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Europaudvalget 2005-06, Det Energipolitiske Udvalg 2005-06
Det Europæiske Råd 15/6-16/6 06 Bilag 5, EPU Alm.del Bilag 242
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AN EXTERNAL POLICY TO SERVE EUROPE’S ENERGY

INTERESTS

Paper from Commission/SG/HR for the European Council

ACING EXTERNAL ENERGY RISKS

The EU and the world need reliable, affordable and sustainable flows of energy. This is a key

element for economic development and the achievement of the Lisbon goals. There is an

obvious link between energy security, sustainability and competitiveness.

Increasing dependence on imports from unstable regions and suppliers presents a serious risk.

Some major producers and consumers have been using energy as a political lever. Other risks

include the effects on the EU internal energy market of external actors not playing by the

same market rules nor being subject to the same competitive pressures domestically.

A secure energy supply requires a combination of internal and external policies. More action

is needed at EU level - this is why on the basis of the Commission Green Paper

the European

Council called for an Energy Policy for Europe and a prioritised Action Plan to be adopted at

its 2007 spring meeting, following the Strategic Review to be presented by the Commission

by the end of 2006. It also invited the European Commission and the Secretary-General/ High

Representative in the meantime to provide input for an EU strategy on external energy

relations.

The legitimate right of individual Member States to pursue their own external relations for

ensuring security of energy supplies and to choose their internal energy mix is not in question.

Nonetheless, the development of a coherent and focussed external EU energy policy, drawing

on the full range of EU internal and external policies, would enhance the collective external

energy security of the Union. It would also help the EU face more effectively possible

strategies by major external energy suppliers to adversely influence market fundamentals.

This paper considers how EU external relations, including CFSP, can be used more

effectively to pursue our common objective of securing reliable flows of affordable and

environmentally sustainable energy.

It is necessarily preliminary and intended to open up debate. But it also highlights concrete

actions that could be put into motion straightaway. External energy relations cannot be

separated artificially from the wider question of what sort of energy policy the EU and its

Member States want. The response to that question will be part of the Action Plan to be put

forward next spring. A more fully developed internal policy is a pre-condition for delivering

the EU’s external energy interests, and for better judging what leverage the EU is able to

bring to bear in its external relations for furthering these interests.

A European Strategy for Sustainable, Competitive and Secure Energy, March 2006, COM(2006) 105 final

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GUIDING PRINCIPLES

In order to enhance the external security of energy supplies of the EU, it is important that a

coherent approach be adopted that pursues the following objectives:

1. Promoting transparency and improved governance in the energy sector through energy

partnerships with third countries, the objective being to create mutually beneficial,

open, transparent, non discriminatory and stable legal conditions for energy

investment and trade.

2. Improving production and export capacities in producer countries and developing and

upgrading energy transportation infrastructure in producer and transit countries.

3. Improving the climate for European companies’ investments in third countries and

opening up the production and export of energy resources to EU industry.

4. Improving conditions for trade in energy through non-discriminatory transit and third

party access to export pipeline infrastructure.

5. Enhancing physical and environmental security as well as the energy infrastructure

safety.

6. Encouraging energy efficiency, use of renewable energies including bio-fuels, low

emission technology and rational use of energy worldwide.

7. Implementing the relevant Kyoto Protocol mechanisms.

8. Diversifying energy imports by product and country.

9. Creating an international regime for the supply of enriched uranium to countries that

have chosen the nuclear option, in line with non-proliferation commitments and taking

into account the EURATOM treaty provisions.

10. Promoting strategic reserve stocks and encouraging joint stock holding with partner

countries.

At this stage, it would be useful to consider two building blocks of energy security:

functioning markets and diversification.

FUNCTIONING MARKETS

Well-functioning world markets are the best way of ensuring safe and affordable energy

supplies. They create a resilient and responsive world energy supply, facilitate investment

decisions, cushion shocks and provide security for both customers and producers. But

markets do not operate in a vacuum; they need physical and legal infrastructure, as well as

information and transparency, and the active participation of major players.

This could be achieved by the EU extending its own energy market to include its neighbours

within a common regulatory area with shared trade, transit and environmental rules. More

widely, the EU should advocate reciprocity in market opening and respect for market rules:

non discrimination, competition, transparency and enforcement.

We need to convince non EU consumer countries that world energy markets can work for

them. If they were to conclude that the only route to security lay in bilateral deals, the risk of

disruption of the energy system would grow.

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DIVERSIFICATION

EU energy security can be enhanced by diversifying energy sources and geographical origin

as well as transit routes. The EU should facilitate the maintenance and upgrade of existing

energy infrastructure in neighbouring countries of key importance to the EU as well as the

development of new infrastructure.

