1. www.tukkk.fi/pei/e Shipments of Russian Oil via the Baltic Sea: A source of integration or disintegration in Europe? Prof. Kari Liuhto Director Pan-European Institute (PEI) Turku School of Economics and B. A. www.tukkk.fi/pei/eNelijärve22.5.2004

2. www.tukkk.fi/pei/e Pan-European Institute (PEI) PEI was founded in 1998, when two institutes were merged: - Institute for East-West Trade (est. 1987) - Institute for European Studies (est. 1989) PEI is one of the leading academic research centres in its field in Northern Europe

3. www.tukkk.fi/pei/e Core Activities PEI conducts high-quality academic and applied research PEI conducts high-quality academic and applied research PEI monitors economic development in the Baltic Sea Rim and Russia PEI monitors economic development in the Baltic Sea Rim and Russia PEI provides education and training PEI provides education and training PEI carries out projects funded by several organisations PEI carries out projects funded by several organisations

4. www.tukkk.fi/pei/e Research Focus Economic and business development in the Baltic Sea region Economic and business development in the Baltic Sea region Economic relations between the EU and Russia Economic relations between the EU and Russia FDI inflow and outflow from Russia FDI inflow and outflow from Russia Regional development in Wider Europe Regional development in Wider Europe SME development in eastern regions of the EU and countries bordering the Union in the East SME development in eastern regions of the EU and countries bordering the Union in the East

5. www.tukkk.fi/pei/e Economic Monitoring Currently PEI executes three monitoring activities: Currently PEI executes three monitoring activities: –Bimonthly review on the Baltic States and Poland –Biannual review on the Kaliningrad region –Weekly business reporting concerning the Kaliningrad region and St. Petersburg New monitoring activity concerning Russia will be introduced in June 2004 New monitoring activity concerning Russia will be introduced in June 2004

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7. www.tukkk.fi/pei/e Development of Russian economy (GDP) GDP 2003 was $ 434 bn (MP) or $ 1450 bn (PPP) a third of the growth due to high oil price in 2003 Sources: Bank of Finland

8. www.tukkk.fi/pei/e Russia’s Foreign Trade (EU25 accounts for ~ 50%) Source: Bank of Finland

9. www.tukkk.fi/pei/e Russia’s export structure in 2003 Source: Bank of Finland

10. www.tukkk.fi/pei/e Russia – an oil economy * reserves 5-10% of world (P/R-ratio 22) *oil and gas ~ 25% of GDP (WP) * over 50% of extracted oil exported * 2nd largest exporter of oil in the world * over 50% of Russia’s oil exports arrive in the EU

11. www.tukkk.fi/pei/e Russian oil producers in 2004 Source: Troika Dialog

12. www.tukkk.fi/pei/e Source: EU

13. www.tukkk.fi/pei/e Source: EU

14. www.tukkk.fi/pei/e Russia’s crude exports in 2002 Source: Russian Petroleum Investor

15. www.tukkk.fi/pei/e

16. Oil transportation in the Gulf of Finland Source: SYKE (2003)

17. www.tukkk.fi/pei/e Some oil terminals in the Russia territory of the Baltic Sea Rim Planned capacity Primorsk up to 70 mt (by the end of the decade) St. Petersburg 16 mt (by 2005-2006) Bukhta Batareinaya6-15 mt (by the end of 2004) Vysotsk5-11 mt (by the end of 2004) Vyborg 1 mt (extension open) Ust-Luga5-6 mt (by 2010) Vistinoup to 10 mt Kaliningradup to 10 mt By the end of the decade, probably over 100 million tonnes

18. www.tukkk.fi/pei/e Conclusion Russian oil shipments via the BS grow (risks grow) Russian oil shipments via the BS grow (risks grow) (Murmansk pipe uncertain – Arkangelsk port ?) Safety and stricter control measures needed Safety and stricter control measures needed (VTMIS, double-hulled ships, on spot sanctions) Public awareness in Russia should be influenced Public awareness in Russia should be influenced Closer EU-Russian co-operation required Closer EU-Russian co-operation required Team play among Baltic countries Team play among Baltic countries

19. www.tukkk.fi/pei/e Epilogue Russian oil is a source of integration in Europe, if it does not represent an environmental threat in the Baltic Sea or elsewhere and if it is not used as a political instrument to obtain conservative goals of Russian foreign policy.