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To Minimize Risk, Diversify!

Gas pipelines from Russia into Ukraine, Europe

The European Union has begun a push to diversify its energy sources.

“Never put all your eggs in one basket,” advises an old proverb: do not risk all your resources by trusting just one provider. Diversify.

To Minimize Risk, Diversify!
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This is particularly important when dealing with indispensable resources, such as energy. Europe learned that the hard way in early January 2009, when a pricing dispute between Russia and Ukraine escalated, leading to a halt in Russian gas exports to Europe and Ukraine. For 13 days, gas delivery for Bulgaria, Greece, Macedonia, Romania, Croatia and Turkey was totally cut off. Bulgaria, Greece and Macedonia were especially vulnerable because they bought the almost all of their gas from Russia, and did not have an alternative source of supply.

Following this incident, the European Union began a push to diversify its energy sources.

Today, Greece is looking to leverage its strategically important position at the southern tip of the Balkan Peninsula when it constructs the Trans-Adriatic Pipeline, or TAP, facilitating – and also using— Azerbaijani gas en route to Italy. Greece is also considering whether to host the Turkish Stream pipeline that would carry Russian natural gas currently routed through Ukraine to Turkey and beyond.

While Russia is an important supplier of energy to Europe, construction of Turkish Stream will not increase Europe’s energy security, said U.S. State Department Special Envoy and Coordinator for International Energy Affairs Amos Hochstein during a recent visit to Greece. The best way for Greece to diversify its supply and increase its energy security is by supporting the Trans-Adriatic Pipeline, which will carry Caspian natural gas from Azerbaijan.Additionally, work has already begun on the Trans-Adriatic pipeline.

The Trans-Adriatic project "fulfills that trifecta of what is energy security: new source, new supply, new route" said Special Envoy Hochstein. “And it's not a single country that is dominating the infrastructure and the gas production, it's many companies, different consortiums, different countries ... no one element can bring it down or use it as leverage," he said.

As Special Envoy Hochstein commented, "Diversification is ultimately the best way to create security of supply." TAP provides that diversification.