6 April 2010

The EU’s Energy Politics - Dr. Dimitris Tsarouhas

The Lisbon Treaty is meant to usher in a new stage in European integration. The smooth functioning of the institutions, new bodies to coordinate policy and a better decision-making process are its main accomplishments. How these will translate into policy practice is uncertain. For the time being, enthusiasm is limited due to intra-institutional squabbles and the failure of the Union to inspire its citizens.
This was not always the case. Over the 1980s and for a large part of the 1990s, the European Union became the focal point of innovative politics the world over. The main reason was the realistic and at the same time idealistic decision of its member states to pool their sovereignty in economic affairs and create the world’s largest single market.
Today, however, intra-state antagonism is on the increase and intergovernmentalist considerations prevent closer cooperation. Energy politics is a case in point, precisely because dependence on oil and (especially) gas is so varied among EU member states.
In what follows I start with reviewing how the single market became possible before discussing Europe’s energy politics agenda. I conclude by arguing that European synergies on energy politics are needed if the Union is to match its economic clout with geopolitical power. The ratification of the Lisbon Treaty could be a step in that direction.

Forming a Single Market
The signing of the Single European Act in 1986 was a historic step forward in the institutional development of the Union. Apart from modifying the Treaties that had created the European Communities, it also ‘brought major cooperative arrangements more firmly within the framework of what may be termed the Community process’ and granted new decision-making powers to the Council of Ministers and the European Parliament.
In addition, the SEA incorporated into the Rome Treaty the concept of cooperation in economic and monetary policy and paved the way for EMU. More importantly, the SEA signalled the willingness of Europe to reform and expand its institutional machinery to face off the economic challenge of the United States and Japan, whose competitive advantage had grown over the previous decade. In all these respects, the SEA proved the crucial turning point in the history of European integration. It was the brainchild of an activist Commission, put in place under the leadership of the French Socialist Jacques Delors. Delors wished to mark a new beginning for the Community, whilst at the same time empowering the marginalized Commission. The Single European Act is therefore the one piece of legislation that unlocked Europe from past inertia and introduced the legislative conditions enabling the Community to move beyond a predominantly intergovernmentalist perspective.

