Russia takes EU energy rules to WTO arbitration

The WTO in Geneva

Russia has requested talks with the European Union on energy rules that challenge Gazprom’s business model, in a possible first step towards filing a dispute at the World Trade Organisation, WTO officials said yesterday (1 May).

The EU introduced the third energy package in 2009 with the aim of opening up gas and electricity markets. Russia objected strongly to it even before the current crisis in its relationship with the European Union.

The legislation is an obstacle, for instance, to the giant South Stream pipeline, which Russia is seeking to build to bypass gas transit nation Ukraine. The European Commission says the project does not comply with its laws [read more].

Russia’s request to the WTO on Wednesday concerns several aspects, including a requirement on granting access to natural gas and electricity networks, which forces Russian firms, such as Gazprom, to sell stakes and cede market share.

It also pertains to EU measures on the production, supply and transmission of natural gas and electricity and alleged discriminatory requirements for certificating third countries.

John Clancy, the commission spokesman for trade, said the laws were sound.

“The EU is confident that the energy regulation, now challenged by Russia, is fully compatible with WTO rules and is ready to explain this in consultations with Russia,” he said.

The Russian Federation said the EU measures were inconsistent with WTO agreements on services, as well as on subsidies and countervailing measures, WTO officials said.

WTO members have 30 days to begin talks to try to resolve a dispute. If these fail, after 60 days a country may ask the WTO’s Dispute Settlement Body to establish a dispute panel.

The EU and United States have imposed visa bans and asset freezes on some Russians in protest at Moscow’s annexation of Ukraine’s Crimea region.

Russia joined the WTO less than two years ago and has become embroiled in trade disputes with the EU and Japan. 

On 19 September 2007, the European Commission (EC) adopted the third package of legislative proposals for electricity and gas markets. A competitive and integrated energy market allows European consumers to choose between different suppliers and all suppliers, irrespective of their size, to access the market. [Read Q&A]

The commission says the third energy package is not discriminatory against Russia, as it applies not only to Russian companies, but to European firms and companies from any parts of the world.

Russia says Article 34 of the EU-Russia Partnership and Cooperation Agreement, in force since December 1997, should exempt it from the third energy package. The article reads: “The parties shall use their best endeavours to avoid taking any measures or actions which render the conditions for the establishment and operation of each other's companies more restrictive than the situation existing on the day preceding the date of signature of the Agreement.”

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