The Necessary Dream of a European Energy Diplomacy
May 20, 2015
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There are many reasons why the already existing European diplomacy should be strengthened, such as the growing global competition or the increased geopolitical instability in key areas for the EU. However, the sector where this diplomacy is most needed and will be more effective suffers from probably the least commitment by Member States: energy. Yet, the recent intra and extra European events possibly reveal that the time is ripe for a strong and compact European energy diplomacy to arise. And maybe to go further than that.
Why now? First, the Energy Union has brought renewed hope on the success of the European energy policy, including the diplomatic aspect which has been somehow missing from the Ashton-Barroso plans. The Communication on the Energy Union itself quotes: “The Commission, with the HR/VP, and the Member States will revitalise the EU's energy and climate diplomacy”. The idea was not a sudden enlightenment and it started, as the whole Energy Union project, from the tense EU-Russia relations of the past year. Indeed, some of the most important geopolitical crises around Europe (Libya, Ukraine, Iraq) have a strong energy component, which needs to be specifically addressed. Furthermore, the inability of the EU to provide a common political answer to these does not exclude the possibility of a valid reaction at least concerning energy supplies, which sometimes keep flowing despite the crises. Libya, for instance, has managed to recover its oil and gas export capacity several times after the civil war, despite major swings.
An European energy diplomacy would be useful in facing not only crises, but future challenges and possibilities as well. The global energy landscape is shifting at a speed it has hardly seen before. The growing Asian thirst for energy could absorb the US gas exports before a single drop would reach Europe. Other players are now appearing on the global energy scene and competition is strong in securing their supplies. This is the case of Africa for example, where the Italian ENI, among others, is active in promising countries such as Angola or Ghana. The EU would also benefit from a firmer position in international organisations, from major (UN, WTO) to sectorial (IEA, IRENA) institutions, where the EU as a whole has rarely truly existed.
The most discussed reason for a European energy diplomacy is, however, to increase the purchasing power of what the Commission defines the world largest energy importer. As expressed in the Council President Tusk’s Energy Union manifesto, a more compact EU on the energy frontline would reduce the power of dominant suppliers. Yet, in order to reach this, Europe has first to become effectively a single energy importer, something which is often true only in the statistics at the moment. This objective involves the development of interconnections, the achievement of the single market and other factors which belong more to the Energy Union as a whole, than to energy diplomacy.
Finally, a stronger external position on energy by the EU would be also positive on the domestic side. Recently, Russia proved it has not forgotten the success of its divide et impera strategy through the weapon of energy, launching its new Turkish Stream which soon received the support of the energy ministers of Hungary and Greece. Suffering from a distressed economy and an increasingly unfriendly EU, Tsipras met Putin and signed a trade agreement with Russia, and the possibility of a five billion euros loan from the Kremlin to Athens for Turkish Stream became real. The Commission did not wait much to send its reply: two weeks later DG Competition decided to send Gazprom a Statement of Objections, reviving the so called antitrust case of the decade, by a document which had been ready but quiet for at least one year. A message to Putin, but also to Tsipras.
As a matter of fact, one of the main reasons for a EU energy diplomacy is to ensure the coherence between different policy levels: national and European, intra and extra EU and among the European institution themselves. A coherence which is much needed, considering that the results are less than optimal when the Member States and the EU clash, as in the case of the Nord Stream. Providing Germany a direct access to Russian gas, the pipeline bypassed the Member States in the middle and missed an important chance of interconnecting the otherwise isolated countries. The design of the upstream infrastructures also suffered from this collision, in particular concerning the OPAL pipeline, which brings the Nord Stream gas southward. As the infrastructure is supplied by only one company, Gazprom, the Commission restricted the access due to the Third Package unbundling rule, leaving half of the pipeline capacity de facto unusable.
Even if the advantages are numerous, the obstacles are probably as many, the first being the definition of the structure. As a matter of fact, the European institutions are already committed to external action in energy, but this responsibility is fragmented among several bodies, which often lack coordination. When discussing the situation of the European energy diplomacy with Nathalie Tocci, Deputy Director at the Istituto Affari Internazionali (IAI), this hardly fit into the definition she provided: “the art of weaving together the various players and instruments of foreign policy making, of which energy is an essential component.”
