WASHINGTON – On the occasion of the unprecedented European energy crisis, we spoke with the American Serb Branko Terzić, an internationally known energy expert and consultant. Terzic worked for decades at the highest levels of the American energy establishment as a commissioner of the presidential advisory body – the American National Petroleum Council; he was the chairman of the European Economic Commission (UNECE), a committee of experts for electricity production and a senior associate at the Global Energy Center “Atlantic Council”. Terzić is a frequent interviewer and commentator on energy issues on the TV networks CNN International, Fox News, NBC, Sputnik and other international media.

The European Union has determined that Serbia can no longer import Russian oil through pipelines under the supervision of the Union. What are Belgrade’s options for importing oil and gas and how will this affect the citizens of Serbia? 

In the past, the Pancevo refinery was supplied with crude oil from various countries. Serbia has recently increased its purchases of oil and gas from Russia due to favorable prices. As long as the EU embargo on Russia lasts, Serbia will pay more than the “market” price for crude oil.

The EU directives are based on giving buyers of energy (oil, gas and electricity) a choice of suppliers through “open access” (known as third party access) to all oil and gas pipelines and electricity transmission systems. In the contract, Serbia committed itself to those energy directives and the principle of “open access”. The European Union is in conflict with that principle.

How do you see the conflict between Russia and the West and the impact of that conflict on the further development of the energy crisis? 

The conflict between Ukraine (supported by NATO) and Russia is not directly related to energy supply and energy prices. Although Russia and Ukraine had significant differences in terms of transit tariffs and the price of natural gas, these factors were not the main reasons for the armed conflict.

The war between Ukraine and Russia is a conflict between two opposing views on Russia’s role in post-communist Europe. On the one hand, we have Russian President Vladimir Putin’s view that the collapse of the Soviet Union and the Warsaw Pact was a historical tragedy that must be rectified. The view in the West, especially among the countries of the former Warsaw Pact, is that the disintegration of the Soviet Union freed the countries of Eastern and Central Europe from Soviet occupation and imposed communist rule. Those countries also believed that they should join NATO to prevent any further attempts to reintegrate them into the Russian sphere of interest.

The natural gas energy crisis in Europe and global oil prices are the results of the covid-19 epidemic, the impending global recession and the Chinese factor in the Ukrainian-Russian conflict.

America and Europe are now marketing their energy products, their gas and developing a structure for receiving gas. Does this mean the end of the energy “love” between Russia and Europe?

The sale of liquefied natural gas to Europe is not one of the main factors in the American foreign policy of the Democratic Party of President Biden. We have a number of politicians from the Biden party who would like to cut off natural gas production in America because of the greenhouse effect. Some cities in the US have banned the expansion of natural gas distribution, and some are considering the possibility of mandating the change with switching the use of gas to electric appliances and to electric heating.

We must also remind that the natural gas industry in the US is not owned by the US administration, but by private investors. This is in contrast to the situation in Russia and OPEC member countries, where the oil and natural gas production industry is state-owned and can be directed towards supporting national interests.

The ability of the US to supply Europe with liquefied natural gas is limited. America can transport natural gas from a dozen port terminals, which are now operational. Those terminals today supply China, Japan and Asia under long-term private sector contracts. Obtaining permits to build new liquefied natural gas facilities is difficult, expensive and takes a long time. There is also considerable opposition to the construction of new LNG terminals. One of the major companies here, Tellurian Energy, for example, announced last week that it was unable to secure financing for a new LNG export terminal due to investor concerns about the long-term future of natural gas in relation to climate issues.

In addition, Europe today has limited capacity to receive liquefied natural gas. About twenty European liquefied natural gas terminals have limited reserve capacity to import only 50 percent of Russian natural gas, which was the case even before the outbreak of the war in Ukraine. If there are no prospects for importing natural gas from Russia, it will be necessary to build a larger number of liquid natural gas terminals in Europe for transport from the Middle East and Australia.

Under normal conditions, with an operational European “free market”, and according to EU energy directives, lower prices should be Europe’s first and most economical choice, as it has been for the past four decades. With a peaceful solution to the Russian-Ukrainian dispute, this could be achieved again in the future.

How do you see the outcome and position of Ukraine when it comes to the transfer of Russian oil and gas after the end of the conflict?

At this moment, two “North Stream” gas pipelines are damaged and out of use. The only route Russian gas can take to Western Europe is via the old Ukrainian pipeline. An unsuccessful economic solution on the use of the Ukrainian natural gas pipeline led to the construction of “North Stream 1 and 2”.

Sabotage of the Nord Stream gas pipeline excludes the possibility of Russian delivery of natural gas to Europe soon, so Ukrainian pipelines are the only transportation option for Russian gas to be delivered to Western European markets.

Europe needs more natural gas to complete the energy “transition” from coal-based electricity generation to renewable energy in the near future. It is possible that in the future both Ukrainian pipelines and Nord Stream systems could play a useful role in that scenario.

Mastering energy resources is the goal of the big players, where are the positions of the small ones?

Winston Churchill, when he was the British Secretary of the Navy before the First World War, once said that nations like England, without their own oil reserves, would ensure the “security” of oil supplies only from different oil sources. This is still the case today for small countries such as Serbia.

All countries without sufficient domestic energy supplies need access to functional energy markets and transportation systems that provide access to numerous suppliers. These are the principles contained in the First, Second and Third Energy Directives of the European Union. Therefore, Serbia should have access to as many transportation routes as possible, including numerous international electric transmission lines, pipelines, improved oil and natural gas storage facilities, and river barges.