Bursting the Bubble

Russia VS. EU Common Energy Policy

9 April 2013 | by

From the very beginning of the European Union (European Communities) the main incentive for states involved in the integration progress was the conviction that cooperation would bring them more benefits than the actions taken on their own. Even in such controversial and extremely important matters like foreign policy, security and a monetary union, a “single voice” has been more or less achieved. In this respect, it is quite surprising that an issue where joint actions and strategies are more than desirable was not paid due attention to. It is the external energy (oil and gas) policy and security where the EU member states are struggling to have a unified position. Obviously, the question arises: can we speak of a truly consolidated European Union if a Common Energy Policy (CEP) cannot be achieved?

In March 2006, the European Commission issued a Green Paper aimed at laying the foundation for a sustainable, competitive and secure energy market in the EU. There, a single voice of the Union on the international arena is mentioned among the key imperatives on the way to a Common European Energy Policy and, hence, energy security. However, despite the Commission’s ambitions, such a policy has not been achieved, due to the lack of agreement among some member states. Which brings us to the simple question: WHY? Obviously, there are many reasons for it. Today we look at one – Russia.

Russia has one of the biggest natural energy resources in the world. The majority of Russian oil and almost the entire volume of natural gas it produces is exported to Europe. Possessing large deposits of energy resources, the country allows itself to pursue an aggressive ‘divide and conquer‘ strategy in the energy sector, based on the declared principle of its energy sources as an instrument of foreign policy. This postulate was officially declared in the Energy Strategy of Russia for the period up to 2020. As a result, the European Union faces a real challenge in negotiating and trading with a state that admits its exploitation of natural energy resources for exerting pressure on other countries’ policies.

Given this fact, it is not surprising to find that Russia desires to protect its major economic sector against various external threats. Russia’s energy policy aims to tie up the West at its manufacturing infrastructure base, and hence, take major control over the European energy market. And since monopolies are not permitted on European markets CEP will to a great extent harm Russian national interests. In short, in order to maintain a dominant position, it is in Russia’s interests to oppose CEP.

The absence of a single voice of the EU would bring the supplier many benefits. First, it results in competition among EU states for Russia’s fuel, which the former currently uses as a crucial bargaining tool. This provides good conditions for Russia to negotiate on long-term gas and oil supply contracts. Second, it hampers the establishment of cooperation mechanisms that would somehow limit the special position of Russia on the market. Third, this is a solid foundation to push different energy projects (like transit routes) which are advantageous only for a few selected states.

On the other hand, political actions of the Russian Federation aimed at disrupting any advancements in the sphere of a unified external energy policy together with some other factors lead to the understanding among EU members of the necessity of CEP. These other factors include high dependence of several countries on Russian fuel, the unreliability of its supply and the need for diversification in general. In this respect, it is not surprising that CEP is mostly backed by states dependent on energy supplies from Russia (such as Poland) and EU institutions (predominantly the Commission as a transnational body, where national interest do not prevail); and where Russian interests are not affected, other states, like Germany or France, back this policy too.

As evidence of the above several aspirations and achievements of the EU in this policy area are worth mentioning. First of all, it is the introduction of the “Third Energy Package”. Second,  the willingness to involve as many states parties to the Energy Charter as possible, which should ideally cover the entire European continent. Third, it is the desire to expand the geographical scope of the European Energy Communities to all European states which are not currently EU members; and lastly, it is the inclusion of energy security in the European Neighbourhood Policy (in particular, the program “Eastern Partnership”).

Thus, Russia’s impact on CEP is both positive and negative. Where Russia’s interests are not touched, its aggressive policy might even serve as an incentive for member states to elaborate the CEP. Where Russian interests are affected – states not dependent but involved in trade are unlikely to support CEP. Those, which have a reciprocal interest in energy relations with the Russian Federation, will not promote the elaboration of a Common Energy Policy. Driven by national interests some EU members enjoy more benefits from bilateral energy relations with Russia.

What do you think?