There are a number of new gas projects which have either been decided or are in an advanced

stage of planning (North Africa, Middle East, Caspian region, Russia and Norway). If

completed, they could create new energy corridors and new import capacity amounting to a

significant share of the EU's current gas consumption. In addition, LNG terminals offer a

particular contribution to security of supply. The development of major international

pipelines to deliver oil from the Caspian region and Central Asia to the EU is also vital.

All instruments, ranging from political dialogues and Community policies such as trade,

development, competition, research and environment through to financial grants and loans,

including those of the EIB, EBRD and other IFIs, should be used in a coherent manner to

speed up the completion of these infrastructure projects.

GETTING RESULTS

This analysis demonstrates the importance of having an EU external relations policy on

energy. It must be coherent (backed up by all Union policies, the Member States and

industry), strategic (fully recognising the geo-political dimensions of energy-related security

issues) and focused (geared towards initiatives where Union-level action can have a clear

impact in furthering its interests). It must also be consistent with the EU's broader foreign

policy objectives such as conflict prevention and resolution, non-proliferation and promoting

human rights.

An external energy policy has to be based on a clear prior identification of EU interests, and

reliable risk assessments. This means ensuring that the EU has the necessary monitoring

capabilities to provide early warning and enhance its capacity to respond. The EU should

envisage a network of energy security correspondents, including representatives from the

Member States, the Commission and the Council General Secretariat to monitor energy

security, and develop analysis and action plans. The European Energy Supply Observatory

could also make a valuable contribution.

An effective external policy on energy depends on being able to harness our considerable

collective resources and put them at the service of shared interests. That means engaging with

producer, transit and consumer countries to produce results. And it means acknowledging

that political challenges require dialogue at political level (including Heads of State and

Government) on a bilateral, regional and multilateral basis.

Possible initiatives that could be developed include:

At bilateral level

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

Considering that the EU and Russia are and will remain interdependent in the energy

sector, work towards a comprehensive agreement with Russia covering all energy

products. The aim should be integration of the EU and Russian energy markets in a

mutually beneficial, reciprocal, transparent and non discriminatory manner. Such an

agreement should ideally be negotiated in the context of the post PCA contractual

framework.



Continue to pursue the strategic energy partnership with Norway, including supporting

its wish to join the Energy Community Treaty, and pursue a similar approach with

Algeria.



Help Turkey to make full use of its potential to become a major energy transit hub and

in particular promote its rapid integration into the Energy Community Treaty.



Implement the EU-Ukraine Memorandum of Understanding on energy cooperation,

the inclusion of a comprehensive energy chapter in the future bilateral agreement and

envisage Ukraine's integration into the Energy Community Treaty.



Place particular emphasis on the implementation of the energy-related provisions of

the ENP Action Plans.



Develop bilateral energy cooperation with important producer and transit partners in

North and continental Africa, the Caucasus, the Caspian Basin and Central Asia, the

Middle East and the Gulf, as well as Latin America.



Enhance bilateral dialogue and cooperation with key consumer countries, particularly

the US (where a more political dialogue on energy is needed) as well as Japan, China

and India in a bid to seek a common approach to global energy issues. The objective

would be to improve the transparency and operation of world energy markets, and to

develop sustainable energy resources and energy efficiency.

At regional level



Extend the EU’s internal market, through expansion of the Energy Community Treaty

to include relevant EEA and ENP countries.



Develop regulatory convergence through the ENP in order to improve to investment

climate and provide a level playing field in terms of market opening, fair competition,

and environmental protection and safety.

At multilateral level



Integrate the EU's energy objectives fully into its multilateral trade policy and pursue

these through the WTO, as appropriate.



Conclude the negotiations of the Energy Charter Transit Protocol and secure the

ratification of the Energy Charter Treaty by all signatories to the Charter.

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

Encourage Member States which are members of the G8 and the Commission to use

this forum to promote the EU's energy interests, including in the G8+5 format which

brings together key producers and consumers.



Consider how to strengthen cooperation with the International Energy Agency and

extend its membership.



Promote an international agreement on energy efficiency, boost development of

renewable energies and deployment of energy efficient technologies.

The European Council is invited to consider whether these proposals should constitute

input into the wider reflection process leading to an Energy Policy for Europe and an

overall Action Plan to be agreed in Spring 2007, and to what extent they should be

implemented already in advance of the outcome of this wider process.

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Annexe:

EU gas and oil consumption in 2004 by source

GAS

24%

13%

10%

46%

12%

21%

OIL

27%

16%

19%

Import from

Russia

Import from

Norway

Import from the

Middle East

Import from

Algeria

Import from

North Africa

Indigenous production

Other Regions