EU-Russia relations after the September proposal on energy liberalisation 

The September study – entitled "Securing the Future: Making Russian-European Gas Interdependence Work" – identifies "fundamental changes" in Russia, Europe and the gas industry itself that are "unsettling the relationship". 

Gas interdependency issues between Russia and Europe are "integral" to their economies and vital for "competition, security and environmental sustainability" reasons. 

CERA believes that "sustainability, efficiency and security" of EU energy supply will not be best achieved by reducing dependence on Russian gas, but rather by the creation of a "carefully and cooperatively managed interdependence between Europe and Russia". 

The "fundamental changes" that are central to the current rising anxieties are: 

• Changes in Russia: Large-scale investment in gas fields and pipelines "for the first time since the Soviet era" is required. A strong economy has "bolstered" a central state which sees energy as a key element in international relations. 
• Changes in Europe: The new EU agenda includes a strong push towards liberalisation in the gas and power sectors, with environmental sustainability a key policy – prioritising renewables, energy conservation and lower emissions. 
• Changes in the gas industry: The gas industry is becoming global, not regional. 

The main risks include: 

• Europe: concerns over transit risks, 'over-dependencies', future gas supply and export monopoly. 
• Russia: regulatory risks from EU liberalisation policies, discrimination against Russian interests in Europe and extension of EU policies outside the Union. 

CERA conclude that exporting Russian gas to Europe is "cost-effective, reliable and beneficial for all parties". 

The report recommends that the following steps be taken to achieve "realistic and sustainable interdependence" between Europe and Russia: 

• Careful assessment of the implications of the September EU liberalisation proposals for security of supply and environmental sustainability. 
• Prepare for the Russian government to review the gas industry after the 2008 election. 
• Respect national sovereignty to create favourable conditions for cross-border investment and manage third-country transit issues. 
• Cooperation on transit risk should include the creation of a multilateral consortium with Ukraine to manage its pipeline and storage system. 
• Allow the markets to do their work.