Dr. Frank Umbach is an expert on EU energy policy and was invited to speak in last week’s EU parliamentary debate on external energy relations. He is associate director at the European Centre for Energy and Resource Security, King’s College, London and senior associate at the Centre for European Security Strategiesin Munich. Andreas Walstad asked him about the EU’s sanctions on Iran, relations with Russia and the lack of an EU-wide nuclear policy.
Interfax: To what extent will the European Commission’s legislation on Intergovernmental Agreements strengthen security of supply in Europe?
Frank Umbach: An information exchange mechanism on inter-governmental agreements between member states and countries outside the EU is a pre-condition for the functioning of a common energy policy and a united EU energy market. One example of where the Commission helped secure a deal on energy is the 2010 Polish-Russian gas agreement. But its involvement came very late, at the end of the bilateral negotiations, so it is hardly a model for the future.
Associate Director at the European Centre for Energy and Resource Security King’s College London, Dr Frank Umbach.
If the Commission is not given information from the start about bilateral negotiations, concessions that are made before its involvement may not be reconcilable with the EU’s internal community law, such as the third-party access clause. Early involvement of the Commission not only improves transparency but provides investors and third parties with important legal certainty and shortens the negotiation process. Ultimately, the EU is only as strong as its member states allow it to be. If the Commission’s proposals are supported and implemented by the member states, they could dramatically transform the EU’s foreign energy policies.
Interfax: Oil-indexation of gas contracts has in some countries, such as Germany, caused headaches for gas-fired power generators. In your view, should the EU get more directly involved in these issues?
FU: The European energy companies need to solve this dispute themselves with Gazprom by re-negotiating the gas contracts. But if this option is not possible or does not produce positive results, the EU might intervene diplomatically.
Interfax: Are sanctions on Iran and Syria justified in your view? Can we expect the EU to carry out sanctions against gas exporting countries too?
FU: Given the security risks in the Gulf region, I think it is justified since Iran is not really willing to cooperate and find a diplomatic solution. For some EU countries, such as Greece, it will be much more difficult to find alternative oil imports in time. But the Western countries all have strategic oil reserves for at least 90 days. How effective the sanctions will be, however, depends not so much on the United States and the EU, but other big importers of Iranian oil – i.e., Asian states and China in particular.
Of course, any sanctions against major gas exporting countries would be more difficult, in particular if EU countries are totally or primarily dependent just on pipeline gas and have no access to LNG imports. There is always an element of ‘double standards’ in Western foreign policy.
Interfax: In September last year, the EC secured a mandate to negotiate the possible construction of a Trans-Caspian pipeline between Turkmenistan and Azerbaijan. Was this a necessary move and is this project realistic?
FU: Turkmenistan explicitly requested that the EU was involved in this project. The EU Council of Ministers gave the Commission a formal mandate for these negotiations, despite strong protests and warnings from Russia. The Turkmen president has declared, against all threats from Russia, that this pipeline project is the country’s most important “foreign policy objective”, which reflects its overall objective to diversify its gas exports and to reduce its dependence on Russian gas export pipelines.
The project is realistic given the common strategic interests of Turkmenistan and the EU. The question is whether Azerbaijan still recognises the same strategic interest given its newly discovered gas fields: Azeri-Chirag-Guneshli and Umid. The Commission believes that a final positive decision on the Trans-Caspian pipeline can be made next June. Furthermore, Azerbaijan (like Turkey) and the State Oil Company of the Azerbaijan Republic have declared Azerbaijan will be a major transit state for Turkmen and other foreign gas supplies to Europe. In contrast to some years ago, the bilateral relationship between Azerbaijan and Turkmenistan has been significantly improved during the last two years. If a Trans-Caspian pipeline won’t be built, the overall bilateral relationship may deteriorate again, which is neither in the interest of Azerbaijan nor Turkmenistan, and also not for Turkey.
Interfax: Germany’s nuclear exit was done without consultation with the EU. Should there be a common EU policy on nuclear energy?
FU: We need a common energy policy in general and for all energy sources – not just for nuclear energy. Every EU country needs to recognise that its energy policies will have direct and indirect impacts on neighbouring EU member states as well as to the common EU energy policies.
As Europe’s leading electricity exporter until the spring of 2011, the impact of Germany’s nuclear shutdown does not end at the German borders. It will automatically affect the electricity supply and grid stability of its neighbours – a fact that has been completely ignored by the German government.
Overall, as the result of Germany’s abandonment of nuclear power, the EU common internal electricity market needs to cope with a 5% shortfall of electricity production.
While Germany has the sovereign right to make its own energy choices about its national energy mix, it has done so at the expense of others. The German government has violated the principle of ‘political solidarity’, enshrined in the EU energy common policies and the Lisbon Treaty. The ‘energy article’ in the Lisbon Treaty clearly stated that any national energy decisions need to be made in “a spirit of solidarity between member states” to “ensure the functioning of the [internal] energy market” and “security of supply in the Union”.
