marchartists

Why Europe must act collectively on

energy
By Javier Solana ; Financial Times Free Access Week
Published: March 8 2006 19:35 | Last updated: March 8 2006 19:35

Energy security has shot to the top of the European and wider international agenda. It is easy to see why. Europe will be importing a growing amount of its energy needs from abroad. We already rely on external sources for 50 per cent. Most estimates suggest this will rise to 90 per cent for oil and 70 per cent for gas by 2030. Russia’s recent disputes with Ukraine, Georgia and Moldova over the terms of gas supplies have concentrated our minds.

If we are importing an ever greater amount of energy from abroad, we need to discuss this with foreign partners. It also makes sense to do this together, as Europeans. We are already working together on liberalising and integrating energy markets within the European Union. It makes sense to complement this with concerted action on the external side. If you negotiate together, you will have more influence.

It is misleading to describe energy questions solely in terms of dependence. Yes, “we” need to buy from abroad. But exporters need to sell. That the EU imports 30 per cent of its energy needs from Russia is now familiar. Equally significant is that Russia gets 20 per cent of all export earnings from selling gas to Europe. This is a relationship of interdependence. To manage interdependence adroitly, you need partnership and trust.

Three factors make energy different from other products. First, hydrocarbons are sometimes located in unstable countries. Second, long-term and large-scale investments are needed to bring deposits to consumers. Third, global energy markets function imperfectly, notably in gas, where there is no real spot market. For all these reasons, governments have a role in energy policy, both to set a framework for companies to plan and operate within and to negotiate directly with other governments. The question is not whether energy and politics are connected but how. We have to find the right balance between a market-driven and a more strategic approach.

In terms of the foreign policy aspects, what could Europe do? A good starting point would be to give more prominence to energy issues in our political dialogues with producers such as Russia, Saudi Arabia, Algeria and others. If we want a diversification of supplies, including alternative modes of transport and delivery, we must talk about this with supplier and transit countries (plus industry). We also need to step up our dialogue on energy with other consumers such as the US, China and India.

Some question whether our member states, given their different outlooks and interests, can agree on a substantive set of messages. More dialogue, they say, sounds good. But what are we going to say? My answer would be that we should stress that most producers and all consumers have a shared interest in maintaining a stable, transparent framework in which the pricing mechanism can function as freely as possible. This means no unilateral measures and no “politicisation” of energy exports to punish foes or reward friends. What we need is an orderly combination of markets, law and consensual negotiations.

When enunciating these principles, many Europeans may think of Russia, which is chairing the Group of Eight leading industrial nations this year and has chosen energy security as its focus. But they are relevant for all producers and consumers. For global security it is vital that China, India and others believe that a predictable and transparent global energy order will work for them, too.

The role of politics is to balance different considerations – for instance, energy versus non-proliferation or human rights concerns. Moreover, politics is essential for fostering trust and confidence on which so much depends in energy matters.

In turn, confidence is built through dialogue and common projects, such as co-operation on developing new pipelines, protecting facilities against terrorist attacks or using satellites to monitor the security of supply.

So we should not just talk to supplier and transit countries – be it Russia or those in the southern Caucasus, the Caspian Sea or West Africa. We also need to do practical things together.

Last, we have to step up our engagement in the Middle East, which will remain the mainstay of Europe’s energy imports for years to come. It is worth remembering that the only time oil supplies have been interrupted in the past 50 years was as a result of conflict in the Middle East.

In each of these areas, there is a strong case for acting collectively, as Europeans, rather than each on our own. The time has come to forge a European energy diplomacy, based on common interests and shared principles.

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THREAT TO BREAK UP ENERGY COMPANIES

Neelie Kroes, the EU’s top antitrust official, said she was inclined to break up companies that controlled both the supply and distribution of energy, thus blocking rivals from entering the market.

Charlie McCreevy, the EU’s internal market commissioner, said he would not stand “idly by” while politicians moved to defend national champions from takeovers by foreign competitors.

“Does anybody really think that I am going to turn a blind eye to the cosy old-boy networks between politicians and managers of companies?” he asked in a speech in London. “If they do, they are living in a fool’s paradise.”

The joint attack suggests the Commission is preparing for a confrontation with countries such as France and Spain, which have tried to frustrate cross-border takeovers of their national energy companies.

It comes the day after José Manuel Barroso, Commission president, unveiled a green paper to promote a genuine pan-European energy market of 450m people – the second largest in the world after the US. Excerpt from Financial Times

EU passes controversial data retention law

EUOBSERVER / BRUSSELS - EU justice and interior ministers have sealed a landmark data-retention law, forcing telephone operators and internet service providers to store data in the fight against terrorism and organised crime.

The data retention directive was approved by ministers in Brussels on Tuesday (21 February), putting an end to a heated debate in and outside EU institutions for over a year and a half.

The directive aims at tracking down terrorists, paedophiles and criminal gangs, but civil liberties campaigners have argued it damages basic privacy rights and breaches the European Convention on Human Rights.

According to the directive, member states will have to store citizens' phone call data for six to 24 months, but the deal does not stipulate a maximum time period, cooling anger among member states who want longer storage periods.

The data would only detail the caller and receiver's numbers, not the actual conversations themselves, while so-called failed calls - calls that do not get through - will not be covered.

EU countries have 18 months to implement the rules, which already have the backing of the European Parliament.

"This is a wonderful example of how co-operation between the council [member states], the commission and the parliament can work," Austrian justice minister Karin Gastinger, hosting the ministers' meeting, said.

Terror attacks trigerred action
The data retention directive was tabled after the Madrid bombings in March 2004 and then fast-tracked under the British EU presidency after the London underground attacks last July.

Britain, France and Sweden have stressed the need to retain data in order to trace terrorists using modern technology.

Swedish justice minister Thomas Bodstrom said on Tuesday he was satisfied with the deal, arguing that fast-moving changes in the telecom market made it important to force phone companies to comply.

Telephone call records are usually saved for a month for billing purposes, but ever more popular pre-paid subscription contracts have led some companies to ditch paperwork.

"In five years, the police would have been faced with a catastrophy, if this deal had not been clinched today," Mr Bodstrom said.

EU oversteps mark?
Ireland and Slovakia voted against the law, saying they regard national security as a matter for member states not the EU.

"This remains our position and we believe that provision for data retention should be made by way of a framework decision under the third pillar," an Irish official indicated.

The third pillar is a technical term relating to intergovernmental decisions made by unanimity, while so-called first pillar decisions are typically made in conjunction with the European Parliament by qualified majority.

"In the circumstances, and for the legal reason I have indicated, we would merely wish to formally record…the fact that Ireland cannot support the adoption of the proposed directive," he added.

Dublin insisted that Ireland retains its veto in justice matters, and is currently cosulting the Irish attorney general about how to proceed with an appeal to the European Court of Justice (ECJ).

The ministry of justice in Slovakia said Bratislava agreed with the content of the directive but also objected to placing it under the first pillar.