Conference hears EU energy supply anxieties

solana.jpg

Russia and Gazprom were on everyone’s lips at the annual conference of the French Institute of International Relations (IFRI) in Brussels last week, which focused on the EU’s external energy policy.

Speaking at the closing session on 1 February, EU foreign policy chief Javier Solana admitted that Europe still had a long way to go before getting a credible external energy policy. “Clearly, we do not have one yet,” Solana said.

“In Europe, we have seen real progress on tackling climate change; some progress on the internal energy side; but rather less progress on the external side. Too often, we see mixed messages and the defence of narrow, national interests at the expense of broader, European interests.”

On the divisive issue of Russia, Solana advocated a pragmatic approach based on mutual recognition of interdependence. “Consumers need to buy but producers need to sell. It is worth recalling that all the existing infrastructure in Russia runs West, not East.”

But he also defended the “justified concern across Europe” about Russia’s leveraging of energy as a political tool, saying that there is “in principle nothing that stops us, the Europeans, from matching their determination with our own discipline.”

In particular, he insisted that the EU “should also stick to our insistence that there has to be reciprocity in terms of investments upstream and downstream” as proposed in the Commission’s third package of energy liberalisation directives in September last year (EURACTIV 20/09/07).

“It is up to us to avoid the kind of fragmented, bilateral negotiations which leave all of us worse off,” Solana said. “Perhaps this cannot happen overnight. But it’s important to get started,” he added, highlighting “more discipline and loyalty” between Europeans during bilateral talks with third countries as a first step.

A session on the EU's energy supply and geopolitics focused heavily on Russia, with Central Asia, China, the Middle East and Africa adding to a picture dominated by anxieties over fossil fuel supplies.

Thomas Gomartdirector of the Russia/NIS Centre at IFRI, pointed to the "securitisation" of Russia's energy rhetoric, making three main observations:

  1. Energy has become an issue of tension between the EU and Russia. According to Gomart, the EU is currently "incapable" of deciding whether it considers Russia to be a threat or a partner because of the perception that groups such as Gazprom are following instructions from the Kremlin.
  2. The EU did not anticipate Russia's quick "
    return" to the world stage as mounting inflows of petrodollars allowed the country to repay its debt and propel itself to third place worldwide in terms of currency reserves.
  3. Energy relations between the two are based on "heavy interdependence", with the EU absorbing 85% of Russia's gas exports (Russian imports cover 25% of total EU gas consumption).

Gomart pleaded for a "de-dramatisation" of EU-Russia energy relations, saying that the EU should get used to the idea of future "massive Russian investments" in the European energy sector as illustrated by Gazprom's recent attempts to get a foothold in the UK energy market.

At the same time, he said there should be a "realisation" at European level of the "geo-strategic dimension of energy," although that recognition brought with it a danger of reducing EU-Russia relations solely to energy matters. The EU, he concluded, should start "behaving like a global actor and not only as a market". He identified energy efficiency as a key potential area of cooperation, describing Russia as "a huge waster of energy".

The EU's special representative for Central AsiaAmbassador Pierre Morel, gave a damning assessment of Europe's energy diplomacy, saying there is currently "no real European external policy on energy". "We have made progress on the internal market and on the environment," Morel said, deploring what he called a "paradox" in that the same has not happened for external energy policy.

Turning to the Caspian, Morel pointed out that the "emerging countries" in the region (Azerbaijan, Kazakhstan and Turkmenistan) want to make the most of the new clout provided by their fossil fuel resources and are pursuing policies to forge partnerships "in every direction".

"They won't let themselves be put under supervision again," Morel said in reference to the region's ex-Soviet republics, adding that Central Asia should be differentiated from Russia as such. He hence pleaded for a specific approach to Central Asia whereby the basic assumption would be that each actor needs the other. "Russia needs Central Asia's resources," Morel insisted.

Tatsudo Masuda, a professor at the Tokyo Institute of Technology, gave an overview of the situation regarding the Eastern Siberia-Pacific Ocean (ESPO) pipeline, which will bring Russian oil to China, Japan and South Korea when it opens, scheduled for late 2008.

Referring to the diplomatic tensions sparked between Tokyo and Beijing over the planned pipeline, Masuda highlighted the "importance of the EU example for Asia," saying that the EU's "ideal example of collaboration" could be applied to Asia as well "if tailor-made".

Masuda also referred to positive developments, citing the Energy Partnership launched in June 2004 between the ASEAN nations and China, Japan and South Korea (ASEAN+3 Energy Partnership).

