Speech by Foreign Minister Frank-Walter Steinmeier at the Second Energy Security Summit of the Munich Security Conference: “The Next Great Game? Global Impacts of the Shale Revolution”

28.05.2014 - Speech

--Translation of advance text--

Wolfgang Ischinger,
Mr Nonnenmacher,
Ladies and gentlemen,

When the theme of the conference was developed, the term energy security still meant something entirely different.

The term shale gas revolution emerged just a few years ago – initially in business newspapers and then ever more frequently in political debates. It aroused great hopes. The focus was on how energy prices, competitive advantages and ultimately also the political balance of power would shift around the world.

However, this discussion was always a bit remote – at least with regard to its impact on us in Germany. The energy self-sufficiency of the US, new sources of supply for Europe, relocations of production in industry, the effects on the transformation of Germany’s energy system – these seemed to be medium or long-term developments.

Since a few weeks ago, however, energy security is no longer an issue in the short term, never mind the medium or long term.

The Ukraine crisis has made the security of supply a pressing political issue – and catapulted it into the consciousness of the informed public in a very new way.

In my view, this affirms a development which I’ve been observing since the early days of my first term of office in 2005 – an impression which I initially formulated in my first speech to the Munich Security Conference in 2006, namely that energy policy is a core element of our foreign and security policy.

What provoked bemused head-scratching or shoulder-shrugging ten years ago, has become tangible in the Ukraine crisis: for while earlier gas crises between Ukraine and Russia – 2006 and 2009 – perhaps still had no ramifications for other spheres and could be resolved on their own, this time the gas dispute is clearly part of the broader political conflict – and will certainly have consequences in Europe, and probably also global consequences!

And whether we want it or not: the EU – all of us – are affected. For around half of Russian gas supplies destined for Europe still pass through Ukraine.

And higher levels of dependence on Russian gas in some countries do tend to translate into higher levels of political anxiety there. This was very apparent during my visit to the Baltic region, as well Hungary and other Visegrad states, which receive 100 per cent of their gas supplies from Russia.

That’s why the political concern about Russia’s annexation of Crimea combined with dependence on energy from Russia has had a very dramatic impact on many of our eastern EU neighbours.

And no‑one should pretend to themselves that we can resolve this problem in the short term. For example by shipping over liquid gas from Texas or Ohio or LNG from Qatar. At present, these are no suitable ways of fending off the short-term threat to energy security, of defusing the situation.

Revolutions are rare, especially in the sphere of energy policy. And evolutionary changes – regardless of whether they are prompted by the desire for lesser dependence or a reduction in CO2 emissions – need time.

One day, the individual states in the EU will have lessened the risks stemming from the lack of security of supply, or security of supply based on one supplier.

However, the emphasis here is on “one day”. For even if an issue suddenly becomes politically urgent, this won’t speed up technological or regulatory developments. Although everyone knows that we need more diversification, that we need new supply systems, that we have to invest much more – and this applies to Europe as a whole – in energy efficiency, although many want to leave fossil fuel behind and focus more on renewable energy, that cannot be achieved overnight.

At any rate, shale gas won’t help us to resolve the acute crisis, certainly not everywhere, when we consider densely populated regions in Germany and the Netherlands. However, markets and prices around the world will of course be influenced by the increased supply. Naturally, that also influences energy policy strategies in Europe – and I’m therefore interested to see what ideas this conference and your discussions produce.

If the link between the foreign policy crisis and the energy supply is as close as I’ve described it, then it cannot be a coincidence, Wolfgang Ischinger, that we’re meeting again today.

If someone were to look at the list of telephone conversations I’ve had during the last two weeks, then they would say: wow, Steinmeier really has prepared well for this conference. He spoke with today’s host nearly every day on the phone!

Wolfgang, as a diplomat with a delicate mission, you’ve been busy recently. With great skill and respect on all sides, you’ve organised round tables in Ukraine and chaired them together with former Presidents Kuchma and Kravchuk.

This national dialogue is crucial to Ukraine’s future. Naturally, the round table cannot solve everything, but since much criticism has been voiced about this or that round table not reaching any decisions, I want to reiterate: that isn’t the task of a round table. The round table isn’t the UN Security Council. It provides a forum for dialogue and brings together people and organisations that – for different reasons – do not talk with each other at present. And this was a success! One million people followed the live streaming and that shows there is considerable interest, a great need for a political dialogue to overcome the divisions. Wolfgang, the fact that these bridges are being built is due in no small part to your efforts. That the atmosphere of the debate has changed a little. This made a substantial contribution not only towards ensuring that the elections could take place last Sunday but that, above all, this election day went off without any major bloodshed and that the outcome was clear. I therefore want to express my personal thanks to you, Wolfgang, for the part you’ve played during the last few weeks in helping to bring about this step forward.

I said that energy policy will play a role in determining whether we can defuse the Ukraine crisis in the short term and I therefore welcome the fact that you, Mr Oettinger, have been conducting intensive talks with the Russian and Ukrainian energy ministers since early May. Yesterday, we thought that a solution was just around the corner and that final decisions would perhaps be made during this conference. I’m certain that even if there are now delays, there is no alternative to what Oettinger and his colleagues from Ukraine and Russia have discussed. I want to urge everyone involved to reach a provisional understanding on gas supplies to Ukraine to prevent Ukraine’s energy supply exerting additional pressure and thus impeding the resolution of the political conflict. I therefore hope that this will succeed and say so in awareness that even during the Cold War we managed over many decades to keep energy supplies out of the major conflicts between the political systems. And if that was possible for many decades and we know that disruptions in the energy supply are detrimental to all sides, then we should seek to ensure that energy policy and energy supplies don’t now become the object of major political conflict between East and West, between Russia and Ukraine, between Russia and the EU. I also believe that – on purely economic grounds – it’s in Russia’s interest not to cast doubt on the country’s reliability in the economic and energy spheres.

