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Several geopolitical and economic developments in the fi rst decade of the twentyfi rst century have heightened Europe's sense of vulnerability in respect of its energy supplies. On the supply side of the energy equation, the continuous fi ghting and rising ethnic and sectarian tension in Iraq, and the diplomatic confrontation over Iran's nuclear programme, have intensifi ed concern over the stability of supplies from the Persian Gulf. On the demand side, China's and India's skyrocketing energy consumption and their eff orts to secure supplies have intensifi ed global competition over scarce hydrocarbon resources. These changes in the landscape of the global energy market, in conjunction with diminishing refi nery capacity, shrinking spare capacity and a low level of investment,