The principle of free and open trade is key to state vitality, whereby the integrity of the global supply chain is a hallmark of the modern global economic model. The ability to move goods and services unencumbered across land, sea and air-based supply chains is critical to this process. This is no less the case than in the energy sector, broadly defined as acquisition, refining and distribution of liquid fuels, natural gas and coal and electric power generation, which is the lifeblood of the modern state. Indeed, the ability to function in 21st Century society is dependent on thousands of men and women around the world who labor in the energy sector to supply the fuel and power we need for everyday life. Yet, despite the tremendous effort to promote renewables over the last two decades, the effort to break the dependence on fossil fuels is more difficult and costly than originally envisioned. In other words, fossil fuels are still necessary to maintain a modern economy; a fact that will not change any time soon.
The global energy supply chain has many moving parts that must operate in a methodical and synchronized manner to ensure peak efficiency and competitively priced products to meet consumer demand. Any deviations from this interdependent and sensitive network can result in product waste, capital loss and corporate failures. In the worst case, long-term or catastrophic disruption to the energy supply chain could lead to the break down in civil order and state failure. With such complex and integrated entities, it is no surprise the energy supply chains are vulnerable to a range of both natural and man-made disruptions.
The Baltic Sea region, less Russia, is host to eight nations with a population of 146 million, an accumulated GDP of $5.4 trillion (US) and an impressive cumulative growth rate of 3.4%. Additionally, these nations host one of the most sophisticated economic infrastructures in the world, with a heavy dependence on the global sea lanes, as well as road, rail, pipelines and air nodes. The stark reality is the Baltic Sea states are facing a Russia determined to exert greater influence in the region and push back against what it sees as NATO’s (read Western) encroachment. To this end, Russian activity in the region is aggressive, with fighter overflights, airspace violations and overt intimidation campaigns. Perhaps one of the most threatening is the potential damage from Russian hybrid warfare operations, of which cyber-attacks play an important role. In fact, Russian government supported hybrid warfare is already underway, in which cyber-attacks on the infrastructure are a popular and effective tactic. To recognize the Kremlin’s complicity, one simply needs to recall the Bronze Soldier incident of 2007, which arguably ushered in the modern concept of hybrid warfare. Moreover, Russia is clearly honing its hybrid warfare doctrine in Ukraine, the Baltic States and the Caucasus.
One of Russia’s greatest coercive assets is its energy dominance and Moscow’s willingness to leverage this raw strength is documented, a fact known all too well by most of the Baltic Sea states. It is also important to recognize the Kremlin thinks strategically; it is no coincidence that Russia is building two gas pipelines, Nord Stream II, to complement the existing Nord Stream, and Turkstream; giant pincers to bypass Ukraine and exert economic and political influence in northern and southern Europe. Ultimately, the goal is to regain its traditional sphere of influence on its western periphery. These pipelines will provide vital revenue, which keeps Putin and the oligarchs in power, so it is reasonable to expect Moscow will take great measures to protect them.
It should also be noted that Germany is also very interested in Nord Stream II and has rebuffed the numerous attempts to kill the project. Some of the most vociferous critics have been Germany’s Baltic Sea neighbors and NATO partners, but to no avail; the pipeline’s construction continues unabated. While the United States has been opposed to Nord Stream II, it has, until recently, kept a hands-off approach. This attitude ended over the summer when Senators Ted Cruz (R, TX) and Jeanne Shaheen (D, NH) proposed the Protecting Europe’s Energy Security Act of 2019, designed to place punitive sanctions on companies building the pipeline, most of which are European. A truly bi-partisan effort in a deeply divided Washington, DC, this legislation is making its way through Congress via the National Defense Authorization Act of 2020 and could be in effect in early 2020. While the impact of these sanctions are potentially crippling to those entities involved in the pipeline’s construction, the question is whether this is too late to have any measurable impact.
The combined Baltic Sea states comprise NATO’s northern flank, to include the vast Arctic region. Though not official members, Sweden and Finland, simply by virtue of geographic location, figure into this broader northern security calculus. The NATO response to recent Russian activities is measured, which includes the Baltic Air Policing and the Standing NATO Maritime Group, as well as forward deployed forces in the Baltic States and Poland. While important displays of Alliance solidarity, these activities are merely tripwires and lack real defensive capabilities against Russia’s large conventional force in its Western Military District. Moreover, the Baltic Sea will be difficult to defend in the event of an Article V declaration. Its narrow confines limit operational mobility, which is so important for naval forces to survive, while the heavily armed Russian exclave of Kaliningrad occupies a strategic bend in the Sea’s southeast corner. Indeed, Russian anti-access/area denial (A2/AD) capabilities may force a NATO withdrawal, and it will be at considerable expense in lives lost and treasure to regain control.
Which brings us back to the notion of energy security and supply chain vulnerability in era of hybrid warfare. It should be noted that NATO relies almost completely on the civilian infrastructure for its operational effectiveness. With few exceptions, the tankers, refineries, pipelines, air, road and rail assets are either owned outright by, or shared with, the private sector. The civilian and military infrastructures are more interdependent than most realize (or want to admit), and attempting to divorce the two is an impossibility. The civilian-owned energy infrastructure is an unwitting proxy in a greater hybrid war that is already underway. Therefore, activity from an adversary that impacts the civilian energy supply chain, will invariably impede NATO’s military mission, and vice versa. Indeed, expect greater strain on civil society should pressure on the energy infrastructure increase.
The question must be asked, what are the risks and how can the energy supply chain be protected? The answer is complex and must address some uncomfortable domestic and international political realities; there are no easy or cheap fixes. For example, market-based solutions to break the dependence on Russian natural gas were undertaken at great expense by Lithuania and Poland, with the Klaipeda and Świnoujście LNG facilities. These projects have contributed greatly to the countries’ relative energy security and freedom of action, and in the case of Lithuania, following the opening of Klaipeda, it was able to renegotiate a lower price for Russian gas.
Yet, from a broader and systemic perspective, there is the clear necessity to improve overall resilience, in fact develop and nurture a ‘culture of resilience’. This includes energy source competition, redundant distribution methods and hardening of energy production and distribution assets where feasible. Also, regular and realistic drills and field or table-top exercises to practice for a disruption have proven effective in responding to real-world events.
Closer cooperation between the civilian and military realms is a necessity, not an option. This includes cooperation outside the borders, notably between the Baltic Sea states and NATO. More specifically, market-economic, political and military cooperation, sharing lessons learned and best practices, and academic collaboration in cyber security, primarily through student-faculty exchanges. As Partnership for Peace members, Sweden and Finland, are already participating behind the scenes in broader Baltic Sea security measures, a fact which should be encouraged by the other national leaders and NATO.
The energy supply chain is only as strong as its weakest link. While it is impossible to provide full resilience, recognizing the weak links and working to limit their impact is a prudent solution. Hence the need for a culture of resilience, in which these considerations are automatically factored into the civilian and military planning process. Moreover, there are numerous Baltic Sea economic and security organizations, which could be leveraged to assist in these collaborative efforts. Sweden, in particular, because of its location as the northern keystone, and the home to many world-class industries and corporations, has a vital role to play in the protection of the energy supply chain.
Arnold C. Dupuy, Ph.D.
Contract analyst at the U.S. Department of Defense and an adjunct professor of international relations at George Mason University and Virginia Tech.
Freddy Jönsson Hanberg
Reserve officer in Swedish Armed Forces and an expert on Supply Chain Risk Management and Security.