Introduction
States have wielded energy access as a strategic tool since at least the industrial revolution, when the adoption of coal power made energy a resource to be extracted and exported (or not), just like other strategic resources, including timber, sailcloth, and metals. In 1700, 75 percent of the world’s coal came from Britain, giving the country considerable power over its strategic rivals and their economic and military development. Over the past 200 years, coal has been displaced by oil and natural gas as the most strategically import source of energy, but energy-exporting states continue to use trade in energy as a political weapon today, though the ways in which energy is weaponized depend on both the physical characteristics of energy (oil or gas) and the marketplace in which it is exchanged.
In any energy market, particular power will be exercised by the “swing producer” with the greatest excess capacity. In the case of oil, this is Saudi Arabia, and in the case of gas, at least in the European context, it is Russia. Both states self-confidently use their price-setting power to achieve diplomatic and political ends. For Saudi Arabia, this has at times included flooding the market with cheap oil to punish rival oil exporting countries, like Iran. In other situations, it has seen advantage in restricting the supply of oil to impose political costs on oil-importing countries, like those that supported Israel in the 1973 Yom Kippur War.
Russia has weaponized its natural gas exports in more sophisticated ways, fostering economic and political dependence on its cheap natural gas exports, which grant it the power to impose tremendous costs on the governments of its customers when it chooses to turn off the tap. Events unfolding in Kazakhstan serve as a stark reminder both that volatility in energy prices can quickly lead to political instability, and that Russia uses political instability within its neighbors to exert greater control over them.
In Central Europe, the ultimate impact of Russia’s aggressive energy policies has to date been blunted by geographic realities: because gas must be carried in pipelines across intermediate countries, those countries (most especially Poland and Ukraine) in turn have significant leverage over Russian schemes. In recent years, Russia has sought to consolidate its position by building the Nord Stream 2 pipeline through the Baltic Sea, carrying Russian gas directly to Central Europe and bypassing Eastern European countries, as well as the transit fees they extract and leverage they command. If brought online, Nord Stream 2 will provide Moscow an even greater degree of direct control over European energy prices.
Terminology
The terminology in this space is messy. “Energy weapon” as a term generally refers to directed-energy weapons that use concentrated electro-magnetic radiation (lasers, microwave beams) or other forms of energy (like soundwaves or particle beams) to affect a target in a tactical environment, either by destroying it, or by interfering with its ability to observe (dazzling) or communicate (jamming).
This summary focuses on “energy as a weapon,” that is, the use of trade in energy goods (oil, gas, coal, electrical grid energy, etc.) as a tool to achieve political or diplomatic ends at the strategic level. This most often includes artificially restricting supply to raise prices and impose a cost on energy-consuming states and their governments. But it can also include artificially expanding supply to suppress prices and impose a cost on energy-exporting states.
Russia
Much ink has been spilled debating the degree to which Russia uses energy as a weapon, particularly in its dealings with former Soviet states, individual European countries, and the EU at large. Some of the strongest evidence that it does comes from explicit Russian policy. From 2003-2020, the official Energy Strategy for the Russian Federation openly characterized energy as a tool for “implementing domestic and foreign policy,” and argued for Russian energy companies to be “strong, constantly evolving and ready for a constructive dialogue with the state.” Other passages declared that “Russian strategic interests necessitate the formation of a single energy policy and energy transport infrastructure in adjacent regions of Europe and Asia, the development of international energy transport systems and ensuring the non-discriminatory transit of energy,” and that “the global nature of energy problems and their increasing politicization, as well as the influential position of Russian fuel and energy sector in the world energy system have put energy among the basic elements of Russian diplomacy.” (Since 2020, these passages have apparently been dropped from the official policy document.)
Taking a broad definition of “energy as a weapon,” Russian policy seems to admit to employing it in each of these passages. Energy is frequently a domestic political concern, but for an energy-producing state to view it as a tool for “implementing foreign policy” strongly implies the weaponization of energy exports, at least as a carrot if not as a stick. Russia, like many authoritarian states, views its large corporations as obliged to serve as tools of state power, euphemized in this document as “constructive dialogue with the state.” To wield energy as a weapon, a state must establish a sophisticated and efficient system of production and delivery to make its product a competitive choice for consumers in targeted states, so the development of “energy transport infrastructure in adjacent regions” (i.e. pipelines, usually) is essential. States can defy market forces to a degree, by selling energy at a loss or withholding sales that would be profitable, but this can rarely be sustained long-term as it comes at a tremendous financial and opportunity cost.
