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Summit 2: How Russia Fits Europe’s Energy Plan

  • October 21st, 2006
  • Posted by 7thmin

eu-flag-reduced-larger.pngThe European leaders set up their “informal summit”, in Finland , with the two-fold purpose of agreeing on a Europe-wide energy policy, which they did not have, and trying to get firm undertakings from President Putin on reliable supplies of petroleum and gas.

They saw disturbing signs of unreliability: Russian resistance to opening the development of energy resources to outside investment and engagement, and its cutting-off of gas to the Ukraine last January in a prices dispute.

Members of the executive body, the European Commission, and of the European Parliament had wanted the heads of government to take a firm bargaining position, indicating also that the twenty-five member states would do better working together than relying too heavily on separate bilateral agreements with Russia.

The key figure, Europe gets 25% of its petroleum and gas from Russia, and will need to get more, was quoted time and again.

The EC Chairman, Jose Manuel Barroso, told journalists he would be making a point to Putin on mutual needs: “We will have 500 million consumers, the biggest market for energy, so our leverage is our market”.

The President of the European Parliament, Josep Borrell Fontelles, said the same: “There is a gas flow and a cash flow. We need the gas but I think the Russians need the cash flow … and I think there is a mutual dependency … I think the European Union would lose credibility if we were to swap energy for human rights.”

Taking clear positions was one thing. Dealing with the man himself would present different problems for his twenty-five EU counterparts at the table.

In concrete terms the Europeans were wanting in-principle support for “balanced and mutually binding” energy co-operation: Russia would be able to invest in the petroleum, gas or electricity field in Europe; European investors and industries would take part in proving Russian resources and building up the infrastructure.

The European Commission produced a paper on energy needs on the eve of the summit, outlining a framework for “regulating and fostering energy trade and cross investments”, which while ensuring supplies for the West, would “support the industrial diversification and technological development that Russia seeks”.

It said:

Russia wants a stronger presence in the EU internal energy market, ensured long-term gas supply contracts, the integration of electricity grids and free trade for electricity and nuclear materials, as well as the acquisition and control of downstream EU electricity assets (gas and electricity) and EU investments and technology for the development of the Russian energy resources.

The EU wants non-discriminatory and fair treatment from Russia in their energy relationship in terms of access to the Russian market for European investors; a level playing field in terms of market conditions, investment and acquisitions in the upstream and downstream Russian energy infrastructure and resources; third party access to pipelines within Russia, including those for transit of energy products from the Caspian region and Central Asia; respect for competition rules as well as high levels of environmental security and safety.

The same report gave the heads of government an outline, all-European policy on energy needs generally, setting out main options which they are guaranteed to return to time and again, as they grapple with the problem of energy supply in the coming years:

• Coherence, to build-in energy with policy in other fields including external relations, research and environment.
• Building an internal European energy market that would deliver high efficiency, good investment levels and innovation.
• Major investments.
• A drive for energy efficiency which would also be linked with combating climate change and encouraging sustainability.
• Development of a low carbon economy to include emissions trading.
• More use by the European Union of “all its weight” to get balanced, market-based international agreements with producing countries and other consuming economies.
• Building up available expertise with networks of energy advisors.

An accompanying “action plan” gives all Europeans some figures to ponder as they prepare for a long Winter. It foreshadows large-scale savings through an attack on waste, estimating that one third of energy production is wasted in the system without being “used” – as “transformation losses”.

References:

Communication from the Commission to the European Council: External Energy Relations – from principles to action. Commission of the European Communities, Brussels 12.10.06, COM (2006) 590 final.

Saving 20% by 2020: Action Plan for Energy Efficiency; realising the potential. European Commission, MEMO/06/387, Brussels 19.10.06. http://ec.europa.eu/action_plan_energy_efficiency/index_fr.htm (20.10.06)

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