EU’s ENERGY POLICY – July 19, 2007

"Like any addiction it is even worse when you depend on someone else for it."

José Manuel Barroso, President of the European Commission, January 2007.

‘Affordable, reliable electricity and gas supplies are central to modern economic and social life.’  So commences a typically bland EU brochure, The Energy Community: creating the power and confidence to rebuild (December 2006).  The announcement made on January 10, 2007 was somewhat less obtuse, though laced with the usual truisms.  The document disclosed how the EU Commission proposed three key measures that had to be implemented to combat the inexorable nature of climate change while simultaneously making the EU energy-efficient and secure in supply.  Admirable, but perhaps a little optimistic.

The first measure, directed at the nature of ‘a true internal energy market’, would mark a clearer division between the production of energy and its distribution.  The second entailed a move towards ‘low carbon energy’, which would involve the creation a ‘strategic European Energy Technology Plan’.  While the details remain thin, the Commission recommended a 50 percent increase in annual expenditure on energy research during the course of the next 7 years.  The controversial issue of nuclear electricity was not excised from the agenda – member states would be allowed to make their own choices on the matter, though the reduction of its usage had to be ‘offset’ by the ‘introduction other low-carbon energy sources’.  The final ‘pillar’ of the EU programme involves the seemingly impressive goal using 13 percent less energy in 2020 than is currently used.[1]  

The highly integrated nature of Europe’s energy system, and the growing membership of the EU, makes such measures urgent.  This continues the trend in European policy to, as one specialist outlines, complete the energy market.[2] Other parts of Europe, the South Eastern sector for instance, have preoccupied the Commission.  They have been encouraged to come on board and improve their provision of energy services. 

Despite such objectives, the pressing politics of energy in recent years make them difficult to fulfil.  Europe has not faced a challenge posed by the problems of supply since the oil shocks of the 1970s.  Russia is proving renascent and stroppy, when ideally, it should be partner in securing Europe’s energy future.

The options on the table are scanty.  One is to insist on better relations between Russia and its neighbours.  Russian policy seems consistent with President Putin’s Candidate of Sciences (kandidat) dissertation at the St. Petersburg Mining Institute.  It proved a less than scholarly and original work authored in 1997 which emphasised the role of gas in projecting Russian influence, a means of re-entering the ranks of great powers.[3] Putin’s behaviour has certainly been consistent with this in recent years, squeezing neighbours with higher gas prices via the ever hungry government owned Gazprom.  Disputes with Belarus and the Ukraine have characterised the scrap for energy supremacy in the region. 

The situation is already bleak: EU dependency on Russian gas imports stands at 40 percent, and is projected to rise unless a regime of diversification is adopted.  Given that various powers the EU hopes to cultivate relations with – Kazakhstan and Turkmenistan – are within Russia’s self-proclaimed orbit of influence, the EU finds itself facing flexing muscles without much recourse.

Measures taken by the EU have been targeted by Russia as potential threats to energy hegemony.  The EU finds itself caught between its energy needs and a country to the East intent on modernising its economy along ideas formulated by Soviet economists.  Such a policy has outflanked European efforts to take the golden road to energy independence.  Moscow, entirely aware of EU desires to secure supply, attempts to outflank them at intervals.   Prior to the EU-Russia summit in May this year, Putin courted the leaders of Kazakhstan and Turkmenistan, urging them to commence work on a pipeline linked to Russian gas reserves.  The political game was brought into sharp relief by parallel discussions taking place in Krakow on the creation of a trans-Caspian pipeline, ostensibly to take place with four Central Asian powerhouses in the scramble for gas reserves: Uzbekistan, Azerbaijan, Turkmenistan and Kazakhstan.  This would have the effect of minimising Russian influence.  Putin, showing initiative, threw a spanner in the works, convincing Nursultan Nazarbayev of Kazakhstan to avoid the summit in Krakow altogether.  The result, at least on paper, is greater Russian access to Caspian Sea gas.

Where should EU policy go?  Possession and acquisition of supplies is one approach, something which implies a rather heavy hand.  This entails, as has been pointed out by the High-Level task Force on UK Energy Security, Climate Change and Development Assistance, poverty and climate change.  Competition is another: reasonable prices set in a climate of supply and demand.[4] The report has some sound suggestions that all centre with securing energy markets in an environmentally sound way.  India and China must be included in any such strategy.  But then, the problem of Russia looms ever large.

