EU energy (security) policy in the context of the changing role of Russia as EU’s natural gas supplier (1994-2019)
Abstract
The aim of this dissertation is to analyze how the European Union has (re)formulated its energy (security) policy in relation to Russia, by focusing especially on the sphere of natural gas. The study analyzes the EU’s attempt to build a common and coherent energy (security) policy while aiming to reduce its dependence from Russian natural gas imports. The analysis consists of four parts. In the first part of the analysis, we present the role of Russia in the EU’s gas sector, arguing that it has been first characterized by Moscow’s reluctance to commit to the European Energy Charter in the 1990s, second by the ‘gas wars’ that took place in Ukraine and Belarus from 2006 to 2010 and that affected the EU’s natural gas supplies, and third by the impact of Russia’s pipeline projects – Nord Stream, South Stream, and Nord Stream 2, from 2011 to 2019 – in the security of the EU’s natural gas supplies. By taking into account the changing role of Russia in the EU’s natural gas sector, in the second part of the analysis, we present the EU’s initial approach to its energy (security) policy (1994-2003). In the third part of the analysis, we present the EU’s changing approach to its energy (security) policy (2006-2014). In the fourth and final part of the dissertation, we analyze the EU’s comprehensive approach to its energy (security) policy (2014-2019). Adopting the methodological framework of analytic narratives, the study investigates EU official documents (including EU legislation and treaties), specialized secondary literature, as well as interviews conducted by the author in Brussels, in addition to his insights from one and a half years of work experience in one of the leading think-tanks located in the ‘Brussels bubble’. The study puts forward an innovative analytical framework that combines, on the one hand, an approach that identifies the EU's three different types of power (normative, regulatory, and economic and market power) and, on the one hand, the nexus defined by the EU integration theories of supranationalism versus intergovernmentalism. The application of this approach to the EU’s energy (security) policy allowed us to conclude the EU's initial approach to be the one of the ‘normative power’, while the subsequent changing EU stance as corresponding to the ‘regulatory power’, and during the final period under analysis, the EU’s comprehensive approach associated with the EU behaviour as an ‘economic and market power’. Furthermore, we were able to conclude that transversally to the three different phases of the evolving EU energy (security) policy, the EU assumed a dual-take approach, which was characterized by the aspiration of the European Commission and some member-states to take energy policy-making to the supranational arena that evolved together with the attempt by a few member-states, led by Germany, to maintain the intergovernmental logic that remains at the core of EU energy policy-making.
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Jorge Félix EU energy (security) policy in the context of the changing role of Russia as EU's natural gas supplier (1994-2019) UMinho | 2021 Universidade do Minho Escola de Economia e Gestão Jorge Augusto Costa Félix EU energy (security) policy in the context of the changing role of Russia as EU’s natural gas supplier (1994-2019) abril 2021
Universidade do Minho Escola de Economia e Gestão Jorge Augusto Costa Félix EU energy (security) policy in the context of the changing role of Russia as EU’s natural gas supplier (1994-2019) Dissertação de Mestrado Mestrado em Relações Internacionais Trabalho efetuado sob a orientação da Professora Doutora Alena Vysotskaya Guedes Vieira abril de 2021
ii DIREITOS DE AUTOR E CONDIÇÕES DE UTILIZAÇÃO DO TRABALHO POR TERCEIROS Este é um trabalho académico que pode ser utilizado por terceiros desde que respeitadas as regras e boas práticas internacionalmente aceites, no que concerne aos direitos de autor e direitos conexos. Assim, o presente trabalho pode ser utilizado nos termos previstos na licença abaixo indicada. Caso o utilizador necessite de permissão para poder fazer um uso do trabalho em condições não previstas no licenciamento indicado, deverá contactar o autor, através do RepositóriUM da Universidade do Minho. Licença concedida aos utilizadores deste trabalho Atribuição-NãoComercial-SemDerivações CC BY-NC-ND https://creativecommons.org/licenses/by-nc-nd/4.0/
iii Acknowledgements During the writing of this dissertation, I have received a great deal of support and assistance. I would first like to thank my supervisor, Professor Alena Vieira, whose knowledge and teachings were invaluable. Your insightful feedback and constructive criticism brought my work to the highest possible level. I would also like to acknowledge my colleagues at the German Marshall Fund of the United States for the opportunities they gave me to further my research. I would particularly like to single out Kadri Tastan and Peter Chase for their mentorship and for providing me with the tools that I needed to choose the right direction for my research. In addition, I would like to thank my parents and grandparents – José and Maria, Elias and Conceição – for always being there for me and providing me with wise advice. Finally, I could not have completed this dissertation without my friends and girlfriend, who provided stimulating discussions as well as good distraction to rest my mind outside of my research.
iv STATEMENT OF INTEGRITY I hereby declare having conducted this academic work with integrity. I confirm that I have not used plagiarism or any form of undue use of information or falsification of results along the process leading to its elaboration. I further declare that I have fully acknowledged the Code of Ethical Conduct of the University of Minho.
v “A política (de segurança) energética da União Europeia perante o papel da Rússia enquanto fornecedor de gás natural (1994-2019)” Resumo O objetivo da seguinte dissertação é analisar como é que a União Europeia (UE) tem (re)formulado a sua política (de segurança) energética em relação à Rússia, sobretudo no que toca à esfera do gás natural. O estudo analisa a tentativa da UE desenvolver uma política (de segurança) energética comum e coerente que ao mesmo tempo seja capaz de reduzir a dependência da UE de importações de gás natural russo. A análise divide-se em quatro partes. Na primeira parte da análise é apresentado o papel da Rússia no setor do gás natural da UE, sendo argumentado que tal papel foi em primeiro lugar caracterizado pela hesitação de Moscovo em se comprometer com a Carta Energética Europeia nos anos 90, em segundo lugar pelas ‘crises do gás’ que aconteceram na Ucrânia e na Bielorrússia entre 2006 e 2010 e que afetaram as reservas de gás natural da UE e, em terceiro lugar, pelo impacto que os gasodutos Russos – Nord Stream, South Stream, e Nord Stream 2 – tiveram na segurança das reservas de gás natural da UE entre 2011 e 2019. Ao ter em conta o papel da Rússia no setor do gás natural da UE, na segunda parte da análise é apresentada a abordagem inicial da UE à sua política (de segurança) energética (1994-2003). Na terceira parte da análise é explorada a abordagem evolutiva da UE à sua política (de segurança) energética (2006-2014). Na quarta e última parte da dissertação é analisada a abordagem mais abrangente da UE à sua política (de segurança) energética (2014-2019). O estudo apresenta um quadro analítico inovador que combina, por um lado, uma abordagem que assenta na distinção dos três diferentes tipos de ‘poder’ da UE (poder normativo, regulador, e económico e de mercado), com, por outro lado, o nexo definido pelas teorias de integração da UE de supranacionalismo e intergovernamentalismo. Ao adotar o quadro metodológico das narrativas analíticas, o estudo baseia-se na análise de documentos oficiais da UE, literatura secundária especializada, assim como na análise de entrevistas realizadas durante um ano e meio de trabalho do autor num think-tank localizado na ‘bolha de Bruxelas’. A aplicação do quadro analítico escolhido à política (de segurança) energética da UE permitiu concluir que a abordagem inicial da UE foi caracterizada pela utilização de um ‘poder normativo’ (1994-2003), a seguinte abordagem evolutiva da UE caracterizada pela utilização de um ‘poder regulador’ (2006-2014), e a última abordagem a ser analisada, a abordagem mais abrangente da UE, caracterizada pela utilização de um ‘poder económico e de mercado’ (2014-2019). Finalmente, foi concluído que a UE assumiu uma abordagem dupla que foi transversal às três diferentes fases de formulação da sua política (de segurança)
vi energética. Esta abordagem dupla foi caracterizada, por um lado, pela ambição da Comissão Europeia e de alguns estados-membros em transportarem o processo político da EU, no quadro da energia, para a arena mais supranacional e, por outro, pela tentativa de outros estados-membros, liderados pela Alemanha, defenderem a centralidade da lógica intergovernamental que continua a caracterizar o atual processo político da UE no quadro da energia. Palavras-chave: Política de (segurança) energética da União Europeia; Política externa Russa; Gás natural; Comissão Europeia; Estados-membros da União Europeia
vii “EU energy (security) policy in the context of the changing role of Russia as EU’s natural gas supplier (1994-2019)” Abstract The aim of this dissertation is to analyze how the European Union has (re)formulated its energy (security) policy in relation to Russia, by focusing especially on the sphere of natural gas. The study analyzes the EU’s attempt to build a common and coherent energy (security) policy while aiming to reduce its dependence from Russian natural gas imports. The analysis consists of four parts. In the first part of the analysis, we present the role of Russia in the EU’s gas sector, arguing that it has been first characterized by Moscow’s reluctance to commit to the European Energy Charter in the 1990s, second by the ‘gas wars’ that took place in Ukraine and Belarus from 2006 to 2010 and that affected the EU’s natural gas supplies, and third by the impact of Russia’s pipeline projects – Nord Stream, South Stream, and Nord Stream 2, from 2011 to 2019 – in the security of the EU’s natural gas supplies. By taking into account the changing role of Russia in the EU’s natural gas sector, in the second part of the analysis, we present the EU’s initial approach to its energy (security) policy (19942003). In the third part of the analysis, we present the EU’s changing approach to its energy (security) policy (2006-2014). In the fourth and final part of the dissertation, we analyze the EU’s comprehensive approach to its energy (security) policy (2014-2019). Adopting the methodological framework of analytic narratives, the study investigates EU official documents (including EU legislation and treaties), specialized secondary literature, as well as interviews conducted by the author in Brussels, in addition to his insights from one and a half years of work experience in one of the leading think-tanks located in the ‘Brussels bubble’. The study puts forward an innovative analytical framework that combines, on the one hand, an approach that identifies the EU's three different types of power (normative, regulatory, and economic and market power) and, on the one hand, the nexus defined by the EU integration theories of supranationalism versus intergovernmentalism. The application of this approach to the EU’s energy (security) policy allowed us to conclude the EU's initial approach to be the one of the ‘normative power’, while the subsequent changing EU stance as corresponding to the ‘regulatory power’, and during the final period under analysis, the EU’s comprehensive approach associated with the EU behaviour as an ‘economic and market power’. Furthermore, we were able to conclude that transversally to the three different phases of the evolving EU energy (security) policy, the EU assumed a dual-take approach, which was characterized by the aspiration of the European Commission and some member-states to take energy policy-making to the supranational arena that evolved together with the
xiv 3.1.3. Challenges stemming from Russia’s annexation of Crimea (2014) .............................. 60 3.1.4. Nord Stream 2 (2015-2019) ...................................................................................... 62 4.1. Concluding remarks .......................................................................................................... 64 Chapter II: EU’s initial approach: the EU as a ‘Normative Power’ (1994-2003) .............. 64 2.1. European Energy Charter Treaty (1994) ............................................................................ 64 2.2. First Energy Package (1998) ............................................................................................. 66 2.3. EU-Russia Energy Dialogue (2000) .................................................................................... 68 2.4. Second Energy Package (2003) ........................................................................................ 69 2.5. Concluding remarks .......................................................................................................... 70 Chapter III: EU’s changing approach: The EU as a Regulatory Power (2006-2014) ........ 72 3.1. EU response to Russia’s growing challenge (2006-2009)................................................... 72 3.1.1. European Energy Community (2006) ......................................................................... 73 3.1.2. Green Paper: “A European strategy for sustainable, secure and competitive energy” (2006) ................................................................................................................................. 74 3.1.3. First Strategic Energy Review: “An Energy Policy for Europe” (2007) .......................... 76 3.1.5. Second Strategic Energy Review: “An EU Energy Security and Solidarity Action Plan” (2008) ................................................................................................................................. 79 3.1.6. Lisbon Treaty (2009) ................................................................................................. 81 3.2. EU response to ‘Russia’s Europeanisation from the East’ .................................................. 83 3.2.1. The Third Energy Package: The Natural Gas Directive and Regulation (2009) .............. 83 3.2.2. The (absence of a) response to Nord Stream (2011) .................................................. 85 3.2.3. EU-Ukraine Association Agreement (2012-2014) ........................................................ 86 3.3. Concluding remarks .......................................................................................................... 87 Chapter IV: EU’s comprehensive approach: The EU as an Economic and Market Power (2014-2019) .................................................................................................................. 89 4.1. EU sanctions to Russian and Ukrainian individuals, officials, and companies (2014-2016) . 91 4.2. European Energy Security Strategy (2014) ........................................................................ 92 4.3. Energy Union (2015) ........................................................................................................ 94 4.4. The rise and fall of the South Stream (2014-2015) ............................................................ 96 4.5. EU-Turkey High Level Energy Dialogue (2016) ................................................................... 99 4.6. EU-China Energy Dialogue and Roadmap on Energy Cooperation (2017 .......................... 100 4.7. European Commission proposal to amend the 2009 Gas Directive (2017) ....................... 102
xv 4.8. Security of Gas Supply Regulation (2017) ........................................................................ 103 4.9. Southern Gas Corridor inauguration (2018) ..................................................................... 104 4.10. EU-USA (8th) Energy Council (2018) ............................................................................. 105 4.10.1. Juncker-Trump Joint Statement on Energy Cooperation: expanding exports of US liquified natural gas (LNG) to Europe (2018) ...................................................................... 106 4.11. EU’s LNG strategy (2019) ............................................................................................. 107 4.11.1. EU-Croatia: creation of the LNG terminal on the island of Krk (2019) ...................... 107 4.11.2. EU-Poland: extension of the LNG terminal in Świnoujście (2019) ............................ 108 4.12. EU’s renewable energy strategy: The Green Deal (2019) ............................................... 109 4.13. Concluding remarks ...................................................................................................... 109 Conclusion .................................................................................................................. 112
1 Introduction 1. Why study EU energy (security) policy? The present dissertation intends to answer the following research question: “how has the European Union (re)formulated its energy (security) policy while faced with the changing Russian role in the EU’s natural gas sector (1994-2019)?”. The development of the EU’s energy (security) policy will be analyzed against the backdrop of the dominant Russian position in the EU’s natural gas market and how it has been used as a political weapon by Moscow towards the EU and its member-states, therefore shaping the development of the EU’s energy (security) policy (Krutikhin, 2021). According to the Encyclopedia of Energy , ‘Energy Policy’ is a subset of economic policy, foreign policy, and national and international security policy that seeks security of supply, affordability, and limited impact on the environment (Kohl, 2004). Nevertheless, according to the Routledge Handbook of Energy Security , the attention of policy-makers, when formulating energy policies, has been first and foremost directed at security of supply. This has happened because states have increasingly been subject to supply crises, which has made them vulnerable to external pressures, as it has been the case of many European states (von Hippel, Suzuki, Williams, Savage, & Hayes, 2010). Accordingly, since the 1970’s oil crisis – which have caused supply disruptions all over the world, including in Europe – European studies focusing on energy started being mostly conducted in a political economy framework focused on guaranteeing security of supply (Jakstas, 2019). Moreover, new energy disputes that appeared in the beginning of the 21st century and that have posed additional risks to states’ security of supply, have led the term of ‘energy security’ to become not just related with guaranteeing continuous and affordable supplies, but also with guaranteeing the security of the entire energy system (Fernandes 2019). As such, the European Energy security Strategy, put forward by the European Commission in 2014 made a distinction between short-term energy security and mediumand long-term energy security (European Commission, 2014). According to it, short term energy security refers to the capacity of the energy system to resist shocks and interruptions to the supplying of energy sources. On the other hand, mediumand long-term energy security refers to the capacity of implementing measures to promote de reduction of the dependence on fossil fuels, energy suppliers, and energy routes, as well as achieving a more functional and integrated energy market (Fernandes, 2019). One can conclude that an energy policy has been always, to some extent, an energy security policy. As a reflection of this, the term ‘energy security’ has frequently dominated the EU energy debate since its
2 emergence in the 1970’s (Siddi, 2016), and this tendency continues until today (more recently, the term has been used interchangeably with ‘EU external energy policy’, which has been intertwined with the notions of EU’s security of supply, reduction of dependence on fossil fuels, energy suppliers, and energy routes). More generally, energy security has been defined as an official goal of many countries, since an uninterrupted access to energy supplies is an inherent condition to a functional economy and a happy population, especially in the last decades, due to the robust world economic expansion, population growth, and the increasing awareness that the energy resources required to power these needs are finite (Ayoo, 2020). Avoiding supply disruptions, reducing dependence on fossil fuels, energy suppliers, and energy routes has therefore been the main objective of the energy policies of the world nations, and of many international organizations, as in the case of the European Union. As such, the EU’s energy (security) policy has, since its emergence, given huge importance to the dimensions of energy security that seek uninterrupted energy flows, reduced dependence on fossil fuels and diversification of routes and suppliers, and that is why the focus of the present dissertation is not the EU’s energy policy (corresponding to an inward-oriented approach, often underpinned by an economic analysis), but rather about the EU’s energy (security) policy (von Hippel, Suzuki, Williams, Savage, & Hayes, 2010). Moreover, the debate surrounding the term EU energy security, both in academia and at the EU policymaking level, has frequently corresponded, in its shape and focus, with EU dependency on natural gas imports from Russia (Ayoo, 2020; Russel, 2020); in addition to the more recent emphasis on the EU dependency on other energy sources such as crude oil, or of the EU's capacity to import LNG, or to produce renewables, as well as on EU relations with other important energy trading partners, such as Iran, the United States, Saudi Arabia, Norway, and others (Bahgat, 2010; Al-Shalabi, Cottret, & Menichetti, 2014; Conley, Ladislaw & Hudson, 2015; European Parliament, 2016). Nevertheless, the EU’s dependency on natural gas, EU-Russia gas trade relations, supply disruptions in Ukraine and Belarus, and Gazprom’s monopolistic domain of the EU’s gas market, are the main discussions surrounding the EU’s energy security (Ayoo, 2020; Russel, 2020) and, therefore, they are precisely what this dissertation’s analysis to the EU’s energy (security) policy is going to be looking at. The EU is the world’s biggest energy importer. The fraction of imported natural gas, in the EU's overall energy consumption, has dramatically increased during the last decades. However, this trend took an unexpected turn in December 2019 due to the Covid-19 crisis. Since this period onwards, think tanks that focus most of their research on natural gas, as it is the case of the Natural Gas programme of the
3 Oxford Institute for Energy Studies , have argued that during the year of 2020, Gazprom’s pipeline supplies going to Europe have fallen down by 16% as a result of the pandemic, which has led to an intense reduction of the debate surrounding the EU’s energy (security) in the gas sector, as well as the Russian role in it (Stern & Fulwood, 2020). Moreover, from December 2019 onwards, the EU’s political agenda became completely dominated by discussions surrounding the Covid-19 crisis. For instance, today, one year later after the pandemic started, discussions led by the current Portuguese Presidency of the Council of the European Union have continuously focused on planning the post-Covid 19 world (Dennison, 2020). This, together with the reduction in gas supplies flowing from Russia towards Europe since the beginning of 2020 until now, are the reasons why the empirical analysis of this dissertation is limited to December 2019. Nonetheless, natural gas is still a critically important energy source and thus deserves continuous academic attention: it is the second most required source of energy within the EU (right after crude oil), and the trend is that its demand further increases (Helén, 2010; Fernandes & Camacho, 2019). According to the International Energy Agency (IEA) in 2019, while the EU’s own gas production is declining, the EU will have to seek additional natural gas imports of 162 billion of cubic meters (bcm) by 2025 to cover up to one-third of its anticipated consumption. At the same time, Russia is well placed to remain the primary source of gas into Europe (Zeniewski, 2019). Indeed, the biggest supplier of natural gas to the European Union is Russia. From the total amount of natural gas that the EU imported in 2019, 44.7 % came from Russia, and in 2020, 30.3% came from Russia too, being that 22 to 28% of that same gas is consumed directly by EU member-states. Contrarily to oil, natural gas is extremely difficult to be transported in tanks and, as such, the most efficient way to transport it is through pipelines (Eurostat, 2020). The existence of pipelines underscores the importance of bilateral relations, as the two respective parties in question are necessary for point-to-point transactions in which the same amount of gas at the entry point of the pipeline needs to be the same at the end point. As a result, most of the time, natural gas markets present a bilateral character, being that in the EU case, the natural gas supplied from Russia circulates mainly through Gazprom’s pipelines (Fernandes & Camacho, 2019).
