Russia-EU energy cooperation: time for meaningful dialog

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Moscow, (RIA Novosti economic commentator Nina Kulikova)

A regular Russia-EU summit scheduled for May 25 is a good opportunity to review the partners' relations. At present, Russia and the EU are revising the foundations of bilateral cooperation, because the current 1994 agreement on partnership and cooperation expires in 2007. It does not reflect the changes that have taken place in Russia, the EU, and the rest of the world in recent years. Everyone agrees that the new agreement should promote closer relations between the EU and Russia. It should be based on today's realities, one of which is the energy dialog.

The recent summits largely ignored energy cooperation. The energy roadmap on the common economic space leaves much to be desired, although Russian-EU energy cooperation is making steady headway. The initiatives on the construction of the North European Gas Pipeline (NEGP), or the Yamal-Europe Gas Pipeline are vivid examples of that.

According to the data of the Russian Ministry of Industry and Energy, the scale of raw oil supplies from Russia to EU countries grew from 144 million tons in 2001 to 256 million tons in 2005, registering an increase of 77%. The potential of Russia-EU energy cooperation is enormous. It may produce very tangible results in such directions as energy saving, energy efficiency, the use of renewable energy sources, and atomic power engineering.

But at the present time its discussion is complicated and too politicized. After Ukraine's gas conflict with the Russian Gazprom last winter, the EU developed doubts about Russia's reliability as a gas supplier. It blamed Russia for using energy carriers as a political weapon to scare neighboring states. But renunciation of the Soviet practice of supplying neighbors with cheap energy was inevitable once Moscow decided to switch over to the market price formation. This is exactly what the European Union repeatedly called on Russia to do.

The other tangle of energy contradictions between Moscow and Brussels is linked with the Transit Protocol to the Energy Charter Treaty. In the early 1990s, Russia signed this Charter, but has not ratified it since. Now the EU is trying to persuade Moscow that it should ratify the Charter in its own interests. De facto this would oblige Gazprom to make its gas pipelines available to independent producers and third countries. Russia would only lose from that because its gas will be much less competitive on the world market.

In turn, Russia is urging the EU to secure equal access of companies from third countries to its markets. Until recently, the intentions of the Russian players to emerge on the European energy site were often resisted. For instance, Gazprom's intention to buy the British Centrica evoked an uproar in the Western press. Gazprom was blamed for trying to establish control over supplies to Western Europe. Some publications even urged the British authorities to change national legislation in order to avert this. Meanwhile, entry into a new market is a perfectly logical decision for a developing company, and is well in line with the civilized norms of a market economy.

Importantly, the energy dialog between the EU and Russia is complicated by the lack of consistent economic policy within the EU itself. Recently, the European Commission accused Madrid of protectionism regarding its energy market. Madrid was blamed for deliberately obstructing the German rivals, who wanted to buy the Spanish energy producer Endesa. Under the circumstances, it is not surprising that Russia is primarily developing a dialog with individual EU countries or companies, whereas energy cooperation with the EU as a whole is becoming less important.

As a result, both the EU and Russia have started leaning towards diversification. The EU has declared its intention to increase gas imports from Algeria, Libya, and Nigeria, and to enhance cooperation with Central Asia and Caspian countries. Russia has spoken about a possibility of upgrading its deliveries to the Asia-Pacific region. At the same time, it is obvious that the bulk of projects on alternative markets are much less effective economically than EU-Russian cooperation could be.

The generally negative coverage of Russia's policies in the past few months, and complications in dialog with Europe look in the context of the upcoming G8 summit as an attempt to exert pressure on Moscow to make it more pliable. International energy security is on the G8 agenda. The sides do not have a single approach to it, and heated debates on this issue are most likely.

At the same time, despite the discord of recent months, the EU has officially recognized Russia as a reliable gas supplier. EU Energy Commissioner Andris Piegbalgs expressed this opinion in the Financial Times. He said that Europe needed Russian gas, and that there were no serious conflicts between Europe and Russia in the energy sector.

The sides will discuss Russia-EU energy cooperation as a major part of bilateral relations in Sochi. It is very important for the sides to avoid political declarations, considering such serious challenges to global energy security as the world's growing demand for energy carriers, negative impact on the environment, and shortage of energy. The interdependence of Russia and the EU in the energy sphere is as obvious as is the need to start, at long last, a meaningful dialog. It should facilitate the formation of a transparent system of relations between energy suppliers and consumers, and make predictable diversification in this sphere. If this happens, the Russia-EU summit in Sochi may become a major landmark on the road to energy security, and a sound prelude to the July G8 summit in St. Petersburg.

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