The broad principles (with few or no surprises) of a global energy policy and the "action plan" designed to put them into being, which were adopted by the G8 Summit (see this column yesterday) failed to level out the differences of opinion between the Western countries and Russia. They relate to aspects which appear theoretical, but which are actually very real, and exert a direct influence over behaviour on the world market. The interested parties have been discussing this for a long time, occasionally going off at various tangents. To begin with, both sides gave the impression that they weren't even speaking the same language. Today the stakes and positions have been clarified, and new prospects for cooperation are emerging, even though the opinions of the interested parties continue, quite logically, to differ.
Security of supply and security of demand. The importing countries, and Europe most of all, have always stressed the need for energy supply to be guaranteed by firm and definitive commitments on the part of the exporting countries. This logical concern practically became an obsession, after the temporary slow-down in flows of Russian gas coming via Ukraine, and the European Commission had confirmed the allowability of long-term contracts (but in principle, the competition services pay little heed, taking advantage of the situation and limiting access for new suppliers). The first phase of Moscow's response stressed the reliability of Russian supply: how many times has Vladimir Putin stressed the fact that commitments have always been adhered to? Then, when the emphasis was increasingly laid on the investment needed for infrastructure (and the shortcomings and delays of Gazprom in this field showed up for all to see), Moscow brought in a link between the security of supply, which is accepted and recognised, and the security of demand. Major investments, which are vital, are only possible if gas and petroleum buyers are prepared to offer a guarantee that their purchases will continue in the long term.
Major manoeuvres. The legal debate is the consequence of the major manoeuvres increasingly in evidence, around plans and concrete achievement alike. The EU (with, on occasion, the participation of American businesses and investors) multiplied and reinforced access to the network surrounding the Russian territory, to afford access to the oil and gas fields of the Caucasus, the Caspian Sea and elsewhere. Some of these plans have just been completed, particularly the so-called BTC oil pipe, which is 1800 km long. Crossing Azerbaijan, Georgia and Turkey, the pipeline links Baku with the Turkish port of Ceyhan on the Mediterranean, and has just been inaugurated with all due pomp and ceremony. Others have been launched, such as the Nabucco project, in which Austria, Hungary, Bulgaria and Romania are involved, along with Turkey (see our bulletin 9219). Some of these manoeuvres are initially diplomatic in nature. Ukraine, Georgia, Azerbaijan and Moldova have reactivated their Union (founded in 1997, but dormant) on the basis of energy cooperation. Poland is to be involved in transiting oil from the Caspian Sea to the EU without going via Russia, Iran or the Middle East. Projects involving Kazakhstan are also in the pipeline.
Russia, for its part, responded with projects aiming to connect its oil and gas fields with China and India, and offered Algeria cooperation in the transportation of liquid gas.
Yet more projects, however, aim to increase direct relations between Russia and the main centres of consumption in Europe, without going via Ukraine, the most famous of which is the Russian-German gas pipeline under the Baltic Sea. Its fame comes from the personal involvement of former German Chancellor Gerhard Schröder. From another point of view, it caused quite a stir in Warsaw, because it would also bypass Poland. If I had to list all of the political initiatives surrounding these various projects, I would never be done. The "Energy Community" is the most spectacular of the lot. The EU (with all its Member States) is a member of this, as are nine countries of the south-eastern Europe: Romania, Bulgaria, Croatia, Macedonia, Serbia, Albania, Bosnia-Herzegovina, Montenegro and also Kosovo (under the administration of the UN). The Secretariat is in Vienna. The European Commission takes the view that Norway, Turkey, Ukraine and Moldova should also be invited to join (for the time being, these countries just told observer status).
These major manoeuvres, which involve colossal interests (investment in the BTC pipeline alone is said to have exceeded four billion dollars) are entirely logical: everybody defends their own interests. But it is always worthwhile to understand what is hidden behind the squabbles over this word or that. The St Petersburg Summit certainly failed to tackle the underlying issue, or to establish a parallel between security of supply and security of demand, but it combined them in a passage in paragraph 6, which talks of interdependence in security of supply and of demand, without laying down any legal parallel between the two.
