The European Commission/Javier Solana document on EU foreign policy with regard to energy does not restrict itself to setting out the principles and general trends summarised in this column yesterday. It also sets some operational objectives which heads of government will be called on to back at their meeting next week.
A. Making the Energy Charter operational. This Charter, negotiated in the 80s, mainly with Russia, but with the involvement of the United States and other countries, was signed but has never been ratified either by Moscow or Washington. The Commission/Solana document says that it must be “ratified by all signatories”, and negotiation of the annexed “transit protocol”, suspended for some fifteen years, should be concluded. This is not a legal affair, but is highly political and has enormous economic significance. The Charter and the Protocol set out the rules which will allow European importing companies to buy Russian oil and gas directly from independent Russian producers, and Gazprom will be required to guarantee the transport, via the network which it owns as a monopoly. The EU has already several times raised the two sides of this thorny issue (buying direct, and transport by Gazprom oil pipelines) with Russian authorities, but to no effect. On the contrary, after a few encouraging noises from a Minister or two, Russia abruptly backtracked. Experts in Russian internal affairs say that those Ministers with liberal tendencies have been forced to resign, and during the recent EU-Russia meeting in Sotchi, on the Black Sea, Vladimir Putin in effect told his European interlocutors (Chancellor Schüssel, Commission President Barroso, High Representative Javier Solana and Commissioner Ferrero-Waldner): the EU is asking for secure Russian oil and gas supplies and wants to be able to buy them directly from independent producers using the Gazprom network, but what is it offering in return? And there is no beating about the bush for Gazprom managers, who say that it is ridiculous even to suggest signing the Charter in its current form.
Should the conclusion be that the objective of the Commission/Solana document is unrealistic? If it is taken to the letter, then maybe it is. But, if it is seen as an invitation for discussions with Russia, then that's different. Gazprom has ambitions to be a “global energy company”, not limiting itself to gas production and export, but investing in western supply companies and achieving vertical integration, allowing it to sell its gas directly to end users. At the same time, Russia needs to find considerable Western investment and to import state of the art technologies to improve its gas and oil production and to reduce consumption (there is still huge waste). This is what the European Union can offer in return. We know Germany is already committed, we know of first agreements with companies, backed by public authorities. It would be in everyone's interests if European negotiations came on top of national negotiations. The Charter and the annexed Protocol would provide the ideal way forward. The important thing, however, is that there is dialogue, at both state and company levels.
B. Turkey, Ukraine and the “energy community”. The document states explicitly that Turkey, Ukraine - and, if I am right in my understanding, Algeria too - should be encouraged to prepare their accession to the energy community (not to be confused, of course, with accession to the EU itself). This would be the way to develop a wide range of countries around the EU which would make up “a common regulatory area with shared trade, transit and environmental rules” with regard to energy. Certainly, the objective defined by the authors of the document is to achieve, in those areas, world rules making possible the regulation of offers, make investment decisions easier, reduce shocks and provide security as much to suppliers (with their outlets) as to buyers (with their supply). But the Commission and Javier Solana know full well that global regulation is not going to happen tomorrow, or even the day after.
In the meanwhile, the energy community provides sufficient security and stabilisation. This community already exists on paper, we know, because the appropriate treaty has been signed. It brings together the EU and nine South-East European countries: Romania and Bulgaria (until they become part of the EU), Croatia, Serbia, Bosnia-Herzegovina, Montenegro, Macedonia, Albania and, through the UN provisional administration, Kosovo. Four countries currently hold observer status: Norway (which is expected to join shortly), Turkey, Ukraine and Moldova. The entry into effect of the treaty depends on ratification, but we mustn't wait for the last one: all that is needed is ratification by the EU and six signatories, and experts believe that this could be achieved before the end of the year.
C. Investing in networks. Here we are confronted with one of the key factors in the document, which comes back to it several times. Firstly, the guiding principles: the EU's “energy partnerships” with producer countries must not simply aim to create “open, transparent, non-discriminatory and stable legal conditions” for energy investment and trade, but also develop and upgrade “production and export of energy transportation infrastructure in producer and transit countries”. The chapter on “Diversification” refers not only to sources, but also to “transit routes”. “The EU should facilitate the maintenance and upgrade of existing energy infrastructure in neighbouring countries of key importance to the EU as well as the development of new infrastructure,” it says. The documents stresses gas transport projects: “There are a number of new gas projects which have either been decided or are in an advanced stage of planning (North Africa, Middle East, Caspian region, Russia and Norway. If completed, they could create new corridors and new import capacity amounting to a significant share of the EU's current gas consumption”. Gasification installations for liquid gas transported by sea are not forgotten: “LNG terminals offer a particular contribution to security of supply” (this remark can be explained by the difficulties encountered by some plans for gasification installations, notably in Italy). Oil pipelines are also mentioned: “The development of major international pipelines to deliver oil from the Caspian region and Central Asia to the EU is also vital”.
The country most directly affected by the new gas pipelines is, of course, Turkey, which will channel gas from the Caucasus and the Caspian Sea to Europe without it going through either Russia or Iran. Some newspapers have reported the completion of the first major project: oil from Azerbaijan has started to arrive in the Mediterranean, thanks to the opening of the BTC pipeline which starts in Baku, loops into Georgia and then crosses Turkey, arriving at the port of Ceyhan on the Mediterranean. 1,767 km in length, partly through the mountains (rising to a height of 2,800 metres), an investment of 4 billion dollars from a consortium led by UK Presidency. Alongside the pipeline for much of its length will run a gas pipeline, which is due to become operational in the first months of next year. Kazakhstan has already planned to link with the gas pipeline so that some of its vast reserves of gas will reach the Mediterranean too, heading for the European market. This is a new route which is opening, adding to those which already exist for Russian gas (which cross the Black Sea to get to Turkey, to which will be added other projects which have already been scheduled).
The Commission/Solana document does not set any date or target for the completion of the planned network. Preparations for the projects are at different stages and their completion will depend on the economic, financial, legal and also political circumstances of each of them. Next week's European Summit should express the desire to move forward in all these interdependent areas.
D. Supply of enriched uranium. While carefully avoiding expressing an opinion for or against nuclear power, the document includes among the guiding principles of its recommended policy the creation of an “international regime for the supply of enriched uranium … in line with non-proliferation commitments and taking into account the EURATOM treaty provisions”.
These few guidelines for the operational initiatives that the European Council will be called on to take next week are founded on the basic principle that energy needs a political framework and cannot simply be left to the rules of the market. Additionally, some guidelines and considerations have not been expressed in words, but are implied. Tomorrow, concluding my preparation for the “energy” section of the next Summit, I will reflect on these two points.
(F.R.)