7/21/2019 The New EU External Energy Policy

http://slidepdf.com/reader/full/the-new-eu-external-energy-policy 1/3

The new EU External Energy Policy: an important move - if it isnot too lateBy Alexander Mirtchev

8 December 2011

With the adoption of its new External Energy Policy, the EU has finally made a first step towards its integration as a single negotiating bloc in the world

energy market. As such the External Energy Policy could become an important factor in the global energy security picture and a possible geopoliticalgame-changer. owe!er, it remains to be seen whether the big EU member states will be willing to subordinate their interests to the wider EU interest."he External Energy Policy has probably come fi!e years too late, argues Alexander #irtche!, President of $rull %orp. and &ice-President of the 'oyalUnited (er!ices )nstitute for *efence and (ecurity (tudies.

In the first quarter of 2011, Europe imported a staggering 896 million barrels of oil, valued at over US 92 billion! In addition, gas imports for the first quarter of 2011"ere 1,#90 $%h, up over &!' per(ent from the pre(eding quarter, valued at over )'0 billion at industrial pri(es! *s a net importer of energ+, the EU has long beenfa(ed "ith the fa(t that the ma orit+ of those imports are from a limited number of sour(es - predominantl+ .ussia and *fri(a! $his dependen(e (omes "ith(hallenges/ the potential fragmentation of the internal mar et, suppl+ instabilit+ and redu(ed (ompetitiveness! In a fe" instan(es, real shortages have o((urred, asin the 2009 .ussia U raine gas dispute! armonising the e3ternal dimension of EUenerg+ poli(+ has thus been high on the agenda!

$he ne" 45ommuni(ation on 4 Se(urit+ of Energ+ Suppl+ and International5ooperation 7offi(iall+ entitled $he EU Energ+ oli(+/ Engaging "ith artnersbe+ond :ur ;orders <, "hi(h "as presented on & September b+ Energ+5ommissioner =>nther :ettinger, aims to transform the European 5ommission intoa monitor and 7to a more limited e3tent< arbiter of the e3ternal energ+ poli(ies of themember states! $o a(hieve this transformation, the oli(+ relies on the (reation of ane" institutional frame"or that in(ludes an 4information e3(hange me(hanism toshare information "ithin the EU on all bilateral, 4intergovernmental energ+ dealsthat member states ma e "ith non EU (ountries! $he proposal adds that 4the

5ommission ma+ give an e3 ante assessment of the (onformit+ of a futureintergovernmental agreement "ith the EU la" before su(h agreement is signed!

$he proposal further aims to fa(ilitate and promote larges(ale infrastru(turepro e(ts, diversif+ sour(es and routes of energ+ suppl+ and integrate the EU energ+mar et "ith those of neighbouring 7non EU< mar ets! *ll in all, the oli(+ proposesto put the EU E3e(utive on the (entre stage in the energ+ poli(+ sho"!

$here is a lot to be said for this ne" approa(h! * unified oli(+ (ould unif+ thedivergent interests, strategies and requirements of a large number of disparateEuropean e(onomies! $hus, it (ould provide more effi(ient e(onomi(

out(omes, redu(e pri(e volatilit+ and strengthen politi(al stabilit+, "ith a positive effe(t on regional and global energ+ se(urit+ and geopoliti(al balan(es! ?ostimportantl+, a unified energ+ poli(+ (ould enhan(e the influen(e of the EU and its ?ember States in the global energ+ mar et, in line "ith the understanding thatthe larger the (ountr+ or blo( , the more mar et influen(e it "ields, and that s i@e translates into 4e(onomi( and 4militar+ po"er 7as pointed out b+ philosopher %illAurant in 4$he Bessons of istor+ <! ;+ strengthening the EUCs internal energ+ mar et and (reating the abilit+ for it to monitor and drive energ+ deals b+ member states, the ne" oli(+ (ould endo" the EU "ith a ne" po"er in global energ+ mar ets greater than the sum of its parts! $his build up to"ard a unified energ+(onsumer stan(e (ould enable the EU to have a larger sa+ in global energ+ se(urit+ matters and ma+ help (ushion it from man+ e3ternal energ+ sho( s!

$hat is, of (ourse, if the ne" e3ternal energ+ poli(+ ever be(omes a realit+ - "hi(h is a big 4if !

