This is the second installment of a two-part interview with Karin Kneissl, an energy analyst and former Austrian minister for foreign affairs. In June 2021, she was elected as an independent director of the board of Rosneft and resigned on May 20, 2022.
For a more complete overview of her experience and credentials, see Part 1 of the interview.
Adriel Kasonta: According to International Energy Agency estimates provided in the World Energy Outlook in 2017, natural gas will play a major role in the future as a source of energy. By 2040, gas consumption will be 40% higher than now. Also, the Earth’s population will grow from 7.4 billion to 9 billion by that time.
With a correlation between energy demand and population growth of two-thirds in Asia and one-third in the Middle East, Latin America and Africa, what are Europe’s (near- and long-term) prospects?
Karin Kneissl: Well, Europe is becoming more and more irrelevant. Demographically speaking and, unfortunately, also politically irrelevant. And currently, I’m writing a book with the working title A Requiem for Europe, because the Europe I grew up in and the Europe I was dedicated to has ceased to exist.
But coming back to facts and figures, gas consumption, and demographic developments is all about non-OECD [Organization for Economic Cooperation and Development] Asia. This is where the music is playing. It’s not Japan, where for the last 15 years we’ve had more diapers used for the elderly than for the baby population.
This is very telling. It’s non-OECD Asia and the non-OECD world where there is a demographic activity and where there’ll also be demand, because there’ll be some sort of new middle class, whatever we’ll define as middle class in the future. It’ll no longer be the definition we studied some decades ago, but it’s there, and it’s not inside EU Europe but beyond EU Europe.
Energy is a fragmented competence but our decision takers haven’t fully understood that they don’t have a monopoly on this topic. Currently, it’s not only the Prime Minister’s Office versus the Ministry of Environment versus the Ministry of Economy. It includes semi-state companies, renationalized companies (like EDF in France), half-nationalized companies, and private stock-listed exchange markets. So it’s bric-à-brac. It’s quite a circus you must deal with when you want to develop a coherent energy strategy.
AK: Many argue that it was a mistake for Europe to become dependent on Russia when gas and oil are concerned. My question is, what is the alternative, if any?
KK: Definitely, and there were efforts in the past. Several [countries], Austrians, Germans, and Italians, had been looking to Iran for at least 25 years, if not longer. And there was a time between 2000 and 2005 when [Mohammad] Khatami was president, and there were projects like Nabucco (I personally never trusted this project) that only remained as a project. But there were millions invested and structures developed to circumvent Russia.
And it was very clearly stated. For instance, this famous Nabucco project, which remained a project for 15 years, never managed to get a single exploration contract, but [there] was a lot of marketing around it. It was also hugely marketed by the European Commission because there already was a very irrational approach toward Russia. It didn’t come out of the blue.
This is a huge topic. I’ve observed with great astonishment how irrational the relations are. And that started a long time before 2014 or this year. So there was Iran on the agenda, but then came Mr Ahmadinejad and the UN Security Council resolutions of 2007-08, which kicked Iran out of SWIFT.
And when the JCPOA [Joint Comprehensive Plan of Action] nuclear agreement was done, high expectations were back in many EU capitals. Everybody was running to the Iranian energy market – the French, the Italians and, of course, the Germans. And after a year, they gave up because they all realized that the pressure from the US was too intense; even though the Security Council sanctions were lifted, there were still US sanctions. So everybody was withdrawing.
And then, in May 2018, the JCPOA was somehow destroyed by the US. Now they are trying to restart the JCPOA, but I don’t think this will happen.
I haven’t been to Iran for five years. Still, I would say from my distant observation, even though now being in Lebanon, I’m a little bit closer, and I hope to go there, I think that the Iranians are in a much better situation today. They have more freedom of movement. Their wings are not clipped any more as they were seven years ago. They now have a strategic alliance with China. The sanctions that do exist, nobody implements them. They’re exporting whatever they can export.
What they need, of course, is a technology for new investments. My [educated guess] would be that they are not going to open the doors very wide to say, “Yes, please, Germany, come, let’s hook up on where we stopped 15 years ago in terms of doing some sort of infrastructure projects, LNG to Europe,” etc. I don’t think that this will happen, because there is no trust. There was little trust beforehand, but trust has completely gone over the last 15 years from an Iranian perspective.
And all the Iranians know that, as I always say, “Pipelines and airlines are moving east.” And Iran is not only the old power of the Persian Gulf. It’s also a Central Asian power, it always was, and it’s a Caspian Basin power. So it looks as much East, in particular to India, Pakistan and Afghanistan, of course, as it looks into the Mediterranean to Lebanon, where I currently live.
