EU’s Energy Union: “Tug of War” between Member States and Brussels? What’s about the Third Countries?

Europe’s energy landscape has always been scenery for a fierce though hidden competition between the Member States and Brussels for influence over the energy sector.

Until recently an essential part of regulatory powers – despite some advances made by commission - was left to national governments and companies. The situation began to change with adoption of the 3rd Package which transferred substantial responsibilities to the supra-national level. Nevertheless, many key pieces of an “energy puzzle” – such as fuel mix choice – remained out of reach for Brussels. In this context, adoption of the Energy Package means one more victory on the “energy front” for European Institutions and less power left for the member states.

Proclaimed goals of the Energy Union are well known but it is not often mentioned that some of them will also have less visible consequences leading to shift of power between the EU and third countries, between EU and Member States as well as between Brussels and private energy companies. Let’s just consider some examples.

1.Transparency of gas supplies is one of the key goals of the Energy Union and is seen as an important component of EU’s energy security. Declared goal is linked with the promotion of compliance checks of Member States’ Intergovernmental Agreements (IGAs) and related commercial energy deals with the third countries. In the future, EU Commission will be informed on the negotiations from an early stage in order to assess the IGA’s compatibility with the internal market rules and security of supply imperatives and move towards standard contact clauses. In the context of this procedure, the Commission will also propose to check the impact of commercial gas supply contracts on EU energy security, “while safeguarding the confidentiality of sensitive information”. These proposals are formally supposed to defend Member States dependent on a single supplier of energy. They are also aimed at ensuring that the EU speaks with one voice. In practice, these regulations may restrict the freedom of maneuver and “energy sovereignty” of the member states (though a lot of new Member States do not see this as a problem) and limits flexibility and competitiveness of the private energy companies which in most cases would not be able to conclude flexible deals or negotiate the discounts. Furthermore, it is still unclear which mechanisms will be put in place to protect one of the fundamental principles of contemporary business culture - confidentiality of the contracts.

2.It is still unclear how Collective Purchase of Gas mechanism will be compatible with the free market, EU competition and WTO rules. Brussels is still far from proposing a legally sound concept but this initiative already raised concerns among European energy companies and gas-producing third countries. For instance, the energy exporters are likely to see this mechanism as an attempt to build a “buyers cartel”. This will have the far reaching consequences.

Collective Purchase of Gas practice will decrease the confidence between energy producers and consumers, and increase the likelihood of a symmetric response – creation of a “gas OPEC”. It is remained to be seen if this scenario corresponds to EU’s long-term energy interests.

3.Promotion of the Southern Gas Corridor under the auspices of supply sources and delivery routes diversification is unofficially aimed on cutting dependence on Russian gas/ This dependence is often perceived as a major security threat in some of Central European capital cities. While supply diversification is a rational idea, policy-driven premastering of the energy map may lead to unexpected results and decreasing Europe’s energy security. New reality on the ground may not correspond to the desired outcome and lead to a new dependency.

The examples showed above prove that without a balanced and realistic approach, we may run the risk of making an error that will be difficult to redress in the future. The future will bring success only if it is well planned, a balance of interests have been achieved and vested interests of all parties concerned are taken into account. Europe needs the Energy Union, but it also needs an inclusive European and global energy security architecture.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.