Energy security: Lowering ambition and leaving Ukraine out in the cold

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EU member states hollowed out the Commission's proposals on security of gas supply in times of crisis. [Visionsi/Shutterstock]

Short-sightedness and lack of solidarity have hollowed out the energy package. While there are certain positive developments in the Security of Gas Supply Regulation, the EU is simply not up to the game in the new reality of energy geopolitics.

Jacek Saryusz-Wolski is a non-attached Polish MEP and a member of the European Parliament’s Delegation to the EU-Ukraine Parliamentary Association Committee.

When European Commission President Jean-Claude Juncker took office, he promised to be “big on big things” – a statement that held a promise on bold reforms in certain crucial areas. There seemed to be a common consensus on the need for a European policy which would ensure secure, affordable and sustainable supply of energy to EU companies and households. Indeed, the initial actions of the Commission were promising. A series of energy stress tests conducted in 2014 simulated gas delivery disruptions to identify weak links and shortfalls in national emergency mechanisms. The results were simple: the segmentation of emergency plans along national borders resulted in a complete lack of coordination and communication. Any crisis would thus spread like a contagion.

What followed was a series of Commission proposals, the so-called Winter Package, which, if adopted would strongly enhance the competitiveness, transparency and security of the Single Energy Market of the EU. However, the European Union proved to be short-sighted by shutting its neighbours out of the system. And in the light of Commission’s proposals, the member states are to blame.

Levelling the playing field

It did not have to be that way. Commission proposals were warmly received by the Parliament; all major political groups saw some room for improvement, especially as regards to the solidarity and transparency mechanisms, but the amendments adopted maintained the general framework of European solutions for EU-wide challenges.

The underlying principles of the Security of Gas Supply Regulation were straightforward. To counter the information asymmetry that facilitates Gazprom’s abusive market practices, the European Union needed more transparency through the creation of an information exchange mechanism concerning all major gas contracts. To ensure solidarity and efficiency of preventive and emergency action plans, member states have to start operating on a regional level – connect their network, plan together, ensure mutual legal compatibility to avoid national protectionism. The new regulation enshrined the principle of solidarity amongst the member states in times of crisis.

The European Parliament has reinforced the mechanisms presented by the Commission. The regions, which grouped countries with the very aim of ensuring market interoperability and functioning of solidarity mechanisms (such as grouping Spain and France together or creating a “Centre-East” region comprised of Germany, the Czech Republic, Poland and Slovakia) were further reinforced by Emergency Supply Corridors, which could, in times of crisis, provide energy to the targeted member state.  The regional preventive action and emergency plans, the main tool of European preparedness, have initially been foreseen as an intergovernmental tool. To avoid gridlock, the Parliament wanted to empower the Commission with the authority to act if capitals were unable to do so. A similar mechanism was prepared for a voluntary joint purchasing mechanism.

The proposed information exchange mechanism was not without fault. Initially, the Commission sought to limit the transparency of gas contract volumes, conditions, duration or prices only to the biggest contracts in the most unequal markets, i.e.: those reliant mostly on a single supplier. In consequence, massive Gazprom contracts with well-diversified importers in the West would not be disclosed; any discrimination or abuse of market position by the Russians would therefore still escape the Commission’s gaze. The European Parliament’s Foreign Affairs Committee sought to give the Commission more access to the contracts by applying the absolute volume criteria; the final report of the Parliament adopted a different mechanism in the end, but maintained the automatism of the information exchange.

Finally, the MEPs praised the cooperation with the Energy Community, crucial in the light of Russian energy blackmail of Eastern Partnership countries. Without ensuring proper response mechanisms in the transit countries, guaranteeing security of supply for the end user is virtually impossible. This sign of solidarity could be one of the most enlightened examples of EU Neighbourhood Policy. It would level the playing field between the EU, Russia and countries like Ukraine and Moldova and help avoid the crises of 2006, 2009 and 2014.

Where is the European Neighbourhood Energy Policy?

Unfortunately, the Council proposals presented in December 2016 were meant to dilute this push for more security. A compromise deal managed to salvage the solidarity mechanism as well as the transparency of the contracts. The price was paid in the security of our neighbours.

The final compromise makes no mention of the possibility to extend the benefits and obligations of the solidarity mechanism to the countries of the Energy Community. In case of a crisis, Ukraine would be left stranded, dependent on the goodwill of its neighbours. And though Poland and Slovakia stood together with Kyiv in the time of the energy crisis by providing gas supplies through trans-border reverse flows, such an ad-hoc mechanism puts strain on individual countries and erodes the credibility of the European Neighbourhood Policy.

This is particularly worrying in the light of the push for the construction of the Nord Stream 2 pipeline, meant to bypass Ukraine, Belarus and Poland. Ukrainians made a massive and painful effort to reform their inefficient energy system, introduce market mechanisms of the demand side and diversify their supply. Yet these efforts would be in vain if they were to be cut out completely from the European gas market.

The European Union has invested significant time, effort and resources to help Ukraine succeed. The adoption of the Third Energy Package by Kyiv is one of the most striking examples of the European normative power and the EU’s ability to transform countries in its neighbourhood. However, if the ENP is not accompanied by a robust and solidarity-based external energy policy, it may fail. In the reality of mutual interdependence between the importers, suppliers and the transit countries, the price of this negligence will not only be paid by our neighbours, but also by the EU itself.