Archive

No. 3, 2012


FROM CONSOLIDATION TO GLOBALIZATION


Oil of Russia magazine talks to Urban Rusnak, Secretary General of the Energy Charter Secretariat, Ambassador, Representative of the Slovakian Republic

Q: What is of higher priority in international energy cooperation today politics or a professional understanding of the reality of today's global fuel and energy complex?

A: Your question concerns the fundamental principles of the approach to international energy cooperation problems. I will begin by saying that I have devoted most of my professional life to diplomacy, where energy issues have occupied a priority place. In this context, I will emphasize that a certain gap has appeared in today's world, an imbalance between the realities of global development of the fuel and energy complex and some of the positions occupied by certain states and politicians. This is largely related to the fact that from the technical viewpoint, the world's power industry has become much more complex. I am convinced that it is going through a qualitatively new transition period ‒ from the traditional hydrocarbon model to a new diversified system of energy resource supply and consumption.

The era when traditional sources of raw material were readily accessible (with respect to geology and location) is coming to an end. The world has reached a new frontier that dictates the need for a qualitative leap in both technology and innovation and in large investments. The current situation that has developed in geological exploration and production of energy, fuel and electricity, their transportation, and energy consumption efficiency is having the most direct impact on the general state of the world economy. At the turn of the 21st century, the global energy industry has become a complex multilevel system no longer suited to simplified political approaches.

Q: What areas of the Secretariat's work do you consider priorities?

A: As you know, the Energy Charter Treaty (ECT) and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects were opened for signature in December 1994 and entered into legal force in April 1998. As of the present, the Treaty has been signed or acceded to by 51 states, the European Community, and Euratom (thus bringing the total number of members up to fifty-three). The text of the document was drawn up on the basis of the European Energy Charter of 1991.

Although underway since 1994, the Energy Charter participating states have still not completed the legalization process. As of today, five states have not ratified the Treaty. So I have inherited unfinished business that requires finding a suitable constructive solution of benefit to the entire process.

The countries that have signed and ratified the Energy Charter Treaty recognize the need for adopting a unified code of international energy regulations and voluntarily pledge to follow them. This unification applies to trade in energy resources, investments, energy saving, and several other spheres. For certain reasons, Australia, Belarus, Iceland, Norway, and Russia have not ratified the ECT. As a first step in executing the mandate of Secretary General of the Energy Charter, I want to take another close look at the positions of these five countries and possibly prepare new proposals for completing adoption of the Energy Charter. The fact that these states have not ratified the Treaty is objectively and subjectively hampering further activity under the auspices of the Energy Charter. Several observer countries are closely watching how the Charter develops in order to decide whether or not to join it. So the question of whether the Energy Charter can act as a common platform of energy cooperation among the world's countries is still up in the air.

Q: What do you mean by "modernization" and "consolidation" of the Energy Charter you frequently mention in your speeches and publications?

A: When the Energy Charter documents were signed, a mechanism of energy cooperation was launched that envisaged regular renewal. Today the need has arisen for bringing the provisions of the Charter drawn up in the 1980s‒1990s into harmony with the realities of the current century. Modernization attempts were indeed made in the past, but they did not come to anything because the aforementioned countries had not ratified the Energy Charter Treaty. In 2009, Russian President Dmitry Medvedev presented the world community with a new conceptual approach. The Energy Charter took these initiatives as an important signal and at its conference in 2009 declared a course toward modernization.

We think that there is a very direct link between the Charter's modernization concept and the Moscow proposals and we hope that in addition to Russia's approach we will also hear ideas from other countries. In turn, the Secretariat intends to take all of the proposals on modernization of the Charter process into consideration.

All this should lead to consolidation within the framework of the Energy Charter. At present, the member states are involved to different degrees in adopting the Charter documents. Consolidation calls for placing all the participants on the same level ‒ a level of voluntary obligations. And this is the cornerstone of future application of the Energy Charter proposals on a global scale. I will remind you that despite all the difficulties, the ECT is the only legal document addressing international energy cooperation. In light of the aforesaid, I would like to note that the Energy Charter is a supra-regional, but in no way a global organization yet, although it is striving to be.

Q: Well-known Henry Kissinger once asked who the U.S. should call if it needed to ask the European Union anything. If there are energy collisions between states, where should they go, who should they call?

