ENERGY DIALOG AS SEEN BY CARTELS


03.11.06
MOSCOW. (Dr. Igor Tomberg for RIA Novosti)

The international energy conference "Moscow Energy Dialog," which was held in Moscow on October 30 – November 1, was the latest round in the sorting out of energy-related issues in relations between Russia and the European Union.
Their bilateral dialog increasingly resembles a conversation between a blind man and a deaf one. The parties are not willing to listen to each other, insisting only that their own demands be met. The EU is setting the tone. Quite recently, Russian President Vladimir Putin was actually delivered an ultimatum in Lahti, Finland: Either Russia ratifies the Energy Charter Treaty together with the transit protocol, or the main clauses of these documents will be included in a new agreement between Russia and the EU.
Russian Industry and Energy Minister Viktor Khristenko, who attended the forum, emphasized that Russia has a unique perspective on the energy problem due to its geographic location and economic situation. "We are both a large energy exporter and a large energy consumer," he said. "At the same time, Russia is an important transit country. So we understand the views of almost all players on the global energy market."
In addition, Russia's Gazprom owns the world's largest gas pipeline network, part of which connects Central Asia and the Caspian region with Europe. This allows proponents of gas-market liberalization to argue that Russia hinders direct access of Central Asian gas to European markets and therefore prevents diversification of EU energy sources. Without the right of direct access to Russian gas pipelines, European consumers are unable to buy Central Asian gas at (they hope) lower prices.
These circumstances are at the root of Brussels' persistent attempts to make Russia ratify the transit protocol to the Energy Charter.
Russian objections to the protocol are based on some of its clauses that allow for a broad interpretation not in line with Russia's interests. Nevertheless, Russia has not ruled out signing the Energy Charter, but it wants the wording of some important clauses to be changed so that they no longer have the potential to encroach on its interests. This work is being carried out by experts, who are amending the wording and bringing the positions closer together. The numerous publications and speeches by both the Charter's proponents and opponents tend to misunderstand the essence of these complicated problems, which often hinders the coordinating process and adds unnecessary tension to the atmosphere surrounding the energy dialog. Very few experts have actually read and understood the 250-page document, but that doesn’t keep them from offering their ample interpretation of it.
The Moscow forum has shown once again that Europeans are waging a coordinated and aggressive battle for the interests of energy-consuming countries under the banner of supply diversification. Russian representatives are right to view this front as a kind of cartel of gas consumers, which naturally makes them want to level the playing field by acting similarly.
Valery Yazev, head of the Russian parliament's committee for energy, transportation and communications, proposed setting up a gas producers' alliance in response. "The EU clearly constitutes a cartel of consumers of Russian gas, and they are demanding that we ratify the Energy Charter Treaty. This is not in Russia's interests because it governs access to our pipeline network," he said. "We need to set up our own gas alliance, which might consist of Turkmenistan, Kazakhstan, Uzbekistan, Russia, Ukraine and Belarus. If the problems with Iran's nuclear program are resolved, I would also like to see Iran in this alliance."
This idea is not all that far-fetched. Gazprom has long been working to build a system for coordinating its actions with owners of large energy reserves. It is currently coordinating its transport, production and pricing decisions with Central Asian producers. It has signed a memorandum of cooperation with Algeria, which is the EU's second largest gas supplier. Last June, the presidents of Russia and Iran agreed to coordinate their gas-selling policies at the summit of the Shanghai Cooperation Organization. Last September, Gazprom began cooperating with Qatar after the company’s CEO visited the country.
The reaction to Yazev's initiative was controversial but constructive. The many problems Russia is encountering on the world’s changing gas markets do not allow it to dismiss the possibility of a gas OPEC. So this can be viewed as one possible scenario for Russia's economic policy, which, though it will not necessarily be carried out, still remains on the table. In any case, the exchange of threats accompanying the Russian-EU energy dialog is unlikely to lead to the creation of a solid legal framework for further cooperation or to ensure energy security for both parties.
Next year, the Partnership and Cooperation Agreement between Russia and the European Union expires, and energy issues will be a key element of the new framework agreement. These issues, however, do not stand a chance of being addressed in the final agreement without a change in their current wording, which would impose unfavorable conditions on Russia. Despite all their disagreements, the EU and Russia will have to come to terms, as this is in both sides’ interests. After all, Gazprom is connected to its European consumers not only by an extremely expensive transport infrastructure, but by the ties that inevitably bind gas producer to gas consumer.

Dr. Igor Tomberg, senior research fellow at the Center for Energy Research, the Institute of World Economy and International Relations, the Russian Academy of Sciences.-0-