EU Trade Commissioner Peter Mandelson, in a speech in Bologna (April 20, 2007) pointed to a ‘level of misunderstanding or even mistrust [with Russia] we have not seen since the end of the Cold War.’  The position of the commissioner is somewhat more optimistic than his colleagues.  The Russians were to be admired for gliding into ‘an almost bloodless revolution’ at the end of the Cold War.  As far as energy is concerned, Mandelson points brings the relationship between the EU and Russia into sharp focus.  ‘Europe wants security of supply – Russia wants security of demand.’  But the nexus requires regulation, control.  International energy trade, he points out, is bereft of legal guidelines, and is nothing less than a legal ‘vacuum’.  Establishing rules providing for mutual investment would stabilise the markets. 

Mandelson’s comments are logical, but the rules of realpolitik may dictate a different pattern.  ‘Irrespective of who owns natural, namely mineral, resources, the state has the right to regulate their development and use,’ suggests Putin’s uninspiring dissertation.  The implications of this are clear enough: the state is central; the role of competition takes second place to expressions of hegemony. 

Regionally, the Caspian and Black Seas offer options to Europe’s energy diversification.  The Americans have been keen to encourage such options.  Matthew Bryza, deputy assistant secretary of state, made clear in June last year that Washington encourages Europe to ‘diversify energy supplies in the region’ with classic private sector panache.  Commercially constructed pipelines are a viable method,[5] though regional cooperation is inevitable.  The cross-border nature of such projects demands it.  Some of these measures are already in place – the BTC (Baku-Tbilisi-Ceyhan) oil pipeline opened in 2006 to carry oil from Azerbaijan through Georgia to Turkey.  The agreement between Azerbaijan and Kazakhstan (June 16 last year) linked Kazakh oil with the BTC pipeline via the Caspian Sea.  Additionally, the shorter South Caucasus gas line runs along the BTC from Baku Georgia’s border with Turkey.  Via Turkey, the needs of markets in southeastern Europe can be met.

The EU has pressed on, despite the obstacles.  The Black Sea has come to be seen as a point to disrupt the Russian stranglehold.  The ‘Black Sea Synergy’ project, advertised in the rather dry, otiose language typical of Commission documents, will serve the objectives of European demand for energy.  A pipeline would run through the Black Sea, supplying gas from Georgia, Azerbaijan and the Ukraine to the EU.  The ‘“chain” of regional cooperation frameworks in the EU’s neighbourhood should also be considered to support energy policy.  A less boisterous and more cooperative Russia would certainly be preferable, but lessening Europe’s dependence is even more fundamental. 

Binoy Kampmark

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Author of the article holds L.L.B., B.A and M. Phil. from the University of Queensland in Australia, he is also a Ph.D. in history candidate at the University of Cambridge. Mr. Kampmark presently works as a Commonwealth Scholar at Selwyn College, University of Cambridge. He is a member of Australian Institute for International Affairs and the Royal Institute of International Affairs.

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Footnotes:

1. For a discussion, see Catherine Brahic, ‘European energy plan targets big carbon cuts’, New Scientist, January 10, 2007, available at http://environment.newscientist.com/channel/earth/dn10933-european-energy-plan-targets-big-carbon-cuts.html.  General European Commission energy policy is publicly released in documents available at: http://ec.europa.eu/energy/index_en.html

2. Dieter Helm, ‘European Energy Policy: Securing supplies and meeting the challenge of climate change’, Address delivered at New College, Oxford, October 25, 2005.

3. V. V. Putin, The Strategic planning of the natural resources in the Region (St. Petersburg Mining Institute, Thesis submitted in 1997).  For more on this, see Harley Balzer, ‘The Putin Thesis and Russian Energy Policy’, Post-Soviet Affairs, 21, 3 (July-Sept 2005): 210-225.

4. High Level Task Force on UK Energy Security, Climate Change and Development Assistance, Energy, Politics and Poverty: A Strategy for Energy Security, Climate Change and Development Assistance (Oxford University, June, 2007), available at http://www.globaleconomicgovernance.org/docs/EnergyPoliticsandPoverty_lr2.pdf

5. Quoted in Vince Crawley, ‘Caspian Region Crucial for Europe’s Energy Needs, U.S. Says’, June 30, 2006, Current Issues, U.S. Department of State, available at http://usinfo.state.gov/xarchives/display.html?p=washfile-english&y=2006&m=June&x=20060630173344MVyelwarC0.4769251

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