4 Since the beginning of the 90’s, the EU has recognized the volatility of its energy market and its high dependence on Russian natural gas. To counter this trend, the EU has publicly shown its will to develop the European continent’s energy security, affirming that an energy (security) policy and an integrated energy market could promote diversification of the EU’s natural gas supplying sources and a consequent greater independence from the Russian market. During the 70’s, the EU started developing strategies that promoted energy cooperation at the national level; however, the beginning of the most significant progresses towards an energy convergence at the European level started in the 90’s (Herranz-Surrallés, 2017). The idea of an energy strategy at the European level was reinforced through the political agendas of the Earth Summit 1 , in Rio de Janeiro (1992), and the Kyoto Protocol 2 (1997). However, it was only in 2007 that the EU member-states decided to legally commit themselves to establish coordinated activities regarding the development of energy policies – a commitment that was brought by the Comprehensive Energy Action Plan , which underlined : “[…] the implementation of the necessary legislation for the creation of an internal electricity and gas market; the need to contribute to security of supply, in the event of an energy supply crisis, by diversifying energy sources and transport routes; and the development of an EU common approach to external energy policy by intensifying energy relations with strategically important regions” (Council of the European Union, 2007). In 2009, the Lisbon Treaty accredited the EU with the necessary competences to be able to legislate and adopt legally binding acts in the domain of energy (security) policy (Biesenbender, 2015). And it is since then that the EU has been fostering the integration of EU member-states in an EU-lead energy 1 During the Earth Summit, the United Nations member-states recognized the need to redirect international and national plans and policies to ensure that all economic decisions fully took into account any environmental impact. The summit produced results; it made eco-efficiency a guiding principle for business and governments alike and thus underlined the need to develop alternative sources of energy that could replace the use of fossil fuels that are linked to global climate change (United Nations, 1997); 2 The Kyoto Protocol was an international agreement with the objective with the aim to reduce carbon dioxide emissions and other greenhouse gases. The protocol was based on the principle of common but differentiated responsibilities – it acknowledged that individual countries have the responsibility to combat climate change and reduce emissions. This agreement points out the danger of the excessive use of fossil fuels (United Nations, 2019).
5 (security) policy framework – which has been done with the creation of new diplomatic instruments that serve the objective of increasing the security of supply of natural gas (Herranz-Surrallés, 2017). Therefore, the following research intends to analyze how the EU has been (re)formulating its energy (security) policy in the field of natural gas – a resource that is essential for the security of the EU member-states – before a Russian government that presents enormous challenges to cooperating with the EU on the trading of the resource (as a way to maintain its market dominant position). The relevance of the following research that analyses the EU’s energy (security) policy in the field of natural gas, stems from the central role of the latter to the EU and the implications of its shortages. After Russia’s cut-off of the gas supply to Ukraine in 2006, EU energy (security) policy became a highly important debate in both the policymaking circles, as well as in the academic fields of European Studies and International Relations, and among the population of the EU overall. Since the 1970’s until actuality, the EU member-states had not ever suffered any interruption to their access to natural gas. This trend changed during the winter of 2006, when the dispute between Ukraine and Russia led to a disruption that affected the natural gas supplies of Hungary, Austria, Slovakia, Romania, France and Poland. Such an event demonstrated how dependent the EU was on a single source of gas, from Russia, and on a single transit route, from Ukraine (Maltby, 2013, p. 438). By showing how vulnerable the EU security of supplies could be, this gas disruption demonstrated the need for a strong common European energy (security) policy. According to an analysis performed by the European Parliamentary Research Service, around half of the EU citizens would like the EU to play a bigger role and to intervene more in energy supply and security than it does currently. The same study stipulates that a more physically and economically integrated market would be able to generate annual gains of €250 billion (Wilson & Dobreva, 2019). In addition, energy related expenditure is spread across different parts of the EU budget, which demonstrates how important the control of energy resources is for the EU’s economy. In this regard, energy has been established as one of the main priorities of the European Union (European Commission, 2020). The following argumentation leads us to believe that a common energy (security) policy has a high economic potential for both the EU and its member-states. However, this potential is admittedly underused due to a high dependency on Russian gas (European Parliament, 2017). Analyzing how the
6 EU has developed its energy (security) policy under conditions of high market dependence will allow to draw considerations about the best future strategy, looking to answer to how the EU can guide itself through conditions of natural gas scarcity or increase of prices, which may lead to a reduction of its dependence and to a strengthening of the market. Finally, as the EU energy (security) policy tends to react to the challenges imposed by Russia to the EU’s natural gas market, understanding how the EU has formulated its energy (security) policy and how it has positioned itself, also allows for an insight into the complex Russian external energy policy towards the EU (Proedrou, 2012; Szulecki, 2018). Russian energy policy, often described as a purely geopolitical strategy (Favennec, 2011), something reflected in the special treatment of Gazprom by Moscow, has not abstained from the use of weaponized interdependence, a condition under which Russia uses energy as a way to maximize its presence in the global economy and in the global politics arena (Korteweg, 2018; Krutikhin, 2021). However, it is too simplistic to look at Russia's energy policy from a geopolitical perspective only, since it also is determined by market and economic ambitions (Romanova, 2016). Moscow has used legal and technocratic instruments to promote its market presence and to mainly deal with one of the last rounds of EU’s energy market legislation – mostly known as the third energy package – which conditions Gazprom’s activity in the EU’s natural gas market and, therefore, the company’s capacity of generating revenue through its monopolistic position in the EU’s energy market (Goldthau, 2015; Romanova, 2016). By looking at the complex Russian energy policy towards the EU’s natural gas market, the following study will allow a better understanding of how the EU has formulated its energy (security) policy. 2. Literature Review When analyzing the state of the art of the contemporary energy (security) policy of the EU, it is possible to distinguish several literature streams, which correspond to different disciplinary areas, ranging from European Studies (Natorski & Surrallés, 2009; Maltby, 2013; Jegen, 2014) and including European Law (Proedrou, 2012; Bochkarev, 2019; Hancher & Marhold, 2019), Energy Studies, as well as the International Political Economy perspective (Kirchner & Berk, 2010; Goldthau & Sitter, 2015; Prontera, 2017), to environmental studies (Götz, 2018; Szulecki, 2018); and International Relations (Stern, 2006; Westphal, 2009), predominantly from the perspective of EU-Russia relations (Romanova, 2016; Siddi, 2020), and Securitization (Wolczuk, 2016; Heinrich, 2017; Szulecki, 2018; Godzimirski & Nowak, 2018).
7 While some authors working on the intersection of European Studies and European Union Law/Energy Studies that have analyzed EU energy (security) policy have placed an emphasis on the internal market aspect of it (Maltby, 2013), others have focused on its external dimension (Stern, Pirani, & Yafimava, 2015), and yet others have emphasized its environmental dimension (Szulecki, 2018). Authors have also paid attention to the evolution of this policy from the international political economy perspective (Prontera, 2017), as well as to the impact of specific events on both the development of EU’s internal energy market (Jegen, 2014), and on the external dimension of the EU’s energy (security) policy (Pointvogl, 2009; Braun, 2011; Goldthau & Sitter, 2015). Contributions focusing on the turning points of the evolution of the EU’s internal market, include the studies of Oana Poiana on the European Energy Community (2006), of Michal Natorski & Anna Herranz-Surrallés on the First Strategic Review (2007), and of Maya Jegen on the Lisbon Treaty (2009). As for the contributions identifying turning points in the development of the external dimension of the EU’s energy (security) policy, these are, for instance, the studies of Matteo Verda on the Second Strategic Energy Review (2008), which saw the EU proposing its own gas corridor to diversify supplying sources, and of Jonathan Stern, Simon Pirani, and Katja Yafimava on the Third Energy Package (2009), which defined new rules for third countries’ companies and pipelines accessing the EU’s gas market. There is also a specific sub-stream focusing on the events that were critical to the objective of incorporating environmental concerns into the EU’s energy (security) policy, including the contributions of Kacper Szulecki on the Energy Union (2015), or of Martin Russel on the Green Deal (2019). Also, in the field of European Studies and Energy Studies, some authors have placed an emphasis on the international political economy of energy, as we already mentioned. Thus, Andreas Goldthau, Nick Sitter, and Andrea Prontera have discussed that the EU has sought to shape the international political economy of gas not by pursuing its own economic interests, but by building an EU energy market constituted by rules and regulations that are attractive to global energy players. Furthermore, these authors also have also ascertained that the EU has been managing the international political economy of gas through the use of its economic power – a strategy that is based on the application of economic power, as for example financial investment, in order to support the European natural gas industry due to its economic and political importance to Europe.
8 2.1. European Studies 2.1.1. Contributions in the field of environment studies The largest share of the most recent literature on European Studies corresponds to the sub-stream of environment studies. Representative of this sub-stream is the contribution of Kacper Szulecki and Julia Kusznir, which has focused on the importance of transiting to cleaner energy, while arguing that this process is associated with the process of promoting security of the European energy sector. The widely referred concept of ‘Energy Transition’ is thus underpinned by the idea of renewables as the technology of the future and as an important complement to natural gas (Szulecki & Kusznir, 2018). Thus, authors like Marco Siddi , while placing an emphasis on the ‘green turn’, have been more specific in explaining the latter’s role in reducing the EU's dependence on Russian gas. Accordingly, the author has argued that investment in renewable energy, coupled with investments in energy efficiency, can be an innovative and climate-friendly way of reducing external dependencies (Siddi, 2016). 2.1.2. Energy studies literature Another big share of literature of European Studies has focused on the sub-stream of energy studies that is associated with the process of European integration in the energy sector. Here, Michal Natorski and Anna Herranz-Surrallés have discussed the different ways in which the EU has been trying to develop its energy (security) policy, against the background of the EU’s dependence from Russia. These authors have extensively written about how the EU has been using energy diplomacy tools to promote its authority and regulatory capacity in the energy sector. In this regard, they have, for example, analysed the European Neighborhood Policy, presenting the new EU partners as new opportunities for the EU’s energy security (Herranz-Surrallés, 2017). Most authors from the European Studies stream (including the sub-stream of Energy Studies) as Thomas Maltby, or Andreas Goldthau , or Nick Sitter, have frequently highlighted an idea that is central to the EU’s energy (security) policy: on the one hand, there is a supranational role that the European Commission has assumed to develop the EU’s energy (security) policy, while that on the other hand, there is an intergovernmental logic that many times remains at the core of EU energy policy-making (Maltby, 2013; Goldthau & Sitter, 2015).
15 Karatyna Wolczuk, who produced extensive literature on the energy (security) policy of the EU and mostly approached it from a securitization perspective, made an important contribution in what regards EU-Ukraine energy relations. Wolczuk has shown that Ukraine is not only a strategically important energy partner of the EU (this is also the case of other post-Soviet countries that participate in the European Neighborhood Policy (ENP) and in the Eastern Partnership (EaP), namely Azerbaijan, Armenia, Belarus, Georgia and Moldova). These countries, as well as Ukraine, are energy-poor and “their asymmetric energy interdependence with Russia is compounded by a pipeline network and location of refineries that are completely structured around supplies from Russia'' (Wolczuk, 2016, p. 114). Thus, Russia’s interest in these countries lies in perpetuating their energy dependence, not only because of the revenues Russia will get from exports, but also because of the political leverage this provides over those countries and the EU itself. At the same time, she argues, the EU’s interest in these countries lies in the promotion of security of supplies, routes diversification, market principles, and energy efficiency, which allows these countries (as they are an important component of the EU’s energy market), and the EU itself, to lower their dependence on Russian energy (Wolczuk, 2016). Alternatively, some authors see a window of opportunity in EU-Russia energy relations. Tatiana Romanova, for instance, states that the political agenda and the legal and institutional conditions that regulate the EU-Russia energy relations have evolved significatively. Such a dynamic results from the fact that Brussels and Moscow have acted towards the creation of an energy cooperation agenda that is based in a strategic planning of the European energy market. This cooperation has been promoted through the creation of transnational dialogue channels, she argues, which has contributed for a depoliticization of the issue. However, Romanova remarks that the legal aspect of this dialogue has been designed with a certain degree of procrastination, with Russia trying to maintain its dominant position at all costs 5 (Romanova, 2013). 2.2.2 Contributions adopting the energy securitisation approach Still in the stream of International Relations, there are some other authors who approached the EU energy (security) policy from the securitization perspective, as already mentioned above. In this regard, Andreas Heinrich has argued that the concept of ‘energy security’ became a core element of the EU’s energy debate in 2006, reflecting the changes in the world energy system, and reaching the top of the 5 Nonetheless, it must be noted that a very positive context of legal cooperation has gained form in the Baltic Sea.
16 EU’s political agenda. This period was characterized by a conjunction of political and economic factors that were affecting the security of supply in many EU member-states. These political and economic factors were the result of the Russian-Ukrainian natural gas crisis and Russia’s temporarily cutting the flow of energy supplies to Ukraine in 2006, thereby affecting some EU countries (Heinrich, 2017). In his turn, Marco Siddi has argued that this interruption of the flow of energy supplies was a move of political instrumentalization of energy resources, aimed at achieving Russia’s foreign policy objectives. Nevertheless, both authors have noted that this cut-off did not have a true impact on any EU memberstate in terms of their immediate energy consumption, but rather in triggering concerns within the EU about the consequences that another potential disruption of energy supplies could bring to its consumers, economic prosperity and political security. In parallel, one cannot forget another conjunction of events that EU representatives have been already alerting for as ‘serious risks’: fast growing global demand for energy, increasing dependence on imports from unstable regions, rising energy prices and global warming (Siddi, 2018). Furthermore, on the sub-stream of energy securitisation, Stephanie C. Hofmann and Ueli Staeger have argued that after the 2006 disruption, the European Commission and some member-states engaged in repeated collective securitisation moves of the EU’s energy (security) policy directed in particular at Russian gas exports to the EU (Hofmann & Staeger, 2018). Also, Thomas Maltby, who, as we have seen, focus most of his research on the stream of European Studies, has made in them many important remarks regarding securitisation of the EU’s energy (security) policy. According to him, what really changed the way EU member states see Russia as a partner was the serious disruption in gas supplies that occurred in January 2009. At that point, negotiations between Russia and Ukraine failed and, as a result, the Russian government cut natural gas supplies from flowing to Ukraine. The gas disruption lasted for 20 days, with the Czech Republic, Poland, Hungary, Romania, Bulgaria, and Slovakia suffering gas supply reductions (ranging between 5 and 30 per cent). This disruption was seen by many experts as a ‘wake-up call’ to the EU memberstates for the need to reduce their dependence on Russian natural gas, the author argues (Maltby, 2013). As a result of the 2006 and 2009 energy crisis, a new dynamic arose:
17 “[…] the European Commission responded by continuing to advocate a community internal and external energy policy, and this exogenous shock proved a catalyst for top-down pressure on policy units to formulate policies specifically related to addressing the issue of energy security” (Maltby, 2013, p. 438). Andreas Heinrich and Kacper Szulecki have argued that after the 2006 and 2009 crisis – which have contributed to the securitization of the energy debate in the EU – a significant progress has been registered, not only in terms of reinforcing the EU's energy security (with regard to access and supply of natural gas), but also in terms of reducing the number of member-states that depend solely on Russia as a natural gas supplier. Moreover, some progress was also accomplished in the reinforcement of European energy infrastructure and in finding new possible suppliers (Heinrich, 2017; Szulecki, 2018) Furthermore, Alan Riley, which we have interpreted to approach the EU’ energy (security) policy from the securitisation perspective too, has argued that the 2006 and 2009 energy crisis have shown the EU how difficult it was to rely on Russia as a trustworthy energy supplier and on Ukraine as a transit country. Additionally, Riley has highlighted that Ukraine is one of the most strategically important gas routes into the EU as it transports gas from the EU’s main supplier and as it is able to transport huge amounts of it (Riley, 2019). 2.3. Literature concerning Nord Stream and Nord Stream 2 Due to the above-mentioned EU fears in relying on Russia as a trustworthy supplier and on Ukraine as a transit country, the idea of the EU diversifying its transit routes gained a lot of traction within the EU energy security debate. That is how the Russian Nord Stream pipeline emerged as an alternative that, according to Henry Helén, Maria Raquel Freire and Roland Götz, would bypass the politically unstable Ukraine and give Russia an opportunity to show the EU that if it was not dependent on Ukraine’s transit system, then Russia could be a trustworthy supplier of natural gas (Helén, 2010; Götz, 2018; Freire, 2019). Nord Stream actually became such an important route for the EU’s gas system that there is a whole section of literature – ranging from European Studies to International Relations – dedicating its attention to it (Balzer, 2011; Värk, Nutt, & Martin, 2011; Stern, Pirani, & Yafimava, 2015; Fischer, 2017; Heinrich, 2017; Götz, 2018; Günther, 2019).
18 It has been noted that in almost all streams of literature that analyze Nord Stream, the geography of the pipeline has been particularly highlighted 6 (Helén, 2010; Värk, Nutt, & Martin, 2011; Heinrich, 2017). Common to all streams of literature that study the pipeline is also the argument of its important economics 7 (Helén, 2010; Balzer, 2011; Värk, Nutt, & Martin, 2011; Stern, Pirani, & Yafimava, 2015; Heinrich, 2017). With the creation of this project, Heinrich argues, Germany intended to satisfy its growing gas demand. He has also noted that the efficiency of Nord Stream in satisfying such demand became evident between 1980 and 2007, when German imports on Russian-supplied natural gas had a remarkable increase of 25%, making Germany the biggest export market for Russian gas exports. However, it is worrying that, taking into account that Germany does not maintain a strategic gas reserve, Nord Stream made it vulnerable to disruptions in supply (Heinrich, 2017). Finally, it has been noted that the discussions about the pipeline have mostly taken place on the substream of EU energy law (Stern, Pirani, & Yafimava, 2015; Fischer, 2017; Götz, 2018; Günther, 2019). According to this sub-stream, while geopolitical considerations still influence the debate about Nord Stream, in the EU, the topic has shifted to a much more legal discussion about how the EU can manage the pipeline through energy market regulation (Stern, Pirani, & Yafimava, 2015; Fischer, 2017). For instance, several contribution address how the EU has used the third energy package’s third-party access and unbundling requirements to manage the pipeline to its own political interest, or how Gazprom has reacted to these requirements in order to safeguard its interests in the European gas market (Stern, Pirani, & Yafimava, 2015; Heinrich, 2017). Authors of the same sub-stream have also dedicated themselves to analyzing the impact of the subsequent Nord Stream 2 on the EU’s energy (security) policy (Fischer, 2017; Götz, 2018; Günther, 2019. 6 According to it, Nord Stream runs from Vyborg, Russia, to Lubmin, Germany, crossing the Baltic Sea and the Exclusive Economic Zones of Russia, Finland, Sweden, Denmark and Germany, as well as the territorial waters of Russia, Denmark and Germany (Helén, 2010; Värk, Nutt, & Martin, 2011). 7 It has been noted that the 1200-kilometre pipeline is one of the most expensive projects of its kind and is the result of a joint venture between Gazprom, which controls 51% of the shares, the German Wintershall Dea and E.ON, with a 15.5% share each, and the Dutch Gasunie and the French Engie with a 9% share each. The pipeline pumps annually about 55 bcm of gas to Germany and other EU countries, and in 2018 the total volumes of gas deliveries to Germany amounted 58.5 bcm (Helén, 2010, p. 28; Heinrich, 2017).
19 According to Roland Götz (2018), this pipeline, which follows the exact same route as Nord Stream, is part of the Russian strategy to increase the capacity of its Baltic Sea pipelines in order to reach Europe with lower prices and more gas. He further argues that this route will allow Russia to maintain itself almost totally independent of Ukraine’s energy transit monopoly, and to deepen its energy trade with Germany and the EU (Götz, 2018). Nevertheless, most authors discussing it, have argued that the construction of the pipeline has raised many concerns for the international community because of the negative impact that it will have for the EU’s energy security and for Europe’s environment. In this regard, it has been deeply highlighted that Nord Stream 2 will deepen the EU’s dependence on natural gas and, although the EU and many member-states are aware of it, the commercial interest of some member-states like Germany, France, or the Netherlands in the execution of the project has been determinant in moving it forward (Fischer, 2017; Götz, 2018; Günther, 2019). Indeed, although Nord Stream 2 has been sanctioned by the EU and the US, most academic literature discussing it already accepts it as a future reality of the EU energy market, arguing that in the EU’s political agenda, the question is no longer whether the construction of the pipeline should be stopped, but rather how the EU will use energy market regulation to manage it after its construction (Fischer, 2017; Götz, 2018; Günther, 2019). As we can see, Russia-Germany energy relations are intertwined with the Nord Stream and Nord Stream 2 debate and the impact it has on the EU’s energy (security) policy. As such, many authors that have approached the EU’s energy (security) policy from the perspective of EU-Russia relations have regularly studied the role of the two pipelines and placed special emphasis on Germany-Russia relations (Helén, 2010; Proedrou, 2012; Siddi, 2020). Marco Siddi, for instance, has argued that the close Russo-German energy relations result from strong mutual economic interests (Siddi, 2020), Furthermore, Filippos Proedrou has explored this issue by arguing that not only Germany, but also France and the Netherlands have huge national corporate interests associated with the activities of both pipelines in European waters 8 . According to him, Russian natural gas is supplied to Germany, and then to France and the Netherlands, under Gazprom export’s contracts with the national companies of these member-states, as for example, in Germany’s case, Uniper which is Gazprom’s oldest partner on the German market (Proedrou, 2012). 8 The German Wintershall Dea and E.ON are Gazprom’s biggest foreign shareholders and have been granted access to the Russian energy sector, where only a few other western companies operate, namely Dutch Gasunie and the French Engie (Proedrou, 2012).