But its real interests, of course, are in the Persian Gulf and Central Asia. It’s too early to tell, but my gut feeling is that not only Iran but also Arab Sunni petro-monarchies, as they are sometimes called, won’t be easily lured into a new partnership with any EU consortium. I don’t think so. And this is [for] historical reasons.
So there is Russia, and its gas can’t be replaced so easily. There was also Libya, of course. Let us take an Austrian company like OMV. It had 25% of its oil and gas portfolio in Libya. But then came the wonderful French-led humanitarian intervention operation, which quickly turned into a regime change in March 2011. So Libya could have been an ideal gas provider because the Libyan gas fields are relatively untapped and very close to Europe. So this is another thing.
And many people are now dreaming about the Eastern Mediterranean – the Levant basin. The problem here is the maritime demarcation line. In other words, who gets what? There is Israel, Cyprus, Turkey, Lebanon and Palestine. There’s a quagmire about the Law of the Sea, and very few here really apply the UN Convention on the Law of the Sea. Instead, they all do their little things in terms of bilateral agreements.
And honestly, if I were a company asked to do the drilling, I would first check if I have any other project that is a little less complicated to do, because this one is costly and it’s politically complex. And above all, we now have these high prices.
But we know that recession is with us, and it won’t stop at Christmas as a present. It’ll be with us at least for the year 2023. And when you have such a dramatic recession in tandem with inflation, there’ll be a breakdown of the prices of commodities sooner or later. I don’t think they’ll return to where they were maybe at the beginning of 2021 because of vulnerable supply lines and the conflict in Ukraine.
Whenever you have fighting, of course, oil and gas remain high. But to make investments now and to find out that in three years, you face another price level is not easy to handle for companies which are under tremendous pressure from their shareholders and an unpredictable sanctions system.
You already needed, before this year, huge international law offices to guide you through every phone call you would do to tell you if you’re allowed or not allowed to do this phone call because of sanctions against whomever.
AK: As we know, Russia has long been in the process of, among other things, an energy pivot to Asia – with Moscow and Beijing currently being in the final stages of building the first pipeline that can send gas from Siberia to Shanghai. It does not seem that Moscow will be isolated any time soon, as far as finding new markets for its energy is concerned.
It also looks to me that Europe needs Russia more than Russia needs Europe. If I am correct, is it really in the Old Continent’s best interest to treat Moscow as an enemy and push it further into the arms of Beijing?
KK: Geography is something that you can never change. And the European continent is very difficult to define because we don’t know where it ends or starts. There is Britain and the Azores. I’m a Mediterranean person, and for me, the Mediterranean is the center of European legacy and heritage. So if it was up to me, I’d bring all the Mediterranean countries into European something.
But we’re definitely underestimating the significant general trend. And when I served as the [Austrian] minister of foreign affairs, I was irritated by this absence of genuine geopolitical thinking among my colleagues. And even if they don’t have geopolitical thinking capabilities, then at least they should have someone on their staff who has this understanding. But it’s not there, and it’s naive behavior.
And now, it turns into a very dangerous situation, because we have a complete disregard for reality, for geographic reality, for a commodity reality, for the basic concept of diplomacy.
In 2020, I published a book titled Diplomatie Macht Geschichte, which is a play on words in German because it says, on the one hand, “diplomacy makes history,” but macht also means “power,” so, on the other hand, “diplomacy power history.”
And it’s a huge book. I wrote it as a textbook for university students. But you can summarize these 500 pages into one sentence and say, “Diplomacy equals keeping channels of communication against all odds in all circumstances.” In other words, “Keep talking to each other in all circumstances.” And the only ones who currently practice diplomacy are the members of the Turkish government.
AK: As Otto von Bismarck famously said, “The only constant in foreign policy is geography.” On that note, what should be Europe’s raison d’être in the future? Is it the continuation of a largely failed Atlanticism, or perhaps something else?
KK: Regarding Europe’s raison d’être, let’s not forget that there was a good time of prosperity when the continent was built of small entities. Whether we go back to the times of the Greek city-states (polis) that were in intense competition with each other, or whether we go to the late 18th century and the Holy Roman Empire of the German nation (deeply fragmented on a territorial level), these are examples of when Europe was flourishing.
Each little sovereign wanted to have the best inventors, the best universities, and the best teachers. So Europe was all about competition, and the brightest minds could work with this sovereign, and if they had a misunderstanding, they would go to another ruler.
There were a lot of fairly fragmented small entities, and this smallness was Europe’s advantage because it created competition and a tremendous amount of universities. And this is what made Europe. and Europe should again be a place of pluralism and freedom (which it is not any more).
This is the conclusion of a two-part interview with Karin Kneissl. Click here for Part 1.