Pipeline politics

$he question is ho" the ne" oli(+ (an be made to "or in pra(ti(e! * ma or aim of the oli(+ is the establishment of a ne" frame"or for engaging partnersoutside the EU that "ould pla(e energ+ relations be+ond the divergent interests of individual member states! $his (ould be (onsidered a (laim b+ the EU tobe(ome a ne" e+ pla+er in the global energ+ mar et, "ith the European 5ommission at its head!

$o some e3tent, this is a development that has alread+ been going on for some time! Sin(e 2009, the European 5ommission has been made responsible for ensuring the blo(Cs se(urit+ of energ+ suppl+, promoting the inter(onne(tion of its energ+ net"or s, and improving energ+ effi(ien(+ and savings! Dor some timeno" the EU has been engaging in 4pipeline politi(s , in parti(ular b+ tr+ing to diversif+ energ+ routes a"a+ from .ussia, through the so (alled Southern =as5orridor, and in parti(ular, the abu((o pipeline that "ould deliver 5aspian gas dire(tl+ to Europe! o"ever, this mission has so far not led to tangiblearrangements "ith e3ternal suppliers and partners! Instead, member states have developed bilateral relationships and pursued individual energ+ deals "hi(h ma+or ma+ not support the 5ommissionCs overall goals and "hi(h ma+ or ma+ not be in the interest of all the member states!

$hus, one of the main questions for the ne" oli(+ is ho" it "ill (ounter the in(entive for member state governments to (ontinue ta ing unilateral a(tion to a(hievetheir individual energ+ se(urit+ goals! $he ans"er to that question is far from (lear! $he oli(+ is (urrentl+ non binding, "hereas to be implemented su((essfull+some transfer of sovereign po"ers to the European 5ommission "ould seem to be indi(ated! In an+ (ase, the oli(+ "ill need to be translated into the (ommonpoliti(s of the EU in su(h a "a+ as to avoid running (ounter to the alread+ established geopoliti(al stan(es of member states to"ard e3ternal (ountries! ot aneas+ tas !

Prisoner's Dilemma

$he oli(+ "ill undoubtedl+ e3pose (ontradi(tions bet"een its intended out(omes and the e3isting positions of individual member states that ma+ have previousl+en o+ed advantageous arrangements "ith energ+ suppliers! ;e(ause the oli(+ has the potential to redefine the geopoliti(al advantages that individual member states have been able to en o+ from bilateral energ+ relationships, it "ill need to provide a repla(ement for them that provides some (ompensation for the member states that stand to lose from ne" initiatives! $his "ill not be eas+ to a((omplish in vie" of the aleidos(ope of e(onomi( and politi(al interests of both EU member states and their e3ternal energ+ suppliers! $he oli(+ "ill in pra(ti(e need to be adapted to the (onfluen(e of geopoliti(al and e(onomi( imperatives that are li el+to top the international agenda in the (oming months and +ears - from e(onomi( gro"th and sovereign debt problems to the overall global pe( ing order that is(urrentl+ in flu3! %hether the European 5ommission has the abilit+ to do so remains to be seen!

Indeed, energ+ forms part of the e3isting relationships and arrangements that have moulded European politi(s even before the Se(ond %orld %ar! 5hanging theparadigm of energ+ geopoliti(s "ill undoubtedl+ bring about resistan(e from the large and influential member states su(h as =erman+, the UF and Dran(e "homa+ per(eive the oli(+ as interferen(e in their sovereignt+!

$hese (ountries ma+ not be prepared to give up the geopoliti(al advantage of e3isting bilateral arrangements "ith spe(ifi( third part+ energ+ suppliers! Dor e3ample, it is un(lear ho" the ne" oli(+ might affe(t the de(isions of

This build-up toward a unified energy consumer stance c ould enable the EU to havea larger say in global energy security matters and may help cushion it from manyexternal energy shocks

There is a risk that the Policy may actually result in alienating some externalsuppliers

7/21/2019 The New EU External Energy Policy

http://slidepdf.com/reader/full/the-new-eu-external-energy-policy 2/3

European leaders su(h as Dran(eCs i(olas Sar o@+ and ;ritainCs Aavid 5ameron to involve their (ountries in developments "ith energ+ supplier (ountries su(has Bib+a! *nd "ould *ngela ?er el entertain ne" (entrall+ defined approa(hes to the =erman .ussian relationship, "hen previous bilateral arrangements havebenefited =erman+ probabl+ as mu(h as the+ have benefited .ussiaG

$he oli(+ thus appears to offer a (hoi(e similar to that in the (lassi( risonerCs Ailemma! If the pla+ers trust ea(h other and ma e the (hoi(e to enter a(ooperative agreement, the+ (an a(hieve an out(ome that is best for the group as a "hole! o"ever, the in(entive for a Hfirst moverC to brea a"a+ from the(ommon position and gain signifi(ant (ompetitive advantage is ver+ strong! $he usual out(ome of the risonerCs Ailemma is that all pla+ers are tempted to pursuethe best personal out(ome for themselves, "hi(h results in ever+bod+ being "orse off! $his (ould (ertainl+ happen in this (ase as "ell!