20 Henry Helén and Filippos Proedrou have noted that due to its interest in the Russian energy sector, Germany has, during the last decades, shaped the EU’s energy (security) policy towards Russia (Helén, 2010; Proedrou, 2012). Helén has further noted that at the core of German interests in the Russian energy sector, are the activities of Uniper. Through close relations with Gazprom, the German Uniper has direct access to Russian energy resources and thus strengthens its positions domestically and internationally as the trader of Russian supplied gas. Finally, Proedrou has stated that at the core of Russian interests in the German energy sector, lies Gazprom’s interests to, through Nord Stream, ensure Germany’s dependence of Russian gas and secure close economic and political cooperation between the two countries. But most importantly, according to Henry Helén, Nord Stream: “[…] rids the EU bound Russian gas of its dependence on transit countries, with which, as has been discussed, Russia has variably volatile relations. A direct pipeline connecting Germany and Russia also decreases, to an extent, the importance of the transit countries to the EU, as gas will flow regardless of potential strained relations between these and Russia” (Helén, 2010, p. 28). Moreover, Helén has noted that by avoiding the Eastern European energy transit system, Gazprom’s Nord Stream enables Russia to affect the energy security of Belarus and Ukraine, therefore altering the geopolitical environment of the EU’s eastern region, the author adds. Nord Stream can also affect the energy security of other EU member-states such as Poland and the Baltics as it will surely favor gas volumes transited through its system instead of the Polish or the Baltic ones. It follows that by undermining energy cooperation between Western and Eastern Europe, Moscow is, through Nord Stream, able to compromise the EU's efforts to develop a common energy (security) policy (Helén, 2010, p. 29). In light of this, other authors, as for example Tolga Demiryol, have argued that Germany’s national energy interests diverge from those of the EU member-states who are dependent on Russian natural gas, because contrarily to Germany and other major importers, these states do not have bargaining power. Demiryol explains this market dynamic by stating the following: “Countries with larger natural gas imports have an advantage that energy-dependent countries with smaller markets lack: bargaining power vis-à-vis suppliers. By the sheer size of their markets, energy consumers like Germany can negotiate on prices and contractual terms,
21 whereas the smaller yet energy-dependent economies in the Baltics and Central Europe do not possess comparable bargaining power” (Demiryol, 2014, p. 59). Thomas Maltby has also been vocal about what Nord Stream represents for the process of European integration. This author, who has produced extensive literature for the European Studies’ stream and Energy Studies’ sub-stream, tells us that the national interests of countries like Germany over Nord Stream mirrors the predominance of an intergovernmental logic over a supranational one when it is time for energy policy-making in the EU. Maltby has argued that the decision of some EU memberstates (most pronouncedly Germany) to have this pipeline developed, as we could already see, shows that when it is time for decision-making in EU energy (security) policy, member-states preferences within the EU prevail, as well as member-states’ security and economic interests over EU objectives of diversification of supply sources (Maltby, 2013, p. 442). As we can see, the stream of literature that studies Nord Stream and Nord Stream 2 has often intertwined with different European Studies’ sub-stream of Energy Studies, and even with the International Relations’ sub-streams of securitization and EU-Russia relations. 2.4. International Political Economy On this intersection of different currents of literature, authors like Andrey Belyi have argued that the EU’s attempt to develop ties with other regions has been subject of interest of several scholars, as it represents one of the main strategies the organization has adopted to demarcate itself from its growing dependence of Russian gas and to shape the international political economy of energy to its own favor. The European Energy Charter (1991) and its ratifying treaty (1994) are a good example of this EU attempt to demarcate itself from Russia, but also of the Russian try to boycott this EU-led process, he notes. The European Energy Charter intended to integrate the Russian and Eastern European energy sectors into the European energy market after the Cold War. The Charter had as its basis the establishment of a relationship of multilateral cooperation and dialogue. However, Belyi clarifies that Russia did not ratify the Treaty, as Gazprom was convinced doing so would make the company lose control over the European energy market. This because the freedom of energy transit established by the treaty involved the access of central Asia energy producers to the European market, which could possibly result in Gazprom losing control of it (Belyi, 2009).
22 Derek Averre has argued that although some Baltic, Central and Eastern European countries do not have the same interest and bargaining power as Germany, they are regarded by both the EU and Russia as strategically important regions from the geopolitical and the energy infrastructure point of view. As such, according to Averre, Russia has, at all costs, tried to maximize its structural power in its shared neighborhood with the EU in order to influence and shape the way in which it is perceived externally. In other words, a strategic control of the shared neighborhood – which possesses a great potential for energy production and transit – allows Russia to have a key role in the production and transport of natural gas to the EU, therefore limiting the organization’s external capabilities. And here, Averre has highlighted that all the demographic, social and economic legacy that Russia shares with its Eastern neighbours grants Moscow a strategic advantage when interacting and developing relations with these countries. However, he notes that these relations have been put at stake due to an increasing engagement of the EU with this region in what regards the creation of bilateral energy security relations (Averre, 2009). Andrea Prontera, approaching the EU’s energy (security) policy from the European Studies and International Political Economy perspective, has argued that engagement with other countries that can offer the EU added value in the field of natural gas is becoming an increasingly common strategy. According to him, not only the EU has been putting in place efforts to enlarge its internal energy market to Eastern Europe, but also to third countries that can help the EU demarcate itself from the growing Russian pressure (Prontera, 2017). Prontera and Heiko Prange-Gstöhl have further argued that integration in the European energy market interests, above all, to third countries with no or only a vague membership perspective – essentially, candidate countries to whom the EU cannot fully apply the “conditionality” approach; countries that integrate the European Neighborhood Policy are a good example (Prange-Gstöhl, 2009; Prontera, 2017). These contributions are often drawing on Europeanisation and International Political Economy studies, by investigating the countries that aim at deeper integration with the EU because, among other reasons, they want to benefit from economic exchange with the organization without having to be subject to the same legislation as member countries. Anyways, if these countries want to integrate the European energy market, they must be subject to EU’s energy legislation, Prange-Gstöhl argues. In this regard, the EU has, for example, used the Energy Community Treaty to export its energy norms and regulations (Prange-Gstöhl, 2009). Moreover, authors from the sub-stream on the international political economy of energy have also discussed the process of European integration. According to Emil Kirchner and Can Berk, the existence
23 of asymmetries in the energy preferences of different EU member-states makes the involvement of the European Commission in the international political economy of energy very complicated. While it is expected that national preferences will keep shaping the EU’s energy (security) policy, at the same time factors such as the liberalization of energy markets, the importance given to a common energy (security) policy, efforts to introduce a super grid of power supplies across the EU, and the spin-off from environmental policy keeps gradually promoting the development of a common energy (security) policy within the EU. Thus, it can also be argued that the growing desire for energy security between memberstates might change the culture of fragmentation between EU member-states towards energy (security) policy (Kirchner & Berk, 2010,). 2.5. Concluding remarks After analyzing the current state of the art, it could be concluded that the culture of fragmentation between EU member-states is a topic that has been transversal to most streams and sub-streams studying EU energy (security) policy. As such, understanding this culture of fragmentation has been essential for the purpose of this dissertation. Against the background of the reviewed state of the art, this dissertation will try to provide an answer to its research question by, on the one hand, assessing the EU’s approach (based on the engagement and cooperation with different actors) that allows to demarcate itself from its dependence on Russian gas, which necessarily implies mitigating the aforementioned fragmentation; and by, on the other hand, assessing Russia’s own evolving approach (based on the engagement and cooperation with specific actors within the EU, such as Germany, rather than the EU itself) to this EU attempt do demarcate itself through its energy (security) policy. This is to say, the (re)formulation of the EU’s energy (security) policy will be studied by keeping in mind Russia’s evolving role in the EU’s natural gas sector and how the EU reacted to it. Ultimately, this dissertation will try to answer this research question by using an analytical framework based, on the one hand, on the use of Goldthau and Sitter’s idea of the EU’s three different types of power in the development of its energy (security) policy: normative, regulatory, and economic and market power; and on the other hand, on the use of the supranationalism versus intergovernmentalism debate, eventually revealing the EU’s dual take-approach that is transversal to the whole development of the EU’s energy (security) policy (independently of the type of the power that the EU is using).
24 The two following ideas will be kept in mind: (1) the progress achieved in the development of the internal and external dimensions of the EU’s energy (security) policy was achieved due to an external actor and external events – Russia and a series of events that were triggered by Russia. Furthermore, (2) when these external ‘windows of opportunity’ 9 appear and the EU must react, it reacts by acting either as a normative, regulatory, or economic and market power – a reaction that is always shaped by a dual-take approach. 3. Analytical Framework: conceptualizing EU energy (security) policy 3.1. EU (Normative, Regulatory, Economic and Market) Power While there are multiple approaches to EU energy security, it is possible to distinguish three different perspectives that characterize the way in which the EU has promoted its energy (security) policy (Natorski & Surrallés, 2009; Pointvogl, 2009; Kirchner & Berk, 2010; Proedrou, 2012; Maltby, 2013; Jegen, 2014; Szulecki, 2018; Siddi, 2020). These ideas have been discussed in detail by several authors, as demonstrated above. However, Andreas Goldthau and Nick Sitter have been especially successful in systematizing their relevance to the EU’s energy (security) policy. According to them, three different perspectives on EU energy security are intertwined with three different types of ‘power’ that the EU applies when formulating its energy (security) policy. These three different ‘powers’ are the ‘EU Normative Power’, the ‘EU Regulatory Power’, and the ‘EU Economic and Market Power’ (Goldthau & Sitter, 2019). Accordingly, the first of the dimensions distinguished by the two authors is the EU Normative Power, which refers to the capacity of the EU to build and manage markets. This fist type of EU power is neutral as to the specific interests of the EU in the energy sector vs those of its main trading partners. This means that when the EU formulates its energy (security) policy, it is not pursuing its own economic interests, but rather building rules and regulations that are intended to be attractive to energy-oriented global players, as it is the case of Russia (Sjursen, 2006). According to Goldthau and 9 The expression ‘windows of opportunity’ was retrieved from Michael Natorski & Anna Herranz-Surrallés’ article: “Securitizing Moves To Nowhere? The Framing of the European Union Energy Policy”, Journal of Contemporary European Research, Vol. 4, No. 2, pp. 74. According to the authors, ‘windows of opportunity’ refer to opportunities to develop the European Energy Policy that were brought about by external events such as disruptions to the security of energy supply of some European countries.
31 In terms of internal parameters, what is considered to be problematic and that, naturally, will be the object of study of the following dissertation is the way in which the EU has (re)formulated its energy (security) in relation to Russia’s evolving role in its gas sector. In terms of spatial framing, this dissertation analyzes the (re)formulation of the EU’s energy (security) policy with regard to the transference of energy between Russia and the EU through Nord Stream, Nord Stream 2, and the Ukrainian and Belarusian transit systems. In terms of data-collection, this dissertation used three main sources: primary sources, secondary sources, in-depth interviews and group debates. Regarding primary sources, we have mostly used official EU documents, as treaties (primary legislation), regulations, directives, and decisions (secondary legislation), as well as recommendations and opinions, and parliamentary debates. These sources were retrieved either from the Official Journal of the European Union, or from the official web site of the European Union. In order to interpret the above-mentioned primary sources, we have used several secondary sources. The main secondary sources were articles from scientific journals from the International Relations, European Studies and Political Science fields, most notably from Energy Policy , European Energy Journal , Journal of European Public Policy , Journal of Energy & Natural Resources Law , Journal of Contemporary European Research , Eurasian Geography and Economics , Europe-Asia Studies , Journal of Common Market Studies , and International Comparative Jurisprudence . Furthermore, we have used three academic contributions that provided very important insights, namely Energy Security in Europe: Divergent Perceptions and Policy Challenges , edited by Kacper Szulecki; EU Energy Security in the Gas Sector: Evolving Dynamics, Policy Dilemmas and Prospects , edited by Filippos Proedrou; Russian Energy Security and Foreign Policy , edited by Thomas Gomart and Adrian Dellecker ; and finally the Handbook of Energy Governance in Europe , edited by Michèle Knodt and Jörg Kemmerzell. Additionally, it shall also be remarked that the articles and policy papers from some research centers and think tanks were also very relevant in terms of providing background information, namely the ones of the Oxford Institute for Energy Studies (OIES), the German Institute for International and Security Affairs (SWP), the German Marshall Fund of the United States (GMF), and the Institute of International Affairs (IAI). Finally, we have also conducted two anonymous interviews: one with a researcher from a Brussels-based think tank that focus on energy policy, and another with an Energy Official from the Permanent Representation of an EU member-states in Brussels. And, in addition, it must be noted that from February 2019 to July 2020, the author worked as a Program Assistant from the Brussels office of the German Marshall Fund of the United States. This professional experience was
32 of great relevance for the purpose of this dissertation as it gave the author the opportunity to exchange ideas with very experienced researchers on the field of EU energy (security) policy; it gave the author the opportunity to dialogue with experts, treated here as anonymous sources that were involved in the process of negotiation of the European Energy Charter; and it gave the author the opportunity to exchange ideas and obtain information about EU energy (security) policy on off-the-record roundtables with EU officials. This last opportunity has been particularly important, as there was a particular off-therecord roundtable that the author organized at the GMF office in Brussels on the 30th of May of 2019 that provided great insight for this dissertation’s dual-take approach argument. This roundtable, entitled “EU Energy Security in the Gas Sector” , had the participation of relevant speakers: Professor Alena Vieira, the supervisor of this dissertation and an expert on EU-Russia relations, a EU Official from the Directorate-General of Energy, and a former US Diplomat. This dissertation will apply the analytic narrative method, which refers to a method of study that has appeared at the boundaries of history, political science, and economics. This method purports to explain specific historical events by combining the usual narrative way of historians with the analytic tools that economists and political scientists apply. Essentially, and according to Bates, Greif, Levi, Rosenthal and Weingast, this method looks at philosophical and historical explanations (in this case of the evolution of the EU’s energy (security) policy), and by checking their discursive consistency and narratologies, provides explanations (Bates, Greif, Levi, Rosenthal, & Weingast, 2000). For instance, the distant history of EU integration has a lot to teach those who study contemporary European integration. This is precisely the central claim of Moravcsik in 1955, broadly referred to as an example of an analytical narrative approach. According to him, the history of European integration since 1955 has shown three main trends that are present today: patterns of commercial advantage, the stronger bargaining power of the most important EU governments, and the incentives to enhance credibility of interstate commitments (Mclean, 2003). We applied an argument that past historical trends of European integration have a lot to offer to contemporary studies of European integration. As such, we have noted alongside the analytical part of this dissertation that patterns of commercial advantage are, indeed, the main factors shaping the stance of some member-states (that have a commercial interest in their Nord Stream contracts with Gazprom), like Germany of France, towards the European Commission having a stronger voice in energy policy-making processes. We have noted that the stronger bargaining power of some EU
33 member-states, like Germany, France or Italy is the main driver of energy policy-making at the EU level, therefore contributing for a continued intergovernmental logic. Finally, we have also noted that the author’s third historical trend of incentives to enhance credibility of interstate commitments can also be applied to this dissertation. This trend is present in modern day European integration in the energy sector if, for example, we look at how the Third Energy Package’s unbundling and third-party access requirements have benefitted the commercial interests of some EU member-states towards Gazprom, which led them to end up committing to the Package’s formulation and application. 5. Structure of the dissertation The (re)formulation of the EU’s energy (security) policy, in which the EU takes a dual-take approach, is divided, I argue, in three different phases: a 1st phase that goes from 1994 to 2003, when there was no external threat to energy supplies, in which the EU behaved as a normative power, a 2nd phase that goes from 2006 to 2014, in which the EU behaved as a regulatory power, a plan that came as a response to Russia-led energy disruptions in Europe, and a 3rd phase that goes from 2014 to December 2019, in which the EU behaved as an economic and market power, therefore adding a geopolitical dimension to its energy security strategy. Between 1994 and 2003, there was not a need to rethink the EU’s energy (security) policy because there had never been a threat to Europe’s natural gas supplies. As such, the EU behaved as a normative power, a behavior that was characterized by the creation of the European Energy Charter Treaty (1994), the creation of the First Energy Package (1998), the initiation of the EU-Russia energy dialogue (1999), and the creation of the Second Energy Package (2003). Between 2006 and 2014, when faced with the first energy supply challenges in Europe and a Russia that was firmly not willing to cooperate, it is argued that the EU behaved as a regulatory power, a behavior that was characterized by the creation of the European Energy Community (2006), the creation of a Green Paper for sustainable, competitive and secure energy (2006), the establishment of the Lisbon Treaty (2009), the launching of the First Strategic Energy Review or Energy Action Plan (2007) the establishment of the renovated Strong European Neighborhood Policy (2007), the launching of the Second Strategic Energy Review (2008), where the Southern Gas Corridor was proposed, the creation of the Lisbon Treaty (2009), the creation of the Third Energy Package (2009), and the establishment of the EU-Ukraine Association Agreement (2012-2013).
34 Finally, between 2014 and December 2019, the EU behaved as an economic and market power, a behavior that was characterized by the sanctioning of Russian and Ukrainian Individual Officials and Companies (2014), the creation of the Energy Union (2015), the cancellation of South Stream’s conclusion (2014) and its replacement by the Turkish Stream Pipeline (2015), the amendment to the 2009 Gas Directive (2017), the creation of the Security of Gas Supply Regulation (2017), the opening of the Southern Gas Corridor (2018), the establishment and enhancement of new partnerships that included Turkey (2016), China (2017) and the United States (2018), and finally, the investment on new energy sources like LNG and renewables (2019). Before these three different phases are analyzed, this dissertation dedicates its first chapter to analyzing the way through which the Russian challenge of cooperation has emerged and evolved from 1991 until 2019. Here, the emergence of this challenge is explained through how Russia has started playing its appointment to EU energy affairs from the European Energy Charter until the enlargement of the EU to some strategic countries. Furthermore, the evolution of this challenge is explained in three different phases. A first one that is characterized by the ‘gas wars’ between Russia and Ukraine and the precedent of the cut-off, a second one that is characterized by the Russia-Georgia energy dispute (2007-2008) and that marks the first energy war in the EU eastern neighborhood and the consolidation of Russia as EU’s energy challenge, and a third one that focus on the construction of Nord Stream, South Stream and South Stream 2 as the last Russian strategy to increase its control over the EU natural gas market.
35 Chapter I: The Challenge of Russia’s natural gas supply (1991-2019) 1.1. The Origins: from the European Energy Charter to the EU Enlargement (1991-2006) In 1991, Russia signed one of the first milestone treaties of the EU’s energy (security) policy, the European Energy Charter, a political declaration on the development of multilateral international cooperation in the energy sector that sought to “improve security of energy supply and maximise the efficiency of production, conversion, transportation, distribution and use of energy, to enhance safety and to minimise environmental problems, on an acceptable economic basis”. Later, in 1994, Russia signed the Energy Charter Treaty (ECT) and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA), a treaty and a protocol that defined the legal framework of the Energy Charter – and, as such, the legal obligations of its signatory members, as it was Russia. However, after the entering into force of the ECT, Russia started to use the possibility of the ECT’s provisional application 10 . Besides having used the provisional application to not have to fully commit itself to the treaty, Moscow has also never ratified it (Pominova, 2014, p. 2). The Russian nonratification of the ECT was a first sign of Moscow's approach to European energy security. Although Russia never ratified the ECT, the country has always had a clear interest in participating and closely following the development of the European Energy Charter, as reflected by the signing of its subsequent treaty and protocol. Russia’s interest in participating in the Charter was initially to get guidelines to develop market legislation in the energy sector, as well as to attract more investment and technology development opportunities much needed to restore the levels of gas production. European countries, in their turn, also had a clear interest in the Charter considering that one of its main objectives was to guarantee the stability of energy supplies going to western Europe and support market transformations in the Eastern front (Pominova, 2014, p. 5). At the time of the first Parliamentary hearings on the ECT, in 1997, it was decided to suspend the possibility of Russia ratifying the treaty until the country acceded to the World Trade Organization (WTO). In 2012 Russia acceded to the WTO but did not ratify the ECT afterwards. Actually, Russia ended up withdrawing from it. Since then, a lot of arguments for and against Russia ratifying the treaty 10 Article 45: Provisional Application: “(1) Each signatory agrees to apply this Treaty provisionally pending its entry into force for such signatory in accordance with Article 44, to the extent that such provisional application is not inconsistent with its constitution, laws or regulations.”; “(3) (a) Any signatory may terminate its provisional application of this Treaty by written notification to the Depository of its intention not to become a Contracting Party to the Treaty.” (International Energy Charter).