The institution in charge of all the European diplomacy is, in fact, the European External Action Service (EEAS), which was asked by the European Council of February 2011 to include energy in its activities and ensure the coherence between the EU foreign and energy policies. Even if the EEAS is the most likely institution to coordinate the European energy diplomacy, others have their say in the matter and their tools to put this into action as well: DG Energy, through the application of the Third Package, the DG for Regional Policy, DG Competition, which has used the antitrust legislation against Gazprom since 2012, and even the DG Development and Cooperation (DEVCO), which has a significant number of projects and staff in countries which could be key for the European energy supply (Nigeria or Mozambique, for instance). Those institutions have each one their different view on energy diplomacy, as DG Energy has now a strong focus on gas, DG Regional Policy on local development and DEVCO is less interested in the European strategy per se and more focused on its role in international cooperation.
Likewise, an European energy diplomacy will require a clear definition of powers, which at the moment is missing. In 2012, the Council established an information exchange mechanisms in energy agreements with third countries. This had small success though, and its revival was included in the Commission Energy Union plans. The EEAS itself has not the power to agree on international binding agreements on energy, as it does instead on trade deals, in which energy and climate are often included to achieve more power, such as in the case of the Transatlantic Trade and Investment Partnership (TTIP).
The main difficulty which an energy diplomacy will have to face will come, however, from the opposition of Member States. Energy supply is still strictly considered a matter of national security, which only a few countries will be willing to delegate to the EU. Some, such as Germany, have favourable agreements with suppliers, namely Russia, which they have no interest in sharing with other European countries. Others use energy as one of the most prominent tools in their own diplomacy, as in the case of France and Algeria or Italy and Libya. On the other hand, smaller economies, such as those of the Visegrad Group (Czech Republic, Hungary, Poland and Slovakia) or the Baltic states, push for increased European cohesion which will lessen the burden of their isolation and energy dependence. However, they have their own position on the external European energy policy, which adds to the already heterogeneous picture coming from the European institutions. Apart from the not-so European attitude of several Member States, the problems here originate from their heterogeneity: the nuclear powered France has different interests than the Russian dependent Lithuania or the southbound Italy. The EU has then to find a balance between an impossible one size fits all solution and the current, inefficient individualistic approach. And it has still a long way to go.
Considering all these issues, it is not clear how and when it will be possible to establish a common, compact European energy diplomacy. Yet, it is necessary to start somewhere. One possible approach could be the one suggested by Tusk for the Energy Union: a step by step methodology, gradually strengthening the role of the European institutions when facing the Member States. The first stage should be the consolidation of the different European voices in one, to provide domestic compactness towards external challenges. In the block nine of its proposal for the Energy Union on energy diplomacy, the think tank Notre Europe suggested: “The long-used leitmotiv “speaking with one voice” should become “a single message with multiple voices” to ensure unequivocal understanding by the external partners.” In other words, the heterogeneity of the Member States cannot be avoided, but a mediation is possible.
A change could be achieved either through a new institution or, as suggested by Luca Bergamaschi of the think tank E3G, by a better coordination of those already in existence. Mr Bergamaschi, whose organisation has done extensive research on energy diplomacy and the Energy Union, provided the example of the external grid. While the number of initiatives is large, from Norway to North Africa and the Balkans, there is hardly any coordination between the High Level infrastructural groups, the external political action and the private and the national projects. Yet, the institutions are all already there: the MedReg, the Energy Community, the ACER and, of course, the EEAS.
There is also another approach which could be taken into consideration and concerns the private sector. Last December, the Centre for European Policy Studies (CEPS) published a commentary. This analysed the possibility of the EU to replicate the common purchases of gas, which the two Japanese companies TEPCO and CEPCO will make through a joint venture in order to reduce the price of LNG. Unlike Tusk’s proposal, this does not involve governments but it will still reduce energy prices and the associated risk, by increasing the amount of acquired gas and then the purchasing power. More importantly, it will elevate the status of the small Central and Eastern Europe consumers, such as the Czech Republic, to that of large buyers, such as Germany or France. Paradoxically, this option will lead the private sector to be the first, effective energy ambassador of the EU.
An actual EU energy diplomacy is now barely more than a dream, but it is needed more than ever. An incoherent external energy action hampers the development of significant investment plans, from the electrical connection between Italy and Northern Africa to a systematic development of the Southern Corridor. Furthermore, a decisive energy diplomacy would have a strong impact on the geopolitical stability of many neighbours of the EU. Countries such as Algeria or Egypt are decreasing their domestic production of fossil fuels, also due to insufficient national and foreign investments. As their energy demand rises, they can rely less and less on their energy exports, with Egypt having already imported gas from Israel. A fact which threatens their economy and, ultimately, their already fragile political situation.
The EU should switch from being able to provide reactions to develop successful long term plans. Even if the Ukrainian crisis triggered this renewed attention to energy diplomacy, Europe should exploit the moment and go further than the simple preoccupation for gas. The answer is, however, inside Europe itself, and it probably lies with the solution to the dilemma everyone knows, and no one asks: which EU do we want? Weak? Strong? None? Perhaps energy diplomacy is the key to pose the question, and the time is now.
