EuroSummit 2006: "Old Europe" Prefers Russia to Poland

One of the main themes of the EU summit which opened yesterday is the question of a common European strategy in the sphere of energy. In this connection Warsaw has put forward its own initiative on maintaining energy security of the European Union. However, its key members, particularly Germany and France, categorically reject the Polish offer. On the other hand, Norway and the Baltic countries actively support Warsaw. Defining their own position on this question, opponents of the Polish initiative are guided first of all by economic interests, and the supporters – by reasons of big politics…

Two weeks prior to the summit in Brussels, the EU Energy Commission actually supported a number of the main principles of the Polish energy initiative, and that was stated in the so-called "Green book" of the European Community. Keep in mind that the initiative of Warsaw is directed toward the diversification of sources of the oil and gas supply to Europe, with the purpose of ending the dependence on Russia in this sphere. The decision of the Commission, which is headed by the Latvian representative, Andris Piebalgs, caused noticeable discontent in Berlin and Paris.

Back at home, Piebalgs is one of the founders of the centrist party "Latvian way" ("Latvijas cels"). On its official Internet site there is an article published, calling for Russia's recognition of the fact of its occupation of Latvia in 1940, which, certainly, does not please the Russians at all. When taking the post of head of this EU Commission about two years ago, Piebalgs announced rigid requirements for Moscow in the field of energy cooperation. His position in relation to the Russian leadership basically conformed to those of Warsaw or Riga. However, they did not suit "old" members of the European Community, primarily Germany and France. A great deal has already been written about the special relations between Berlin and Moscow, including information on economic activity in Russia of German firms, among which are those connected to the current ruling party, the Christian Democrats (CDU).

A fact, which is much less recollected, is that in many respects due to energy cooperation with Russia, German firms engaged in the resale of Russian power resources have turned to monopolists in this area.

Today we are talking about a huge German power empire reaching such countries of Central and Eastern Europe as Hungary, Czechia, Slovakia, Bulgaria and Romania. In this area two power giants - E.ON Ruhrgas (the company, which signed the contract with Moscow on laying a gas pipeline on the bottom of Baltic Sea) and RWE - are working. The latter has established control over Czech national Transgas gas infrastructure, a 3,640 km long - transaction which cost the Germans 4.2 billion Euro. In its turn, E.ON Ruhrgas owns 22 % of all distributive capacities of the Czech electric system and 40 % of the whole Czech electricity market.

In the Hungarian market of electricity this company owns more than 85 %. Thus, both RWE, and E.ON Ruhrgas carry out an extremely conservative market policy, which is not promoting diversification of energy streams. As a consequence, the economy of the countries in which they work suffers severely. This circumstance has already drawn the attention of the EU Competition Commission. In the middle of February 2006 the head of this Commission, Neelie Kroes, even threatened the German firms with antimonopoly sanctions.

In this connection it is necessary to note that an active struggle against monopolies in the energy sphere is also carried out by the Czechs. The Czech Energy Regulatory Office - ERO, responsible for maintaining competition between various firms in this area, accuses RWE of abusing its prepotent position in the Czech energy market by creating a monopoly. Even today the ERO checks the legality of 34 contracts on delivery of gas, which RWE-Transgas has signed with local Czech firms.

Obviously, for this reason Vladimir Putin's attempt to convince the Czechs of the inoffensiveness of the Russian gas monopoly, undertaken at the beginning of March has not achieved the expected effect. Obviously, Prague is not going to submit its whole economy into the hands of the German-Russian energy alliance. The desire of the Czech leadership to use corresponding structures in the leadership of the European Community for preservation of its own power security is also obvious. So it is quite possible to expect Czech support of the "Green book" at the present EU summit.

As for Germany, in view of all the abovementioned, its categorical aversion to the Polish power initiative and objection concerning the contents of the "Green book" becomes understandable. Without particularly naming Russia, the head of the German Ministry of Foreign Affairs, Frank-Walter Steinmeier, declared the inadmissibility of creating a model of power cooperation, which would be directed against somebody. Besides, by his words, this model should not provoke a repartition of the European market of energy. This requirement evidently testifies to the aspiration of the ruling German party to protect the interests of large German capital in Europe and, first of all, the German-Russian gas project.

Finally, referring to France, it is necessary to say that, similarly to Germany, its reaction to the Polish power initiative is very negative. Official Paris, from the lips of President Jacques Chirac, severely criticized the Polish idea of creating a "European energy NATO". To tell the truth, as against the Germans, who rely on the deliveries of Russian energy carriers and refuse to use atomic energy, the Frenchmen suggest that the framework of energy resources diversify to increase the infrastructure of nuclear power stations on the continent. Such offers were submitted by Paris (from the lips of Minister of Finance Thierry Breton) for discussion during a meeting of the financial departments of the EU member - countries at the end of January.