36 have been put forward and a lot of more attention has been paid to the arguments against the Russian ratification as doing so was much more in line with Moscow’s energy policy interests (Boute, 2014). Although participating in the ECT would have brought Russia a greater attraction of investments into its energy sector and protect Russian investments abroad, ratifying the ECT would also pose a series of risks to Russia. According to Irina Pominova, from the Energy Charter Secretariat, some of the main risks were: the ECT would require a third party to access the JSC Gazprom pipelines for cheap gas from central Asia; the ECT would prejudice JSC Gazprom with respect to its access to European pipelines and benefit European companies regarding their access to Russian pipelines; the ECT would sought to disrupt the system of long-term contracts for the supply of Russian gas to the European countries; the ECT would not cover submarine pipelines; the ECT would not contribute to the settlement of transit disputes between Russia and Ukraine; and finally, the ECT transparent transit rules and fair competition practices would have negative consequences for the Russian strategy in the European gas market (Pominova, 2014). As such, one can conclude that Russia’s decision not to ratify the ECT can be explained by Russia’s perception of this treaty as a legal instrument primarily directed at guaranteeing the security of Europe’s energy supply and reducing Russian influence over the European natural gas market (Boute, 2014). Furthermore, the ratification and implementation of the ECT’s rules that were shown above would have resulted in greater competition in Russia’s energy transportation sector and, thus, in losses for Gazprom’s energy monopoly in Europe (Smith, 2006). 2.1. The ‘gas crisis’ between Russia and Ukraine and the precedent of the cut-off (20062010) Indeed, Russia's non-ratification of the ECT was one of the first signs of what was going to be the Russian energy strategy to safeguard its dominant position over the EU natural gas market. However, the EU only started looking seriously at the risks stemming from dependency on Russian gas supplies after the cut-off of gas to Ukraine in 2006 (Smith, 2006). 2.1.1. The first Russia-Ukraine gas crisis (2006) Although for many years now there has been an emerging need to manage the EU’s energy (security) policy in a way that is transversal to all EU member states and that results in a collective and concise way of energy policy and decision-making, member states’ national objectives and interests never
37 allowed this to happen. In truth, the advancements that have determined the development of the EU’s energy (security) policy resulted, essentially, from external catalysts. Are clear examples of these catalysts the oil crisis of the 1970’s, which resulted in disruptions of oil supplies from the Middle-East that created difficulties for many Western European nations that relied on energy exports from the region; the option to diversify and use energy resources that are less harmful for the environment in light of environmental pressures emerging from phenomena as global warming; but most importantly, the need to diversify natural gas supplying sources in light of a natural gas cut-off imposed by Russia to Ukraine in 2006 (Fânzeres, 2015, p. 32). The EU is highly dependent on a source of gas, Russia, and on a transit route, through Ukraine, and until the completion of the first section of Nord Stream in 2011, all Russian gas exports to Europe transited through Ukraine, Belarus, and Moldova. In 2004, Gazprom exported around 150bcm of gas to 22 European countries, while the Russian gas represented almost 40% of Europe’s total imports and 28% of the continent’s demand. In this context, Ukraine held a pivotal geographical role with more than 80% of Russian gas to Europe being sent via Ukraine in 2004 (Maltby, 2013, p. 438). The energy relations between Russia and Ukraine have never been easy and that is the first reason behind the 2006 energy crisis. During the 1990’s, the Russian-Ukrainian gas relationship was characterized by a Ukrainian inability to pay for up to 50bcm of the gas it imported from Russia, which resulted in debt and unpaid bills which, in its turn, led to reduction of gas supplies to Ukraine for short periods of time to force the country to pay its debt, and to diversions in the gas volume delivered to Europe. However, in the Summer of 2004, the Russian government, Gazprom, and the Ukrainian government agreed that Central Asian gas, mostly from Turkmenistan, would be delivered to Ukraine and settlement of past debts were agreed. Moreover, Gazprom made a loan to Naftogaz which allowed it to pay past gas debts and to ensure 5 years of Turkmen gas deliveries to Ukraine and transit of Russian gas to Europe. With the agreement being put in place in late 2004, it seemed that all the requirements to (re)normalize the Russian-Ukrainian gas relation were again fulfilled (Stern, 2006, pp. 2-3). However, in December 2004, the Russian-Ukrainian gas relation went down again as Turkmenistan requested a price increase from their Russian and Ukrainian counterparts. Russia and Ukraine hesitated, so on December 31 the Turkmen halted gas flows for both countries in order to force them to accept the demand. Ukraine gave up to Turkmen pressure and on January 3, 2005 gas flows
38 restarted at a higher price, as requested by the Turkmen. As a result, a joint venture called RosUkrEnergo, with the objective of shipping Turkmen gas to Ukraine and Russia, emerged. Nonetheless, Turkmen deliveries to Russia did not resume until May 2005. Moreover, between the first half of 2005 and October of the same year, Ukraine entered a series of confusing supply arrangements with Turkmenistan and Iran, leaving Russia uninvolved. To add one more layer to the problem, it was reported that in May 2005, 7.8bcm of gas which Gazprom had deposited in Ukrainian reservoirs had not been made available to Gazprom despite several requests. Some suggested that the gas was either missing, had disappeared, or was stolen by people. With this in mind, by July 2005, most of the conflictual elements of the Russian-Ukrainian gas relationship that had previously been restored, had reopened again. Unpredictably, by late 2005, world oil and gas prices reached a new height and CIS countries were paying 3 to 4 times less for Russian gas than the rest of Europe as a product of transit barter deals, and in order to recover some of the money it was losing, Gazprom demanded Ukraine to start paying “European prices” (Stern, 2006, p. 4). Gazprom wanted Ukraine to pay €190.52 per 1000 cubic meters from the start of 2006, up from the current €41.42 suggesting that if Ukraine could not afford to pay this price, then the company could extend loans to Ukraine. Ukraine did not seem to like much this offer, so, in a final offer, Russian Prime Minister Vladimir Putin said: “I instruct the government and Gazprom to ensure gas deliveries in the first quarter of 2006 with the conditions and rates of 2005, on the condition that before the end of today the Ukrainian partners sign the contract with Gazprom’s offer for switching to market prices in the second quarter” (Deutsche Welle/ Agence France-Presse, 2005). Ukraine rejected the offer of Vladimir Putin and as a response, at 10.00am Moscow time, on January 1, 2006, Gazprom cut-off gas supplies to Ukraine (Maltby, 2013). After 30 years of stable gas deliveries from Russia to the EU, the Russian cut-off to Ukraine led to a shortfall in supplies in several European countries: Hungary (40%), Austria, Slovakia, and Romania (33%), France (25-30%), Poland (14%) and Germany (with no further details being known with regards to this country). The impact of the Gazprom measure was immediate and impossible to overlook with EU countries reporting on January 1, 2006 that contractually agreed amounts of gas had not been delivered. Evidently, the non-deliveries resulted either because Ukrainian companies were diverting gas
39 from the pipelines, or because Gazprom failed to pump enough gas. However, considering Gazprom’s concern about security of supply and its interests in the money it was going to earn with the exports to Europe, there was only one explanation – the gas was being withdrawn by Ukrainian customers. Naftogaz, in response, argued that the company had taken only Turkmen gas to which it believed itself entitled, rather than Russian gas in transit to Europe; many Ukrainian spokespersons suggested that Ukraine was entitled to take 15% of the gas crossing its territory in transit to Europe; or that is was entitled to take gas if the temperature dropped below -3C. However, neither of these explanations were in respect of the agreed contracts (Maltby, 2013, pp. 438; Stern, 2006, pp. 8-9). By January 4, Russian gas deliveries to Europe were back on track. In terms of the consequences of the disruption, no European country had to interrupt supplies to customers, luckily, because many industrial customers were closed due to the holiday season. Additionally, the European mild weather during that time also helped (Stern, 2006, p. 9). The dispute came to an end thanks to a commercial agreement where Gazprom and Naftogaz signed a 5 year contract in which: Gazprom agreed to pay Naftogaz a tariff of €1.33/mcm/100km for transit of gas to Europe; RosUkrEnergo became the company delivering gas to Ukraine, with Gazprom not delivering any Russian gas to Ukraine, and Naftogaz not exporting any gas received from Russia to Europe; RosUkrEnergo and Naftogaz would form a joint venture by February 1, 2006 in order to market gas in Ukraine which has been received via Russia; RosUkrEnergo’s annual gas balance consisted of up to 17bcm of Russian gas purchased from Gazprom with a base price of €190.52/mcm; and, in terms of sales, 34bcm of the gas was agreed to be sold by the joint venture (between RosUkrEnergo and Naftogaz) at €78.69/mcm during the first half of 2006 for the Ukrainian market without the right to re-export. The agreement clearly showed that many issues had not been solved, particularly the gas price issue (Stern, 2006, pp. 9-10) After the conflict came to an end, European press was supporting Ukrainian President Yushchenko’s position, informed by the idea that the dispute had political underpinning, with Russia attempting to blackmail Ukraine and unseat its leader by putting economic pressure on the country (Stern, 2006, p. 10) With the cut-off, Russia also impacted the European asymmetries of interdependence with Ukraine. The dependence of Ukraine and Europe on fixed networks of transportation and on a single supplier,
40 Russia, raised many concerns about the consequences that disruptions to energy supplies would bring to consumers, economic prosperity, and political security (Kirchner & Berk, 2010) Despite the gas cut-off not bringing any direct negative consequences to any EU member-state in terms of energy consumption, one must remark that it called the EU’s attention to the role of energy as a vital security complement. In this regard, Edward C. Chow, Senior Associate for the Center for Strategic and International Studies, highlighted that: After the crisis, “the European Union has been slow to implement the extensive and often politically challenging policy changes needed to create a cohesive and integrated energy market. The Orange Revolution presented an excellent opportunity to work with a newly empowered Ukrainian government to reform its gas sector, including transit, which is so vital to Europe’s own energy security. However, this opportunity was squandered by both Ukraine and its Western friends” (Bovair & Chow, 2009). This crisis also taught the EU some lessons: it was not wise to be overly dependent on a single supplier or supply route; even disputes which do not directly involve third countries can affect those countries; and all parties need to be part of an international dispute settlement procedures such as those provided by the Energy Charter Treaty and its Transit Draft Protocol which Russia has never ratified. After this crisis, the EU slowly started waking up for the urgent need to strengthen its energy security (Stern, 2006, Bovair & Chow, 2009). On January 4, the EU Gas Coordination Group met to congratulate the two countries on settling the dispute. During his regard, the EU Energy Commissioner, Andris Piebalgs, stated that: “I too welcome the agreement reached between Gazprom and Naftogaz. […] . We have been stressing that such a quick agreement was vital if Russia and Ukraine were to retain their position as reliable and secure gas and transit suppliers to Europe. Indeed, I believe that we can say that, with this action, both Gazprom and Naftogaz have proved their determination to remain wholly reliable suppliers of gas and transit respectively to the EU” (Piebalgs, 2006). After congratulating both parts for the dispute settlement, the Energy Commissioner explained that the EU had learned three lessons with it:
47 “a purely commercial conflict which should be resolved bilaterally” (Pirani, Stern, & Yafimava, 2009, p. 46). On that same day, an EU fact finding mission was sent to Moscow and Kiev and on the following day, the European Commission President, José Manuel Durão Barroso , stated that: “[...] it was unacceptable that the EU’s gas supply security was taken hostage to negotiations between Russia and Ukraine. He warned that reputation as reliable partners […] was at stake and insisted that Ukraine and Russia had to find a stable and long-term solution to guarantee reliable gas supplies to the EU” (European Commission, 2009) After the crisis came to an end, the President of the European Commission made a new statement where he welcomed both sides for reaching an agreement, highlighted the work of the EU, and presented the lessons it had learned. However, he still made it clear that this crisis presented a very serious challenge for the EU’s energy security, staining Russia, and Ukraine’s reputation as energy partners: “Today we can – finally – welcome the resumption of gas supplies to Europe. The Russian side opened the valves this morning and the Ukrainian side has allowed the gas to flow. […] We set up a monitoring team on the spot over a week ago, which was vital for confidence building. […] So, welcome news. But at the same time, it is difficult to welcome something that should not have happened in the first place. It was utterly unacceptable that European gas consumers were held hostage to this dispute between Russia and Ukraine. Therefore we have to learn the lessons of this dispute. […] First, solidarity worked inside the EU and with our near neighbours. […] Second, however, we must not allow ourselves to be placed in this position in future. New Year is for fireworks and celebration, not gas crises. This cannot become an annual event. […] And finally, let us remember that energy efficiency, renewables, all means of cutting back on carbon emissions, will become ever more important in the future. Measures to develop energy security and measures to tackle climate change are mutually reinforcing” (European Commission, 2009). This was the first time ever that EU member states had seen impactful amounts of natural gas flowing from Russia to their national reserves being cut-off. This was a ‘wake up call’ for the EU of the consequences that its energy dependency towards Russia could bear. As such, on 16 July, the
48 European Commission released a working document concerning measures to safeguard security of gas that should be incorporated into future legislations and in the Gas Security of Supply Directive: “The early warning and crisis prevention mechanisms at the EU level are weak in dealing with a sudden and unforeseen crisis. The situation at the moment is largely based on an assumption that national responses exist and will be enough. […] There is inadequate coordination and coherence between national provisions to anticipate and avoid crises. Greater consistency in crisis prevention might be achieved for example by regular exchanges between Member States about the situation of emergency measures and peer reviews of risks assessments among Member States. […] Enhanced engagement with EU’s major suppliers and transit countries can also provide an appropriate framework for developing early warning mechanisms” (European Commission, 2009). 2.1.4. The second Russia-Belarus gas crisis (2010) One year after a very severe transit dispute with Ukraine, Russia incurred a new one, but this time with Belarus again. As referred to above, the two countries had already had two incidents in the past that resulted in gas transit interruptions, namely the 2004 gas dispute and the 2007 oil dispute; but this new one was particularly important as it came right after the ‘wake up call’ Ukraine gas dispute with Russia that provided momentum for the discussion on the EU’s energy dependency towards Moscow (Yafimava, 2010, p. 3). This time, Russia presented Belarus with an ultimatum to pay its gas debt in five days; otherwise, Belarus would face gas supply cuts. In turn, Belarus asked Gazprom to pay its transit debt at an increased rate, threatening to reduce and potentially halt transit of oil and gas to Europe. Despite its counter-demand, there was not much Belarus could do. In the 2000s, when Moscow realized that the project of political integration with Minsk had failed, Russia decided to cancel two very important subsidies to Belarus: one to Belarusian oil refineries that received crude oil without export duties, and another one corresponding to cheap gas prices. The cancelation of these subsidies created a high pressure on Belarus´ finances, which became even more pressurized after the 2008 financial crisis (Yafimava, 2010). Belarus acknowledged that its negotiating power vis-à-vis Gazprom was smaller than ever. However, because of the soon to come Nord Stream pipeline completion in 2012, Belarus attempted to use its
49 still important energy transit network to secure better commercial terms. Belarus did so in three different ways. First, in January 2010 Belarus asked Gazprom again to reduce the prices of natural gas, which Gazprom refused. Second, in April 2010 Belarus sent Gazprom a draft agreement that demanded Gazprom to extend the period for Belarus to pay European gas prices until 2014-2015, instead of 2011 as it had previously been agreed – obviously, Russia refused. So, finally, as a last resort, the Belarusian president offered to sell a controlling stake in Beltransgaz’ if Belarus were to receive gas at domestic Russian prices. Russia replied that it would only consider this offer if Belarus paid its gas debt, which Belarus did not do. Actually, this debt just kept growing over 2010. Belarus was supposed to pay €140.17/mcm in the first quarter of the year, and €153.17 in the second, but the country unilaterally decided to pay Gazprom only €124.25/mcm, and as a result, accumulated debt. As a response, Moscow started gradually reducing gas pressure towards Belarus and, in turn, Belarus threatened to divert gas in transit in order to meet domestic demand and until Gazprom paid its debt in transit fees. Russia kept reducing the gas pressure and without having other options, on June 23 Belarus paid its debt of €154.90 million to Gazprom. As a response, Gazprom also paid €188 million for transit, in line with what was defined in the contract, putting an end to the dispute (Yafimava, 2010, pp. 8-10). During the crisis, the Belarusian energy ministry sent a letter to the European Commission warning about a possible reduction of gas going to the EU through Belarus (Yafimava, 2010, p. 9). Moreover, the EU Energy Commissioner, Günther Oettinger, also received a letter from the Russian Deputy Prime Minister, Igor Sechin, in June 21, where through the Early Warning Mechanism (EWM), he warned for an interruption in energy supplies flowing through Belarus towards some EU member-states, adding that, despite the danger that this presents for EU energy security: “The Russian side continues to do its utmost to avoid a crisis” (Rettman, 2010). Even though this crisis was also caused by Russia – as Moscow, did not fulfil with its contractual obligations to pay the agreed transit fees to Minsk – Russia made good use of the EWM on energy cutoffs set-up in 2009 during the gas dispute with Ukraine (Rettman, 2010). EU officials publicly appreciated the Russian warning, saying that:
50 “This Early Warning Mechanism works well. It's not just the notification part, it's when the consultations start, that's when it gets interesting, because we talk about what could happen and what would be the solution for us in an ongoing process” (Europa Nu, 2010) Additionally, even the Lithuanian Deputy Foreign Minister, Evaldas Ignatavičius, reiterated the Russian worry to not create any negative consequences to Europe with the dispute – even though Lithuania was one of the most affected countries by the Belarus cut-off: “I don't think Russia wants to send any more negative signals to the EU. [Despite the Belarus dispute] Russia wants to show that it is simply interested in selling gas to the West. (Europa Nu, 2010)" In terms of the consequences that this crisis had for the EU’s natural gas reserves, the European Energy Commissioner spokeswoman, Marlene Holzener, stated that Poland and Lithuania were receiving the same volumes of natural gas as usual – implying that Germany had not also been affected (Yafimava, 2010, p. 10). However, the Lithuanian national gas company, Lietuvos Dujos, reported that it experienced a reduction of gas supplies coming from Russia through Belarus of about 30% (BBC News, 2010). Jerzy Buzek, Head of the European Parliament, disagreed with the public statement made by Marlene Holzener and gave credit to the Lithuanian national gas company report, stating that Poland, Germany and Lithuania had indeed experienced reductions. Buzek’s statement was later disaccredited by the Commission’s spokeswoman, Nicole Bockstaller and by the Russian Energy Minister, Sergei Shmatko (Yafimava, 2010, p. 10). Although the EU saw this crisis as a commercial matter with no political implications for the Union’s energy security strategy, one day before the crisis, the Energy Charter Secretary General issued a statement urging for the need of interrupted transit: “This dispute over payments for gas supplies and transit is a commercial matter. Still it is important to draw attention to the principle of uninterrupted transit, which is a core element of the Energy Charter Treaty. […] In accordance with Article 7(6) of the Treaty, a Contracting Party through whose Area Energy Materials and Products transit shall not, in the event of a dispute over any matter arising from that Transit, interrupt or reduce, permit any entity subject
51 to its control to interrupt or reduce, or require any entity subject to its jurisdiction to interrupt or reduce the existing flow of Energy Materials and Products” (Mernier, 2010). By accepting Gazprom’s demands over gas prices’ increase and by selling a big stake of its energy infrastructure to Russia, Belarus, like Ukraine, remained with few bargaining cards left. Moreover, the bargaining power of these states would further diminish after the construction of the Nord Stream pipeline in 2012, allowing Russia to bypass all the energy transit systems that it was dependent on, like the ones of Ukraine and Belarus. This pipeline was thought to precisely make Russia more independent from Eastern European transit systems and to satisfy Europe’s growing demand. However, it had a severe impact on the EU energy security system, as it is going to be demonstrated below. For now, one must mention that despite not having had any severe consequences for Europe’s energy reserves, the 2010 gas crisis had an effect and shaped the EU’s energy security strategy. On 20 October 2010, the Council of the European Union and the European Parliament adopted the Regulation (EU) No 994/2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC. In this regulation, the EU highlighted the challenge of cooperation presented by Russia in the gas disputes with Ukraine and Belarus by emphasising: “The failure of the single largest gas infrastructure, the so called N – 1 principle, as a realistic scenario. […] growing reliance on imported energy as a significant additional risk for the Union’s security of energy supply […]” And, as such, urged for the need of: “[…] an internal gas market as a central element to increase the security of energy supply in the Union and to reduce the exposure of individual Member States to the harmful effects of supply disruptions (Official Journal of the European Union).” Furthermore, this regulation drew several recommendations to be incorporated into Member States’ energy policies in order to reduce their dependence from single suppliers – clearly referring to Russia. The implications of this directive for the EU's energy (security) policy will be analyzed below.
