KavkazCenter - The EU wants to build an energy strategy in the Caspian region

The EU wants to build an energy strategy in the Caspian region

Energy security has come back again to the forefront of the European Union's international political agenda. The EU is trying to deepen its energy relations with the former Soviet republics in the Caspian region through the so called "Baku Initiative", aimed at creating a Black Sea/Caspian regional energy community shaped on Brussels' energy rules. Even though it will not alter the current pattern of energy trade in the Eurasian space, it will help in the long run to build more market-friendly energy relation between the EU and Caspian energy producers.

Over the course of the 90s, a variety of state and corporate actors were involved in a geopolitical competition to select the most appropriate routes to export available Caspian hydrocarbons. Most of attention has been focused on the capability of a US-led attempt to promote the routes that best served its foreign policy goals.

Despite the harsh conditions of low energy prices, the geographical remoteness of Caspian hydrocarbons and the relative disadvantage of Caspian oil vis-à-vis cost-effective Persian Gulf crude, Washington did manage to create the working conditions necessary for private actors to invest in brand-new multi-billion dollar energy infrastructures.

Russia and Iran on the other hand did not manage to keep Western political and corporate actors away from playing an active role in the definition of energy policy in the Caspian region. This 'great powers' geopolitical competition resulted in a lack of EU involvement in the region. The EU was incapable of entering the game in an area, namely energy policy, where Member States preferred to act according to their national interests (or of those of their respective energy companies).

Where does Brussels stand?

Following the publication of the 2001 Energy Green Book, the Commission seemed to recognize the potential role of Caspian resources in meeting increasing EU energy needs in the years to come.

However, the instruments and actions taken to achieve the stated objectives were flawed in the sense that they did not address some structural inefficiencies of EU external energy links. Indeed, these became evident in the apex of the Russian-Ukrainian gas crisis last January. This is true especially in regards to the management of the EU-Russia energy dialogue inaugurated in 2000.

Instead of pushing for an effective reinterpretation of the well-established pattern of Eurasian energy trade, where Russia and its energy companies played the role of incumbents, the EU attitude towards Russia resulted in the consolidation of the Gazprom export monopoly and a refusal to grant Caspian and Central Asian producers non-discriminatory access to the Russian energy network. In fact, these oil and gas pipelines link the former Soviet republics to Russia, and Russian energy infrastructures to the rest of Europe.

International energy policy cooperation instruments such as the Energy Charter Treaty and its Transit Protocol could have played a decisive role to reformulate the position of the Russian State and its energy companies in a system of energy trade, investments and environmental protection in the Eurasian space. Negotiations were suspended in December 2003 and did not return to the heart of policy making debate between Russia and the EU until the gas crisis in January 2006 erupted.

Russia never agreed to adhere to the rules of "Brussels-made" energy law provisions, and Brussels never voiced disapproval of Russian positions in a convincing manner, since energy security did not seem to be threatened by a lack of fair and objective energy trade standards between the EU, Russia and the newly independent Caspian region countries.

Rather, assuming Russia's reliability in the past, securing Russian energy exports - especially gas - was apparently considered the best option available. In the meantime, countries like Kazakhstan and Azerbaijan repeatedly called for a fair access to Russian pipelines in order to have transparent access to consumer markets.

However, Brussels did not ignore calls coming from Caspian region countries over the last decade and on occasion has promoted increasingly closer ties, on both political and economical levels. This is the case, first, of the TRACECA initiative started in 1993, aimed at promoting a European-Caucasus-Central Asian trade and transport web of infrastructures along an east-west axis, rather than north-south.

Then, by signing Partnership and Cooperation Agreements with basically all countries in the area, the EU showed some willingness to upgrade its political and economic presence in the region, along with its active participation in the so-called "Western engagement" that characterizes multilateral initiatives under several international organizations operating in the area.

Finally, the inclusion of the South Caucasian countries in the European Neighbourhood Policy (ENP) in 2003 has marked a breakthrough change in EU attitudes towards the Caspian region at large.

In the field of energy, Brussels launched the so-called INOGATE Programme in 1995, a TACIS line of finance aimed at addressing some supply security issues in participating INOGATE countries such as infrastructural deficiencies, regulatory standard requirements and possibly the improvement of the investment framework especially for downstream projects.

The newly established European Neighbourhood and Partnership Instrument for the 2007- 2013 period is likely to broaden the competencies of the INOGATE programme, favouring a more active ownership by participating countries. The INOGATE, though conceived merely as an energy technical assistance tool, has provided the enabling environment to foster regional cooperation, although it has not brought any significant change in the pattern of energy production, trading and consumption between European countries and their Caspian partners.

The 'Baku Initiative': does it make any difference?

Policy makers in Brussels have given this initiative very high consideration, in terms of results to be achieved. However, energy analysts are very cautious to share this view given the complex dimension of EU energy security from different perspectives: temporal (short/long term energy supply), physical (infrastructure availability and reliability), geopolitical (the possibility of a politically-motivated supply interruption), environmental (the sustainability of the current pattern of energy consumption), economical (correlation between high oil prices, macroeconomics, and alternative energy resources), to mention only the most prominent features.

In the last ministerial-level meeting of the Baku Initiative held in Astana, the Parties - EU, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkey, Ukraine, Uzbekistan and the Russian Federation (as an observer) - agreed on a Road Map that stresses the need to build an energy partnership based on a comprehensive range of key issues.

The Road Map envisions actions and initiatives ranging from regulatory and legal standards reforms based on the EU acquis, to energy supply and demand management. Further, priority was given to the promotion of energy infrastructure and transportation facilities, as well as to encouraging energy efficiency and the sustainable use of energy resources, with an emphasis on technological cooperation.

With regard to this initiative, Russia does not seem as worried about it as it was with regard to the TRACECA and INOGATE programmes in the past. Since then, the geopolitical landscape has changed a great deal, and Russia is now more confident about its political role in the Caucasus and Central Asia regions. On the other hand, the EU is trying to actively build an energy strategy in the southern flank of Russia, in order to diversify its oil and gas import needs in the long run.

It will take a long time, but the value added of this strategy lies on its goals, which are the establishment of institutions and the pursuit of market-building initiatives. In this respect, the EU can have a say and will share its experience with new partners that have since long demonstrated their willingness to access EU consumers at fair market conditions.

Source: CaicazCom