The Energy Charter and freedom of access to the markets. Yesterday, I described as a trick of semantics the way in which the G8 had levelled off the big difference in opinion related to the Energy Charter: the Summit did not say that it was in favour of this Charter, but that it supported the principles of it. In this way, Russia can continue not to ratify the Charter, even though it has signed it (the United States, incidentally, are in the same position), has let it be known that it may apply the fundamental principle of it. What is this fundamental principle? It is free access, for all signatory countries, to the energy resources of the others. In practice, any Western oil company would have the right to buy Russian oil or gas directly from the source, in Siberia or wherever else, and to transport it using Gazprom's pipeline (as it has the monopoly on the network), in return for a fee. A Russian minister who is in favour of the market economy hinted at the possibility of ratifying the Charter, but Mr Putin quickly obliged him to backtrack (before going on to replace him), and has since taken every possible opportunity to repeat that the Charter will never be ratified as it stands. According to certain observers, in St Petersburg, the Russian leader is said to have taken up the refrain: an adequate quid pro quo will firstly be necessary. But what?
Mr Putin's quid pro quo. Mr Putin made himself quite clear at the EU/Russia Summit in Sotchi, which was held at the end of May. He responded as follows to the arguments of the EU concerning market rules, the opening-up of the market and transparency (our translation): "our partners expect exclusive advantages from us and demand of us a liberal policy of access to our production, our infrastructure and our transport. And so I reply: what will we have in exchange? Where are your gas fields, and what major networks are you allowing us access to? If you have none of the above, we will have to find an alternative solution allowing reciprocal movements, in our mutual interest. If our European partners want access to the holy of holies of our economy, oil and gas, they will have to make an equivalent effort themselves". The objective is clear: to get Gazprom, or maybe other Russian companies, onto the European market, getting involved in distribution, selling their gas and oil directly to their European customers.
Since then, contacts, requests and negotiations have multiplied in volume. Gazprom has been negotiating links with European (and Western in general) companies to take stakes and get directly involved at the stage of optimising and distributing products. The financial advantage is enormous, because gas is sold retail at much higher prices than to the direct importer: you can times it by three at least, sometimes by 10. There are many plans in the pipeline, and the authorities are, in many cases, directly involved in them. In Moscow this June, Romano Prodi and Vladimir Putin signed a kind of framework agreement, which paves the way for the conclusion of negotiations underway between ENI and Gazprom, and between Enel and Gazprom. Gazprom's plans to take control of Centrica (United Kingdom) have not been shelved. The Belgian installations at Zeebrugge have also been targeted, and there are plans for a Gazprom stake in the Dutch company Gazunie, in return for which Gazunie would get in on the gas pipeline under the Baltic Sea, which would then, at the same time, be developed in the direction of the Scandinavian markets. Offers to the Algerians for a narrow cooperation in the process of liquefying gas prior to its transportation by ship are very firmly under way. At the same time, American (and other) giants are negotiating their part in the exploitation of the highly lucrative Russian fields.
All of this to-ing and fro-ing is in line with the principles of the Charter, but the contracts are negotiated on a case-by-case basis, and the public authorities reserve the right to intervene (it was the British authorities who blocked Gazprom's attempts to buy Centrica, and Mr Putin even made a clear reference to this in St Petersburg).
A warning? The Charter will not be ratified, despite the hopes of Brussels, because Moscow will not agree to a general rule of market opening, legally enshrined freedom of access to the "holy of holies" of the Russian economy. But each party needs the other; this means that there will be agreements and specific negotiations, under the watchful eye of the authorities. And each party will continue, the same time, to seek either other sources and other time-tables for supply (the EU and its Member States), or other outlets (Russia). All's fair in love and war. In any case, that's what's happening.
Reserves and transparency. For Russia (a throwback to the past or a technical shortcoming?), the level of gas and oil reserves is a State secret. But the big importers and, even more so, the big investors, need to know the situation in order to do their sums. The G8 Summit went no further (in paragraph 3) than to list a few principles and announce new initiatives to improve data-gathering, using joint methods. This is a first step.
(F.R.)