In parallel, however, the large French companies continue searching for sources of power supplies beyond Europe. So, literally one week ago, information popped up on negotiations of the French gas giant Gaz de France with Iranian authorities on the realization of a large, long-term (2010-2035) project for the extraction of natural gas. It is abundantly clear that in a similar situation the Frenchmen do not need intervention of the leadership of the European Community with its new regulatory policy in the sphere of delivery of energy resources, nor the Polish initiative, behind which the active participation of the USA is clearly seen. Official Paris, as well as Berlin, would be quite satisfied with a minor decision of the EuroSummit concerning the necessity of cooperation in the field of energy, which would leave their hands untied. Concerning Russia both capitals would prefer a formal signing by it of the European Energy Charter in the framework of the G-8, without any real restriction on the Kremlin's influence in the power market of Europe.

Perhaps the only ones who openly supported the Polish power initiative and the "Green book" of the Eurocommission were the Baltic States and Norway. Polish Prime Minister Marcinkiewicz also responded positively to the "Green book". The day it was presented the Norwegian mass media and officials publicly stated their satisfaction with the aspiration of the EU to diversify energy streams with the help of Oslo. Simultaneously, the Baltic countries have actively supported the initiative on energy security within the framework of the EU. In the middle of January, in parallel with the publication of the Polish initiative, the President of Lithuania, Valdas Adamkus, openly declared his support. As he said, Europe cannot be a hostage to Russian energy sources, and the EU should search for means "to maintain the independence of its economy from Moscow", and this is impossible "without a united, common policy". Latvia and Lithuania adhere to a similar position. The theme of power security was discussed during the last visit to the USA of Latvian President Vaira Vike Freiberga at the end of February - beginning of March. As for the Estonians, two days after the publication of the "Green book", on March 10, Warsaw was visited by the president of the Estonian parliament, Ene Ergma, who expressed his consent to the position of the Poles concerning energy security.

It is necessary to note also that the Polish power initiative was supported by Ukrainian President Viktor Yushchenko, who was visited by Polish President Lech Kaczynski in Kiev at the beginning of March. They signed a declaration of cooperation between Poland and Ukraine in the field of energy, which provides for construction of an oil pipeline, Odessa – Brody – Plotsck, through which Azerbaijani oil would be delivered to Poland. This oil pipeline project has already been discussed by corresponding bodies of the EU and should be mentioned during the present summit. Nevertheless, in the words of Kaczynski, without any connection to the future decision of the European Community on this question, Ukraine and Poland already are actively at work on the project, which will be implemented by a joint Polish-Ukrainian company "Sarmatia".

In this case the European leaders should decide, which, from their point of view is more dangerous to the EU stability – Russia’s terrible promise of turning energy streams to the opposite direction or the desperate autocratic behavior of Warsaw wishing, in defiance of "Old Europe", to be released from power dependence on Moscow.

Well, of course Old Europe prefers Old Russia to New Poland; just as ageing ancient decrepit creaking decadent old people prefer the company of one another, than the company of youngsters.

I would worry more if Poland were favored by Old Europe, but the fact that Old Europe is uncomfortable with Poland makes me think the prospects for the future, for Poland, are nothing but.....good.

Poland is just upset that once the pipelines bypass her straight into Europe she no longer has leverage. She tried to use the fact she was an energy hub into Europe from Russia to blackmail Russia and it backfired.

Poland had not enough of an education to understand that capitalism hates the middle man and tends to do all it can to cut them out.

VERY interesting article. Good job.

France and Germany are too far away from Russia, and aren't willing to listen to Russia's neighbors who simply just know better. OK, damn, we'll see.

It's like tickling a bear, but in addition, W.Europe are the naive children who know nothing about bears. What will the german energy monopolists do if Russians decide they don't need the german middleman? Or if Russians wanted to increase the price they charge? Diversify, you dumba##es.

The contemporary composition of the German energy market will make any "anti-Russian" energy policy impossible. Before a reasonable (we have to keep Russia in the boat anyway) change could come real the big monopolies (that are all linked with Gasprom) have to be broken up into smaller pieces. Since those conglomerates have immense political influence this is going to be extremely difficult. Nevertheless it would be the best that could happen to all of us since German consumers (apart of the Polish interests) have to pay a horrible "extra-price" for buying energy from a such monopoly.

Besides - it is no wonder that the French (and large parts of the German political establishment) are no friends of a "Energy-NATO". Eon, EDF and RWE are those who smear the political establishment with their slush money in both countries. Just a small example: My own neighbour, the minister of economy in Baden-Wuerttemberg, Ernst Pfister, recieved (together with his staff) all tickets for the soccer world championship from Eon. When it came up in the public, Pfister smiled, gave the tickets back and nobody cared anymore since everybody already knew what was going on.

I can not offer a fast solution of this problem since Merkel's CDU is deeply involved into the Energy-business. Those who decide on these matters are Wulf Bernotat, Pierre Gadonneix and Harry Roels. The gouvernment has only very limited possibilities and is bought anyway.

This is mainly technical question.
Russia owns more than 1/3 of world's gas reservers. Iran and Qatar together own 1/4. Other countries have much less:
http://www.cia.gov/cia/publications/factbook/rankorder/2179rank.html

You need giant amounts of money to build pipelines and other gas infrastructure.

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