52 2.1.5. Russia as EU’s energy challenge and the first war in the EU Eastern neighborhood: Russia-Georgia (2008-2009) During the energy disputes of the 2000s, especially the January 2009 one, when Russia cut gas supplies for 13 days, affecting a total of 16 EU member states, Russia clearly used energy as a weapon against pro-Western states that it considered to be in its sphere of its influence, as for example Ukraine; while also affecting EU and NATO member-states. This showed how dependent Europe is on Russian gas supplies and thus, triggered concerns related to the security of EU gas supplies all over the continent (Goldthau, 2015). In order to respond to its concerns, the EU started rethinking its energy strategy and looking at incorporating new dynamics into it such as diversifying its supplies by creating alternative routes to obtain central Asian energy sources via Azerbaijan and Georgia (de Haas, 2009). Georgia was, since the beginning, a key possible partner to the EU as it is a major distribution center for energy in the region. As it happens, ever since Georgia became a key energy player for the EU, Russia experienced major losses in market share and in its political bargaining power with Europe. So, once the Russians invaded Georgia in 2008, a major part of its military operations focused on Georgian energy distribution centers such as pipelines and ports (AFCEA International, 2012, p. 19). For example, Russia allegedly tried to bomb the Georgian sections of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and of the South Caucasus gas Pipeline (SCP) in an attempt to disrupt Caspian energy pipelines that it does not control and that in both cases provide supplies to EU member-states (Nichol, 2009, p. 21). Another example of the Russian attempts to boycott Georgian infrastructure to regain strategic influence over Europe's energy supplies was the unauthorized deployment of 400 Russian railway troops and engineers to restore 50 kilometers of railway line between Sukhumi and Ochamchire. Ochamchire, which occupies a strategic place in the Black Sea, could then be used as a base by Gazprom’s announcement of offshore exploration for oil and gas in the Black Sea coast (Blandy, 2009). With Georgian energy infrastructure wounded, Russian supplies became more attractive again to Europe. However, the Russian actions in Georgia showed Europe that Russia was indeed becoming more and more aggressive, especially in what concerns energy matters – but Russia was still a key energy supplier to the EU, especially to some EU member-states that benefited more of the Russian position. As such, some EU member-states, led by France and Germany, pushed for a diplomatic
53 solution to the situation in Georgia, while others, including Poland, Italy, Sweden, and the UK, advocated a stronger stance against Russia (Markovic, 2008). It is clear that one of the main intentions of Russia in its intervention in Georgia was to gain strategic advantage over some key Georgian energy infrastructure and energy-rich areas that were giving Georgia a special place in the EU’s energy equation and at the same time reducing some of the Russian relevance in it. This showed the EU again how hard it was to cooperate with such a hostile country, and that is why the EU – while not forgetting the relevance of Russia to its energy security – kept engaging Azerbaijan and Georgia to obtain central Asian energy sources. Nevertheless, at the same time, Moscow did not want to stay behind and started to try to get rid of its dependence on transit of its gas through the Ukrainian pipeline network and tried to get Western and Southern European states interested in constructing alternative pipelines through these regions (de Haas, 2009, p. 7). 3.1. ‘Europeanisation from the East’? New pipeline projects and growing tensions (20112019) There are two controversial cases in which Russia tried to get rid of its dependence on transit of its gas through Ukraine and convinced Western and Southern European states to construct pipelines that directly connected Russian natural gas to them. The first and most relevant one is the already mentioned Nord Stream, a pipeline that resulted from a bilateral agreement between Germany and Gazprom. Nord Stream crosses all the Baltic Sea, from Russia to Germany, avoiding intermediaries of other transit routes, as for example, the Yamal-Europe and Progress pipelines; the second is South Stream, a pipeline that resulted from a deal between Hungary and Italy with Gazprom. This pipeline started to be built to the detriment of the Nabucco pipeline, one of the main European projects for diversifying the sources of gas supplies to EU countries (Natorski & Surrallés, 2009, p. 72). 3.1.1. Nord Stream (2011) Russia considers Western Europe a lucrative economic zone with which gas trade is indispensable. Particularly important in this domain are the German, Italian and British markets due to their big populations that consume a lot of natural gas. Besides, rising demand of natural gas among these countries motivates Gazprom to promote energy relations with them. Moreover, these countries pay Russia higher prices for natural gas than the CIS ones, providing Russia with a very strong income source (Proedrou, 2012).
54 On the one hand, Russia has in high regard the core EU member-states with which it trades gas supplies as they are important partners in the global politics panorama. On the other hand, when it comes to energy relations with the Eastern Neighborhood, Russia approaches it in a neo-imperialist way as it views it as still part of its sphere of influence – and the fact that their energy market is not so important for Russia allows it to follow such a stance too (Proedrou, 2012, pp. 80-81). This dual Russian attitude is reflected in the construction of Nord Stream. One the one hand, Nord Stream ensures Gazprom a vital presence in one of its most lucrative European markets, Germany. On the other hand, Nord Stream allows Russia to play political games with countries of Central Eastern and Eastern Europe, as it bypasses their traditional transit routes that Gazprom is very dependent on in order to send gas to Europe. This allows the company to avoid paying fees for Russian gas transit through their systems 12 . Furthermore, these countries stand to lose a lot of revenue that they enjoy from the transit of Russian gas through their territory. As such, they see Nord Stream as a project that is absent of any economic logic and that is only driven by geopolitical interests (Heinrich, 2017, p. 61; Proedrou, 2012, p. 81). Map 1 : Nord Stream route (with legends) (Nord Stream, 2011) 12 Brussels, 10 January, 2020. Interview with an anonymous researcher from a European think tank.
55 Bypassing the transit systems of countries like Ukraine and Belarus has been a longstanding Russian objective. These countries have damaged Gazprom’s influence in Europe in the gas crisis of 2006 and 2009, when they siphoned off gas destined for Western Europe, which created economic and reputational problems for the Russia-EU gas trade (Proedrou, 2012, p. 83). As such, Nord Stream allows Russia to avoid what it considers inconvenient partners such as Ukraine and Belarus, which in turn provides Russia with greater control of its export trade without suffering neither economic losses nor damage to its reputation (Proedrou, 2012, p. 83). The construction of the Nord Stream pipeline generated a sweet and sour effect among several European states because of the effect the pipeline had on European energy security. Poland was one of the most vocal states in this regard, but from the ‘sour’ point of view. As a traditional transit country for natural gas, Poland saw the construction of Nord Stream as a politically motivated project and as a threat to its energy security. Poland argued that Russia would be able to interrupt gas deliveries to Poland, without harming Germany or other important Western European consumers. Additionally, Poland argued that the construction of the pipeline resulted in environmental damage, a loss of transit fees for Russian gas transported through Poland via the Yamal-Europe pipeline 13 , and in the blockage of the harbor entrance in Świnoujście, which is essential for Poland’s LNG imports and thus, for Poland and Europe’s diversification of energy supplies (Heinrich, 2017, p. 65). Taking this into account, many Polish politicians pronounced their negative opinions about the impact that Nord Stream had on Polish and European energy security. Elżbieta Kruk, a current Polish Member of the European Parliament 14 , remarked the following in 2005: “The Baltic Sea pipeline […] is a political decision […]. Has the minister not heard of the economization of Russia’s foreign policy, reaching its political goals by utilizing resource dependence? The Russians admit openly that gas transit has a political dimension, even a strategic one. If the construction of the Baltic Sea pipeline would be a purely economic 13 The Yamal-Europe Gas Pipeline transports gas from the Yamal peninsula to European consumers and travels across Russia, Belarus, Poland and Germany. The export corridor increased flexibility and reliability of Russian gas supply to Western Europe. The European Union qualified the Yamal – Europe as the top-priority investment project implemented as part of the Trans-European Network (TEN) (Global Energy Monitor, 2020). 14 “MEPs are the elected representatives of EU citizens; they represent their interests and those of their cities or regions in Europe. They listen to people with local and national concerns, interest groups and businesses.” They are EU lawmakers, therefore being one of the main intervenients in EU energy policy-making, but can also scrutinise the Commission and the Council of Ministers” (European Parliament, 2020).
56 investment, why would the investors be willing to pay four times the amount needed for the construction of the Yamal II pipeline?” (Heinrich, 2017, p. 66). Also, Bogusław Sonik, a former Polish member of the European Parliament, pronounced himself in this regard, by highlighting the negative impact that the pipeline would have for Europe’s energy security: “Its construction arms our energy security; it also harms the energy security of Lithuania, Latvia, Ukraine, Belarus, the Czech Republic and Slovakia and – considering the environmental damage – of Estonia, Sweden and Denmark. […] We do not have an aversion against Russia, but common sense requires us to diversify our supplies. Energy security is one of the most elementary goals of any state. Thus, it is also a priority of the European Union” (Heinrich, 2017, pp. 66-67). The argument put forward by Elżbieta Kruk summarizes the context in which the EU has been formulating its energy (security) policy, and how it does so through a dual take-approach. When Kruk tells us that the construction of Nord Stream presents an energy security risk to some Eastern and Northern European countries, as it puts at stake their possibility to diversify their supplying sources, we realize that these countries are obviously against Russia’s energy strategy in Europe and thus, the ones advocating for an energy approach that tries to demarcate itself from the Russian dominance of the EU’s natural gas market. At the same time, the argument below, put forward by Slawomir Debski, director of the Research and Analysis Office at the Polish Institute for International Affairs, shows us that on the other side of this European dual-take approach there is Germany – supporting Russia’s dominant position in the European natural gas market – as contrary to its Northern and Eastern European neighbors, it highly benefits from the construction of the pipeline, as it gives Germany the status of a privileged economic partner, with regard to the extraction and delivery of fossil fuels, and many economic and financial benefits. In this regard, Debski tells us that: “Russia views Germany as its most important partner in Europe. The successful conclusion of the Russo-German contract for building the Nord Stream gas pipeline has emboldened the Russians so much that they intensified their efforts to pour sands into the gears of European integration and to break up European Unity. This is promoted by offers to grant Germany the
63 Map 3 : Nord Stream 2 route (Gazprom, 2021) These divergence of perceptions within the EU towards Nord Stream 2 reflects this thesis’ argument about an EU dual-take approach when it comes to formulating its energy (security) policy and dealing with Russia. On the one hand, the member-states that oppose the project and the European Commission itself focus on political arguments, such as the need for solidarity with Ukraine and Russia’s instrumentalisation of energy as an aggressive foreign policy tool towards Europe. On the other hand, the member-states that support the project focus on economic arguments, such as the commercial potential that it has for some of Europe’s biggest natural gas customers (Siddi, 2020). The international controversy towards Nord Stream 2 and the opposition of some member-states, the European Commission and the US is justified because the project will have a negative impact on Europe's energy security. Maik Günther presents interesting arguments in this regard. According to him, the general idea that has been put forward by the project supporters that it will be ‘necessary for European energy security’ is false in case diversification of supply is the objective, but true in case of diversification of supply routes is the objective. Nord Stream 2 will reduce transit gas flow through Ukraine and Poland, which means declining transit revenues for them, and weakened positions in negotiations with Gazprom. Nord Stream 2 will also reduce the growth of LNG imports to Europe as it will cover the demand that was going to be satisfied by LNG. Moreover, he argues that the EU has enough pipelines and LNG terminals to import all the gas it needs without Nord Stream 2 (Günther, 2019).
64 Besides, one can does not forget the fact that even after being sanctioned in 2018 by the US in order to stop laying pipes, Gazprom kept doing so, which shows that Russia and Gazprom are not always willing to respect international law (Siddi, 2020). 4.1. Concluding remarks After repeated conflicts with transit countries of Eastern Europe, especially with Ukraine in 2006, 2009 and 2014, with Belarus in 2007 and 2010, and with Georgia in 2008-2009, which resulted in the disruption of gas supplies to several European countries, Russia’s natural gas export strategy to Europe started being regarded as challenging and even threatening. Additionally, Gazprom’s construction of Nord Stream and Nord Stream 2 to diversify Russian export routes presented, as viewed by some European member-states and the European Commission, several political, economic and environmental consequences with high costs for Europe’s energy security strategy (Heinrich, 2017, p. 62). The 2009 Russia-Ukraine gas crisis – when the EU saw an impactful downfall in the amount of Russian gas being delivered to its member-states – served as a ‘wake-up call’ to the EU, and in particular to the European Commission, and to some Eastern and Central Eastern member-states of how challenging Russia could be to Europe’s energy security. Although this moment marks a change in the way the EU (re)formulated its energy (security) policy to avoid dependency from Russia, one must clarify that such (re)formulation had already started in 1999, way before Russia was regarded as a challenge to European energy security – and the objective of the next chapter is precisely to analyze how the EU did so between 1999 and 2005. These chapter analyzes how the EU did so through a ‘dual-take approach’ that consists of memberstates that have an interest to maintain Russia’s dominant position in the European natural gas market, and member-states – supported by the European Commission – that suffer political and economic damage with Russia’s position and thus are against it. Chapter II: EU’s initial approach: the EU as a ‘Normative Power’ (1994-2003) 2.1. European Energy Charter Treaty (1994) The European Energy Charter Treaty (ECT), signed in the end of 1994, set for the first time, the legal framework for transit, trade, and investment in energy in the European Union (U. Talseth, 2012, p. 8)
65 The overall idea of the ECT was that all its signatory members would be under a common regulatory framework that ensured that all energy companies – regardless of national origin – could be treated equally and fairly, therefore removing trade barriers in energy materials and products. It responded to a very concrete challenge: developing legislation that would reduce discrimination between companies, ensure transparency in trade, as well as procedures governing freedom of transit, and encourage investment (Axelrod, 1996). Moreover, the ECT provided a framework for Western technology and financial resources to be made available in order to develop the energy resources of the East that the West largely needed. However, it would benefit both sides. Western European states needed to diversify their energy sources as well as ensure security of supply – as such, it served their interest to explore and increase production in the East. At the same time, Eastern European states would gain a lot, from the economic point of view, with new investments from the West in their energy sectors (Axelrod, 1996, p. 498). Although the ECT had a regional character aiming at creating a model of West-East energy governance, it was also developed with Russia in mind since it was an important energy player for the EU. By the time it was developed, Russia faced several issues: production and consumption had declined, it needed hard currency and to increase its exports to the West, and one-third of its gas was being lost in transit also because of its complicated relationship with Ukraine. Being a full member would have allowed Moscow to tackle these issues and become more in line with the EU energy market (Axelrod, 1996, p. 498) The development of the ECT came at a time when the European Commission was pushing towards deeper political and economic integration and creating an internal energy market was an essential part of that integration process. The creation of this market meant that common practices and standards would be the norm – and one of these practices was to allow third party access (TPA) to another state’s transmission pipelines (Jaś-Nowopolska, 2010). This was a big issue for Russia. Russia was key to the success of the ECT as it had vast gas resources all over its territory and in the Caspian Sea. However, the European Energy Charter failed to have Russia ratifying it, which meant that Russia was not legally bound by the Charter. Russia did so because the Charter’s provisions regarding third-party access to pipeline systems would put at stake Russia’s authority over its pipeline monopoly in the EU, as well as who could get or not get access to it (U. Talseth, 2012, p. 8).
66 The ECT represents a clear example of the EU behaving as a normative power. According to Goldthau and Sitter , with the normative model comes the idea of “the EU creating binding international rules that serve to level the playing field and benefit everyone – which in the energy sector includes net importers (like the EU) and exporters (like Russia)”. That is what the ECT did by developing an Eurasian regime that would regulate energy trade, transit and investment (Goldthau & Sitter, 2019, p. 4). 2.2. First Energy Package (1998) The ECT represented a step towards a more regulated European energy market as it promoted common standards and practices to be incorporated into the energy sectors of its signatory members. However, as we could see, the ECT was not successful because it failed to incorporate, in its ratification, the most important key player for EU energy security in the gas sector – Russia. With this failure, the EU started thinking about a new strategy to regulate energy trade and to push for further liberalization of the energy market 15 – a strategy that would be still in par with the ECT, but that would have a slightly bigger regulatory character. That is how the First Energy Package emerged in the late 90s (U. Talseth, 2012, p. 13). The Package introduced two new directives whose objective was to open European electricity and gas markets to free competition by breaking up existing monopolies and opening the markets to new participants (European Parliament, 2020). In order to do so, the Package adopted two liberalization directives: one for the electricity market in 1996 and another for the gas market in 1998. The gas Directive 98/30/EC or ‘First Gas Directive’, which is more important for this dissertation, had to be transported into member-states’ national law by 2000 (European Parliament, 2020). The First Gas Directive introduced a binding procedure for all member-states that until today is of the utmost importance for the EU's energy (security) policy – the procedure of unbundling. This process has the objective of separating activities of energy companies that are potentially subject to competition (namely production and supply of energy), from those where competition is not possible or allowed (namely transmission and distribution/ retail of energy 16 ). As a result of the unbundling process, companies operating in the EU energy market are not allowed to produce and supply natural gas while 15 “The legal basis of the liberalization and harmonization of the EU internal energy market are Article 194 and Article 114 of the Treaty on the Functioning of the European Union (TFEU).” The aim of the liberalization is to create one single integrated internal European energy market across all EU member states and therefore reduce general energy costs and create synergies to strengthen security of supply (Next Kraft-werke GmbH, 2020). 16 In the EU, transmission and distribution of gas are regulated monopolies (Florence School of Regulation, 2020).
67 at the same time managing the transmission and distribution networks (Florence School of Regulation, 2020). There are several types of unbundling: account unbundling, functional unbundling, legal unbundling, independent system operator, and ownership unbundling. In the case of the First Energy Package’s gas directive, only accounting unbundling was required. This kind of unbundling mandates vertically integrated companies (the ones that concentrate all the types of activities) to split up the bookkeeping according to the different activities. Furthermore, the directive also provided that memberstates must have access to this accounting, and that they were required to ensure that transmission system operators did not disclose confidential information to other parts of a vertically integrated undertaking or to third parties (Next Kraft-werke GmbH, 2020; Florence School of Regulation, 2020). At the time when the First Energy Package was established, most of the national natural gas companies were still publicly owned or controlled for reasons of national economic or political interest, and a change was needed. As such, the EU started adopting energy market regulation that shifted the political attention from market liberalization to market integration. The First Energy package laid down some important legislative bases for the EU’s energy (security) policy (European Parliament, 2017, p. 17). Another very important legislative fundamental that was promoted in the Package’s ‘First Gas Directive was the idea that member-states now had the right to require the owners of gas pipelines to allow third parties to use their pipelines under regulated conditions, or to require them to negotiate individual contracts with third parties. This was the concept of regulated third-party access and negotiated TPA, respectively – a concept that had already been defined and established in the ECT. TPA was a clear example of the EU’s attempt to push for market liberalization and to develop an harmonized set of rules for the EU’s gas transmission infrastructure (Hancher & Marhold, 2019, p. 291). It was clear that through liberalization, the EU wanted to eliminate all rules and measures adopted by member-states that were used to excuse and retain competition barriers. As such, the EU’s idea was nothing else but creating and protecting competition in the European energy market (Rokas, 2009). However, accounting unbundling was not enough to create a competitive market and unbundling is, still today, an unfinished and necessary measure to be fully incorporated into the EU's energy (security) policy (U. Talseth, 2012).
