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  Perspectives of regional cooperation in the sphere of energy

Dr. Arűnas Molis
2010 11 22

On 8 October, the session of the third Parliamentary Assembly of Lithuania, Poland and Ukraine took place. It placed the focus on energy security challenges and perspectives in Eastern and Central Europe. All the three countries are dependent on Russian energy and are aware that it is necessary to diversify consumption of energy and import of its resources, as well as to define a more favorable regime for energy cooperation with Russia. Another question is: how to reach this goal?

There are two ways for changing the unfavorable balance of import of energy resources from only one country. First of all each country can try to solve problems independently. For instance, Lithuania prepared a new National Energy Strategy. One of its main projects is construction of a new nuclear power plant, energy links with Sweden and Poland and terminal of liquid gas. A total of 30-40 billion litas would be necessary for the realization of this strategy. For Lithuania this is a huge sum.

But the lack of funds is not the main problem.  The Baltic States decided to reform the gas sector and received an immediate letter of protest from the gas monopolist. It was enough to read the statement of “E.ON Ruhrgas“ and „Gazprom” owning “Lietuvos dujos”. It said that splitting the gas business might cause serious problems in gas supply.

Poland faces similar problems after having decided to separate administration of the gas pipeline “Jamalas-Europe” crossing its territory.  The Polish company PGNiG was about to purchase gas from „E.ON Ruhrgas“, but „Gazprom“ blocked the agreement of the Ukrainian „Naftogaz“ on gas transit via its territory.

Because of asymmetric relations between the supplier and consumer the policy of the Region’s states has never been and will not be effective if they pursue individual negotiations with Russia on gas supply terms. “Depolitization” of energy related problems and their transfer to business structures would be a mistake, since without governmental support and political and financial aid of the EU companies of the above states would not be able to realize major gas transit projects. Therefore resolution of energy security problems shall become a political and economical problem of the whole region and the entire EU.

In this respect quite logical seems the proposal of I.Degutiene, Speaker of the Lithuanian Seimas, extended this spring and repeated during the Assembly - to set up the agency of gas consumers which could counterbalance the cartel agreements in the gas export market supported by Russia. The European Energy Community could really be effective if it takes the concerns of the Member States related to liberalization of the EU energy market, establishment of common energy policy etc.

According to Lithuanian and Polish experience, insufficiently differentiated supply to the region’s oil processing plants affects the development of energy infrastructure projects. Therefore a possible increase in Kazakhstan’s oil transit through Ukraine seems quite promising; we must not also forget the oil pipeline project „Odessa–Brody–Plock–Gdansk“. If Lithuania, Poland and Ukraine seek energy independence and income from oil supply and processing, this project has to be implemented.

Establishment of the mechanism which could facilitate modernization of the Ukrainian natural gas transit system is not only the concern of Kiev but also of Vilnius and Warsaw. In order to get financial aid from the EU for modernization of this system, Ukraine is enforced to liberalize gas market and at the same time open the road to this market for Russia’s capital. The task of Baltic States and Poland is to at least partially mitigate negative consequences of Russia’s interference. We should require the EU to take part in the multilateral (together with Russia) consortium for modernization of the Ukrainian gas transit infrastructure. This would create conditions for the EU to timely respond to gas supply disorders and prevent from Gazprom’s dictate.

Thus, there is no wonder why Russian authorities and Gazprom seek to suspend implementation of the EU Energy Directive III.  On the other hand, Russia has already realized that this is only the question of time when countries importing gas will find its replacement. According to bravest forecasts this will happen earlier than Russia finds equivalent replacement for the European gas market. Thus wise and unanimous negotiations with Russian suppliers by suggesting new cooperation initiatives could help to achieve success.

It is necessary to highlight one more cooperation trend relevant to the Assembly states: the nuclear energy.  Recently Germany decided to continue operations of nuclear reactors. This is a good sign for the region and especially for Lithuania, which is planning to construct a nuclear power plant, since we can expect Berlin’s support for the development of nuclear energy in the context of common EU energy policy.

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