Carpe diem, Europe.
Image: NASA
The importance of being a Union
Why now? First, the Energy Union has brought renewed hope on the success of the European energy policy, including the diplomatic aspect which has been somehow missing from the Ashton-Barroso plans. The Communication on the Energy Union itself quotes: “The Commission, with the HR/VP, and the Member States will revitalise the EU's energy and climate diplomacy”. The idea was not a sudden enlightenment and it started, as the whole Energy Union project, from the tense EU-Russia relations of the past year. Indeed, some of the most important geopolitical crises around Europe (Libya, Ukraine, Iraq) have a strong energy component, which needs to be specifically addressed. Furthermore, the inability of the EU to provide a common political answer to these does not exclude the possibility of a valid reaction at least concerning energy supplies, which sometimes keep flowing despite the crises. Libya, for instance, has managed to recover its oil and gas export capacity several times after the civil war, despite major swings.
An European energy diplomacy would be useful in facing not only crises, but future challenges and possibilities as well. The global energy landscape is shifting at a speed it has hardly seen before. The growing Asian thirst for energy could absorb the US gas exports before a single drop would reach Europe. Other players are now appearing on the global energy scene and competition is strong in securing their supplies. This is the case of Africa for example, where the Italian ENI, among others, is active in promising countries such as Angola or Ghana. The EU would also benefit from a firmer position in international organisations, from major (UN, WTO) to sectorial (IEA, IRENA) institutions, where the EU as a whole has rarely truly existed.
The most discussed reason for a European energy diplomacy is, however, to increase the purchasing power of what the Commission defines the world largest energy importer. As expressed in the Council President Tusk’s Energy Union manifesto, a more compact EU on the energy frontline would reduce the power of dominant suppliers. Yet, in order to reach this, Europe has first to become effectively a single energy importer, something which is often true only in the statistics at the moment. This objective involves the development of interconnections, the achievement of the single market and other factors which belong more to the Energy Union as a whole, than to energy diplomacy.
Finally, a stronger external position on energy by the EU would be also positive on the domestic side. Recently, Russia proved it has not forgotten the success of its divide et impera strategy through the weapon of energy, launching its new Turkish Stream which soon received the support of the energy ministers of Hungary and Greece. Suffering from a distressed economy and an increasingly unfriendly EU, Tsipras met Putin and signed a trade agreement with Russia, and the possibility of a five billion euros loan from the Kremlin to Athens for Turkish Stream became real. The Commission did not wait much to send its reply: two weeks later DG Competition decided to send Gazprom a Statement of Objections, reviving the so called antitrust case of the decade, by a document which had been ready but quiet for at least one year. A message to Putin, but also to Tsipras.
As a matter of fact, one of the main reasons for a EU energy diplomacy is to ensure the coherence between different policy levels: national and European, intra and extra EU and among the European institution themselves. A coherence which is much needed, considering that the results are less than optimal when the Member States and the EU clash, as in the case of the Nord Stream. Providing Germany a direct access to Russian gas, the pipeline bypassed the Member States in the middle and missed an important chance of interconnecting the otherwise isolated countries. The design of the upstream infrastructures also suffered from this collision, in particular concerning the OPAL pipeline, which brings the Nord Stream gas southward. As the infrastructure is supplied by only one company, Gazprom, the Commission restricted the access due to the Third Package unbundling rule, leaving half of the pipeline capacity de facto unusable.
Member states, European institutions and other troublemakers
Even if the advantages are numerous, the obstacles are probably as many, the first being the definition of the structure. As a matter of fact, the European institutions are already committed to external action in energy, but this responsibility is fragmented among several bodies, which often lack coordination. When discussing the situation of the European energy diplomacy with Nathalie Tocci, Deputy Director at the Istituto Affari Internazionali (IAI), this hardly fit into the definition she provided: “the art of weaving together the various players and instruments of foreign policy making, of which energy is an essential component.”
The institution in charge of all the European diplomacy is, in fact, the European External Action Service (EEAS), which was asked by the European Council of February 2011 to include energy in its activities and ensure the coherence between the EU foreign and energy policies. Even if the EEAS is the most likely institution to coordinate the European energy diplomacy, others have their say in the matter and their tools to put this into action as well: DG Energy, through the application of the Third Package, the DG for Regional Policy, DG Competition, which has used the antitrust legislation against Gazprom since 2012, and even the DG Development and Cooperation (DEVCO), which has a significant number of projects and staff in countries which could be key for the European energy supply (Nigeria or Mozambique, for instance). Those institutions have each one their different view on energy diplomacy, as DG Energy has now a strong focus on gas, DG Regional Policy on local development and DEVCO is less interested in the European strategy per se and more focused on its role in international cooperation.