68 2.3. EU-Russia Energy Dialogue (2000) Two years later, the European Commission decided that it was time, once again, to find a way to deal with the growing Russian role in the EU’s gas market. As such, the EU-Russia Energy Dialogue was launched at the sixth EU-Russia summit in Paris, with the objective of resolving questions of common interest that were relevant to the energy sectors of the EU and Russia and that remained unsolved after the Russian non-ratification of the ECT. In this regard, both actors were aiming at a strengthened energy security, one from the position of an importer and the other one of an exporter. Moreover, Russia’s interests included attracting new investments and secure markets while the EU was eager to move towards a legal regime that would govern the Russo-European energy trade (U. Talseth, 2012, p. 3). And using the EU-Russia Energy Dialogue as a lever to start creating a stable legal regime between both actors was exactly what the EU wanted. Ferran Tarradellas Espuny, spokesperson for Energy Commissioner Piebalgs when the Dialogue was established, made that clear by stating that it would enable “progress to be made in the definition of a EU-Russia energy partnership” (Espuny, 2009, p. 8). This was both the first EU energy (security) policy dialogue established with an external energy partner and the first sectoral dialogue with Russia. Russia, as the EU’s most important single supplier of energy products, especially in what regards natural gas, was therefore the most obvious choice for the EU’s first external initiative to strengthen energy cooperation. Moreover, the EU had already started engaging with Russia in this sector, when in 1999 made it the first proponent of the EU’s “Common Strategies” developed under the Amsterdam Treaty (European Commission, 2011). For the EU, this was a first step in binding Russia and the EU into a closer relationship in which all issues of mutual concern in the energy sector could be addressed, and all the policies of market integration could be pursued, therefore enhancing the energy (security) of the EU (Espuny, 2009, pp. 8-9). This was a clear example of Goldthau and Sitter’s idea of the EU behaving as a normative power. Initially through this Dialogue and later through a partnership, the EU was binding Russia into a closer energy relationship with the EU, which Goldthau and Sitter called a “regime” that would regulate EURussia energy relations. At the same time, by defining improvement of investment opportunities in Russia’s energy sector as the main objective of the Dialogue, the EU was signaling the idea of mutual
69 benefit and attracting a global energy player like Russia, and creating conditions to commit it to international energy law (Goldthau & Sitter, 2019, p. 13) Moreover, the dialogue was a very supranational way of the EU dealing with international energy relations: “it resulted from a European Commission-led project for liberalizing the energy market in the 1990s – which drew widespread initial criticism from the member states because it challenged interventionist energy policy and the role of national champions in the electricity and gas sector“ (Goldthau & Sitter, 2019, p. 4). 19 years on, the Dialogue remains impotent, without a clear mandate or any achievements to its name. This happened due to a main reason: Russia wanted to focus on sections of the economy rather than integrating the European energy market, which was the goal of the European Commission (U. Talseth, 2012, p. 4). Besides, the actors that had established the Dialogue and wanted it to work successfully, were not the ones making the decisions that really affect the governance of EU-Russia energy trade. From the Russian side, the Dialogue was defined by the Ministry of Energy, and from the EU side, it was defined by EU Officials. However, the only ones that could make it work were, from the Russian side, government representatives in Gazprom, and from the EU side, national governments of the 27 member-states (U. Talseth, 2012, p. 7). 2.4. Second Energy Package (2003) By September 2000, most member-states had already implemented the gas directive that was brought by the First Energy Package. However, the European Commission considered that the progress that was achieved by member-states towards liberalization was still insufficient to achieve the Commission’s great goal of a consolidated energy market – and again, it cannot be forgotten that achieving this was an essential step towards a common EU energy (security) policy (Jegen, 2014, p. 7). Thus, the Second Energy Package was proposed to fill this void and successfully complete the electricity and gas markets (Rokas, 2009). The Package, which was adopted in 2003, brought two directives (directive 2003/54/EC for electricity and directive 2003/55/EC for gas, which was known as the ‘Second gas Directive’ and came following the first one) and one regulation (regulation (EC) No 1228/2003) (Florence School of Regulation, 2020). According to the European Parliament and the Council of the European Union, the objective of the Second Energy Package was to keep liberalizing and unifying the European internal energy market. Such, they argued, would be done by:
70 “[…] creating conditions more conducive to genuine, fair competition and to put in place a true single market” ; and by “[…] taking the measures necessary to attain clearly defined objectives such as to protect vulnerable customers, to protect consumers’ fundamental rights and to promote economic and social cohesion” (Official Journal of the European Union, 2003). This meant that by 2007, all industrial and domestic consumers should have the ability to choose their own gas suppliers freely. Moreover, member-states’ gas companies were now subject to full legal unbundling between gas transmission and commercial activities; member-states also had to ensure the implementation of the TPA system to the gas transmission and distribution system, as well as to LNG facilities. Finally, it was now mandatory for member-states to establish national energy regulators (NRA) whose operations would follow minimum requirements defined by the EU. With the objective of ensuring a common functioning of the NRAs at the European level, the EU also created the European Regulators Group for Electricity and Gas (ERGEG) (Official Journal of the European Union, 2003, Katsis, 2013, p. 6). The new provisions aimed at improving competitiveness and developing service quality, at guaranteeing fairer prices for consumers, establishing obligations on public services and strengthening security of supply (Rokas, 2009). However, due to the lack of regulatory framework, especially in the market of renewables, and to the incorrect implementation of regulation by public and private companies, the desired progress towards a common energy policy was not achieved (Rokas, 2009). In what regards the specific issue of incorrect implementation of regulation, was particularly negative the fact that a transmission system operator and a gas wholesaler still could be owned by a single holding company, which meant they were still able to operate in different activities of the natural gas value chain at the same time – and this was nothing more than an uncompetitive practice (Next Kraft-werke GmbH, 2020). 2.5. Concluding remarks During the 2000s, the European Commission attempted to consolidate its internal energy market in order to achieve the goal of a common energy (security) policy. This consolidation was promoted through the creation of market liberalization rules that were present in the ECT and the First and Second Energy Packages.
71 The First Package’s gas directive brought the concept of accounting unbundling, which represented the Commission’s first attempt to break with national and regional monopolies, a necessary condition for a truly unified European energy market (Jegen, 2014. Additionally, it also deepened the ECT concept of third-party access, which gave member-states the right to require the owners of gas pipelines to allow third parties to use their pipelines under regulated conditions (Hancher & Marhold, 2019). However, accounting unbundling was not enough for breaking up with vertically integrated gas monopolies that controlled prices on the wholesale market. As such, the Second Package’s gas directive tried to fill this void and established the concept of legal unbundling which went further by separating commercial activities from transmission system activities. Moreover, the second gas directive also deepened the third-party access concept by making its implementation mandatory in member-states' transmission and distribution systems, as well as LNG facilities (Rokas, 2009, Katsis, 2013). But more energy (security) policy related activities within the EU proliferated in the 2000 and as we could see, the EU-Russia Energy Dialogue was one of them. Contrarily to the Packages and the ECT, the Dialogue had a more bilateral and regional character as it was particularly directed to Russia and its was objective was to basically solve issues of mutual concern in the energy sector and create a model for cooperation based on common practices – the EU was trying to bind Russia to its will (Jegen, 2014). However, the Dialogue, as well as the ECT, failed in their objectives of integrating Russia. In this regard, the Packages were far more efficient due to their legal, binding character (U. Talseth, 2012). The 2000s was a period of strengthening the internal dimension of the EU’s energy (security) policy and the European Commission was the main actor in this regard, behaving almost as a supranational actor (Jegen, 2014, p. 4). Furthermore, as we could see, with the Packages, the ECT and even the Dialogue, the EU Commission behaved as a normative power as it used regulations to build and manage its internal market, while at the same time creating binding international rules to level the playing field and benefit everyone, including Russia (Goldthau & Sitter, 2019, pp. 3-4). Moreover, during this period the EU Commission also became more vocal about the need to strengthen the external dimension of its energy (security) policy. In this regard, the 2000 Green Paper refers to geopolitical issues in the Middle East and to the fact that the EU lacks the powers and means to “negotiate and exert pressure” (Jegen, 2014, p. 8).
72 Chapter III: EU’s changing approach: The EU as a Regulatory Power (2006-2014) 3.1. EU response to Russia’s growing challenge (2006-2009) The 2000s were definitely a period in which the EU focused on the development of its energy (security) policy. During the first half of this period, the EU took several strategic actions with the objective of creating a cohesive internal energy market – which, as we could see, it successfully did through a global approach that did not forget Russia. Nevertheless, the second part of this period was
79 As such, through the ENP and its successor, the Commission has been trying to extend the internal energy market to neighbouring countries. Still, these attempts were almost useless as back then there was still the problem of inconsistency within the EU internal energy market. Besides, member-states had different energy objectives towards different EU neighbouring countries. This resulted in the creation of bilateral alliances that in their turn provided neighbouring countries with the argument of not being able to commit to EU core energy provisions as they would overlap (Weber & Bafoil, 2015). Still, engaging with neighbouring countries that were of the interest of the EU from the energy point of view and exporting acquis communautaire was a way that the Commission adopted in order to have an external voice in the international energy arena. In this regard, by doing so the Commission wanted to create a pan-European area that integrated and subjugated to EU rules all neighbouring countries that were of utmost importance for the EU’s energy (security) policy (Andoura & Vinois, 2015, p. 11) This goes in line with Goldthau and Sitter’s idea of the Commission behaving as a regulatory power by using regulation to build and manage the European energy market in a way that favors itself (Goldthau & Sitter, 2019, p. 5). 3.1.5. Second Strategic Energy Review: “An EU Energy Security and Solidarity Action Plan” (2008) European Commission led strategies like the above analyzed ‘Strong ENP’ have failed to succeed because of divergent strategies between member-states and also because of their different degrees of natural gas import dependency towards main suppliers like Russia. This has been one of the main problems through the development of the EU's energy (security) policy (Maltby, 2013). The Commission firstly tried to tackle this problem in 2006, through the Green Paper. Still, it was not very well succeeded as it was too general in its objectives. As such, two years later, the European Commission launched an ‘EU Energy Security and Solidarity Action Plan’ whose one of its main objectives was precisely to tackle this long present issue of member-states inconsistency (Maltby, 2013, p. 439). The attempt to pursue this objective can be read in the Commission’s Action Plan: “[…] interconnection and solidarity within the internal market is not only a natural feature of an integrated market-based system but is equally essential to spread and reduce individual risk” (European Commission, 2008).
80 Still, the main and most impactful announcement of the Commission’s Action Plan was not to tackle the inconsistency issue, but to build the Southern Gas Corridor (SGC). The SGC, which intended to bring central Asian and Middle Eastern gas to European markets, marked a new stage in EU energy (security) policy-making: the emergence of a more consistent external dimension and a shift from a purely market-oriented approach to a more geopolitical one (Verda, 2016, p. 69) Map 4 : Southern Gas Corridor route (Bankwatch Network, 2021) It was obvious that in order to demarcate itself from Russian gas dependency, the EU did not just need a consistent internal market, but, above all, a geopolitical strategy based on creating infrastructural connections with new suppliers. Moreover, it was a known fact that fossil fuels were to remain the backbone of EU energy supply, as such member-states and the EU itself decided that the EU’s energy (security) policy had to assume its external dependency problem and find a solution to it (Verda, 2016). Still, not only the SGC emerged as a possible solution to the EU’s external energy challenge, but also as a response to the growing energy security challenge in light of the Russian gas cut-off to Ukraine in 2006, the interest of many Western companies (namely BP, Total, Statoil and Devon Energy) in gas supplies from the Caspian region (namely Azerbaijan, Iran, Iraq and Turkmenistan) and the US pressure on the EU to create a geopolitical East-West pipeline running from Central Asia through the Caucasus and Turkey to Europe (Jarosiewicz, 2015, p. 9).
81 The SGC followed the same rational as other EU-supported project that intended to reduce dependency on Russian gas: Nabucco gas pipeline, the Turkey-Greece-Italy (ITGI) route and the Trans-Adriatic Pipeline (TAP) (Jarosiewicz, 2015, p. 9). In political terms, the objective of the SGC was to bring the EU closer to the Caucasus and Turkey, as well as creating energy relations with both. In this regard, the Commission had planned to use the SGC as a gas pipeline controlled by Western firms and managed by EU law. Moreover, the EU wanted to interconnect various gas supplying sources such as Iran, Iraq and Turkmenistan to the supply line in an unrestricted manner. All this with the objective of promoting diversification of supplies and promoting the energy security of Southern and Central European countries, thus reducing their dependence on Russian gas (Jarosiewicz, 2015, p. 10). Despite the SGC marked a new and different commitment from many EU member-states to the EU’s energy (security) policy, the European Commission would years later discontinue the project due to the cancellation of the Nabucco gas pipeline in 2012 – which was the flagship project of the SGC –-, the emergence of several commercial and financial setbacks, and its direct competition from a project that would also years later be announced by Gazprom: the South Stream (Poiană, 2017). 3.1.6. Lisbon Treaty (2009) Despite the failure in building the Southern Gas Corridor, the European Commission did not give up and continued – as it had been doing since the 90s – in showing remarkable leadership towards the establishment of a common energy (security) policy and/ or an EU external leadership. And although this leadership has not resulted in major achievements, small but very important steps have been taken (Natorski & Surrallés, 2009). Some of these most important ‘small steps’ were made in the Lisbon Treaty, in 2009. The Treaty incorporated for the first time an energy title on ‘Energy Policy’ – something that the European Commission had been pursuing since 1990. The Title, which corresponded to the Treaty’s Article 4 set out a co-decision (ordinary) legislation procedure and established a shared competence between the EU and the Member-States in the governance of EU’s internal energy market, of trans-European networks, and, most importantly, on energy matters (Maltby, 2013, p. 440). The ‘shared competence’ concept was a considerable achievement because the member-states were no longer able to exercise authority when the EU had done so (Jegen, 2014, p. 8).
82 The achievements of Lisbon Treaty also included its article 194, a solidarity energy clause aimed at ensuring the functioning of the internal energy market, the security of energy supply in case of external energy disruptions like the ones the ones in Ukraine that had an impact of the EU’s natural gas supplies and promoting the interconnection of internal energy networks (Maltby, 2013, p. 440). However, one could not get deluded with these measures as it was also established that they should not affect the member-states’ right to determine the conditions for exploiting their energy resources, as well as their right to define their own energy mix. Additionally, in regard to the ‘solidarity’ concept, it was too vague and did not have a binding character. In regard to the co-decision procedure, the European Commission did not have an integral role in it, and intergovernmental cooperation and national preferences were still the most impactful and leading factor of the decision-making process (Maltby, 2013, p. 440). Despite the critics, the truth is that the Lisbon Treaty brought nothing less than accomplishment in what regards giving the EU more competences on energy (security) policy. Actually, the three dimensions that the EU had been advocating since the 90s – internal market, environment and external relations – were now finally materialized in this Treaty (Jegen, 2014, p. 8). Still, the long-discussed in this dissertation EU dual-take approach was present in the way memberstates viewed the Lisbon Treaty. Germany, for instance, subscribed to the spirit of solidarity invoked by the Treaty when it came to assist Central and Eastern Europe member-states that were subject to supply disruptions with a Russian origin. However, Germany circumscribed it when it came to the funding of infrastructures, as pipelines, arguing that it was “private companies’ business: firms should take the profits but also bear the risks” (Jegen, 2014, p. 14). The Lisbon Treaty was remarkable in its accomplishments as for the first time it established energy as a shared competence and was even able to promote an external energy (security) policy dimension – the one of solidarity in case of disruptions. Still, Germany’s stake on this was clear and as one of the most influential EU players on energy matters, one knew that the EU still had much to do 17 . 17 Brussels, 10 January, 2020. Interview with an anonymous researcher from a European think tank.
83 3.2. EU response to ‘Russia’s Europeanisation from the East’ In addition to the future work that the EU had to put to develop an energy (security) policy, Russia engaged on a series of energy disputes with Ukraine, Belarus and Georgia between 2006 and 2010, which directly affected the natural gas supplies of some EU member-states, especially Central and Eastern European ones, making the EU’s task even harder (Pirani, Stern, & Yafimava, 2009). Consequently, these states started feeling more vulnerable to Russian pressure and the EU started seeing Russia as its biggest geopolitical rival. Still, at the same time, the EU needed Russian gas and Russia also needed the revenue coming from European gas purchases (Popovic, 2020). Aware of this complex sweet and sour relationship, the EU needed to develop a strategy that addressed the dependence on Russian gas and the growing security threat that it presented for the Union’s energy market (Popovic, 2020). 3.2.1. The Third Energy Package: The Natural Gas Directive and Regulation (2009) In 2009 the EU adopted the so-called third energy package (TEP) which contained two Directives and three Regulations. Among these directives and regulations are particularly important the gas Directive 2009/73/EC and the Regulation (EC) No 715/2009. Through these directive and regulation, the TEP intended to pursue the aim of further liberalizing and integrating the European internal energy market, as well as defining conditions for access to its gas market (Florence School of Regulation, 2020). The latter was particularly important as it placed stricter demands than ever on energy companies operating on the EU’s territory – as it was Gazprom’s case. Actually, the changing legal environment brought by them caused a great resentment in Russia and its state-owned energy company (Stern, Pirani, & Yafimava, 2015, p. 3). The first main reason of this resentment was TEP’s requirement that the operators of transmission networks (like Gazprom) had to allow any gas supplier non-discriminatory access to their transmission networks, so that this third parties could also supply European customers; this legal requirement was the third-party access principle (European Commission, 2011). The second reason for Russia’s resentment was that TEP now mandated unbundling of transmission networks and certification of transmission system operators (TSOs), unless an exemption from these rules was granted by an NRA and approved by the European Commission (Stern, Pirani, & Yafimava, 2015, p. 3) This unbundling rule prevented companies which were involved both in transmission and production/ supply of natural gas (again, like Gazprom) from controlling all these segments at the same time and
84 as such, of using their privileged position as operators of transmission networks to obstruct access of their competitors to this same network (European Commission, 2011). However, due to the national interest of some EU member-states in Gazprom maintaining its dominant position – namely Germany and Italy – these provisions were weakened. Still, even these wakened provisions posed some serious challenges to Gazprom’s dominant position. The reason was that they were complemented by some other bold measures 18 . For example, the TEP also forbade companies outside the EU from purchasing strategic distributed networks without first being authorized by the governments of EU member-states, which in turn had to consult with the European Commission (U. Talseth, 2012, p. 13). Moscow perceived this measure as an EU direct effort of protecting itself against Russian dependence and named it as the “Gazprom clause”. As a result, there was a direct stand-off between Moscow and Brussels, with neither of them willing to step back (U. Talseth, 2012, p. 13). As a result, to the present day, the TEP and the ECT remain the two main legal documents regulating the Russo-EU energy trade (U. Talseth, 2012). Still, the fact that such a bold EU Commission-led legal package like the TEP was seen as ‘not necessary’ by member-states like Germany alert us once again to the EU dual-take approach when it comes to energy (security) policy-making. Furthermore, the TEP represented a clear EU direct attempt to require a specific third actor, Gazprom, to adhere to the EU’s energy provisions – this, in case Gazprom wanted to keep exporting its gas to the EU’s market 19 . Actually, it was so directed at Gazprom that Moscow itself defined TEP’s article 11 on ‘security of supply risks’ as “Gazprom clause”. This kind of EU approach, presented and analyzed, above, is regarded as ‘EU Regulatory Power’ (Goldthau & Sitter, 2019). Regardless of its clear objective of targeting Russian dominance over the EU natural gas market, one must also clarify that the TEP was one of the most complete EU legal documents governing energy affairs. This because it went way further liberalizing the EU natural gas market structure, or even defining the main lines of access to the EU’s gas market 20 . The TEP established the European-wide network codes (NCs), a regulatory framework to support a single European Market; it established the 18 Brussels, 10 January, 2020. Interview with an anonymous researcher from a European think tank. 19 Brussels, 7 February, 2020. Interview with an anonymous officer from the permanent representation of an EU-member-state. 20 Brussels, 7 February, 2020. Interview with an anonymous officer from the permanent representation of an EU-member-state.
