold War the Soviet Union never disrupted energy supplies to the West.[28]

Russia, in turn, accuses the West of applying double-standards relating to market principles, pointing out that it has been supplying gas to the states in question at prices that were significantly below world market levels, and in some cases remain so even after the increases. Russia argues that it is not obligated to effectively subsidize the economies of post-Soviet states by offering them resources at below-market prices.

The risk for supply interruptions aimed at the states of the Former Soviet Union is present today. Depending on bilateral relations and the present context, the risk for partial and/or short-duration cut-offs is high. Since 1991, the energy lever has been used for putting political or economic pressure on Estonia, Latvia, Lithuania, Ukraine, Belarus, Moldova, Georgia that subsequently affected most of Europe. The number of incidents, i.e. cut-offs, take-overs, coercive price policy, blackmail or threats, is over fifty in total (of which about forty are cut-offs). Incidents appear to be equally divided between the Yeltsin and Putin eras, but the number of cut-offs has decreased by half during Putin. The immediate reasons for Russia’s coercive policy appear to be political concession in ongoing negotiations, infrastructure take-over, and execution of economically favorable deals or to make political statements. There are economic underpinnings in the majority of the cases and Russian demands for payments of debts are legitimate. However, there are also political underpinnings in more than half of the incidents, and in a few cases explicit political demands are evident.[29]

Azerbaijan and Armenia

Starting 1 January 2007 Gazprom increased the price of natural gas for Azerbaijan to 235 Vladimir Socor has observed.[31]


The Russia-Belarus energy dispute began when Russian state-owned gas supplier Gazprom demanded an increase in gas prices paid by Belarus, which has been closely allied with Moscow and forms a loose union state with Russia. It escalated on 8 January 2007, when the Russian state-owned pipeline company Transneft stopped pumping oil into the Druzhba pipeline which runs through Belarus.[32] Transneft has accused Belarus of forcing the shutdown by stealing oil from the pipeline and halted the oil transport.[33] On 10 January, Transneft resumed oil exports through the pipeline after Belarus ended the tariff that sparked the shutdown, despite differing messages from the parties on the state of negotiations.[34][35]

Czech Republic

On 9 July 2008, after signing an agreement between the United States and the Czech Republic to host a tracking radar for an antiballistic missile system, the flow of Russian oil through the Druzhba pipeline to the Czech Republic started to reduce. Although officially the linkage between reduction of oil supplies and the radar agreement was not claimed, it was suspected.[36] Transneft denied any connections with radar agreement, saying that reduction was purely commercial as Tatneft and Bashneft started to refine more oil at their own refineries.[37] Although Prime Minister Putin asked Deputy Prime Minister Igor Sechin to 'work with all partners to make sure there are no disruptions', in reality the supplies were reduced to 50%.[38][39]


In the January 2006

  • Russia Energy Survey 2002 OECD/IEA 2002 ISBN 92-64-18732-4
  • Robert L. Larsson Russia's Energy Policy: Dimensions and Russia's Reliability as an Energy Supplier, FOI-R—1934 –SE, March 2006, ISSN 1650-1942
  • Russian Electricity Reform - Emerging Challenges and Opportunities OECD/IEA 2005 ISBN 92-64-10943-9
  • Three new rules of the Russian oil and gas industry Ivan Rubanov, "Expert", 2 July 2007
  • The Battle for the Next Energy Frontier: The Russian Polar Expedition and the Future of Arctic Hydrocarbons, by Shamil Midkhatovich Yenikeyeff and Timothy Fenton Krysiek, Oxford Energy Comment, Oxford Institute for Energy Studies, August 2007
  • Andreas Goldthau Rhetoric versus reality: Russian threats to European energy supply, Energy Policy, 2008
  • Brookings Report on Russian Energy:
  • Dirty Hands: Russian Coal, GHG Emissions & European Gas Demand
  • BP, Russian billionaires, and the Kremlin: a Power Triangle that never was, by Shamil Yenikeyeff, Oxford Energy Comment, Oxford Institute for Energy Studies, 23 November 2011
  • Renewable Energy in Russia - A Giant Yet To Be Awakened:

External links

  • Survey of energy resources (PDF) (21 ed.). World Energy Council (WEC). 2007.  
  • Key World Energy Statistics 2007 (PDF).  


