“Substantial reciprocity” is there. Some time ago, when the EU was calling on Russia to ratify the Energy Charter that the EU had signed long before, Vladimir Putin's response was still the same: what's the trade-off? The Charter includes freedom of access to energy sources in signatory countries, which clearly means that Europeans can directly buy oil or gas from Russian producers and then transport it to consumer countries by way of the Gazprom network, in return for a fee. Putin demanded that the EU in return for this access to the “sacrosanct economy of its country” make an equivalent effort of “substantial reciprocity”. This reciprocity was expected to take the form of direct access to the European market and Gazprom being allowed to trade its oil there at market prices. This trade-off actually did become a reality. Gazprom signed important contracts with several European top-ranking energy companies. On the one hand these contracts extended Gazprom supply commitments for several decades (until 2030 or even until 2035) and on the other, they included Gazprom access to the direct distribution of some of its production to European customers by using plant belonging to European partners. The scale of some of these contracts is colossal. In the case of Gaz de France (GDF), they involve billions of cubic square metres, with an additional quota that will be, up to 2010, transited via the new gas pipeline under construction in the Baltic Sea (there is the possibility that it will go further with Poland). Gazprom is currently opening up subsidiaries in different Member States in view of getting industrial customers for parts of the market open to it. In France this could directly result in 2 billion cubic metres flowing every year. In several cases the contracts also involve obtaining a holding in European firms operating in Russian oilfields controlled by Gazprom.
This is the “substantial reciprocity” principle in complete application.
The EU has to remain vigilant. The time has therefore come for Europe to call on Russia to apply other aspects of the Energy Charter. In its communication last October, “External energy relations - from principles to action” (published in EUROPE/Documents 2451), the European Commission gave its approval, in practice, to the substantial reciprocity demanded by Mr Putin and indicated some of the conditions for it. Russia will certainly not sign the Charter as it currently stands. Putin indicated that some aspects had to be revised but at the same time accepted its principles. The EU therefore has to demand that these principles are respected and avoid the risk, as denounced by André Ferron last November (see this column in EUROPE 9315), that the EU offers Gazprom “genuine access to European networks in return for a precarious access to Russian networks”. According to this “energy” specialist from the “Confrontations Europe” association, “there can be a total separation of producers and networks in Europe but this will never happen in Russia…the Russian State keeps a tight grip on the networks and on Gazprom”.
Vigilance is therefore necessary. There is, however, also a reassuring aspect to Gazprom access to the European market. It seems obvious that if Gazprom does not provide the quantities of gas agreed to EU countries, the EU could block Gazprom supplies to customers it had gained in Member States, which would destroy consumer confidence as well as Russian conquest of part of the European market.
The Polish case. Gazprom penetration into European networks only represents part of the countless other stakes at play. Let's not forget that according to several observers, the Polish veto on opening negotiations for a new EU/Russia agreement is more to do with energy questions than the Russian boycott on Polish meat imports: behind meat, there's gas and gas from Russia is essential to the Poles. There is a reason why the Polish government originally imposed two conditions on opening negotiations: first of all, Moscow's ratification of the Energy Charter before the end of the embargo on meat. Warsaw then withdrew the first condition because it would have meant a definitive refusal to negotiate. The energy dossier hasn't gone away. If it's being spoken about a little less openly, it's because Polish demands do not exclusively apply to Russia but to Germany and other Member States too. Poland is seeking certainties with regard to its energy supplies. We only have to recall how Warsaw responded to the Russian-German gas pipeline through the Baltic Sea, which would have bypassed Poland (a Polish minister described the Putin/Schröder agreement a “new Ribbentrop-Molotov pact” against his country). At the present time, ongoing contacts between the German Presidency of the EU and the Polish government on possibilities for the swift opening of negotiations with Russia, focus on energy issues. Polish President Lech Kaczynski mentioned a new and positive atmosphere, as well as a certain optimism, but did add that several aspects were still pending.
“Nabucco” is not just the most famous opera of Giuseppe Verdi. Another very important aspect involves the “Nabucco” project, the 3,400 kilometre gas pipeline for transporting gas from Azerbaijan, Kazakhstan and Turkistan (as well as gas from Iran when it's possible) to Europe and right to the heart of the EU. At first glance, Russia has nothing to do with this project, as Nabucco will go through Turkey, Bulgaria, Romania and Hungary and finish up in Austria. In reality, Nabucco has a rival: Moscow has set up a project that will cross from the top to the bottom of Russia and link gas pipelines that already exist or which are being built. In the southern part of the country these pipelines join Turkey, from where they follow the same route as Nabucco to Hungary. The objective is both strategic and economic: maintain a level of exclusivity for Russia of supplies from Siberia and the Caucasus to Europe and protect itself from the danger of Russian production not being sufficient in meeting current and future commitments to the European market (on this last point, forecasts from Russia and the International Energy Agency (IEA) do not concur). Five of the six countries involved in Nabucco are EU Member States, the sixth, Turkey, is an associated country, currently in accession negotiations. We can see that the EU is directly involved.
A victory for Putin. Beyond the aspects related to supply and transit, Europe has to be attentive to aspects involving holdings and investment. A reminder of what happened with the Sakhalin - 2 project, the biggest liquid gas project in the world, is salutary. Before the Putin era, Royal Dutch Shell held a majority stake but Vladimir Putin believed that his predecessors had given too much away and he wanted to take this project back under state control. He succeeded. Firstly, he accused Shell of not having respected environmental standards and having caused irreparable damage to the environment in the far north of the country. It looked like a legal dispute would be ongoing for years, which would have blocked the project for a long time. The Anglo-Dutch company actually agreed to the bitterly negotiated transaction, and gave up control of the operation to Gazprom. At the same time, or almost, Gazprom announced that it had rejected offers from western countries to participate in the exploitation of the giant Shtockman oilfield because none of them had proposed any “interesting business ventures” in return for participation! And it was not a question of small calibre companies, we only have to mention the names of Total and Chevron.
It is obvious that assertions made by Moscow should be taken with a pinch of salt. Shortcomings, delays and disorganisation are part and parcel of the Russian energy scene. After years of under-investment, there is an absolute need for western investment and technology. But at the same time, we should never forget that America's former equal in the conquest of space will gradually be able to reconstruct its scientific networks from which will come new scientists. The Russian people are able to put up with hardships, shortages and suffering better than most of us in the west.
Links between energy and defending European values. I'll end with an appeal: last November's warning by Javier Solana about the request that the EU acts together in the energy arena. The High Representative's tone was firm and solemn: in the absence of unity, “our partners will play about with us, which has nearly happened on several occasions”. The absence of unity will not only have serious consequences in the energy domain but it will also have repercussions on the whole of the EU's external actions, “by limiting its capacity to push forward the broadest foreign policy objectives, solve conflicts and tackle questions of human rights and good governance”. Those negotiating with Europe in the domain of energy, “do not necessarily share our interests or values” and European weakness “provides an advantage to regimes that can use their energy resources in pursuit of doubtful ends” (see this column in EUROPE 9315).
These sentences do not target Russia in particular but more specifically other regimes elsewhere, perhaps. The principle, nevertheless, remains valid: firmness and vigilance in the energy arena will enable the EU to be more efficient in other areas. To get its values across in general, the EU needs unity and realism in the energy domain, as well as being able to reduce its dependency. The Commission's “package” has to be considered as a whole: diversification of sources, energy efficiency, renewable energy and reduction of emissions. Everything is related. (FR)