85 Agency for Cooperation of Energy Regulators (ACER), an European agency with the objective of enhancing energy competition; it introduced an obligation for member-states to define vulnerable consumers; it granted energy consumers the right to switch energy providers and to receive clear offers, contracts and energy bills; and it set out obligations on suppliers with respect to the conditions that supply contracts should respect (European Parliament, 2017). 3.2.2. The (absence of a) response to Nord Stream (2011) After such an ambitious step like the TEP, clearly directed at struggling against Gazprom’s dominance, the 2011 EU decision on supporting the construction of Gazprom-led project Nord Stream came as a surprise. The EU publicly showed a clear interest in the execution of the project, as did Germany; but again, the will of some other member-states was not considered, pointing out to the EU’s dual-take approach when it comes to decision-making on energy affairs (Whist, 2008). On the one hand, Germany was one of the countries with a strongest interest in the execution of the project. Berlin argued that its interest in it were based on a desire for energy security and to avoid possible disruptions in transit countries like Belarus or Ukraine. The German Chancellor Schroeder actually pushed for the conclusion of the deal, and after leaving office even took a position as chairman of the supervisory board of Nord Stream (European Commission, 2007, p. 3) Also Finland showed its political support for the project. On this matter, Finish Prime Minister argued that such a project was in the interest of the Finish strategic partnership with Russia, adding that he did not see any security concerns related to the project (European Commission, 2007, p. 4) Finally, the European Commission argued that the project was very positive for the energy security of Germany and of Europe in general as it would provide much-needed gas to an increasingly energy thirsty union. Moreover, it would add an additional transit route, the Commission argued. The EU formally declared its support by re-affirming the pipeline’s status as part of the Trans-European Network Energy Guidelines (‘TEN-E’) in 2006 (Whist, 2008). The Energy Commissioner Andris Piebalgs argued in that same year that: “The more pipelines we have, the securer is the supply. The question is only that in the course of construction all the relevant environmental factors will be respected, but that too I see positively” (European Commission, 2007, p. 2). One the other hand, Poland, and other Baltic States (Sweden, Denmark, Estonia, Latvia and Lithuania) were very critical about Germany closing the Nord Stream deal with Russia, arguing that it was a
86 politically motivated strategy that would increase Russia’s leverage on them and threaten their energy security. This strategy, they argued, would allow Russia to use the pipeline to blackmail other transit countries, or to possibly also use it as a tool to put Member-States against each other (Whist, 2008). Nordic States also emphasized the potential environmental impact the project could have. In this regard, they argued that the construction of the pipeline would disturb a contained area of the sea and cause more pollution (Whist, 2008). Moreover, there was also some debate about the possible military concerns the pipeline could raise. On this, the Swedish Research Defense Agency stated that it could be used for intelligence purposes and give a Russia strategic advance in the region (European Commission, 2007, p. 6). The Nord Stream project was a reflection of the strained EU-Russia energy relations and it highlighted the different interests and approaches shaping the formulation of an EU energy (security) policy. Moreover, the approval of the pipeline also highlighted the EU’s natural gas supplies diversification challenge (Ratner, Belkin, Nichol, & Woehrel, 2012). 3.2.3. EU-Ukraine Association Agreement (2012-2014) One of the best instances illustrating the negative impact of Nord Stream construction on the EU’s strategy to diversify its natural gas supplies is to look at how the pipeline bypassed Ukraine, one of the EU’s most important transit countries for gas (Kapitonenko, Shamshur, & Chalyi, 2012, p. 4). Nord stream started exerting greater pressure on Ukraine, whose economy is largely dependent on incomes from Russia-EU energy transit, leading the country to start deeply considering greater alignment with the EU (Kapitonenko, Shamshur, & Chalyi, 2012, p. 4). As such, the EU had already been acting in order to protect one its most important transit countries and it had been doing so by working on the establishment of a EU-Ukraine Association Agreement that would create privileged links between both in an area of mutual interest – energy (European Commission, 2011). The Agreement was drafted in March 2012 and signed in March 2014, right after the Russian occupation of Donbass and Crimea – two regions that were of the utmost importance for the Ukrainian energy structure (Bayramov & Marusyk, 2019, pp. 12-13). With the Agreement, Ukraine committed itself to becoming a greater EU energy partner and to implement a wide range of EU energy provisions that would be crucial to reform its energy sector and to integrate the EU’s energy market (Conconi, Herghelegiu, & Puccio, 2020).
87 In this regard, the Agreement clearly states that Ukraine is: “Committed to enhancing energy cooperation, building on the commitment of the Parties to implement the Energy Community Treaty […]” and “Committed to enhancing energy security, facilitating the development of appropriate infrastructure and increasing market integration and regulatory approximation towards key elements of the EU acquis […]” (European Commission, 2014, p. 5). The importance of Ukraine for the EU’s energy (security) policy has always been clear. However, one believes that the construction of Nord Stream highlighted this importance to the EU, which culminated in the establishment of the EU-Ukraine Association Agreement. For instance, in 2011 the EU launched a communication on security of energy supply and international cooperation entitled: "The EU Energy Policy: Engaging with Partners beyond Our Borders". In it, the EU reiterated the importance of Ukraine through the following statements: “Approximately 20% of the EU's gas supply passes through Ukraine. The EU must support efforts to rehabilitate Ukraine's Gas Transmission System, while improving transparency and the legal framework. It should aim at faster integrating Ukraine into the Energy Community. The EU must also work to establish a tripartite cooperation at political and administrative level with Russia and Ukraine to ensure stable and uninterrupted gas supplies through the Eastern Corridor” (European Commission, 2011). After 2011, and with the signing of the EU-Ukraine Association Agreement, the EU started to provoke a change in the energy structure of Ukraine (by exporting its acquis communautaire) that would favor the EU’s energy (security) policy itself. One of the most important changes in this regard was the EU demand for Naftogaz to be restructured and reunite the legal conditions to perform a greater role in the EU’s gas transport system (Bayramov & Marusyk, 2019, p. 12). 3.3. Concluding remarks While in the beginning of the 2000s the EU intensified its efforts in strengthening the internal dimension of its energy (security) policy, from 2006 until 2014 a greater focus was placed on the development of its external dimension. This change was due to a particular event: the Russian natural
88 gas cut-off to Ukraine in 2006. This event showed the EU how vulnerable it was to Russian gas supplies and its transportation through Ukrainian infrastructure (Jegen, 2014). Consequently, the EU emerged in a new wave of policy-making focused on the development of mechanisms and rules that would allow itself to respond to this kind of external events as well as deal with specific third countries that had a direct impact in its market – Russia and Ukraine (Jegen, 2014). As such, from 2006 to 2009 the EU adopted a series of policy initiatives to deal with the growing Russian challenge of cooperation in the energy sector. Although many important initiatives were taken in this period (like the 2006 European Energy Community and Green Paper), one must highlight the following ones. First, the First Strategic Review, or “An Energy Policy for Europe'', which was established in 2007. Although this policy did not achieve any considerable progress towards the definition of a common external energy (security) policy, it made a huge progress with regards to security of supply as it established response mechanisms that would face the eventuality of an energy cut-off (Council of the European Union, 2007). Second, the Second Strategic Review, where the EU proposed the creation of the Southern Gas Corridor, which would bring the Union closer to other energy producing and transit countries in the Caucasus. The SGC was a pipeline that was planned to be controlled by Western firms and managed by EU law. All this with the objective of promoting diversification of supplies and promoting the energy security of Southern and Central European countries, thus reducing their dependence on Russian gas (Jarosiewicz, 2015, p. 10). Third, and lastly, the Lisbon Treaty was particularly important as it finally materialized the three EU energy (security) policy dimensions: internal market, environment and external relations. Moreover, this Treaty introduced energy as a shared competence, whereby member-states could not apply authority when the EU had done so (Jegen, 2014). This period of policy-making allowed the Eu to develop its ability of dealing with the Russian growing challenge – it actually showed the entrepreneur power of the Commission in leading the development of the EU’s energy (security) policy. Still, some policies – like the First Strategic Review – did not fulfill their potential due to the classic EU dual-take approach problem related to the reluctance of some member-states – especially Germany – in putting their national energy interest towards Russia at stake (Natorski & Surrallés, 2009). From 2009 to 2014, the Commission’s efforts towards the creation of an external energy dimension were motivated by new Russian-led events that had directly affected the security of the Union’s energy supplies: a cut-off of gas supplies to Belarus in 2007, a second cut-off to Ukraine in 2009, a conflict with Georgia in 2008 and 2009, and a second cut-off to Belarus in 2010
95 of power and negotiation. But most importantly, this body meant a common EU external voice on energy issues (Fânzeres, 2015, p. 33). However, the reasonability of the presented measures was questioned right after they came to public as they had been put forward by then Prime-Minister Donald Tusk and were clearly directed at serving the economic and political interests of Poland and other member-states that were very dependent on Russian gas. Moreover, the Energy Union’s measures were based on the idea that dependence on Russian gas constituted a threat to Europe, when , in truth, stronger member-states like Germany, Italy, the Netherlands, or even France (that nevertheless pushed a lot for the Energy Union to materialize), did not agree with that idea. In turn, these states actually had a clear interest in maintaining this dependence, an interest that became apparent if one took a look into their energy partnerships with Russia – still, they showed support for the measures for a matter public rhetoric (Fânzeres, 2015, p. 34; Szulecki, 2018, p. 3). As such, Germany was not very vocal about the Energy Union. Berlin did support the objective of diversifying the gas supplying sources, but did not see any need to create a common European approach for the acquisition of natural gas supplies; Italy, in turn, showed support, but made clear that wanted to keep promoting its energy dialogue with Russia and other states of strategic interest in the Eastern Mediterranean and also Azerbaijan; and Spain and France showed a lot of support for the Energy Union’s and the associated goal to develop a common EU energy (security) policy (Fânzeres, 2015, p. 34). In general, the Energy Union was very well received, after it was put forward by Donald Tusk. However, it was later taken-up and reshaped by the new European Commission administration under JeanClaude Juncker (Szulecki, 2018). Juncker continued what Tusk initiated. He set out the Energy Union to be the main political reference for the formulation of EU energy regulation, 24 something that became clear after a decision of the European Council in 2015: “According to a Council Decision of December 2015, new energy infrastructure, in addition to being in line with TEP requirements, ‘should entirely comply with the objectives of the Energy Union. In effect, this Decision makes the Energy Union goals – with security of supply topping 24 Brussels, 19-20 February, 2020. 550th Plenary Session of the European Economic and Social Committee.
96 the list – the explicit political context in which regulation is to be interpreted. EU regulation thereby becomes a potentially formidable instrument for advancing EU foreign policy priorities, particularly regarding the fate of Ukraine’s energy economy and Russia’s capacity to service its contractual gas export obligations – including its ability to earn money on the European market” (Goldthau & Sitter, 2019, p. 12). The Energy Union was based on a market-power strategy. Contrary to most of other previous policyinitiatives in the energy field, it viewed that gas was a strategic good and that security of supply should be of utmost concern, especially for states that relied on Russia for almost 40 per cent of their gas imports 25 . This view had never gained traction before, even after the several Russian cut-offs to Ukraine or Belarus. However, the deterioration in EU–Russia relations, the annexation of Crimea and the increasing competition between the EU-supported Nabucco pipeline and the Russian South Stream alternative, this view gained a lot of traction (Goldthau & Sitter, 2019). 4.4. The rise and fall of the South Stream (2014-2015) Indeed, Russia’s South Stream pipeline and its non-compliance with EU law was a very important factor leading the EU to use its market power in a strategic and selective way (Goldthau & Sitter, 2019, p. 9). South Stream, as it had been mentioned before, was a big competitor to the EU supported Nabucco pipeline since they both aimed at the market of Southeastern Europe. The project was welcomed by the European Commission that despite being skeptical regarding Russian ambitions in the EU’s gas market, saw it as a solution to avoid transit risks emanating from Ukraine and Belarus. Moreover, the Commission also regarded the project as an extra route to EU-Russia gas trade, thus enhancing security of supply (Fânzeres, 2015). Germany, Italy, and France also had a strong national interest in the execution of the project since their national companies Wintershall, ENI and GDF Suez respectively were major actionists of the pipeline. Additionally, Bulgaria, Greece, Slovenia and Hungary also had an interest in the pipeline since they would be some of its main recipients, thus ensuring a bigger amount of Russian gas supplies (Proedrou, 2012, p. 84). However, despite general interest in the project, even from the EU Commission, it soon started facing several challenges at the EU level. First, Gazprom based the project solely on a set of 25 Brussels, 19-20 February, 2020. 550th Plenary Session of the European Economic and Social Committee.
97 intergovernmental agreements with the main European countries involved in it. Gazprom did so in order to avoid that the pipeline would be subject to the third energy package’s third-party access and unbundling requirements, which would require the company to not utilize the full capacity of the pipeline as a way to open it to third parties, thus allowing greater competition (Proedrou, 2012, p. 94). The EU Commission saw this as a Russian breach of EU energy law and, as such, asked Moscow to either re-negotiate or renunciate the agreements governing the pipelines, arguing that if the company would not do so, then the Commission would have to initiate infringement procedures against or and the involved member-states themselves. Russia decided not to follow the EU’s request to abide by the Package, and neither did Bulgaria, opting for maintaining the intergovernmental agreement with Gazprom (Stern, Pirani, & Yafimava, 2015, p. 4). As a result, the EU Commission started two infringement procedures against Bulgaria: one for not respecting the TEP and another for possible disrespect of the standard pipeline procurement procedure. This led to the suspension of the pipeline construction in Bulgarian territory in August 2014 (Goldthau & Sitter, 2019, p. 9). With the Bulgarian suspension, complemented by the EU Commission’s accusations of Gazprom’s disrespect of third-party Access and unbundling requirements, Russia abandoned the project in December 2014. At the same time, the EU Commission had been taking actions against Russia for annexing Crimea, which also helped create momentum for the Russian cancellation of the project at the end of the year (Stern, Pirani, & Yafimava, 2015, p. 4) According to Goldthau and Sitter , the EU Commission’s accusations of Gazprom’s disrespect of the third energy package and investigation of Bulgarian procurement related to the pipeline are an example of the EU behaving as a market power as it is using energy market regulation in order to impose Russia and Bulgaria legal conditions to access its internal energy market (Goldthau & Sitter, 2019, p. 9). In the meantime, South Stream’s cancellation occurred, during the Summer of 2015, with Gazprom replacing it with a new project: the Turkish Stream 26 (or TurskStream) which intended to bring the Russian gas to the European territory of Turkey, through the Black Sea. Also, during the Summer, Gazprom announced the already debated Nord Stream 2, which despite having a very different geographic location that the one of Turkish Stream, had the same objective: increasing the shares of Russian companies in the European energy market, diversifying export routes, and bypassing transit 26 “TurkStream consists of two lines, each capable of delivering 15.75 billion cubic meters (bcm) of natural gas annually. The first line is intended for the Turkish market, while the second is meant for Europe, comparable to South Stream before the project was scrapped in 2014. Therefore, TurkStream may affect the supply situation in both Southeast and Central Europe, adding another non-Ukrainian supply route from Russia” (Jirušek, 2020).
98 countries, like Ukraine or Belarus, that presented political risks to Russia. Moreover, according to the European companies that support them, these projects would contribute to increased European energy security by adding an extra route and being able to fulfill Europe’s growing gas demand. Contrarily, the project’s opponents argue that they are political instruments intended to give Russia leverage over Ukraine and Eastern Europe (Siddi, 2020, p. 10). However, it was unclear whether these considerably recent projects would give Russia political leverage over Eastern Europe. The main concern for the EU is instead the likelihood of some member-states taking extreme stances towards the projects, which would undermine the EU’s internal coherence on energy issues (Siddi, 2020, p. 10). Map 5 : Turkish Stream route (Hurriyet Daily News, 2017) In the case of the Turkish Stream, the EU has also expressed concerns related to the pipeline section in Serbia arguing that it must respect EU energy law, namely the third energy package’s third-party access and Unbundling Requirements. Additionally, the EU has also added that it will scrutinize the evolution of the project’s execution and check if it adheres to the internal energy market rules (Jirušek, 2020). As such, the EU has a big challenge ahead in what regards guaranteeing that the project is fully in line with its energy law. Most possibly, in order to deal with it, the EU would need to find a solution that balances its import needs and foreign policy concerns related to Russia (Jirušek, 2020). Still, import
99 needs might be a determinant factor regarding how the EU will deal with the project – especially if one takes into account that current forecasts estimate that Europe will need to import an additional 77 bcm by 2025 as a result of EU decarbonization policies and the fall in domestic gas production in Europe. Thus, the Turk Stream will be very welcome in Europe, however, it will be subject to EU’s market access conditionality tools (Bochkarev, 2019, pp. 2-5). 4.5. EU-Turkey High Level Energy Dialogue (2016) Indeed, the EU’s growing gas demand has been a determinant factor in what regards the development of the EU’s energy (security) policy. Being aware of this growing challenge has led the EU to create new strategies directed at countering it. One of these strategies, as already mentioned, is based on closing and deepening ties with strategically important countries that stand as crucial for the EU’s energy security and energy diversification, as it is Turkey (Karbuz, 2014; European Commission, 2016). With the objective of deepening such ties, the EU Commission’s 2015 Energy Union called for intensified work between both parties on the Southern Gas Corridor and for the establishment of a new strategic energy partnership with Turkey. Furthermore, the European Commission argued that the strategic presence of the European Union and Turkey in the Southern Gas Corridor’s region could therefore be used to benefit both from the region’s gas export potential, making gas supplies to the EU and Turkey more secure (Tagliapietra & Zachmann, 2015, p. 1). Turkey geographical location at the cross-roads of gas-rich countries and at the intersection of a very important pipeline of the Southern Gas Corridor, the Trans-Anatolian Pipeline (TANAP), is intended to be used by the European Union as a game-changer in the future of the EU's energy (security) policy in the gas sector. This Corridor has the potential of bringing gas supplies from Azerbaijan, Turkmenistan, and Iran, thus reducing the EU’s dependence on Russian natural gas supplies, and promoting the competition of Southern and Eastern European natural gas markets (Tagliapietra & Zachmann, 2015, pp. 3-4). As such, in order to create mutual benefit from Turkey’s position, both the EU and Turkey have been working towards greater cooperation in the natural gas sector, being one of the highest points of such cooperation the 2016 EU-Turkey High Level Energy Dialogue. In the Dialogue’s Joint Press Statement, one can clearly notice the mutual commitment to the Corridor and how Turkey will play a greater role in the EU’s energy (security) policy:
100 “Both sides underlined the importance of Turkey as a key country for the EU's energy security and as a regional energy hub, and they reaffirmed their joint commitment to the successful implementation of the Southern Gas Corridor. Its timely completion is critical so as to allow gas flowing to Europe by 2020. In this regard, Turkey will continue to play an active role in the Southern Gas Corridor Advisory Council which will convene for a second meeting shortly” (Cañete & Albayrak, 2016). Moreover, the potential of EU-Turkey cooperation in the gas sector goes even further since Turkey also has the conditions to improve its LNG capacity, which can contribute to its position as regional gas hub in the long term, and to its objective of becoming a very important transit and supplying country to Europe (Cañete & Albayrak, 2016). Finally, Turkey has a considerable potential to play a major role in the European renewables and energy efficiency strategy, increasingly incorporated in the evolving EU energy (security) policy. Additionally, Turkey is investing in the nuclear energy and carbon market, being its new nuclear energy programme and climate change mitigation efforts an example of it, something that the EU might consider as a way of complimenting its energy (security) policy in the gas sector in future (Tagliapietra & Zachmann, 2017, p. 2). Finally, the EU-Turkey cooperation in the gas sector could further develop if the Turkish Stream is able to fill third-party access and unbundling requirements and further double its capacity by creating a second string aimed at supplying the European gas market (Tagliapietra & Zachmann, 2017, p. 4). Despite all this potential, it should be noted that EU-Turkey energy cooperation has never been institutionalized precisely because of Turkey’s reluctance to be subject to EU’s energy law. Notably, Turkey is fearful that being subject to it could cause the split-up of its state-owned oil and gas company BOTAŞ, or even give other companies non-discriminatory access to its company’s pipelines (Tagliapietra & Zachmann, 2017, p. 5). As such, in order to help Turkey further integrate with the EU and to assist Turkey in becoming a key transit country for gas that will allow the EU to demarcate itself from its dependence on Russian gas infrastructure, the EU has launched the EU-Turkey High Level Energy Dialogue. 4.6. EU-China Energy Dialogue and Roadmap on Energy Cooperation (2017) China too has similar energy needs to the ones of Europe, namely its gas demand. Moreover, besides energy scarcity, both the EU and China face an additional number of common challenges in the energy
101 field, like their vulnerability to climate change and to the increasing volatility of energy prices. This makes cooperation between both a strategic action that needs to be taken (Kottari & Marantidou, 2016). Their main common challenge: dependence on imports of fossil fuels, has been the main driver of their interaction. China and the EU are the world’s largest importers of natural resources, which makes them very dependent on supplying countries, as it is the case of Russia in what regards their natural gas imports. And natural gas is expected to become a major component of China’s energy mix, as it already is of the EU’s – which means both need to deepen their energy ties with Russia. This makes EU-China cooperation in the energy sector very important. Thus, the EU has been taking measures to promote such cooperation with China, being the most notorious ones the establishment of an annual Energy Dialogue with the country since 1994, which in 2017 achieved one of its greatest outcomes by leading both parties to agree on implementing a EU-China Roadmap on Energy Cooperation (Kottari & Marantidou, 2016; Cătuţi, Egenhofer, & Elkerbout, 2019). The Dialogue, besides having established investment in renewables and efficiency schemes as a mutual interest, also has put a lot of importance in the shared need of their economies to invest in producer countries like Russia and facilitate the development of strategic energy infrastructure (Kottari & Marantidou, 2016). The Dialogue has served as a basis to promote further engagement between both actors in the pursuit of greater cooperation with Russia. Actually, China has already been looking at playing a crucial role in the reform of the Energy Charter Treaty by functioning as a communication bridge between the EU and Russia at the same time that China-Russia energy ties deepen (Kottari & Marantidou, 2016, p. 17). Additionally, China has been largely investing in the gas sectors of many industrialized EU member-states, which means that Europe is playing a growing role for China’s energy security. Thus, it is of the EU’s economic interest to deepen energy ties with China. The Energy Dialogue and subsequent cooperation initiatives are clear examples that the EU is indeed trying to promote such energy ties (Liedtke, 2017, p. 664), Nevertheless, if the EU wants to obtain greater benefit from its cooperation with China, it should offer China a more interesting cooperation project. According to an author, China prefers bilateral cooperation with EU member-states, as for example Germany, which not only is one of its most important trading partners, but also the EU’s most relevant member-state when it comes to individual energy relations with Russia. The reason for the Chinese preference, the author adds, is that it is easier