  1. ^ [1]
  2. ^ Davies, R. W. "The Economic Transformation of the Soviet Union, 1913–1945". Cambridge University Press. 
  3. ^ Y. Bushuyev, A. Makarov, A. Mastepanov and N. Shamrayev. "A New Energy Policy of Russia: Implementation Experience". World Energy Council. Retrieved 2008-03-03. 
  4. ^ Michael Fredholm (September 2005). "A New Energy Policy of Russia: Implementation Experience" (PDF). Conflict Studies Research Centre, Defence Academy of the United Kingdom.  
  5. ^ name=summary>"The Summary of the Energy Strategy of Russia for the Period of up to 2020" (PDF). Ministry of Energy of the Russian Federation. March 2003. Retrieved 2008-03-03. 
  6. ^ 8. Lough, John. "Russia's Energy Diplomacy." . Chatham House, 1 May 2011. Web. . .
  7. ^ Lough, John. "Russia's Energy Diplomacy." . Chatham House, 1 May 2011. Web. . .
  8. ^ Neil Buckley; Tobias Buck (2006-06-16). "Duma votes for Russian gas export monopoly".  
  9. ^ Isabel Gorst (2006-12-13). "Caspian boost for US policy".  
  10. ^ Judy Dempsey (2006-12-12). "Russia takes heat over energy supply".  
  11. ^ "The Independent Gas Producers in Russia". Alexander's Gas & Oil Connections. March 2006. Retrieved 2008-03-03. 
  12. ^ Dieter Helm (2006-12-12). "Russia, Germany and European energy policy". Retrieved 2008-03-03. 
  13. ^ Russia to maintain Gazprom export monopoly-PM Putin, UNIAN Retrieved on 2009-10-01
  14. ^ 4. "Origins of the 1973 world oil shock." 1973 Oil Crisis. , Action Forex, 9 May 2014
  15. ^ The Battle for the Next Energy Frontier: The Russian Polar Expedition and the Future of Arctic Hydrocarbons, by Shamil Midkhatovich Yenikeyeff and Timothy Fenton Krysiek, Oxford Institute for Energy Studies, August 2007
  16. ^ a b Outer limits of the continental shelf beyond 200 nautical miles (370 km) from the baselines: Submissions to the Commission: Submission by the Russian Federation CLCS. United Nations
  17. ^
  18. ^ a b Robert L. Larsson Russia's Energy Policy: Dimensions and Russia's Reliability as an Energy Supplier, FOI-R-- 1934 –SE, March 2006
  19. ^ "Russian Government Approves Kyoto Protocol Ratification". 2004-09-30. Retrieved 2006-11-02. 
  20. ^ "Russia forced to ratify Kyoto Protocol to become WTO member". 2004-10-26. Retrieved 2006-11-03. 
  21. ^ Tony Johnson, staff writer: Council on Foreign Relations
  22. ^ Viktor Danilov-Danilyan for RIA Novosti Moscow (RIA Novosti) 21 February 2007
  24. ^ "Gazprom will bundle carbon credits with gas sales".  
  25. ^ Beware Russia, energy superpower, by Philip Delves Broughton, The First Post, 12 October 2006
  26. ^ How Sustainable is Russia's Future as an Energy Superpower?, by the Carnegie Endowment for International Peace, 16 March 2006
  27. ^ Lough, John. "Russia's Energy Diplomacy". Chatham House, 1 May 2011.
  29. ^ Larsson, Robert L.. "Russia's Energy Policy: Security Dimensions and Russia's Realibility as an Energy Supplier." FOI – Swedish Defence Research Agency: n. pag. Web.
  30. ^ "Azerbaijan halts oil exports to Russia".  
  32. ^ "Russia oil row hits Europe supply".  
  33. ^ "Russian oil flows via Belarus halted". Upstreamonline. 2007-01-08. Retrieved 2007-01-09. 
  34. ^ "Belarus Cancels Oil Transit Tax; Druzhba Oil Deliveries Resumed".  
  35. ^ Finn, Peter (2007-01-11). "Russia-Belarus Standoff Over Oil Ends, Clearing Way for Accord".  
  36. ^ Kramer, Andrew E. (2008-07-11). "Russian oil to Czechs slows after U.S. pact".  
  37. ^ Fabrichnaya, Yelena (2008-07-14). """Russia says Czech oil supply cut "not political.  
  38. ^ Andrew E. Kramer (2008-07-22). "Putin Orders Restored Oil Flow to Czechs".  
  39. ^ Judy Dempsey (2008-07-30). "Russia further cuts its oil deliveries to Czech Republic".  
  40. ^ Russia blamed for 'gas sabotage', by BBC News, 22 January 2006
  41. ^ Russia: Ossetia Pipeline Adds Fuel To The Georgia Fire, by Nona Mchedlishvili, RFE/RL 6 November 2006
  42. ^ The Georgia-Russia standoff and the future of Caspian and Central Asian energy supplies., by Shamil Midkhatovich Yenikeyeff, August 2008
  43. ^ Russian oil supplies to Lithuania cut off, by Vladimis Socor, Eurasia Daily Monitor Volume 3, Issue 150 (3 August 2006)
  44. ^ Baltic lessons for EU in dealing with a resurgent Russia, Financial Times, (24 November 2006)
  45. ^ Aleksander Kotlowski (University of Oxford) (2009-06-07). Russian Energy Strategy and Transit Routes in Eastern Europe. published in  
  46. ^ EU-Russia Energy Dialogue, by, 12 January 2007
  47. ^ Projected Russia-EU pipelines
  48. ^ Russia gets tough on energy sales to Europe: No foreign access to pipelines, official says, by Judy Dempsey, International Herald Tribune 12 December 2006
  49. ^ Debating the Charter at the Energy Committee of the Russian State Duma. Press realise by the Energy Charter Conference Secretariat 7 December 2006
  50. ^ Transit Protocol. Background to the Negotiations. Background information by the Energy Charter Secretariat
  51. ^ a b c Smith, Keith C. (October 2008). Russia and European Energy Security - Divide and Dominate (PDF).  
  52. ^ Robert L. Larsson (March 2006). "Russia’s Energy Policy: Security Dimensions and Russia's Reliability as an Energy Supplier". Swedish Defence Research Agency. 


