No. 4, 2011

Stanislav Zhiznin ,
D. Sc. (Economics), Professor of Moscow State Institute (University) of International Relations, President of the Center for Energy Diplomacy and Geopolitics


The economic and geopolitical aspects of energy cooperation between Russia and the European Union

Energy cooperation topped the agenda at the Russia-EU summits held in 2010 in Rostov-on-Don (June 1) and Brussels (December 7), as well as on June 10, 2011 in Nizhny Novgorod. At these meetings, the Russian and EU leaders focused their attention on implementation of the so-called Third Energy Package, advance of the Russian initiative to improve the international law framework of energy cooperation, and the practical aspects of forming a Partnership for Modernization, in which the Russia-EU Energy Dialogue should play a part.

High level accomplishments

Several consultations were held with the European Commission and specialized agencies of the EU member states regarding the implementation of the EU's Third Energy Package, in which representatives of the Russian Energy Ministry, the Russian Economy Ministry, the Russian Foreign Ministry, as well as the diplomatic missions of the Russian Federation in several EU countries also took part. At the end of 2010, the European Commission and stakeholder agencies and companies of the Russian Federation got down to forming a special joint working group to study the impact of EU legislation, including the Third Energy Package, on Russia-EU energy relations.

Russia's permanent mission to the EU continued working with the European Commission to advance the conceptual approach to the new legal framework of international cooperation in the energy sector (goals and principles) put forward by President of the Russian Federation Dmitry Medvedev, as well as the draft Convention on Ensuring International Energy Security prepared by Russian experts on its basis and presented at the end of 2010 in Brussels and the capitals of the EU member states.

In 2010, consultations were held between Igor Sechin, Deputy Chairman of the Russian Federation Government responsible for development of the energy sector of the Russian economy, and Guenther Oettinger, European Commissioner for Energy, during which they discussed the state of Russia-EU cooperation in the energy sector and the main problems in this sphere, and mapped out steps for further enhancing energy interaction of the two sides.

On November 22, 2010, a high level jubilee conference was held in Brussels to mark the 10th anniversary of the Russia-EU Energy Dialogue, in which the leaders of the European Commission, Russian Energy Ministry, representatives of other agencies of the Russian Federation, as well as commercial companies and academic circles of Russia and the European Union participated. The 5th session of the Russia-EU Permanent Partnership Council on Energy was held on the same day.

During the abovementioned events, an agreement was reached on drawing up a joint roadmap of Russia-EU cooperation in the energy sphere until 2050, the prospect was discussed of setting up a joint analytical center to study the gas markets and provide a consolidated assessment of the potential supply of and demand for natural gas, and the annual 11th progress report of the Coordinators of the Russia-EU Energy Dialogue was signed.

Steps in the energy sphere were coordinated with the European Commission within the framework of a working plan of action to implement the Russia-EU Partnership for Modernization initiative which was approved during the Russia-EU summit on December 7, 2010 in Brussels. The Russian leadership's plans to enhance energy efficiency and improve the situation in energy saving could open up new opportunities for cooperation with the EU framework of Partnership for Modernization. These plans include finding a solution to large-scale tasks aimed at renovating worn-out equipment in the fuel and energy complex and its related industries.

On June 20, 2010, the prospect of Belarus shutting down gas transit put the efficiency of the Memorandum on an Early Warning Mechanism in the Energy Sector within the framework of the Russia-EU Energy Dialogue signed in November 2009 to the test.

On May 23-24, 2011, a meeting of the joint thematic group for strategy, forecasts, and scenarios of the Russia-EU Energy Dialogue was held in Moscow, during which the efforts being made to draw up a Roadmap of Energy Cooperation until 2050 were discussed. The gas aspects of EU-RF cooperation were discussed at an international conference in Moscow organized by the Institute for Energy and Finance on May 24, 2011.

The geopolitical and economic aspects of the Energy Dialogue were discussed at a panel session on "Energy Cooperation between Russia and Europe: New Opportunities" organized by the Russian Energy Ministry in St. Petersburg on June 16, 2011, within the framework of the Petersburg International Economic Forum.

Important bilateral meetings were held in 2010-2011 between the Russian leadership and the leaders of Germany, Italy, France, Belgium, Holland, Austria, Finland, Poland, and several other EU countries. During these meetings, specific issues of energy cooperation were discussed with representatives of companies from Russia and the above countries. It should be noted that bilateral energy cooperation between Russia and many EU countries is developing more efficiently than EU-RF relations. This is because the EU countries have their own national energy interests in their relations with Russia which they find easier to advocate in the bilateral format. Strong ties are developing between the energy business of these countries and Russia.

