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To reduce dependence by the European Union on the supply of gas by Russia and thereby the insecurity of the practices of the Kremlin, the European Union has constructed a natural gas transport pipeline taking the resource from Turkey through to Austria, Bulgaria then to Romania and later to Hungary. This project has drawn major support from the USA and is called “Nabucco.”

All these efforts made by the European Union are in the effort of attaining an economic balance by considering the foreign sector. By considering the foreign sector in this case supports the idea that the economic performance of any country will depend on the other States and nations in matters of imports and exports. The European Union needed to strike a balance between the imports and exports in order to perform well economically.

This is all in the effort of promoting an open economy; a situation where the government of the leading body like that of the European Union has to make considerations concerning the effects of the internal policies affecting the foreign sector for instance if a country is to increase its rates of interest, this discourages the out flow of capital and promotes capital inflow.

This difference between capital out flow and capital inflow greatly influences the rates of exchange.

Russia’s state of energy superpower would manipulate the economies of the member states of the European Union if not dealt with. A sudden inflation of energy prices by the Russia causes a rise in price in the entire European Union economy. This will automatically amount to high rates of inflation which will increase the chances of an economic recession.

It is very imperative for the European Union to have these measures established in order to have a stabilized economy. This will make it possible for the European Union to regulate its resources by either allowing inflation to rise and later fall hence facilitating a recovery to the recession by lowering the rates of interest.

However, the EU may opt to lower the rates of interest instantly to avoid a recession. All the same, the choice of either of the two options depends entirely on the interest rate levels and the inflation of a given economy. Lowering rates of interests increases the aggregate demand shifting back the probable output to the initial level. This is very important for the EU economy to avoid a recession since inflation cannot be avoided.

Conclusion:

From this research, it is very possible to reduce the Russian energy reliance by the European Union although not completely. If the Russian energy organizations and Companies are available in all areas which could be alternatives to the EU and more especially if the anticipated project of “Nabucco” failed, then there will not be any other choice left for the European Union other than making purchases from Russia or may be from firms having Russian interest.

Getting these resources from Russia is up to date the cheapest way of energy supplies due to the geographical location and extant Russian energy infrastructure. It should also be noted that the energy supply from Russia to Europe has traditions with it whilst with a new major supplier, it is important for the EU to have an experience of new cultures and how to secure a safe relationship of business and dependable energy policy with other new part