See also

The Russian government and Russian energy companies were beneficiaries in the Oil-for-Food Programme.[52]

Oil-for-Food Programme

Experts believe Bill Browder's "visa problem" is related to that he made questions about Gazprom's murky intermediates which receive money from Gazprom.[51]

According to the estimation of Swedish economist Anders Åslund, 50% of the state-owned Gazprom's investments are lost through corrupt practices.[51] For instance, the Russian section of Blue Stream pipeline was three times more expensive to construct per kilometer than the Turkish section of the pipeline.[51]



Russia and the European Union have also failed to finalize the negotiations on the Energy Charter Protocol on Transit. The main issue remain open is how, and to what extent, the Protocol will include mechanisms for establishment long term transit arrangements.[50] Also the third party access to its pipeline infrastructure has remained Russia's main objection to the Protocol.

Russia signed the Energy Charter Treaty in 1994, but flatly refused to ratify its current revision. Russia's main objections to the ratification revolve around the proviso about the third party access to the pipelines and transit fees.[48][49] Notwithstanding the fact that Russia didn't ratify the treaty, Ivan Materov, State Secretary and Deputy Minister of Industry and Energy of the Russian Federation, serves as the vice-chairman of the Energy Charter Conference, and Andrei Konoplyanik as the Deputy Secretary General.

Ratification of the Energy Charter Treaty

The EU-Russia Energy Dialogue was launched at the EU-Russia Summit in Paris in October 2000. François Lamoureux, Director general for Energy and Transport at the European Commission and Viktor Khristenko, Vice-Prime Minister of the Russian Federation took up the responsibility as sole interlocutors. Christian Cleutinx, then Head of Unit at the European Commission was designated as the Coordinator of the dialogue. At the working level the Energy Dialogue consists three thematic working groups. The Energy Dialogue involves the EU Member States, energy industry and the international financial institutions.[46] Projected gas pipelines originating in Russia and supplying Europe.[47]

EU-Russia Energy Dialogue

At the beginning of 2006 Russia greatly increased the price of gas for Ukraine to bring it inline with market values. The dispute between Russian state-owned gas supplier Gazprom and Ukraine over natural gas prices started in March 2005 (over the price of natural gas and prices for the transition of Gazprom's gas to Europe). The two parties were unable to reach an agreement to resolve the dispute, and Russia cut gas exports to Ukraine on 1 January 2006 at 10:00 MSK. The supply was restored on 4 January, when a preliminary agreement between two gas companies was settled. Other disputes arose in October 2007 and in January 2009, this dispute again resulted in 18 European countries reporting major falls or cut-offs of their gas supplies from Russia transported through Ukraine. Gas supplies restarted on 20 January 2009 and were fully restored on 21 January 2009.


There has been rapprochement with Tusk's government in Warsaw, after two years of tensions with the conservative government of Kaczynski. The cooperation on the Yamal-Europe pipeline has continued without serious problems. Nevertheless, some disagreements concerning control of the Yamal-Europe pipeline and transit pricing remain. Despite attempts to relieve tensions, consecutive Polish governments strongly oppose the Nord Stream project bypassing Poland and favour further development of overland alternatives. It remains a contentious issue that as a result of the Russian-Ukrainian gas dispute in 2009, Polish PGNIG gas company did not receive contracted supplies of Russian gas from Ukraine.[45]


On 29 July 2006 Russia shut down oil export to Mažeikių oil refinery in Lithuania after an oil spill on the Druzhba pipeline system occurred in Russia’s Bryansk oblast, near the point where a line to Belarus and Lithuania branches off the main export pipeline. Transneft said it would need one year and nine months to repair the damaged section. Although Russia cited technical reasons for stopping oil deliveries to Lithuania, Lithuania claims that the oil supply was stopped because Lithuania sold the Mažeikių refinery to Polish company PKN Orlen[43] in an effort to avoid the refinery and infrastructure being bought out by Russian interests.[44] Russian crude oil is now being transshipped via the Būtingė Marine Terminal.


[42] On 1 November 2006 Gazprom announced that it will construct a direct gas pipeline to Georgia's breakaway region of


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