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Despite New Sources, Europe Still Relies On Russian Oil


This is WEEKEND EDITION from NPR News. I'm Scott Simon.

It was six months ago when Russia sent troops into Crimea, quickly scheduled a referendum then annexed the peninsula. Sanctions imposed by the West have weakened the ruble and squeezed funding to banks and industries, but Crimea's annexation seems to be a done deal.

Now, in a moment we'll talk to our reporter, David Greene who's in Crimea, about the changes that have taken place there. Ukraine would like the West to impose more sanctions, but that seems unlikely. Europe depends heavily on Russia's vast oil and gas reserve to get through the winter.

Since 2009, the European Bank for Reconstruction and Development has focused efforts on trying to reduce Europe's energy dependence on Russia. The bank is investing in renewable energy and improving energy efficiency. The recent crisis in Ukraine has made the bank's work even more pressing.

We are joined in the studio by Suma Chakrabarti, the president of the bank. He's in Washington, D.C. for the annual meeting of the World Bank and the International Monetary Fund. Thanks for being with us.

SUMA CHAKRABARTI: It's a real pleasure.

SIMON: How dependent is Europe on Russia?

CHAKRABARTI: Well, some parts of Europe much more than others. So if you look at the German energy market, Germany's much more dependent than say, the U.K. So it varies a lot. And in the case of Ukraine, it also - has been - quite dependent.

SIMON: Is Ukraine particularly vulnerable this winter?

CHAKRABARTI: Ukraine, I think, has enough storages of gas for this winter, but nevertheless, it's a long-term issue that Ukraine really has to address.

SIMON: Yeah and it owes billions to Russia, doesn't it?

CHAKRABARTI: It owes some on the contracts it has and there's a negotiation going on at the moment between Russia and Ukraine on those contracts. But the fundamental point for Ukraine is its energy efficiency levels are very low. If Ukraine could get to Western European levels of energy efficiency, it would actually need to import very little gas at all.

SIMON: But how do they do that?

CHAKRABARTI: Well, they need a lot of investment. There's no doubt about that and this is where the EBRD comes in, I think. We have to really help Ukraine with energy-efficiency credit lines through banks and so on. We need to get companies in Ukraine to become much more energy efficient. At the same time, we also need to help Ukraine with its immediate energy security needs, I think. One of the things we're thinking of doing is a gas transit project, really to help with the reverse flow of gas from Slovakia, for example.

SIMON: Not so long ago, there was a feeling that if Western Europe, Eastern Europe and Russia were kind of codependent - Russia obviously providing a lot of the energy - that was going to be good, that that would knit a working relationship together on the continent, which had been the source of, obviously, so much suffering. What's happened?

CHAKRABARTI: What's happened is clearly a geopolitical mess, currently. And that has affected not just energy, but other fields too - investment levels elsewhere. So you can see, in terms of foreign investment outflows from Russia, they're in very, very heavy this year. The economic linkages were there. They're sort of beginning to break down because of the geopolitical tensions.

SIMON: Our reporting from Ukraine says that a lot of people there are stocking up on blankets and batteries. They're concerned about the winter to come.

CHAKRABARTI: Yeah, well, I mean, if you look at the economic situation in Ukraine, we're projecting this year that the economy will shrink by 9 percent and next year by another 3 percent. So that has real human consequences. The budget is under extraordinary strain. You can imagine the war, the conflict, in the East and that was where heavy industry was concentrated. That's affected people very badly.

SIMON: What can the West do over the next few years before these energy efficiency projects begin to pay off?

CHAKRABARTI: Well, I think I'd give an example of what we're trying to do because that's - in a way, says it all really. We really need to ramp up our investment in Ukraine, after really reducing investment in Ukraine over many years because of corruption. But we have a government, which is now tackling corruption, with our help. We have a willingness really, to reform. So we're putting a lot of money into Ukraine really to try and get the economy back on its feet as fast as possible. But it will take two, three years I think before we get positive rates of growth again in Ukraine.

SIMON: Suma Chakrabarti is the president of the European Bank for Reconstruction and Development. Thanks very much for being with us.

CHAKRABARTI: Thank you very much. Transcript provided by NPR, Copyright NPR.