Obstinate Europeans

What can you do with those stubborn guys in Europe? They are so dense and unwilling to accept the arguments of Moscow: competition is bad and monopoly is good.

Over and over again, they keep insisting on their Third Energy Package, which the Russian leaders refer to as ‘a very harmful document’, and want Gazprom to unbundle its gas supplying, transporting and marketing businesses; share pipeline space with other gas producers; obey independent regulators and transmission operators; and drop manipulations with prices.

It’s a déjà vu. Do you remember Dmitry Medvedev’s ‘Conceptual Approach’ letter he sent to the European Commission in April 2009? He brushed away the Energy Charter rules and suggested a new set of rules to guarantee global energy security. The star idea was to secure ‘non-discriminatory access to markets’, meaning of course the openness of markets outside Russia (the lawmakers in Moscow had just a year earlier introduced draconian restrictions on operations of foreign oil and gas companies.)

The proposals were ignored. Three months later the European Parliament and the Council of Europe adopted the notorious Third Energy Package.

Last week Prime Minister Dmitry Medvedev made a new appeal along the same lines. He declared that, in terms of international law, the intergovernmental agreements between Russia and the EU countries that participate in the construction of the South Stream pipeline system supersede the EU’s Third Energy Package. Deputy energy minister Anatoly Yanovsky confirmed that the official letter had been forwarded to the European Commission.

The letter is a reaction to the Commission’s determination to revise Russia’s agreements on South Stream with separate EU members and to undermine the ‘divide and conquer’ strategy of Gazprom on the European markets. And again, the Russia appeal will probably remain ignored.

EU rules are rules. The Commission must follow, and follows, Decision No 994/2012/EU of 25 October 2012 establishing an information exchange mechanism with regard to intergovernmental agreements between Member States and third countries in the field of energy. This piece of legislation requires obligatory notification of existing intergovernmental agreements to the Commission, which will make these agreements available to all other Member States. The Decision also confirms the possibility for the Commission to participate upon request of a Member State in negotiations as observer. It also provides the possibility for the Commission to perform upon request from a Member State ex-ante compatibility checks of negotiated agreements with the EU legislation.

The EU members involved in the South Stream project have announced their compliance with the Third Energy Package. It will be interesting to watch how they address the issue of amending the agreements with Moscow…

* Mikhail Krutikhin is with RusEnergy, an independent consultiancy specializes in monitoring, analysis and consulting on oil and gas industry of Russia, Central Asia, Azerbaijan and Ukraine. RusEnergy is a Natural Gas Europe Media Partner.