$o be generall+ a((epted the oli(+ must be seen b+ all member states to be to their advantage 7or it must have san(tions for non (omplian(e<! ;ut it is (urrentl+un(lear ho" it "ill distinguish bet"een the divergent interests and mar et "eight of larger and smaller (ountries in deplo+ing its regulator+ me(hanisms, andindeed if su(h a distin(tion "ill be made at all! It is important to remember that the EU members are not identi(al and a (ommon energ+ stan(e that is redu(ed tothe lo"est (ommon denominator (ould be seen as non benefi(ial b+ (ertain states! *s it stands, the oli(+ "ould seem to offer as mu(h in(entive for member states to (ir(umvent it as to (ompl+ "ith it!

Benefits for suppliers

Dor the ne" oli(+ to be(ome a su((ess, it "ould also need to engage the suppliers, ma ing them sta eholders in the future energ+ se(urit+ of Europe! $he oli(+fo(uses on the starting point of establishing spe(ifi( dialogue and partnerships "ith e3ternal suppliers! *n e3ample is the negotiation of a treat+ bet"een the EU,

*@erbai an and $ur menistan for the (onstru(tion of a $rans 5aspian pipeline s+stem that the European 5ommission has t a en upon itself! Initiatives of this t+peprovide suppliers "ith an e3panded and stable mar et!

In general terms, ho"ever, the oli(+ does not give a (lear indi(ation of "hat its added benefits are for these suppliers! *s a result, there is a ris that the oli(+ma+ a(tuall+ result in alienating some of them, or even be seen as endeavouring to for(e them to give up the (ompetitive advantage that their natural resour(esprovide! E3pe(ting energ+ e3porters to forego this (ompetitive advantage is not realisti( and (ould even be (ounter produ(tive! Should the EUCs energ+ suppliersdetermine that the oli(+ is damaging to their interests, the+ ma+ be tempted to re(tif+ an+ per(eived harm b+ dire(tl+ engaging "ith spe(ifi( member states,providing blandishments that (ould prove too s"eet to ignore, "hi(h "ould again lead to the negative out(ome of the risonerCs Ailemma!

Durther refinements of the oli(+Cs deliver+ me(hanisms are therefore needed to in(entivise energ+ suppliers to Hbu+ inC to it! In(entives (ould ta e the form of bilateral arrangements bet"een e3ternal suppliers and the EU for the development of energ+ fa(ilities and infrastru(ture as "ell as te(hnolog+ transfer arrangements that "ould benefit energ+ e3porters in the long run! *lternativel+, in(entives (ould be outside the energ+ realm, and (ould be determined b+ thespe(ifi( interests of the e3ternal (ountries and the relevant needs of the EU as a unified energ+ (onsumer!

Political intent

$he ambiguit+ of the E3ternal Energ+ oli(+Cs impa(t at its initial stage, "hi(h is not un(ommon for similar poli(ies of signifi(an(e, is e3a(erbated b+ the nature of the (urrent global energ+ s+stem and its fo(us on se(uring a((ess to oil and gas! $he dominant poli(+ approa(h b+ (ountries has been aimed at a(quiring (ontrolover energ+ supplies, or 4energ+ independen(e , as a national se(urit+ imperative! $he oli(+ does mention the importan(e of 4interdependen(e , but it is stillover"helmingl+ based on traditional notions of diversif+ing suppl+ sour(es "hile at the same time de(reasing relian(e on oil and gas! * stronger emphasis oninterdependen(e might have positive results! $he oli(+ does mention the importan(e of sustainable energ+ supplies 7e!g! from *fri(a< in the future, but it ma+ bene(essar+, for e3ample, to e3pand on the EUCs position to"ard alternative energ+ megapro e(ts, in order for it to maintain its effe(tiveness do"n the line "hennon fossil forms of energ+ ma+ pla+ a more important role in EU energ+ balan(es!