The Russian state consolidated its control over the Russian energy market in the late ‘00s, with some firms forced to sell strategically important assets to state-owned firms like Gazprom, while key energy oligarchs were brought closer into the Kremlin fold. Russian firms also began acquiring and trying to acquire energy assets in both former Soviet states and in Eastern and Central Europe.
An inherent challenge of relying on transnational energy transport networks to wield energy as political power is that it requires the cooperation of, or some degree of acquiescence by, the intermediate states. For Russia, this challenge is most apparent with Ukraine, which has since 2005 been at times aligned with but more often against Russia. Ukraine has a partial veto over Russian energy policy towards Europe, since roughly one-third of Russian gas bound for European customers transits Ukraine. Ukraine also benefits from the transfer fees it extracts from Russia in exchange for the use of these pipelines (approximately $1 billion annually). At times of particular strain in Russian-Ukrainian relations, Russia has turned off the flow of gas, causing energy shortages not only in Ukraine but downstream among European customers also.
To remove this dependence and give it even greater leverage over both Europe and Ukraine, Russia has sought to build alternative pipelines, most notably Nord Stream, Nord Stream 2, and TurkStream. Nord Stream 2, which is mostly complete and awaiting final activation, would carry gas directly from Russia to Germany, bypassing pipelines through Ukraine or Poland, and giving Russia greater power to splinter European solidarity and play its rivals against each other.
Determining what role energy has played in shaping the outcomes of Russian diplomacy is challenging, because the threat of weaponized energy affects international politics regardless of whether steps are taken to reduce energy flows, or even whether said threat is made explicit. Nevertheless, there is ample evidence that Russia’s approach has been effective. It has routinely cut supplies of gas to adversaries at times of political conflict, as it did with Ukraine in 2006 and 2009, and paid a relatively low price for it.
The EU made significant, but insufficient, efforts to reduce Russian influence after those crises. The EU passed the Third Energy Package, which forced Gazprom to face greater competition from other sources of gas, including North America. It also eliminated “destination clauses” that prohibit the resale of gas, allowing a more liquid energy market within the EU, and decreasing Russian leverage over any one country. The Energy Union Strategy implemented six years ago encourages solidarity among member states and proposes internal energy sharing arrangements to support member states through future crises. Still, these measures did not prevent the development of the Nord Stream 2 pipeline project, which is fracturing EU and transatlantic politics today.
Perhaps the biggest impediment to Russia’s strategy was the North American shale gas boom itself, which dented Russian leverage by offering a viable alternative that required relatively small modifications to infrastructure. But growth in Chinese demand for gas, as well as greater European demand driven by the retirement of coal and nuclear power stations, have ensured that Russia retains a dominant market position.
Today, Russia is using existing leverage to enhance and preserve its own ability to use energy as a weapon long into the future. Europeans have endured a sharp increase in energy prices this winter, and Russia has refused to increase deliveries, and tied higher exports to approval of the Nord Stream 2 pipeline. It has sharply reduced both coal and gas exports to Ukraine as it escalates its military presence on the Ukrainian border, potentially allowing it to inflict political instability on Ukraine at will in the middle of a military or political confrontation. Ukraine has already been forced to turn to Belarus for energy assistance this year, and Belarus is likely to cooperate with any Russian gambit to put pressure on Ukraine if asked.
At the same time, Russia is also putting immense pressure on Moldova, conditioning the price of future energy exports on whether it pursues a trade agreement with the EU. Moldova remains particularly vulnerable to pressure as it imports electricity from its own breakaway territory of Transnistria, which is controlled by Russia.
In the long-term, a combination of European energy integration and a greater reliance on renewable energy could permanently end Russia’s ability to weaponize its position as a dominant energy exporter. But at the current rate of integration and decarbonization, this dream remains years away, and there is no evidence that Russia is growing more cautious or judicious about its weaponization of energy flows in the foreseeable future.
