The most important event in the history of the Energy Charter Process for the last 17 years has taken place with the adoption of the International Energy Charter (IEC) in The Hague on 20 May 2015.
Ministerial Conference in The Hague
Without doubt this Ministerial Conference has been a great success in terms of the engagement with the Energy Charter Process by countries from all over the globe and by the commitment to the principles of the IEC they expressed through their signature of the IEC on behalf of their governments.
Now it is the time to reflect on the outcome of this event.
Among the biggest achievements of the Ministerial Conference was the adoption of the IEC by China and OPEC member Iran. There is also the extension of the Charter Process to Latin America and to many countries in Africa, particularly the ECOWAS region. In total, 75 countries and institutions formally adopted the text of the International Energy Charter, 64 of which have signed it during the Conference. A further 11 countries who adopted the IEC will sign it in the near future.
Had representatives from the Russian Federation participated in The Hague, all would undoubtedly have welcomed them. After all, it is largely thanks to Russia that the process of the modernisation of the Energy Charter’s was initiated. Unfortunately, participation by the Russian Federation did not happen. However, on the eve of the Ministerial Conference a delegation of Russian officials visited the Energy Charter Secretariat in Brussels to discuss the context of the upcoming event and the modernisation of the Energy Charter Process.
Russia in the Energy Charter Process
The Russian Federation was an active participant in the Charter Process until 2014. Despite Russia expressing the view that the Energy Charter had failed to prevent the Russian-Ukrainian gas crises it remained involved. The fact is that in neither 2006 nor 2009 did either party invoke the dispute resolution mechanism of the Energy Charter Treaty (ECT). In 2009 the Russian Federation withdrew from provisional application of the ECT and as a consequence deprived itself of the advantages provided by this instrument. Because of the gas conflicts, the EU-Russia Early Warning Mechanism in the framework of their Energy Dialogue was established in 2009 and then updated in 2011.
The main lesson to be derived from the crises is that all parties in an energy conflict rather than attempting bilateral solutions should be members of international independent dispute prevention / resolution procedures, such as those, established by the Energy Charter. With that in mind, the multilateral Model Energy Charter Early Warning Mechanism was approved at the 25th Energy Charter Conference in Astana in November 2014.
The Process of Modernisation
Since 2012, the Charter’s constituency has focused on the development of the International Energy Charter in order to reflect new developments and challenges in international energy markets. While Russia welcomed the Warsaw Mandate, it did not become involved in the actual process following the publication of the Yukos awards in July 2014. The adoption of the IEC on 20 May 2015 was the first step in the direction of modernisation. On the basis of this updated political declaration, the new International Energy Charter, the Contracting Parties and Observers can subsequently complete, extend or correct the existing legally-binding framework provided by the Energy Charter Treaty. But that will be the next phase of modernisation.
Revisiting the Transit protocol – a legal framework to facilitate energy trade across borders and cooperation among energy producing, consuming and transit countries – is also on the Energy Charter’s new agenda. The Russian Federation was an active participant of these negotiations in the past.
Opportunities for Russia in the Charter Process
Russia, as one of the largest energy supplier in Eurasia, could well take intellectual leadership in the Energy Charter modernisation process. By doing so, the country’s interests would be taken into account when it comes to the “upgrading” of the Energy Charter Treaty – the ultimate phase of modernisation.
Moreover, by participating in the Charter activities, Russia would benefit from potential competition advantages on the new markets, opened by the IEC. Indeed, Russia has set a course for the new markets to ensure security of demand. Russia concluded a gas contract with China in October 2014, and recently moved on to the construction stage of the Turkish Stream offshore gas pipeline. It is important to note that Turkey is a full member of the Energy Charter, and now China has adopted the IEC, thereby indicating its real interest in the Energy Charter Process.
Prospects for the Future
The benefits of the Energy Charter for the Russian Federation are obvious. The country’s counterparts in the framework of energy cooperation, one or another way are involved into the Charter Process.
The adoption of the IEC is undoubtedly not the only instance where the doors for the Russian Federation to the Energy Charter Process will be open. The Charter’s agenda for the upcoming years is ambitious and far-reaching and participation of Russia is welcome.
The Energy Charter Secretariat appreciates Russia’s continued willingness to engage in the dialogue with the Energy Charter, despite the challenges to relations arising from the Yukos awards. Hopefully the dispute surrounding these awards will be resolved in a way, which will allow for re-engagement by the Russian Federation in the modernisation of the Energy Charter Process.