Likewise, an European energy diplomacy will require a clear definition of powers, which at the moment is missing. In 2012, the Council established an information exchange mechanisms in energy agreements with third countries. This had small success though, and its revival was included in the Commission Energy Union plans. The EEAS itself has not the power to agree on international binding agreements on energy, as it does instead on trade deals, in which energy and climate are often included to achieve more power, such as in the case of the Transatlantic Trade and Investment Partnership (TTIP).
The main difficulty which an energy diplomacy will have to face will come, however, from the opposition of Member States. Energy supply is still strictly considered a matter of national security, which only a few countries will be willing to delegate to the EU. Some, such as Germany, have favourable agreements with suppliers, namely Russia, which they have no interest in sharing with other European countries. Others use energy as one of the most prominent tools in their own diplomacy, as in the case of France and Algeria or Italy and Libya. On the other hand, smaller economies, such as those of the Visegrad Group (Czech Republic, Hungary, Poland and Slovakia) or the Baltic states, push for increased European cohesion which will lessen the burden of their isolation and energy dependence. However, they have their own position on the external European energy policy, which adds to the already heterogeneous picture coming from the European institutions. Apart from the not-so European attitude of several Member States, the problems here originate from their heterogeneity: the nuclear powered France has different interests than the Russian dependent Lithuania or the southbound Italy. The EU has then to find a balance between an impossible one size fits all solution and the current, inefficient individualistic approach. And it has still a long way to go.
A few recipes for the European energy diplomacy
Considering all these issues, it is not clear how and when it will be possible to establish a common, compact European energy diplomacy. Yet, it is necessary to start somewhere. One possible approach could be the one suggested by Tusk for the Energy Union: a step by step methodology, gradually strengthening the role of the European institutions when facing the Member States. The first stage should be the consolidation of the different European voices in one, to provide domestic compactness towards external challenges. In the block nine of its proposal for the Energy Union on energy diplomacy, the think tank Notre Europe suggested: “The long-used leitmotiv “speaking with one voice” should become “a single message with multiple voices” to ensure unequivocal understanding by the external partners.” In other words, the heterogeneity of the Member States cannot be avoided, but a mediation is possible.
A change could be achieved either through a new institution or, as suggested by Luca Bergamaschi of the think tank E3G, by a better coordination of those already in existence. Mr Bergamaschi, whose organisation has done extensive research on energy diplomacy and the Energy Union, provided the example of the external grid. While the number of initiatives is large, from Norway to North Africa and the Balkans, there is hardly any coordination between the High Level infrastructural groups, the external political action and the private and the national projects. Yet, the institutions are all already there: the MedReg, the Energy Community, the ACER and, of course, the EEAS.
There is also another approach which could be taken into consideration and concerns the private sector. Last December, the Centre for European Policy Studies (CEPS) published a commentary. This analysed the possibility of the EU to replicate the common purchases of gas, which the two Japanese companies TEPCO and CEPCO will make through a joint venture in order to reduce the price of LNG. Unlike Tusk’s proposal, this does not involve governments but it will still reduce energy prices and the associated risk, by increasing the amount of acquired gas and then the purchasing power. More importantly, it will elevate the status of the small Central and Eastern Europe consumers, such as the Czech Republic, to that of large buyers, such as Germany or France. Paradoxically, this option will lead the private sector to be the first, effective energy ambassador of the EU.
An actual EU energy diplomacy is now barely more than a dream, but it is needed more than ever. An incoherent external energy action hampers the development of significant investment plans, from the electrical connection between Italy and Northern Africa to a systematic development of the Southern Corridor. Furthermore, a decisive energy diplomacy would have a strong impact on the geopolitical stability of many neighbours of the EU. Countries such as Algeria or Egypt are decreasing their domestic production of fossil fuels, also due to insufficient national and foreign investments. As their energy demand rises, they can rely less and less on their energy exports, with Egypt having already imported gas from Israel. A fact which threatens their economy and, ultimately, their already fragile political situation.
The EU should switch from being able to provide reactions to develop successful long term plans. Even if the Ukrainian crisis triggered this renewed attention to energy diplomacy, Europe should exploit the moment and go further than the simple preoccupation for gas. The answer is, however, inside Europe itself, and it probably lies with the solution to the dilemma everyone knows, and no one asks: which EU do we want? Weak? Strong? None? Perhaps energy diplomacy is the key to pose the question, and the time is now.
Carpe diem, Europe.
Image: NASA
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