Brussels, 30/05/2002 (Agence Europe) - "If we look forward at the factors that will shape Russian-European integration in the 21st century, in my view, none will be more important than the strength of the co-operation we are able to develop in the energy sector", stated Energy Commissioner Loyola de Palacio at the EU-Russia Summit in Moscow on Wednesday. She described it as addressing "the fundamental building blocks for developing economic co-operation and for constructing our common European economic space… "we are engaged in building something more durable; an Energy Partnership that will achieve solid, concrete and mutually beneficial results to enhance the energy security of the entire European continent".
Loyola de Palacio hailed the progress outlined in the Second Progress Report of the high level work group (jointly chaired by Russian Vice-Prime Minister Victor Khristenko and cam Director-General François Lamoureux) endorsed at the summit:
Improving energy production and transport legal framework. Both sides agreed on the need to complete the legal framework for Production Sharing Agreements "to attract investment in the short term". A "joint report on the current state of play and the proposals in the current draft legislation" will be submitted "for consideration before the November EU-Russia Summit". Russia and the EU want to 1) create joint ventures for energy exploration, production and transport; and 2) provide a framework governing non-discriminatory access to the energy transport networks.
Security of transport networks. Alongside technical assistance provided in 2003 under the TACIS programme, the Summit welcomed 1) the understanding reached with Gazprom (leading Russian operator) to construct an EU-Russia gas certification centre for testing and adopting modern, efficient, gas related technologies; and 2) the idea of using a regional satellite accident prevention monitoring systems (Russia's GLONASS and the future GALILEO system) for oil and gas infrastructure in all countries of Eastern Europe, Central Asia and the Caucasus. The feasibility of such a system will be studied in the framework of TACIS.
Security for long-term supplies. The EU and Russia are convinced of the end for long-term contracts for gas to provide a secure legal and regulatory environment for the EU and investment in Russia but agreement still has to be reached on "destination clauses" that ban one EU country from selling gas bought from Russia to other Member States since the EU sees this as running counter to the single market.
New strategic transport infrastructure of common interest. Both sides want to develop transport routes and while such decisions are in the hands of the private sector, they have asked a group of independent experts to define technical requirements, the level of financing necessary and the timescales involved and organise round tables of governments, financial institutions, the private financial sector and the energy companies to promote the necessary investment and design a scheme to mitigate the residual non-commercial risks with the help of financial institutions, banks, the private sector or, for example, a specialised Investment Guarantee Trust.
Energy efficiency. On top of ratifying the Kyoto Protocol, Russia and the EU have identified two pilot projects - building a connecting pipeline in Astrakhan (south-east Russia) and converting to biomass in the Archangelsk Oblast (north-west). Both projects will require TACIS technical assistance and could cover the area of Kaliningrad in the future. The EU is also funding two technology transfer projects for relatively low cost methods to improve the efficiency and environmental performance of coal-fired power stations in Russia.
Technical co-operation. The decision to establish the EU-Russia Energy Technology Centre in either Moscow or Saint Petersburg was welcomed by the Summit. The Commission will provide funding for three years and in the future the parties will sign a Memorandum of Understanding to ensure the ETC is inaugurated by the end of 2002.
Russia and the EU also stressed in the report the importance of other challenges in their energy co-operation, viz: 1) interconnection of electricity networks. Before substantial trade in electricity can take place, a number of preconditions have to be met such as reciprocity in market opening, cost-based pricing, environmental protection and nuclear safety based on international standards; 2) joint assessment of the oil market to examine the role that petrol stocks could play in cutting market volatility; and 3) trade in nuclear materials, a sensitive issue between the EU and Russia. Russia stresses that "qualitative limitations in trade of nuclear materials between Russia and the EU are discriminatory" by the EURATOM Supply Agency. The report recognises that in view of EU enlargement, it will be necessary to reassess the Supply Agency's long-term energy supply policy since future EU Member States have long-term supply agreements with Russia.