Six points on "short term progress". With Russia admitted to the circle of democratic countries, aligned on the EU and the United States to combat terrorism and organised crime, willing to cooperate in the political and security field (see yesterday's editorial), the doors of economic cooperation are wide open and very close partnership can now swiftly develop in the energy sector.
As far as principles are concerned, the question of EU/Russia energy partnership had already been settled in a positive way, as the ideas launched by Romano Prodi had been taken on board by the October 2000 Summit in Paris, and several principles had been laid down. From the beginning of this year, studies and work had accelerated. Four expert groups from both parties worked together from January to June and handed the results of their work over to be discussed on a "one to one" basis between Director General Lamoureux for the EU and Deputy Prime Minister Khristenko for Russia for the establishment of a joint summary report. Their report identified: a) the points on which progress may now be made; b) the points which require further scrutiny and a technical study. The summit on 3 October considered that the summary report marked the end of the exploratory phase and transition to the following, "official" stage of energy dialogue. We have therefore entered onto the road to partnership. Following the summary report, the three members of the summit, Mr Putin, Mr Verhofstadt and Mr Prodi took on board the six following aspects of "short term progress":
1) The development of judicial instruments in Russia to allow increased European investment, concerning for example the legal base for production and transport of energy, the agreements on the sharing of production, and simplification of procedures for granting licenses.
2) Physical safety of transport networks. A regional system for the monitoring and detection, by satellite, of leaks will be studied for oil and gas installations.
3) Long-term contracts for the supply of energy (Russia attaches great importance to "take or pay" contracts).
4) New "common interest" infrastructures. The projects defined as being of common interest are cited explicitly: a) interconnection of the electrical networks of the EU and Russia; b) the Yamal-Europe gas pipeline network going across Belarus and Poland; c) the exploitation of the Shtokman fields; and d) the connection of the "Droujba" oil transmission system (through Belarus and Ukraine) with the "Adria" network. Russia also considers the Kobrin-Velke Kapoushani gas pipeline as a priority.
5) The achievement of pilot projects in the Russian regions of Arkhangelsk (in the northern part of the country) and Astrakhan (in the south) for energy saving and the rational use of energy. Several projects should be ready next year, with financial support from various European sources (including industry). These projects will form a basis for the realisation of other similar regional projects.
6) The ratification of the Energy Charter Treaty by the Russian parliament. The EU considers that the few problems that are hindering this ratification and the finalisation of the transit protocol "must be resolved".
Themes which "require further scrutiny and a technical study" concern: - a scheme for support of investment that would reduce commercial risks; - the prospects that the "flexibility mechanisms" of the Kytoo Protocol could open up for Russia with a view to attracting energy investment; - the possibility of creating, in Moscow, an EU/Russia centre for energy technologies; - the joint implementation of energy saving projects and enhancement of renewable energy sources; - and the study of the preconditions for exports of Russian electricity towards the EU.
Ivan Ivanov's ambitions. As one can see, these are not just vague intentions but concrete and solid ambitions. And the extraordinary complementary nature of interests leads us to believe that factual results will not be slow in coming. The EU hopes to diversify and enlarge its energy sources. Russia has immense natural resources but also an urgent need for investment, technology and long term contracts. How can the two parties meet? It is true that the notion of time is not always the same in western Europe (where time is precious, too precious) and in Russia (which sometimes gives the impression that it has eternity before it). For example, the Russian Parliament has still not ratified the Energy Charter
signed years ago and considered as a priority instrument for giving concrete substance to cooperation. The "Putin rhythm" is perhaps a little different. Deputy Foreign Minister Ivan Ivanov vigorously denounced the astounding energy waste and losses. Russia consumes four times more energy per GDP unit than the EU and loses half of the energy produced because of its dilapidated energy circuits! He also stressed that the Energy Charter generally meets the interests of Russia, a response that is without ambiguity for nationalist parliamentarians who regret the partial abandon of sovereignty on national natural resources. The time for analysis is now over and it is time to move on to "provisions that will commit both parties", concluded Mr Ivanov.
He also specified, however, that Russia does not accept the role of being no more than a seller of energy raw material. Its ambitions go further. It wants to be able to export processed oil products also, as well as electricity, aluminium and fertilisers (for which the production involves considerable energy consumption) and nuclear fuel. The more the EU calls for gas and oil, the more it must invest in Russia in the same sectors, and also provide it with technology. The Russian operators also want the possibility of investing, in their turn, in the energy processing and distribution companies that have a foothold in the Union.
Importance of long-term contracts. Ivan Ivanov also took position on the controversial issue (within the European Commission) of compatibility between the EU directive on the liberalisation of the gas market and the "destination clauses" of long term supply agreements signed by Gazprom with Community gas importers. The long term contracts restrict the freedom of the European consumers to choose their supplier. Mr Ivanov writes: "the European Commission must choose between stable energy supply and the letter of the law on competition. At the strictly legal level, most Gazprom contracts were signed before the "natural gas" directive, which should not have a retroactive effect if it is to comply with the canons of the law. Also, the EU has in its legal arsenal paragraph 3 of Article 81 (formerly Article 85), which authorises exemptions to competition rules". The Deputy Minister continued: "it therefore appears that the solution to this problem lies in political determination, even if consultation between lawyers from both parties can be useful". He added that the literal application of competition rules would bring the "energy dialogue into question".
One should not take Mr Ivanov's peremptory tone to the letter but interpret it as confirmation of the importance that Russia attributes to long term Gazprom contracts and an explanation of the small phrase cited above on the importance that Moscow places in "take or pay" contracts. It is unthinkable that the energy partnership, so vital for both parties (as it must contribute to giving the EU greater autonomy and freedom of action in a sector where it is vulnerable to blackmail of every kind), should be compromised by a legal detail, all the more as partnership also involves another aspect that the 3 October Summit did not mention but which will be back on the table in due course. I refer at this point to the plan to label Russian natural gas and oil prices in euros, when exported to the Union. Vladimir Putin has never expressed reservation of principle on this idea floated by Romano Prodi. It would be a significant gesture for the international recognition of the European currency. All the more if the rumours whereby the EU and Russia could at the same time come to an agreement on fixing a "reasonable" range for oil prices valid for a 20-year period were to be founded.
Unlimited worksite. One can see that the energy partnership potential is extraordinary although there are still many points to be clarified. It is accompanied by openings into many other fields (over and beyond the "terrorism" and "political dialogue" aspects mentioned in yesterday's EUROPE). The joint declaration of 3 October mainly mentions: the elimination of obstacles to trade, investment and transit; European support to Russia's WTO membership, relaunching of the round table of European and Russian industrialists; the search for "concrete solutions" for the region of Kaliningrad; Russian participation in the EU's scientific research and development programme; the implementation of cooperation agreements in the nuclear field (thermonuclear fusion, nuclear safety), already signed; the establishment of long term partnership between the European Space Agency and Rosaviakosmos, which will focus on launching services, global satellite navigation, control of the global environment; search for an agreement on arrangements for border controls and crossing (EU enlargement must not trace "new lines for separation in Europe"); specific measures against unlawful immigration and the intention to conclude a "re-entry agreement; and active cooperation in the field of the environment with a view to "ratification and rapid entry into force of the Kyoto Protocol".
You may find this list long and ambitious. But I don't. I could never find we are doing or preparing too much to consolidate partnership between the EU and Russia.
(F.R.).