A: To be honest, I don't think there is anyone to call today. Of course, both the Energy Charter and the European Commission, OPEC, the International Energy Agency, and the recently established International Energy Forum, have their own telephone numbers. However, all these other organizations are only engaged in energy in their own segments. The Energy Charter is the only one with an international legal base. All the other structures are arenas for exchanging opinions among energy producers, consumers, exporters, and importers. I would recommend that anyone who has any questions about energy issues, just like other aspects of world policy, call the organization that has a clear legal framework, generally coordinated rules of conduct, and regulations for settling conflict situations.

I would like to draw attention to a new important feature of today's energy world. Recently, the boundaries among energy producers, consumers, exporters, and importers have been disappearing. For example, the U.S., which is the largest producer and consumer of energy resources, has become self-sufficient in gas thanks to the development of shale fields, and may soon become its exporter. While technical reasons compel Kuwait, which has huge gas supplies, to import LPG.

Q: In recent years, the European Commission has been taking active steps to intensify energy policy management in the EU countries and participate in political talks to resolve energy conflicts outside the European Union. How similar are the functions of the European Commission and the Charter in international energy cooperation? What are the relations between them?

A: As you know, our organization is not a structure of the European Union, but an independent international organization. Nevertheless, the Energy Charter did indeed begin its development within the European Commission, where the Charter's Secretariat was housed for some time. But this was about 20 years ago, and since then the Energy Charter has been developing independently. Unlike the European Commission, the activity of our organization covers a larger group of countries. Indeed the European Commission participates in resolving conflicts outside the EU, but only in those cases that affect the European Union countries. It is worth noting that they are all members of the Energy Charter, and all the new states that join the EU should also join the Charter.

Q: In April of this year Russian Deputy Minister of Energy Anatoly Yanovsky spoke before the European Parliament. He brought up many aspects of international energy cooperation. In particular, he noted that the main differences in the position of Russia and the Energy Charter are related to the Transit Protocol. What possibilities are there for eliminating such differences?

A: We are in constant working contact with the Russian Ministry of Energy and are well informed about Russia's position on the Transit Protocol. I would like to emphasize that the gist of the draft of this protocol, which has been the target of unsuccessful talks for almost 10 years, is no longer viable. The participants in the talks came to the conclusion back in 2011 that if we are guided by the current text of the draft no progress toward finding common ground will be made. Today we are thinking anew about how to work under the Transit Protocol. I will note that the matter primarily concerns transit deliveries of natural gas. As for the transit of electricity and oil, the differences between the sides are less significant. Therefore I would suggest that all the participants hold talks on a wider range of issues than only gas deliveries.

Q: Mr. Ambassador, please tell us about the Energy Charter's cooperation with real energy business and energy companies.

A: An Industrial Consulting Group functions in the organization's Secretariat that is a kind of interface for dealing with representatives of the energy business. This group comprises most leading energy companies of the world, such as ExxonMobil, BP, Shell, Total, Eni, and others, including Russia's LUKOIL. The board meets three times a year, whereby, as a rule, two of these meetings are held in the Charter's participating states on a rotational basis. A wide range of problems of current business is discussed at these events, and the Secretariat pays close attention to the proposals and initiatives of the energy companies. The procedure for joining the Industrial Consulting Group is quite simple: all you need to do is send a corresponding request to its chairman.

Q: At the very beginning of our conversation, you emphasized the fact that the era of cheap and accessible raw hydrocarbons is drawing to a close. What does your organization think about the projects for developing the energy resources of the Arctic? Isn't there the danger that the Arctic projects will become a target of dispute between certain states and political forces?

A: The question of developing the Arctic's resources raises both interest and concern ‒ primarily from the point of view of environmental safety of the energy projects. The Charter on the whole pays great attention to analyzing the environmental and climatic consequences of energy resource production and consumption. But the activity of the Charter only extends to the territory of its member states. And of the Arctic countries only Denmark is a full-fledged member of our organization. The U.S. and Canada have the status of observers, while Norway and Russia have signed the ECT but not ratified it. Nevertheless, I am convinced that the Energy Charter has all the necessary prerequisites to become a comprehensive legal base for interstate cooperation in the Arctic.

While highly evaluating the potential of the Arctic's energy resources, the Charter is paying keen attention to the use of different renewable sources of energy that are less expensive and associated with fewer environmental risks. Consequently, I would like to note our active efforts under RER projects in the Far East and North Africa.      - Yury Lavrov



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