EU: Brussels Mulls Over Its Energy Sources

Could oil eventually pass through this Kazakh pipeline to Europe? (file photo) (ITAR-TASS) A new report underscores the growing importance of energy to the EU's foreign policy. That increases the significance of Russia, but also reinforces a growing feeling in Brussels that alternative sources are needed.

BRUSSELS, Jun 2, 2006 (RFE/RL) -- Energy security is increasingly moving to the top of the EU's agenda in its dealings the outside world, a point underlined in a paper released today.

It identifies the European Union's main energy objectives as not just securing gas and oil deliveries from Russia, but also ensuring that it has reliable alternative sources.

EU officials say relations with Russia take center-stage in their thinking.

Russia is the biggest outside supplier of both oil and gas to the EU.

Fokion Fotiadis, a senior official with the European Commission, the EU's executive body, says the EU and Russia depend on each other when it comes to energy, and that this will remain the case for the foreseeable future.

"Russia wants us to give assurances that we will continue to be a reliable long-term partner in terms of consuming energy," Fotiadis says. "We want Russia to give us assurances that they will continue to be a reliable supplier in the long term."

But the two sides are having difficulty agreeing what conclusions they should each draw from their interdependence.

Fotiades explains the EU's analysis: To be able to continue to meet EU needs, Russia needs "enormous" investments to modify its pipelines and other infrastructure. He notes that technology is "abundantly" available in Europe, but not in Russia. The European Commission estimates Russia will need to invest in excess of 700 billion euros ($905 billion) into its energy sector between now and 2020.

But Russia is refusing to ratify an "Energy Charter" with the EU that aims to allow Western investors safe and orderly access to the Russian energy market. At last week's EU-Russia summit, President Vladimir Putin specifically refused to give outsiders a stake in Russia's gas monopoly Gazprom. Russia also rejects EU requests for access to its pipelines to enable the transport of oil and gas from Central Asia.

The Southern Options

Turkmen President Saparmurat Niyazov prays with religious leaders at the opening of a new gas compressor station in 2005 (ITAR-TASS)

Energy issues will form the core of talks expected to start in July on a cooperation agreement to replace an agreement due to expire next year.

Privately, EU officials concede it is impossible to predict if Russia will accept any of the EU's key demands. But one official insisted today that it would be a "win-win deal for everyone," noting that Russia's sales to the EU of gas alone account for about 8 percent of Russian GDP and that the EU gets about 24 percent of its gas from Russia.

A senior official familiar with the positions of EU member states said internal consensus would also be difficult to reach, owing to different "sensitivities." Energy policy remains a matter for national capitals, and Germany, France, and other larger member states are reluctant to cede any sovereignty.

There is an growing feeling in the EU that alternatives are needed to Russia. One of the most promising sources of gas -- increasingly seen as a more important fuel for the EU than oil -- is the Caspian Sea basin.

"There is a great potential for Central Asian resources to assume a substantial part in our future energy equation, in particular with regard to gas," says Fotiades. "You have large quantities of gas which will be produced in the future in Azerbaijan and the Caspian [region] around Azerbaijan, but you also have enormous capacity for gas that could come also from Kazakhstan, Turkmenistan, and a bit of Uzbekistan."

Comparatively little Caspian gas reaches the EU now. The Commission estimates, however, that Azerbaijan has 35 billion cubic meters readily available and Kazakhstan 45 billion. Turkmenistan has 100 billion cubic meters that could be tapped -- if it were to allow in Western developers. The EU is therefore very keen to support projects that would lay pipelines linking Central Asia with the Caucasus and Turkey -- and thus bypass Russia. Most gas from the region currently arrives via Russian pipelines.

Iran, second only to Russia in the volume of proven gas reserves, could become another major contributor. However, its nuclear dispute with the United Nations currently precludes any deals with the EU.

Turkey To Rival Ukraine As Hub

With or without Iranian energy, the EU expects Turkey to emerge as a major transit hub.

Fotiades says Turkey could within 10 years rival Ukraine, the main transit country for Russian gas.

Algeria could be another option. It currently supplies 10 percent of the gas consumed by the EU, and officials say Algeria could double its deliveries with relative ease.

Imports already satisfy half of the EU's energy needs and that proportion is steadily rising. That ensures that the issues raised in the report -- and to be addressed on June 8 by the EU's energy ministers and on June 15-16 by EU heads of states -- will be viewed with increasing urgency.