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Following the January gas crisis Europe has awoken once more to the grave danger of its energy security being under threat. However, instead of sober economic calculations and market mechanisms the EU continues with its infrastructural dream. The 'mega' projects of the Nabucco and South Stream pipelines are often mentioned as saviours of EU energy security, but they are too expensive and politically troublesome. Besides they are only about the pipes and infrastructure and not about the development of sources and effective distribution. Instead, the EU needs a single energy policy and regulatory agency to decide on the levels of gas imports, exports and transit on a continent wide basis. This is the quickest way to deliver both security and to optimize consumption and reserves.

Today, the major problem that the EU faces on this issue are as follows: 1) Huge dependency on Russia (42% of gas imports) and 2) disproportional energy diversification between Eastern and Western Europe. While the dependency on Russia is decreasing with improvements in renewable sources and energy efficiency the second problem persists. Not only does it mainly effect new member states but it also creates greater costs for the old ones. The proper way to address this challenge is to build the necessary connections between national gas markets whilst creating a single regulatory mechanism at community level. Such a mechanism would be responsible for the import and export of gas from country to country and would gather information about the supply, production capacity and consumption needs. In this way an integrated regulation mechanism would create both economic and political benefits. Besides these advantages the liberalizing of the EU's energy market would have a positive effect on Europe's energy security in the following ways:

1. National deficiencies would become European ones which would in turn facilitate common positions on both energy and foreign policy.
   
2. The gas supply security would increase in all EU countries because in the case of a problem in one member state the flow can easily be diverted. While this would be particularly advantageous for new members it would also bring political dividends for older ones.
   
3. The gas issue would therefore be depoliticized by such moves and Russia would not be able to build EU splitting coalitions. Currently this is the biggest weakness of the EU and if this can change through internal integration instruments it would enhance the groups international standing.
   
4. If the EU implements market liberalization and community regulation successfully then it would supply a very good reference point for the rest of the world. This would be of key importance in the long run as most gas exporting states have state owned energy sectors. This is the case with Russia too, whose energy market is only functioning thanks to costly government support.

Currently the dysfunctional Russian gas market poses a significant threat to the EU's energy security. With domestic prices artificially low no one sees a reason to invest in energy efficiency. This leads to huge losses and as a result the Russian company Gazprom gains 100% of its profits from only a quarter of the gas it sells - the one for export.  Furthermore, the Russian state monopoly strongly discourages any attempts at new investment, developing new gas sources and improving the infrastructure. According to the International Energy Agency, Russia should invest around $11billion for both maintenance and further development of its energy infrastructure. However, this money is currently mainly used for consultancy and new pipelines whilst development is totally neglected. Indeed, Russia now invests more in the future Sochi Olympic than it does in its energy sector. This may create the ironic situation where the richest country in terms of resources could run out of gas and not be able to export the amounts it's contracted to.

We had such a case in winter 2005/6 and if we want to avoid it happening again we should work towards the liberalization of energy markets. This would ease the progress of energy efficiency and strengthen foreign policy positions throughout Europe. Furthermore, it would not require the huge investments seen in Nabbuco and South Stream. What it requires is political will. If the supporters of a single energy policy lose the fight with the lobbies of the construction companies and the bureaucrats the EU will miss a golden opportunity to take a major step toward solving its energy problems. Liberalization is where we should start and then the diversification of routes and sources would be the cherry on the top of the energy security pie.

Ivan Kalburov holds an MA in International Relations from CEU, Budapest. He writes a regular blog at http://criticae.wordpress.com/.

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