The Middle East
The oil-exporting Arab states (Saudi Arabia chief among them as the “swing producer” with the greatest spare capacity) made the concept of “energy as a weapon” famous through their 1973 embargo of states that provided military assistance to Israel. The threat of using oil sales as a political weapon had been popular in the region for years, but the relatively low reliance of Western countries on imported oil, as well as the availability of alternative sources, made Arab leaders, especially the Saudi monarchy, reluctant to employ it. In 1973, declining U.S. production and the political necessity of responding to the 1973 Yom Kippur War changed the calculus, and in October 1973 the Organization of Arab Petroleum Exporting Countries (OAPEC) (Saudi Arabia, Libya, Kuwait, Algeria, Iraq, Syria, and Egypt) issued an embargo on the countries that had supported Israel during the conflict (Canada, Japan, the Netherlands, the United Kingdom, and the United States; later Portugal, Rhodesia, and South Africa also).
The embargo proved to be a tactical success, in that OAPEC successfully raised the price of energy in the target countries, imposing substantial economic and political costs, especially in the United States. It proved to be a strategic failure, though, as none of the target countries changed their policies regarding the Arab-Israeli Conflict, and the embargo was mostly suspended in March 1974.
Several factors made it harder to for the Arab states to wield energy as a weapon to their advantage in international diplomacy. One is the nature of oil as an energy commodity: oil infrastructure was already heavily reliant on large tankers, and oil markets had already largely priced in the expense of intercontinental shipping. This meant that replacing Arab oil imported by tanker with, for instance, Venezuelan oil imported by tanker was less costly and disruptive than replacing Russian gas carried to customers via pipeline with coal or oil or liquified natural gas imported via cargo ship.
Another factor is the difficulty of coalition politics versus the relative ease of unilateral bullying. While Russia has the market share in Europe to act on its own, OAPEC required all its members to participate. While these states were united in a shared hatred of Israel, there was a stark divide between the monarchies (Kuwait and Saudi Arabia) and the states that adhered to various forms of revolutionary Arab nationalism (Egypt, Libya, Algeria, and Iraq). The former opposed Israel but were also wary of the Soviet Union and recipients of U.S. support. The latter were more closely aligned with the Soviet Union and sought a firmer position against the targets of the embargo, including the United States and United Kingdom. This meant that when Israel provided a fig leaf concession (a process of negotiation over the status of the Golan Heights), solidarity within OAPEC collapsed.
A further dynamic that continues to impede solidarity among the oil exporting Arab states is Iran’s position as a major oil exporter. This makes it impossible for Arab states to reduce exports without enriching their rival, Iran, which will earn windfall profits through greater sales, a higher price, or both. Remarkably, this holds even given that Iran is itself embargoed by many of the states that the OAPEC cartel once tried to coerce, because oil is traded on a global market. If Arab states cut production, the United States will be forced to buy oil at a higher global price. But this will shift the consumption patterns of other states, like China, away from oil for which it must compete with the United States and towards oil for which it does not, like Iran’s.
For all the reasons above, Saudi Arabia has mostly been unable to weaponize its energy dominance to achieve specific diplomatic aims. In the wake of the murder of Jamal Khashoggi by Saudi agents and the ensuing tensions with the United States, markets reacted to fears that Saudi Arabia would cut production as retaliation for the allegations. Instead, the Saudi oil minister quickly dismissed the idea in an interview with TASS, likely because the regime saw cuts to production as too costly to themselves and too beneficial to Iran.
Instead, Saudi Arabia has in recent years more often used energy as a weapon in the opposite direction, maximizing production to punish Iran, or at times, Russia. This was the case in 2014-2015, when Saudi Arabia allowed the oil market to become saturated to decimate the economies of Iran and Venezuela. Since last year, Russia and Saudi Arabia have been unable to agree on production cuts to support a higher price of oil, and Saudi Arabia has retaliated against what it views as a Russian defection by again flooding the market with oil, despite low demand due to the pandemic. Perversely, weaponizing low oil prices can be safer for energy exporters than weaponizing high prices: high prices incentivize innovation in efficiency and renewables, while low prices breed complacency and make innovation less economically viable.
The views expressed in GMF publications and commentary are the views of the author alone.