In addition to representatives of executive power, parliamentary, business, sociopolitical, and scientific circles are becoming actively involved in the Russia-EU Energy Dialogue. Conferences, seminars, and symposiums are being held. Special mention can be made of the conference called "A Single Energy Platform as the Basis for the Secure Future of Europe: the Agenda for Russia and the European Union" held on September 13-14, 2010 at the European Parliament in Brussels, in which deputies of the European Parliament, diplomats, scientists, and business representatives of Russia and the EU countries participated.

Practical results

A brief assessment of the overall situation in Russia-EU energy cooperation reveals the following:

First, the Russia-EU Energy Dialogue is still rather perfunctory. Several feasible projects are being implemented on the basis of agreements between the Russian and EU leadership, as well as with some European countries outside the dialogue. At the same time, joint structures have been created and cooperation experience is being accumulated between the official institutions of Moscow and Brussels.

Second, the energy diplomacy of each country of the European Four (Great Britain, Italy, Germany, and France) is having a great impact on world energy policy and has its own special features. Belgium, the Netherlands, Greece, Austria, Poland, and the Czech Republic, as well as other individual EU countries, are also pursuing different foreign energy policies.

Third, bilateral energy cooperation between Russia and many EU countries at the state and business level is developing successfully. The relevant political and legal institutions and implementation mechanisms have been established. Practical experience of bilateral interaction between business structures and the expert and sociopolitical communities of Russia and the countries of the European Union is being accumulated.

Fourth, involving parliamentary, business, and expert circles from the EU countries and Russia in the Energy Dialogue is expanding its base and creating a favorable psychological and information atmosphere for developing this process.

Geopolitics and the economy

A look at the geopolitical and economic aspect of the Russia-EU Energy Dialogue reveals the following:

  • The geopolitical and economic importance of the Russia-EU Energy Dialogue goes beyond the energy interests of the sides since the EU and Russia are interested in political and economic stability in Europe. A long-term strategic partnership is forming between them. As concerns the energy sector itself, it should be noted that the Europeans expect Russia to promote the EU's energy security, primarily by means of uninterrupted deliveries of energy resources. For Russia, energy cooperation with the EU could mean additional ways to attract energy technology. In addition, it is beneficial for Russia to make use of the experience accumulated in many European countries of balanced interaction between business and the state for developing the fuel and energy complex and its related industries. This particularly applies to forming economic mechanisms that make business participation in modernizing the energy-generating and energy-consuming industries attractive.
  • At present, the economy of many EU countries is experiencing an upswing, which is leading to an increase in gas consumption. This is largely related to the Japanese syndrome which, after the accident at the nuclear power plant in Japan, has slowed down the implementation of nuclear energy development programs in the EU.
  • The situation in the Arab world has worsened and many countries of the Middle East and North Africa are expected to remain politically unstable in the next few years. This is creating additional risks for oil and gas deliveries to the EU from the region's countries. It is doubtful that the designated deadlines for building underwater gas pipelines from Libya and Egypt will be met.
  • The situation in Iraq remains unstable, which could long delay the implementation of programs aimed at increasing oil production, developing gas fields, and enhancing oil and gas transportation infrastructures. This could also affect energy supply to the EU countries.
  • The complicated foreign political situation around Iran, particularly the U.S. sanctions, is not conducive to attracting investments into the development of the Iranian oil and gas complex. Moreover, the Americans are against laying a transit gas pipeline from Turkmenistan to Turkey and on to Europe through Iranian territory.
  • The unregulated legal status of the Caspian Sea, as well as the difficulties in relations between Turkmenistan and Azerbaijan will make it impossible to lay oil and gas pipelines along the bottom of the Caspian Sea in the near future.
  • Russia is stepping up its energy relations with the leading Asian consumers (China, Japan, Korea, and India). Sakhalin projects and the ESPO pipeline project are being implemented. It is time to begin building gas pipelines for transporting gas to China from Western and Eastern Siberia.
  • The Russia-U.S. Energy Dialogue is on hold at present, but it could be revived and have an impact on energy cooperation between Russia and the EU.
  • The EU is keeping an eye on the active cooperation among gas exporting countries within the Forum of Gas Exporting Countries (FGEC), in which Russia plays a key role.

To briefly sum up the considerations presented above, an increase in the EU's interest in expanding deliveries of gas, as well as oil, from Russia can be predicted, which is related to the additional risks involved in carrying out these deliveries from the Middle East and North Africa, the indefinite status of the Nabucco project, and the halting of nuclear energy development programs. What is more, the development of renewable energy sources within the EU 20-20-20 program, in accordance with which these sources were to put competitive pressure on oil and gas in EU energy consumption, has clearly slowed down. In this respect, it is evident that Russia's role in ensuring the EU's energy security could grow in the next few years. The practical results of the Energy Dialogue will largely depend on significant extension of the Roadmap of Energy Cooperation until 2050.

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Oil of Russia, No. 4, 2011
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