*lthough poli(ies su(h as the ne" E3ternal Energ+ oli(+ rarel+ result in theinitiall+ de(lared or anti(ipated out(omes, the oli(+ itself represents a (lear signal to the mar ets - the EU aims to be(ome a unified (onsumer blo( that

dire(tl+ engages e+ e3ternal suppliers! o matter ho" it evolves in pra(ti(e, it is an e(onomi( and geopoliti(al signal that heralds an important unfolding stor+!Undoubtedl+, the oli(+ represents a ne" building blo( introdu(ed relativel+ unobtrusivel+ "ithin the broader tapestr+ of poli(ies underpinning the EuropeanUnionCs development that "ould define the internal EU energ+ mar et! $he oli(+ thus has the potential to be(ome a benefi(ial game (hanger in the politi(al andenerg+ lands(ape of Europe and be+ond! Indeed, its ver+ e3isten(e (ould (hange the energ+ and geopoliti(al balan(es of the 21st (entur+!

A out the author

Alexander Mirtchev is Vice-President of the Royal United Services Institute for Defence and Security Studies and founder and president of Krull Corp ! a US-"ased #lo"alstrate#ic solutions provider $e is an international co%%entator on #lo"al econo%ic security! ne& econo%ic trends and e%er#in# policy challen#es! &ith fre'uent appearanceson US and international ne&s pro#ra%s $e has served as Senior (ello& of the Institute of )urope! Russian Acade%y of Sciences* Senior (ello& of the +ational Pu"lic Center of the ,ul#arian Acade%y of Sciences* and as Ad unct Professor at St Kli%ent .hrids/i University $e is a Doctor )%eritus of the University of (orei#n 0rade and (inance!U/raine and a %e%"er of the Russian Acade%y of +atural Sciences

!ontri utions

*lthough perhaps too for"ard loo ing, I must go along "ith t he (on(lusion made b+ this arti(le - the mere fa(t that the oli(+ "as put for"ard is a geopoliti(al4game (hanger! %h+ "ould the Europeans not "ant to have a stronger internal mar et, and "h+ "ould the+ not "ish to "ield more geopoliti(al po"er on thebasis of a stronger role in the energ+ mar ets! $he onl+ stumbling blo( (ould be the issue of sovereignt+ - "ho among the European (ountries "ould be "illingto give up su(h a signifi(ant element of its sovereign po"ersG I thin the author is too optimisti(, and, udging b+ the "a+ the EU is dealing "ith the debt (risis,the+ "ill fall out over the E3ternal Energ+ oli(+, too! ?a+be "e "ould need a ne" ?arshall lan, but the US is not doing that "ell e(onomi(all+, either! ?a+be"e as the 5hineseG

S. Schuster

It is notable that the arti(le ma es the point that the EUCs poli(+ ma ing should in(orporate the positions of the suppliers! $o ta e .ussia as an e3ample, b+ thefa(t it supplies the ma orit+ of the European natural gas, it is in effe(t putting its o"n energ+ poli(+ in the hands of the EU (ustomers! *lthough Europe is goingthrough an all time lo" period of e(onomi( gro"th, it is still a ma or mar et! In order for .ussia not to be put off b+ the e(onomi( problems of Europe, the poli(+should strengthen the EU mar et to provide the .ussians "ith a stable sour(e of in(ome! :ther"ise, .ussia ma+ (onsider gas agreements "ith other (ountriesthat are better e(onomi(all+ "ould be a better "a+ to support its o"n gro"th! .ussia, as mu(h as other energ+ suppliers, is not betting on one horse! *nd eventhough establishing pipelines ta es time, the .ussians ( ould de(ide that a pipeline to 5hina or India is more lu(rative than dealing "ith a depressed Europe!

Anthony Baxter

=erman+ "ould have too mu(h to lose if it gave up the ord Stream it has alread+ lost its edge as .ussiaJs no! 1 single (ountr+ trading partner to 5hina,and=a@prom 7some"hat un"illingl+, but "ith fe" options< is diverting resour(es rapidl+ to the Dar East energ+ mar ets! *n a((ommodation "ith the EU that ta esinto a((ount .ussiaJs sta e in ord Stream and South Stream 7let alone missile defen(e<, i!e! emphasis on mutual benefit for a (hange, might "ell ensure thefuture of the EUJs energ+ suppl+ and diminish e3penditures on defense!

J.L. Blac

The new External Energy Policy is as much a statement of political as economicintent

7/21/2019 The New EU External Energy Policy

http://slidepdf.com/reader/full/the-new-eu-external-energy-policy 3/3