No. 4, 2011

Yury Lavrov ,
Corporate Affairs Director, LUKOIL Belgium


LUKOIL is actively developing business ties with institutions of the European Union and Europes business community

Every year, more than 15,000 professional lobbyists "go to work" in the European Parliament and other structural subdivisions of the European Union. Most of them represent business (oil and gas included), nongovernmental organizations, and different regions of the European nations. Their efforts are traditionally of a confidential nature, but are increasingly becoming subject to monitoring and oversight by EU bodies.

New rules of transparency

The Transparency Register, a unique instrument for monitoring the activity of lobbyists in the drafting of legislation and the execution of resolutions adopted in the European Union, went into effect at the end of June 2011 by joint decision of the European Parliament and the European Commission.

In presenting the new regulations at the European Political Center in Brussels, Maros Sefcovic, Vice President of the European Commission, has stressed that "The introduction of the Transparency Register is an important step toward increasing the openness of the decision-making process in the European Union and corresponds in particular to the interests of the citizens of the European countries."

Registration extends to both private individuals and legal entities maintaining contacts with members of the European Parliament and the EU leadership, and with officials engaged in drawing up business documents; document management; compiling informational material; organizing meetings, consultations, seminars, and other events that influence the process of drafting and adopting EU resolutions. Registration is not required of members of national governments, international intergovernmental organizations, and diplomatic missions. At the same time, the members of any organizations (political, religious, regional, networking, etc.), specially created to interact with the European Union, are subject to registration.

"Now only registered representatives of organizations and companies will have open access to the European Parliament building," cautions EP Vice President Diana Wallis, responsible for transparency issues. "This will allow the parliamentarians to get a better idea of who they're meeting with, and the public at large will be kept informed as to who is interested in having a hand in the shaping of European policy."

Lobbying ... At what cost?

The most important item in registration is the question of the financial cost of lobbying. The lack of a detailed accounting procedure gives grounds for various assessments. The cost of such efforts cited this year by fuel and energy companies thus varies from 50,000 euros for ConocoPhillips to 2 million euros for ExxonMobil and Total.

According to the new regulations' recommendations, lobbying costs must include:

  • staff costs, calculated with account for the time they spend lobbying;
  • administrative costs, including maintaining an office in Brussels;
  • paying for the services of consultants and support companies;
  • operational expenses for direct lobbying;
  • membership and other dues to associations and organizations, if these organizations are themselves not registered. Each lobbyist is now required to provide the register with a complete list of member organizations.

The above list was cause for great consternation at many companies. For example, legal and consulting firms representing (under conditions of confidentiality, as a rule) the interests of their many clients must consult with the latter as to the format for disclosing information and calculating lobbying costs. Plans call for the transition to the new register to be made within twelve months from the date of its introduction, i.e., from June 23, 2011. Registration is done on a voluntary basis, but many members of the European Parliament favor establishing a mandatory procedure beginning in 2015.

Sanctions can be imposed in cases where the Code of Conduct is violated or false information is submitted. The most serious sanctions include suspension or permanent removal from the register and denial of access to the European Parliament building, along with public notification of this at the register's Internet portal.

The information presented at the registration portal is available to the public at large. A number of analytical centers, particularly the Alliance for Lobbying Transparency and Ethics in the European Union, regularly analyzes these data with subsequent publication of their conclusions and their forwarding to the appropriate EU bodies.

It is noteworthy that even though the Transparency Register is already in force, a heated argument continues over definitions of the concepts of "lobbying" and "lobbyist." According to the official interpretation used within the European Commission, "Lobbying is taken to mean all activities carried out with the intent of influencing the shaping of policy and the course of the decision-making process in European institutions." (From the EC Code of Conduct for Interest Representatives.) The Transparency Register itself uses the concept of "interest representatives," followed by "lobbyists" in parentheses. Daniel Gueguen, Europe's leading expert on lobbying issues, claims that "lobbying should be considered a democratic tool for communication and interaction between government authorities and business." In his book European Lobbying, he emphasizes that lobbying is a complicated modern process that combines knowledge of companies and industries, the structure of EU bodies, an understanding of geopolitics and world economics, diplomacy, fluency in foreign languages, and practical work experience.