102 for China to reach bilateral agreement with an individual member-state rather than with the EU. Additionally, China enjoys greater leverage when the EU is divided (Newsletter for the European Union, 2017). Still, multilateral cooperation is very important for the EU and as such, the 2017 EU-China Roadmap on Energy Cooperation comes at a moment when the visions of EU and China are aligned in terms of promoting their position as important gas importers from Russia, investing in infrastructure of mutual interest and in clean energies (James, 2019). One can conclude that the EU’s establishment of a strategic partnership with China is an example of the EU using its economic power by offering China investment opportunities in its gas sector, and thus benefit from China’s energy connection with Russia. According to Goldthau and Sitter, this approach has not yet been much debated in the EU, however, it is very common in China and Russia’s external economic policies (Goldthau & Sitter, 2019, p. 12). 4.7. European Commission proposal to amend the 2009 Gas Directive (2017) Right after closing two important energy cooperation deals with Turkey and China, in November 2017 the European Commission took a bold step: it proposed to amend the Third Energy Package’s Natural Gas Directive with the objective of expanding EU gas rules – namely third-party access, tariff regulation, ownership unbundling and transparency – to all gas pipelines going to and coming from third countries (European Commission, 2017). The Commission noted that the measure would allow itself to do the following: “[…] ensure that all major pipelines entering the EU territory comply with EU rules, are operated under the same degree of transparency, are accessible to other operators and are operated efficiently. Once the amendment is adopted by the European Parliament and Council these changes will constitute a significant step towards the completion of the Energy Union. This clarification will also contribute to meeting the goals of the EU gas market, which include increasing competition between gas suppliers and providing a boost to energy security in the EU. Ensuring that all major pipelines wholly or partly located in EU territory are operated efficiently under a regime of transparent regulatory oversight” (European Commission, 2017). Moreover, the Commission stated that the objective of the amendment was to improve the functioning of the internal market and promote solidarity between member-states. However, its real goal was to
103 find a way to gain political leverage over the developing Nord Stream 2, which was going to severely increase the Russian dominance over the European gas market. Actually, the amendment would not just create additional bureaucratic rules for Nord Stream 2 to operate in the EU, but also shift energy (security) policy powers from member-states to the Commission, therefore giving the institution the so long-desired powers to authorize and block intergovernmental agreements between member-states and Russia, as well as powers to determine EU member states’ energy policies (Bochkarev, 2019). As expected, this amendment was not well received by many member-states with a clear interest in Nord Stream 2, as it is the case of Germany and France. In this regard, the French government stated that the Commission’s amendment violated the principle of subsidiarity, extended the application of EU energy law beyond the EU borders without a proper legal basis, and violated the sovereignty of member-states to determine their own energy policies, which was established under Article 194(2) of the Treaty of the European Union (TFEU). Also, Uniper, criticized the Commission’s action, arguing that it violated the sovereignty of member-states to determine their energy sources established under the TFEU (Bochkarev, 2019). Due to the criticisms raised by Germany and France, but also because of the Council of the EU’s disapproval to move the amendment forward, the European Commission is still today struggling to make its will prevail. This shows the increasing entrepreneurial role of the institution in energy affairs and how it is using its regulatory capacity to create market access conditions to Russia, which is, according to Goldathau and Sitter an example of an application of market power (Goldthau & Sitter, 2019). Most importantly, the fact that the amendment did not move forward because of memberstates’ national interests over Nord Stream 2, shows us, once again, the EU’s dual take approach when it comes to energy (security) policy-making. 4.8. Security of Gas Supply Regulation (2017) In the same month that the EU Commission proposed its amendment to the Natural Gas Directive, it also adopted the Security of Supply Regulation. Although this regulation did not extend itself to external pipelines, as the EU wanted its Directive to, the Regulation contained a number of relevant provisions that had a legal impact on new pipeline capacity arriving into the EU, like Nord Stream 2. These provisions established the need for member-states to provide common risks assessments, preventive regional action plans, and an information exchange mechanism about gas supply contracts. Thus, the
104 way in which member-states planned their regional emergency plans in the event of a gas shortage could have an impact on the development of new gas transmission capacity (Hancher & Marhold, 2019). Additionally, the regulation stressed preserving existing pipelines and supply contracts, and created a new solidarity clause. According to it, a member-state that is directly connected to another memberstate that requested for the activation of the solidarity clause is obliged to take measures to guarantee gas supplies to the customers of the requesting state – having these measures to be incorporated in their emergency plans (Hancher & Marhold, 2019, p. 9). According to the 2018 Deputy Director General of the European Commission’s DG Energy, this regulation meant that consumers were protected in case supplies ran short. According to him, the regulation meant that the EU had a functioning gas market (Bochkarev, 2019). 4.9. Southern Gas Corridor inauguration (2018) As a way of keeping developing its gas market, in 2018 the European Commission announced the opening of its long planned Southern Gas Corridor. The SGC consists of four sections that extend through a length of 3,500 kilometers. The first section corresponds to the Shah Deniz gas field and extraction facilities in the Caspian Sea; the second to the South Caucasus pipeline which runs from Baku to the eastern Turkish city of Erzurum; the third to the Trans-Anatolian Pipeline (TANAP) which extends itself from the gas-receiving city of Erzurum in Turkey to the Greek-Turkish border; the fourth and last, the Trans-Adriatic Pipeline (TAP) which carries gas from the Greek-Turkish border to Italy via Greece, Albania and an offshore section in the Adriatic Sea. The SGC is able to channel a total of 10 bcm of gas to the EU every year (Siddi, 2019, pp. 8-9). The project represented a huge step forward in the development of the EU's energy (security) policy as it allowed the EU to diversify its gas imports by accessing gas supplies in the Caspian Sea through a route that bypasses Russia. Moreover, by allowing several European countries to diversify their supply sources, it also allowed them to reduce their dependence on Russian gas (Siddi, 2019). The SGC has also served as a catalyst for further investment in the gasification of the Western Balkans that currently lack a gas sector and are therefore very dependent on locally produced coal, as for example Albania, Kosovo and Montenegro. The project also gives an opportunity for Bosnia & Herzegovina, which is
111 EU channeled a lot of investment to the renewables sector, as it realized the complementing role it could have to Russian gas. This period of policy-making showed that the European Commission could have a leading role in the development of the EU’s energy (security) policy, especially if it used its economic power. Still, more could have been achieved if it was not for the usual dual-take approach problem characterized by the reluctance of some member-states of putting their national energy interest towards Russia at stake (Natorski & Surrallés, 2009). One of the best examples of this dual-take approach during this period was the European Commission Proposal to amend the 2009 Gas Directive (2017). The Commission’s amendment would extend TEP rules (third-party access, tariff regulation, ownership unbundling and transparency) to new import pipelines, like Nord Stream 2. This would not only create additional bureaucratic hurdles for Nord Stream 2 to operate in the EU but would also mean a shift in energy (security) policy powers from member-states to the Commission, therefore giving the institution the so long-desired powers to authorize and block intergovernmental agreements between member-states and Russia (Bochkarev, 2019). Obviously, this was not well received by many member-states, but especially by the ones with a national interest in Nord Stream 2, like Germany or France, which stated that the Commission’s amendment extended the application of EU energy law beyond the EU borders without a proper legal basis, and violated the sovereignty of member-states to determine their own energy policies, which was established under Article 194(2) of the TFEU (Bochkarev, 2019).
112 Conclusion This dissertation has set out to answer the research question of “how has the European Union (re)formulated its energy (security) policy while faced with the changing Russian role in the EU’s natural gas sector?”, by arguing that the European Union has conceptualized its energy (security) policy through three different approaches: as a normative power, as a regulatory power, and as an economic and market power. From 1994 to 2003, the EU conceptualized its energy (security) policy while behaving as a normative power. During this period, the EU did not consider Russia as a challenge to its energy strategy, as such, it focused on using regulations to build and manage its internal market, while at the same time creating binding international rules to level the playing field and benefit everyone, including Russia. The European Commission was a crucial actor in this regard, behaving almost as a supranational actor engaging in energy (security) policy initiatives. The most meaningful ones that led us to realize that the EU was behaving as a normative power during this period were the European Energy Charter Treaty (1994), the EU-Russia Energy Dialogue (2000), the First Energy Package (1998), and the Second Energy Package (2003). All these policies were based on the creation of market liberalization rules. The First Energy Package brought the concept of accounting unbundling, which represented the Commission’s first attempt to break with national and regional monopolies, a necessary condition for a truly unified European energy market. Additionally, it also deepened the ECT concept of third-party access, which gave member-states the right to require the owners of gas pipelines to allow third parties to use their pipelines under regulated conditions. However, accounting unbundling was not enough for breaking up with the vertically integrated gas monopolies that controlled prices on the wholesale market. As such, the second gas directive tried to fill this void and established the concept of legal unbundling which went further by separating commercial activities from transmission system activities. Moreover, the second gas directive also deepened the third-party access concept by making its implementation mandatory in member-states' transmission and distribution systems, as well as LNG facilities. The EU-Russia Energy Dialogue, in its turn, had a more bilateral and regional character as it was particularly directed to Russia and its objective was to solve issues of mutual concern in the energy sector and to create a model for cooperation based on common practices. However, the Dialogue, as well as the ECT, failed in their objectives of integrating Russia. In this regard, the Packages were far more efficient due to their legal, binding character. The 2000s was a period of strengthening the internal dimension of the EU’s energy (security) policy.
113 From 2006 to 2014, the EU conceptualized its energy (security) policy while behaving as a regulatory power. During this period, Russia cut-off gas supplies to Ukraine (2006 and 2009), Belarus (2007 and 2010), and Georgia (2008 and 2009). Some of these cut-offs had a direct impact on the gas supplies of EU member-states, therefore serving as a ‘wake-up call’ for how challenging EU’s dependence on Russian gas could be. As such, the EU engaged in a wave of policy-making based on the development of regulation that would allow itself to integrate and subjugate to EU rules neighbouring countries that were of the utmost importance for the EU’s energy (security) policy. The most meaningful policy initiatives that led us to realize that the EU was trying to develop mechanisms that would allow itself to respond to external threats to its energy security were: The First Strategic Review (2007), the Second Strategic Review (2008), the Lisbon Treaty (2009), the Third Energy Package (2009), and the EUUkraine Association Agreement (2012-2014). The First Strategic Review, although not having achieved any considerable progress towards the definition of a common external energy (security) policy, made huge progress with regards to security of supply as it established response mechanisms that would face the eventuality of an energy cut-off. The Second Strategic Review, in its turn, proposed the creation of the Southern Gas Corridor, which would bring the EU closer to other energy producing and transit countries in the Caucasus, therefore allowing the EU to diversify its supplies and to promote the energy security of Southern and Central European countries, reducing their dependence on Russian gas and their vulnerability to cut-offs. The Lisbon Treaty was particularly important as it finally materialized the three EU energy (security) policy dimensions: internal market, environment, and external relations. Moreover, this Treaty introduced energy as a shared competence, whereby member-states could not apply authority when the EU had done so. Also in 2009, the EU launched the Third Energy Package, which was directly aimed at tackling Russian influence over the European gas market. The Package placed stricter demands on energy companies operating on the EU’s territory – as it was Gazprom’s case. The most impactful of these demands were the third-party access requirement and the requirement for the unbundling of transmission networks. Between 2012 and 2014 the EU launched the EU-Ukraine Association Agreement that intended to transport the EU’s acquis communautaire to the Ukrainian energy sector, thus integrating it in the European energy market and stepping it away from Russian dominance. This Agreement came in light of the construction of Nord Stream in 2011, which bypassed important transit countries for Europe, like Ukraine. Nord Stream was supported by the EU as it was seen by the bloc as a solution to its growing need for gas and as an extra route to its transport system. Still, the project raised a lot of debate among member-states that were in favor and against it, being the most vocal ones in this regard Germany and Poland, respectively. This period of
114 policy-making surely achieved a few great things in dealing with the growing Russian challenge. Still, some policies – like the First Strategic Review, the Lisbon Treaty, or the Third Energy package – did not fulfill their potential due to the classic EU dual-take approach problem related to the reluctance of some member-states – especially Germany – in putting their national energy interest towards Russia at stake. While in the beginning of the 2000s the EU placed its efforts in strengthening the internal dimension of its energy (security) policy, from 2006 until 2014 a greater focus was placed on the development of its external dimension. This change resulted from the Russian gas cut-offs. From 2014 to 2019, the EU formulated its energy (security) policy while behaving as an economic and market power. During this period, the EU kept trying to develop an external component for its energy (security) policy in order to deal with its dependence on Russian gas supplies and the transit instability in Ukraine, while at the same time it created economic opportunities to guarantee the well-being of its natural gas sector, as for example, new partnerships with energy producers and transit countries. The most meaningful policy initiatives aimed at strengthening the external dimension of the EU’s energy (security) policy were the Energy Union (2015), and the Security of Supply Regulation (2017). Both these initiatives achieved a lot in terms of promoting security of supplies and solidarity between member-states. In terms of promoting security of supplies, the Energy Union was particularly effective as it created an EU body that negotiates supplying contracts with the bloc’s main suppliers, thus giving the EU a coherent external voice in energy negotiations. But most important in this regard, the Energy Union established that security of supplies should now be the main driver of any EU energy regulation. Therefore, the EU could now explicitly use energy law for advancing the interests of its energy market, as for example determining the fate of Ukraine’s energy economy or Russia’s capacity to service its contractual gas obligations. Regarding promotion of solidarity between member-states, the Security of Gas Supply regulation was particularly important. It created a solidarity clause that forced a memberstate that was directly connected to another member-state requesting solidarity to take measures to guarantee gas supplies to the customers of the requesting state. Both these policies, as it was mentioned, were very important for the purpose of giving the EU’s energy (security) policy a coherent external voice. However, the Energy Union was way far more relevant in this regard since it allocated a huge amount of money to this purpose. For example, thanks to the money allocated to the Energy Union, the EU was able to invest great amounts of economic resources in the establishment of renovated partnerships with Turkey (2016), China (2017), and the US (2018) because of the important role they could have in the European gas sector. Turkey showed a lot of potential to be an important
115 gas transit country for Europe, China showed to be a strategic partner of Russia in the gas sector, which could be used in the EU’s interest, and the US showed to be a very important future partner as an LNG exporter to the EU. Considering that the EU had agreed to import much more LNG from the US to compete with Russian gas, during 2019 the EU also started investing in its own liquefaction capacities in Poland and Croatia. Additionally, the EU also invested many economic resources to develop its own gas corridor directed at finding new suppliers in the Caucasus and bypassing Russia: The Southern Gas Corridor (2018). Finally, through the Green Deal (2019), the EU channeled a lot of investment to the renewables sector, as it realized the complementing role it could have to Russian gas. This period of policy-making showed that the European Commission can have a leading role in the development of the EU’s energy (security) policy, especially if it uses its economic power. Nevertheless, one must clarify that despite the increased investment in LNG and the European strategy to diversify energy sources through renewables, new routes and new suppliers might reduce Russian influence, in the future, Russia will still be an important strategic partner of the EU and Gazprom will still be the EU’s main supplier. This will happen because of the very competitive Russian gas prices and long-term supplying contracts that the EU has agreed with Russia and that go beyond 2025. The EU and Russia will, therefore, be partners in the future and, as such, in order to get the partnership on the right track, all the issues of EU dependence on Russian natural gas have to be solved in a diplomatic way and through dialogue and cooperation. Still, from 1994 to December 2019, the EU could have achieved more in terms of gaining greater independence from Russian natural gas if it were not for the dual-take approach that resulted disagreements between the EU institutions and the member-states that took an active role in the definition of the EU’s energy (security) policy. This has ultimately led to very few measures being adopted towards the development of a common EU energy (security) policy, despite the several measures that were put forward in this direction by the European Commission and the European Parliament. These measures were not innovative, still they clearly promoted the communitarisation of the EU’s energy (security) policy. Nevertheless, the final decisions adopted by the Council of the EU (and that reflected the interests of member-states) would discredit the measures put forward by the Commission and the Parliament. On the one hand, the EU institutions and member-states shared a highly securitizing discourse of the EU’s dependence on Russian natural gas, on the other hand, they lacked agreement on tacking measures that would reduce this dependence. This lack of agreement was characterized by a dual-take
116 approach that reflected the differences between what the actors involved considered as threatening to the EU’s energy security. Some actors framed Russian actions as economic threats, other as political, and other as environmental. The European Commission focused on protecting the European economy, the European integration, and the European citizens and consumers, therefore lacking interest about the national perspectives. The European Parliament focused on the protection of the EU citizens’ way of life and on natural gas as a global good. The Council of the EU and some member-states in particular focused on their national energy systems and on their responsibility to ensure energy dependence by following economic interests. This divergence led us to conclude that contrarily to the European Commission and the European Parliament, member-states still do not perceive the EU as a reference and do not trust it as the most appropriate actor to deal with energy problems, even in times of demand for cooperation at the EU level. One of the best examples of this dual-take approach during this period was the European Commission Proposal to amend the 2009 Gas Directive (2017). The Commission’s amendment would extend TEP rules (third-party access, tariff regulation, ownership unbundling and transparency) to new import pipelines, like Nord Stream 2. This would not only create additional bureaucratic hurdles for Nord Stream 2 to operate in the EU but would also mean a shift in energy (security) policy powers from member-states to the Commission, therefore giving the institution the so long-desired powers to authorize and block intergovernmental agreements between memberstates and Russia. Obviously, this was not well received by many member-states, but especially by the ones with a national interest in Nord Stream 2, like Germany or France, which stated that the Commission’s amendment extended the application of EU energy law beyond the EU borders without a proper legal basis and violated the sovereignty of member-states to determine their own energy policies, which was established under Article 194(2) of the TFEU. With reference to the EU dual-take approach, this dissertation has argued that throughout the whole period of formulation of the EU’s energy (security) policy between 1994 and December 2019, there was, many times, an incomplete implementation of EU internal market legislation by member-states, as well as tensions between bilateral and EU actions in the external dimension. This is what we have called EU dual-take approach, and what Thomas Maltby calls “[…] an intergovernmental logic that remains at the core of EU energy security policy, undermining its coherence and effectiveness at least in the terms of supply diversification and supply disruption mitigation. For example, the progress of Russian backed large scale gas pipeline projects such as Nord Stream and South Stream demonstrate the prominence of
117 member state preferences within the EU, and the influence of their security and economic interests relative to the EU’s objectives of diversification of supply sources which both of the Russian backed projects undermine” (Maltby, 2013, p. 442). During this dissertation’s analysis, we were able to understand if the dual-take approach that was inherent to each event or policy-making initiative (that constituted an integral part of the formulation of the EU’s energy (security) policy) had either a more supranational or intergovernmental logic. Therefore, we were able to draw a table where we trace the most predominant logic of each event or policy-making initiative: Table 1. EU dual-take approach (2021) EU Dual-take Approach Commission + Member-States MemberStates European Energy Charter Treaty (1994) x Normative Power First Energy Package (1998) x EU-Russia Energy Dialogue (2000) x Second Energy Package (2003) x European Energy Community (2006) x Regulatory Power Green Paper (2006) x First Strategic Energy Review (2007) x A Strong European Neighbourhood Policy (2007) x Second Strategic Energy Review (2008) x Lisbon Treaty (2009) x Third Energy Package (2009) x Response to Nord Stream (2011) x EU-Ukraine Association Agreement (2012-2014) x
118 EU sanctions to Russian and Ukrainian Individuals, Officials and Companies (20142016) x European Energy Security Strategy (2014) x Economic Power Energy Union (2015) x The rise and fall of the South Stream (20142015) x EU-Turkey High Level Energy Dialogue (2016) x EU-China Energy Dialogue and Roadmap on Energy Cooperation (2017) x European Commission Proposal to Amend the 2009 Gas Directive (2017) x Security of Gas Supply Regulation (2017) x Southern Gas Corridor inauguration (2018) x EU-USA (8th) Energy Council (2018) x EU’s LNG strategy (2019) x EU’s renewable energy strategy: The Green Deal (2019) x Source: Author’s own production.
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