Gas Supply and the Russia factor

There is a marked difference in the oil and gas markets. While the former functions pretty much on the basis of predictable prices and pretty secure supply, gas supply is very much depended on pipelines due to the nature of the product. The logical consequence of that is that gas supply becomes enmeshed in geopolitics and the relative power leverage the Union can have vis a vis its main suppliers.
Russia is here the world’s most important player as it is the largest producer of natural gas and has the largest proven gas reserves. The Union, by contrast, produces only one quarter of what it consumes. For the foreseeable future, the EU will be dependent on Russia and the question that emerges is how this relationship can be managed to avoid conflict and secure supply in the long term.
What is the main goal of the EU at this moment in time? The Union has declared that it wishes to establish a ‘balanced’ partnership with Russia on the issue and has been asking for the renewal of the PCA, the Partnership and Cooperation Agreement between the two sides. The original agreement dates back to 1997 and is the framework within which bilateral trade relations are managed. Energy relations are but one of the items on this agenda and the negotiations between the two sides are ongoing. The PCA therefore addresses the issue of energy though it is by no means limited to it.
The 2009 Russia-Georgia war cast a shadow over EU-Russia relations, and it revealed that the Union remains deeply split on the issue. While some countries (mostly CEE states) push for a tough stance towards Moscow, old and powerful member states wish to maintain good relations with Russia, even at the cost of disappointing some new entrants. Furthermore, it is important to stress that not all EU member states are exposed to the Kremlin’s ability to control gas supplies in Europe to the same extent. In fact, member states such as Spain have no dependence on Russia whatsoever, and can therefore make their policy calculations regarding Moscow in a markedly different way compared to the Baltic states or Poland, whose dependence on Russian gas is absolute.
What is certain is that Russia is well aware both of EU divisions on the subject and its own ability to influence western policy. The prominent role of Gazprom, aided by the Kremlin, is no coincidence. What is Russia’s objective on this issue?
Russia’s dominant position in the vital gas market and the pipeline diplomacy necessary to achieve stability in supply means that Russia has been able to use its position for political reasons. This, in turn, is part of the larger Russian narrative of grievance and the insistent complaints levelled towards the west for the way it sought to exploit Russia’s weakness in the early post-Cold War era. The chaos of the time has left its mark on Russia’s attitude towards the west and suspicion has been ripe for quite some time. Following Putin’s arrival to power, that grievance manifested itself in a new type of neorealist policy towards the west. Disrupting gas supplies for a brief period in 2006 was a warning shot. In early 2009 Russia stopped supplies to Ukraine over a payment dispute leading to a (literally) frozen landscape across much of Eastern Europe for two long weeks. Europe is currently busy financing various gas and electricity projects to prevent a future supply crisis in an attempt to insure itself against unpredictability and pipeline politics.
The EU claims that securing supply diversity is a key priority and has therefore backed projects such as Nabucco, a project aiming at delivering Caspian gas to Austria from Turkey thus lessening dependence on Russia. Despite the signing of the Intergovernmental Agreement on the project in July 2009 and its recent parliamentary ratification by the Turkish Parliament (the countries involved including transit are Turkey, Bulgaria, Romania, Hungary Austria) question marks remain s to the efficacy of this private-sector project, the amount of gas secured and the alternative routes mapped out. Moreover, Nabucco’s rival, the Kremlin-backed South Stream that will deliver gas from Russia to Europe via Bulgaria, Greece, Serbia and Croatia to Italy. In August 2009, Russia and Turkey agreed that the proposed pipeline will be able to pass through Turkish territorial waters. Russia and the EU both deny the alleged rivalry between the two projects. These are but two of the prominent examples highlighting the role of pipeline politics in the context of EU-Russia relations as the old continent is scattered with plans and ongoing pipeline projects all scrabbling for security and good positioning in the gas match.
The American factor should not be left outside completely. Russia’s actions in Georgia and its behaviour in what it sees as its ‘near abroad’, especially Ukraine, highlight its intense displeasure from US-backed initiatives to incorporate those countries into NATO (similar to what happened with CEE states earlier). The recent NATO Summit in Bucharest provided further evidence of many EU states’ unwillingness to sacrifice a level-headed political relationship with Russia for the sake of NATO expansion in former Soviet territory. Whether this policy can be reconciled with the alleged willingness by Brussels to push the Kremlin on its human rights and civil liberties record is a different question. Meanwhile, the realization that all three (US, Europe, Russia) need each other in the face of challenges such as the Iran question leads many to predict a soothing of relations in the near future. Following the Russian-Georgian war and the tension this was accompanied by, EU-Russia relations already seem to have been stabilized again. Meanwhile, the US and Russia are close to a very hopeful, new nuclear treaty to halve the number of their nuclear stockpiles. Obama’s arrival to the White House is already producing visible signs of improvement in US-Russian relations.

Conclusion: EU Energy Politics and the Lisbon Treaty
Last December, the Lisbon Treaty finally came into effect. After a decade-long process of soul-searching, failed referenda and endless arguments about integration, the Union now has a better tool to address global policy challenges and coordinates the work of its institutions more effectively.
Energy is explicitly mentioned in the Treaty and that is a first for such a document. More importantly, energy policy has shifted away from unanimity voting towards qualified majority. This should in theory make it easier for the Union to reach quick and effective decision on energy. Solidarity on energy supply is pledged by Brussels to member states and that is a gesture to countries that have been affected by the recent crises mentioned above. If it is more than a token gesture remains to be seen.
A common energy policy is now an official EU objective. Pipeline politics reveal that this may still be a far-fetched goal. Lisbon, however, has brought it a tiny step closer to reality. For the sake of European integration, energy constitutes a vital policy area where new initiatives can pave the way for integration.

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