LUKOIL's "Brussels vector"

The realities of today's European market are such that business, especially in the field of energy, is forced to present and uphold its interests in the different subdivisions and associated structures of the European Union. More than 75% of all legislation and regulations affecting the energy complex are created by EU institutions and must be followed in all member states, and in all countries aspiring to membership.

Meanwhile, the scale of LUKOIL's production, commercial, and investment operations in the sphere of oil refining and marketing in the European countries allows the Company to consider itself not just Russian but European at the same time. In light of this, LUKOIL has in the last two to three years considerably stepped up its interaction with EU bodies, EU businessmen and oil associations, international energy organizations, and analytical centers for applied policy. Priority lines of development for corporate ties are:

  • maintaining the Company's high image;
  • ensuring the required transparency of LUKOIL operations;
  • monitoring the legislative process in the area of the fuel and energy complex;
  • analyzing the competition policies in EU markets;
  • proactive identification of ecological requirements for the oil and gas business.

The current makeup of the European Parliament was decided in 2009 and includes 736 deputies from 27 countries. It is noteworthy that LUKOIL conducts commercial operations in 15 EU countries whose deputies number more than 300, or 45% of all Eurodeputies. Thirty-one deputies serve in the Interparliamentary Committee for EU-RF Cooperation. LUKOIL does its best to inform in a timely manner the members of the Committee of its current and planned operations, of innovations in the areas of production and technology, and of ensuring environmental safety and social responsibility.

In April 2011, a group of deputies from the European Parliament visited one of the Company's oil platforms in the Caspian Sea and discovered for itself much that was new in the area of offshore hydrocarbon production.

During their visits to Brussels, LUKOIL's top executives traditionally include in their itinerary a visit to the European Parliament and meetings with the European Commissioners responsible for issues of energy, ecology, trade, and competition. At the expert level, cooperation with the European Commission is maintained through the Company's participation in three specialized groups operating within the EU-RF Energy Dialogue.

In November last year, the conference on the tenth anniversary of the energy dialogue took place in Brussels. Russian Energy Minister Sergey Shmatko, EU Commissioner for Energy Guenther Oettinger, Belgian Minister for Climate and Energy Paul Magnette, Deputy Chairman of Gazprom Alexander Medvedev, President of the Russian Gas Society Valery Yazev,  European Commission's Director-General for energy Philip Lowe and other speakers participated in the conference. European energy lobbyists which were present in the hall paid attention to the words of the Russian minister: "We must learn to listen to each other, speak the same language. Increased efforts are needed to form the interaction both at the governmental level and at company level." According to Mr. Oettinger, in the long run Moscow and Brussels faces the problem of convergence of energy markets, which should improve the legal framework of cooperation to ensure stability and reduce uncertainty in the energy relations. The European Commissioner called for broad participation of representatives of both parties in developing "a road map" in the energy sector for the period up to 2050.

The Fourth European-Russian Forum, devoted to the topic of "Partnership for Modernization," was held in Brussels in November 2010. More than 300 delegates took part, including members of the European and Russian parliaments, European Commissioners, and Russian Federation ministers, representatives of Russian-speaking associations, research centers, business, and so on.   The audience listened with special interest to the speeches of the State Secretary of the RF Foreign Ministry Grigory Karasin, the Russian representative to the EU Vladimir Chizhov, the State Duma deputies Kira Lukyanova and Konstantin Zatulin, Academician Ivan Ivanov, Director of the "Russian world" Foundation Vyacheslav Nikonov. From the European side, the most informative and friendly toward Russia were the speeches of MEP Csaba Tabajdi (Hungary), A. Peterle (Slovenia), W. Remek (Czech Republic), W. Schulz (Germany), T. Zdanoka (Latvia). LUKOIL's innovative operations in Russia and Europe were discussed during the session of the forum dedicated to issues of modernization. Special emphasis was given to such aspects as the Company having its own scientific research base; the successful inauguration of new facilities (a platform in the Caspian, the terminal in Varandey); cooperation in the area of technologies and environmental safety with such leading international corporations as Total, Statoil, ISAB, and others; and participation in the project to create a new center for innovation in Skolkovo.

