Energy: Russia Can Boost Security Through Transparency

Ambassador Keith Smith addressing the Prague Energy Forum (RFE/RL) PRAGUE, October 24, 2006 (RFE/RL) -- Russia is correct to argue that energy security is a two-way street, former U.S. Ambassador to Lithuania Keith Smith told the Prague Energy Forum today. However, he noted, many in the Kremlin seek not merely security, but control. Below, RFE/RL presents the complete text of Smith's remarks to the forum.

Keith Smith: The prominent attention given energy issues at the EU-Russia "summit" in Lehti, Finland, on October 20 was quite illustrative. The summit demonstrated that there is a converging perception in Western and Central Europe regarding the risks of energy dependency on Russia.

This may or may not be fair, but it is a fact.

The differing perceptions between "old" and "new" Europe has until now encouraged those Russians more interested in power projection to use energy as a foreign-policy tool. Russia's modernizers and market-oriented groups have been increasingly sidelined by the Kremlin.

Analysis Of The Tensions

East-West tension over Moscow's current energy policies reflects at least four factors:

1. The growing state monopoly over energy production and distribution that followed the destruction of private energy companies such as Yukos and Sibneft;
2. Reduced transparency in the Russian energy sector;
3. Monopolistic behavior by Gazprom and Transneft, including control of pipelines carrying Central Asian oil and gas to Europe; and
4. Growing social and political differences between Russia and the rest of Europe.

European uneasiness with Russian energy policy was suppressed as long as the troika of [former German Chancellor Gerhard] Schroeder, [French President Jacques] Chirac, and [former Italian Prime Minister Sylvio] Berlesconi had a monopoly on European policy with Russia.

I sympathize with the Russian desire to have secure markets in Europe before proceeding with large and expensive energy investments. The Russians have a good point when they say that energy security is a two-way street.

Nevertheless, too many people in the Kremlin believe that security for Russia can only come from controlling down-stream facilities abroad.

Transparency Produces Security

Europe rightly believes that security comes from reciprocity in investment opportunity and the same levels of transparency and commercial law in all parts of Europe.

If Western companies were larger participants in Russian energy development, the increased transparency and competition would only increase European confidence in Gazprom's or Rosneft's purchases of downstream facilities.

The Vulnerable East

Too many people in Brussels still believe that Europe stops at the Elbe.

When EU officials declare that Russia has always been a reliable supplier of energy, they ignore the record from 1990 to today in East Central Europe.

Where was the EU Commission when energy was cut off to Latvia or to Lithuania? All that came out of Brussels was the "sound of silence."

If Article 82 of the Rome Treaty can be applied to Microsoft for putting its music software with its Window's program, why are the monopolies of Gazprom and Transneft allowed to operate in a way that increases the cost of energy to European consumers?

Central Europeans should demand that the commission -- and particularly DG Comp [the European Commissions Competition Directorate-General] -- take action to increase competition, particularly in Central Europe.

Western Europeans have strong energy companies that can resist hostile takeovers or pressure from Gazprom, whereas the Central Europeans have less capacity to defend their own economic interests. That should be the job of the commission.

Tbilisi residents protesting in January against perceived Russian efforts to use energy to pressure Georgia (epa)

I agree with those Russians who believe that it is in their country's long-term interests to have a market-oriented, transparent energy sector. Not only would this dissipate the growing suspicion of Russian energy policy, but it would speed the development of a stronger Russia that is well integrated into the world economy.

There are too many people in Moscow who believe that the West, and especially the United States, prefer to see a weak, dependent Russia. This is nonsense and corresponds to no large segment of opinion in the United States or Europe.

I would invite Russians to carry out their own opinion polls abroad. An open, transparent, and democratic Russia is in everyone's interest.