He concluded by pointing to climate change as a challenge which "offers unprecedented opportunities for cooperation", saying the EU and Japan should be "top runners" in moving towards a low-carbon economy. "The discussion between Gazprom and the EU is not as important as climate change," Masuda said, adding that it was "only a matter of time" before Japan joins the EU Emissions Trading Scheme for greenhouse gases.  

Valérie Niquet, director of the Asia Centre  at IFRI, gave an overview of the energy situation in China, saying the country was currently "in a learning phase" due to its rapid economic development. The Chinese strategy, Niquet said, is to:

  • Develop its own oil and gas resources, including offshore - a strategy which is causing tensions with neighbouring countries in the South China and East China Seas.
  • Decrease its oil consumption (import dependency is set to rise from 50% now to 80% in 2030, according to the IEA).
  • Diversify its energy resources with increased use of gas and nuclear power (coal, which currently covers 70% of China's energy needs, is not expected to fall below 60%, Niquet said).

Niquet said there were two conflicting schools of thought in China on energy, both of which are heavily marked by fears about China's "vulnerability" to external suppliers: 

  • The economic approach (supported by a minority but gaining ground) which argues in favour of a rapprochement with other big energy-consuming nations in the IEA and advocates using China's trade mightiness to weigh more heavily on the world's major energy suppliers, notably Saudi Arabia and Russia.
  • The classical security approach (currently favoured by a majority), closer to the "military-industrial lobby", which uses the rhetoric of "survival" and portrays China as being under siege from external forces (for example, US influence in Taiwan). The result is a "go-out" policy turned towards Central Asia and Africa (the latter accounting for 30% of China's oil imports).

Turning to the implications for Europe, Niquet said the EU needed to strengthen its energy dialogue with China, including on environmental issues and relations with third countries.

Former French Foreign Minister Hubert Védrine had harsh words about the EU's attempts at forging a common external energy policy, saying Europeans should stop lamenting their divisions. "Europeans are divided, it's their nature, it's a fact," Védrine insisted, adding that a lot of time and effort could be gained from recognising this.

Suggesting a possible way forward, Védrine said a process similar to economic and monetary union (EMU), which culminated with the launch of the euro, could be applied to foreign policy. Like the EMU, the process would have a timetable, an agenda, intermediary targets and a countdown, Védrine explained.

Using the controversial Russo-German Baltic gas pipeline project to illustrate his point, Védrine said an EMU-style process would pull EU nations together into "a convergence process based on each others' legitimate interests." "It is a process which is not quick and easy but which has the advantage of being explicable to the public," he added, insisting that "divergences need to be put into the public place."

Védrine concluded by saying that a true common external energy policy cannot be achieved in Europe without a feeling of a common threat. "I think the lever of anxiety needs to be utilised," Védrine concluded somewhat enigmatically.

Sadek BoussenaAlgeria's former energy minister and former chairman and CEO of Sonatrach, the Algerian state-owned oil and gas company, closed the session by giving a producer country's point of view.

Boussena was highly critical of what he called the "obsession" in the Western world with security of supply, saying the concept could mean something quite different from a supplier country's perspective. Alluding to the Iraq war, Boussena said he was once asked, while giving a lecture in an Arab university, whether the country had a chance of being invaded due to its oil and gas resources. "For rich countries, security of supply is a clear thing, for the others, it is quite different," Boussena said.

Boussena also called for consuming countries to "temper" their demands regarding investment in spare oil production capacity. "OPEC countries are being asked to invest in spare capacity, just in case something happens, for the sake of bringing comfort to the market," Boussena said ironically. "This has to be tempered. The markets are nervous, it is a normal thing." Commenting on high oil and gas prices, Boussena added that "very low prices are bad, they destabilise producing countries and do not encourage investments".

Turning to "oil nationalism" and the complaints by international oil 'majors' that they are being denied access to resources in producer countries, Boussena was strict. "International oil companies have to understand that things have changed," he said, calling for European and US companies to "foster partnerships that go beyond oil to find a balance of interest" which also favours the host countries.

"Producer countries are not only producer countries," Boussena insisted. "They too are looking forward to more sustainable development." Moving on to the issue of democracy in producer countries, Boussena asked: "What does the EU prefer? Dealing with dictatorships which take quick decisions but can change their minds or negotiating with slower regimes where decisions take time but are debated across society?"

The 2008 annual conference was the first in a series of events organised by IFRI's energy programme, in partnership with Reuters and EURACTIV, on 31 January and 1 February. The objective of the conference was to take stock of the European Union's external energy policy and examine perspectives for the future.

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.