The Program for Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) was developed and implemented as of June 1,  2007, to guarantee environmental safety. A number of special hearings dedicated to Program implementation were held in the European Parliament with representatives of business in attendance. REACH monitoring and participation in two European petroleum associations, the Conservation of Clean Air and Water in Europe (CONCAWE) and the European Chemical Industry Council, allowed LUKOIL to register promptly and for the first time the products made at its refineries in Bulgaria and Romania, and at eight plants in Russia and two in Ukraine.

LUKOIL Belgium has been a member of the European Policy Center, Brussels' leading think tank, for three years now. The EU's administrative capital contains more than 50 organizations doing applied policies research. By joining in the center's work, LUKOIL got the opportunity to consult with leading European analysts and gained access to current research in its field of business. Igor Ivanov, a member of LUKOIL's Board of Directors, delivered an address at the center in November 2010 that was well received.

LUKOIL's joining the BusinessEurope Confederation of European business in 2009 allowed it to take part annually in sessions of specislized working groups and committees, and to obtain valuable information for the Company's business in Europe. In the opinion of many experts, BusinessEurope is the most influential lobbying organization in the European Union. The annual European business summits held every year by the organization are especially noteworthy. LUKOIL President Vagit Alekperov has already spoken twice at such events and used the opportunity to meet with EU leaders and heads of the world's leading energy companies.

LUKOIL has twice held exhibitions in Brussels dedicated to innovations and environmental safety in the oil business. Of special interest to Brussels' business community were the Company's projects in the field of offshore oil production, using the ice-resistant terminal at Varandey, and developing the energy sector. The exhibitions helped businessmen to become better acquainted with LUKOIL and upheld LUKOIL's high image in the nations of Europe.

LUKOIL's great investment and conscientious way of doing business in Belgium itself was duly praised by Crown Prince Philippe of Belgium, Count of Flanders, during an official visit to the Company's main office in Moscow. His Royal Highness arrived in Russia at the head of a Belgian economic mission that included the heads of a number of ministries and government agencies, and representatives of business circles. The Crown Prince presented LUKOIL President Vagit Alekperov with Belgium's Royal Order of the Crown, Commander Class.

In the Hague in June 2010, Roman Kolodkin, RF Ambassador Extraordinary and Plenipotentiary to the Netherlands, also presented LUKOIL with an award, the prestigious RusPrix, for developing Russian-Dutch economic and investment cooperation in connection with the acquisition of a 45% stake in the Zeeland Refinery in the Netherlands. As Claude Gueguen, General Director of the refinery, stressed at a meeting with LUKOIL Belgium workers in Vlissingen, the most important aspect of the project is that both partners, Total and LUKOIL, are among the world's leading oil refiners, and that more than half of all the crude being refined goes to plants in Russia.

Not by oil alone

Cooperation between LUKOIL and the European Parliament includes not only narrowly professional topics. So, in April last year, in Brussels the first European Russian Youth Forum took place, at which the Company presented its experience with youth.

LUKOIL Belgium regularly receives invitations to speak on energy issues from leading Belgian universities that train specialists for the EU institutions and transnational business. Such speeches can lead lobbying in the early stages, introducing students and graduate students with the strategy of the Company in Russia and abroad, especially with the peculiarities of conducting oil business in the EU.

In 2011, events on the 20th anniversary of LUKOIL are being held. Representatives of the various EU institutions, the energy business community, academia, and the diplomatic corps attended a grand concert of the Tchaikovsky Grand Symphony Orchestra conducted by Vladimir Fedoseev at Brussels' best Bozar Theater. Lobbying as well as other operational and policy issues were aside at the time when the audience enjoyed a delightful performance of the outstanding Russian pianist Denis Matsuev.

Finally, it should be noted that the continuing turbulence on the world and European markets is leading to a considerable rise in the efforts of European Union institutions to regulate the economies of the EU countries and create a single European market for goods, services, and investment. Analyses of current EU legislative activities and the immediate availability of information on such issues will therefore be inevitable attributes of successfully doing business in the countries of the European Union.

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Oil of Russia, No. 4, 2011
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