Analysis of last week's tug-of-war over Russian gas exports leads me to several conclusions, over and above those set out in my column in issue No. 9103, namely:
1. Far more than a chance event. The significance of what happened and future repercussions go well beyond those of a chance event. The EU should by now have become fully aware of the demand for an energy policy decided upon and managed in common. It is true that this demand has already been recognised by EU heads of state on two occasions in the past: once in a formal way by agreeing to include the idea of a common energy policy in the draft Constitutional Treaty and setting out its objectives; and secondly at the Hampton Court Summit in October 2005, when the Commission was instructed to prepare a working document on energy policy, to be submitted to the Spring European Council this year. But the Constitutional Treaty has been blocked for an indefinite period of time and the Hampton Court Summit's outcome in terms of energy policy has not had much of an impact. When heads of state formally deal with energy in detail in March, we are entitled to hope they will be firm and positive. In its working document, over and above the big questions surrounding security of supply, the functioning and transparency of the internal market, alternative energy, and the like, the European Commission may decide to breathe new life into two programmes that have already been mooted but ended in failure - compulsory EU stock-piling; and scrapping the upper limit on liability for accidents at sea. The impact of the Russian gas crisis should ensure that the media and public opinion will be closely following debate at the European Council in March, paying close attention to the outcome.
2. Diversifying supply and transport networks. The danger of relying too much on Russia as a gas supplier was vividly brought home, especially by Member States like Poland, Hungary, the Baltic States, Slovakia and Finland, which get virtually all their gas supplies from Russia. Other countries are aware that EU gas supplies will soon be running out (in the next years or decades). These facts are well known and often quoted. What is rather new here is politicians and public opinion becoming aware of it. Relying on a very small number of gas pipelines is just as risky. In this sense, alternatives are positive, not only pipelines across the Caspian Sea and Turkey, but also the planned joint German-Russian pipeline across the Baltic Sea (much in the news due to Gerhard Schroder's involvement and furious reaction in Poland). Poland should see the issue from a European point of view and assess the advantages of being part of a powerful European partner that can square up to Russia. It should fight to ensure this partner exists.
3. Russia backed down. Expert analysis of the Gazprom-Naftogaz are in virtually unanimous agreement that it was Russia, not the Ukraine, which backed down. Commentators who immediately came to the opposite conclusion (like French newspaper Le Monde's comment that Russia is imposing gas price conditions on Ukraine) are mistaken, explained by the complicated nature of the agreement finally reached. The aim of course was to cover up the fact that Russia had to give way, because Ukraine will now pay USD 95 per cubic metre of gas, far more than the USD 63 it used to pay, but also far less than the initial demand of USD 230. The Russians could not actually follow through on their threat to turn off gas supplies to the Ukrainian pipeline supplying Europe without losing all credibility as a reliable supplier. Cutting gas pressure for a day was a mistake, but going beyond that would have been downright careless, causing people to lose confidence and causing Russia's expansion and cooperation plans to founder. Europe's diplomats made this abundantly clear to Russia.
4. Coherent negotiator. The EU now needs to consolidate unity and keep the pressure up because Russia has still not ratified the 1991 European Energy Charter, drawn up after tough negotiations, to establish solid legal rules for energy supplies. Even without the Charter, the EU has other cards up its sleeve because it accounts for 65% of Russia's exports. The external aspects of the EU's energy policy are as important, if not more, than liberalising the internal market (the latter sometimes seems to be the Commission's main concern). Europe has a strong bargaining position as the biggest client in the world with regard to all the players on the global energy scene - Russia of course, but also Ukraine (on transport costs), Turkey, and so on. As long as it knows how to be a united, coherent negotiator… (F.R.)