When I talk of concerns about energy dependency, then – in light of the current crisis – I’m talking about Ukraine.

However, it’s equally important that we talk about the EU and Germany. Germany has to import more than 95 per cent of its oil and around 90 per cent of its natural gas.

That means that not only in Ukraine but also here in Germany, energy security is an essential goal of foreign policy.

How can we achieve this aim? The first solution is more Europe. In its recent history, Europe has successfully mastered crises by moving closer together. Energy union is therefore the key term. However, we mustn’t misunderstand this as the return to a nationalised energy industry and the creation of cartels.

What we need is the completion of the internal energy market. The European Commission will present us with proposals on this today and I would be all for us setting to work as quickly as possible.

There should be no more corners of the EU which are not or are only inadequately connected to the pipeline network in the single market. The time has now come to select the most important energy projects throughout Europe not yet implemented which will make us less reliant on imports.

And the time has also come for a debate without taboos on whether the market can do all this or whether we have to rethink our financing models in Europe and provide public funds. I’m certain that institutions such as the European Investment Bank (EIB) can also help here. Think of the Baltic region, where – to all intents and purposes – there is no gas link with the EU with the possibility of supply in both directions. That’s why the concerns about dependency are especially strong there. If gas can flow without any problems within the entire single market from one country to another, then the concerns in the Baltic region will diminish considerably.

That also applies to the expansion of LNG terminals – although here in front of an audience of experts there’s no need to express any doubts. At any rate, those who think that a few additional billions of cubic metres of LNG can be supplied to Europe by Qatar in the short term should think again. This should at least be discussed in a dialogue with the supplier countries themselves, which are producing at full capacity and aren’t even in a position to conclude new contracts. And the fact that we’re still not able to create a genuine European single market for electricity, for instance due to the lack of interconnectors, really is an anachronism we have to address. The first key word is therefore Europe, an energy union in Europe.

The second is diversification – diversification at three different levels: diversification of sources of energy, of suppliers and of supply routes.

Sigmar Gabriel and the other G7 energy ministers spelled out to us at their meeting in Rome that no country should be dependent on one single supplier.

There’s a basic principle in the world of diplomacy: never put all your eggs in one basket. And that also applies to countries which supply us with fossil fuels. We therefore have to understand that, of course, diversification on the supplier side – for example, to Asia – is also a smart policy!

And the shale gas revolution will play a part in this.

I’m not sure whether we’ve sufficiently discussed or understood the geological, environmental or geopolitical consequences of this development.

First of all, however, the extraction of shale gas enhances competitiveness in the countries where it’s produced! In many branches today, energy costs are what labour costs were in the nineties: the critical cost factor. Today wages account for only a quarter of industrial costs. Energy and raw materials, on the other hand, make up 40 per cent, even up to two thirds in energy-intensive branches. The energy self-sufficiency of, for example, the US, has broadened its scope for action in the foreign policy field. Some say that the US will lose interest in the Middle East. Everyone can work out for themselves what that would mean for the security architecture in this region.

The US is directing a considerable portion of its attention to the Asia-Pacific region, which will import almost 90 per cent of its energy from the Middle East. The Chinese and Indian economies will not only be among the largest consumers. We can be sure that the political engagement of these powers in the region will grow accordingly and that both will become our direct rivals for energy resources.

The message of the shale gas revolution for Europe is double-edged for another reason: firstly, the supply possibilities will widen in the medium term, and energy security could increase as a result. On the other hand, we – especially here in Germany – have to face up to an uncomfortable truth: it’s foreseeable that the shale gas revolution will prolong the fossil age. The fight against climate change should encourage us to prevent the world from seeing the shale gas revolution and the shift to green energy as alternatives. It’s not a case of either a switch to new technologies in energy policy or the extraction of shale gas. For I believe the switch to new technologies in the energy supply is unavoidable, at least if we want to prevent things getting worse. That gas and power generated from gas will have to play a role in future is, in my opinion, likewise beyond doubt.

Foreign policy will have to continue playing its part. You can see that “Energieaußenpolitik” (energy-related foreign policy) may be a long word, but the point is that it’s one word. Of course, energy policy within the context of foreign affairs cannot compensate for shortcomings in national energy policies. However, it can help to greatly reduce the susceptibility to mistakes in energy relations by developing a crisis-proof system of agreements which binds supplier, transit and consumer countries to a formal system of rules. However, it’s not the binding nature of this system which matters but its combination with a crisis resolution mechanism, which will hopefully ensure in future that energy and energy supplies don’t become a pawn of political and foreign policy interests.

Energy and climate diplomacy undoubtedly belong in the tool kit of foreign policy. That wasn’t the case eight years ago. I addressed this issue for the first time in the speech to the Munich Security Conference which I mentioned. When I left the stage after the speech, Horst Teltschik – your predecessor, Wolfgang – said, “Mr Steinmeier, that really was an interesting speech. It’s just a pity you didn’t talk about foreign policy.”

That wouldn’t happen today! Today we think differently. I’m secretly pleased therefore that the Munich Security Conference has organised a conference on energy security.

I hope you all enjoy fruitful discussions!

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