EU touts energy market from Atlantic to Urals

By Andrew Beatty

Date: 24/05/06

The EU should create a new body to deal with international energy crises, under plans to be discussed today (Wednesday 24 May).

The proposals, drawn up jointly by staff from the Council of Ministers and the European Commission, also advocate expanding the EU's internal energy market to include neighbouring countries such as Russia and Turkey.

The paper, on the foreign policy dimensions of energy supply, is to be adopted by commissioners today. EU government leaders will discuss it at the 15-16 June summit.

The text, drafted in response to rising energy prices and regional instability, notes that "some major producers and consumers are using energy as a political lever".

It proposes establishing a permanent group of analysts who would help limit potential risks to EU energy supplies.

The body would not only co-ordinate crisis responses, but could present proposals on improving infrastructure to prevent crises before they occur.

The group would include representatives from member states, the Commission and Council but it is not yet clear which institution would have control over the group and who would be responsible for its management.

A Commission official said that the paper had been kept "relatively vague" and avoided setting out specific actions, in order to get round areas of responsibility being claimed by one EU institution or another at this stage.

Officials tried to play down talks of a rift between the institutions. A senior Commission official denied reports of a turf war between the Council and Commission. "We are working with our Council colleagues in a very constructive way," he said.

One senior Council official stressed that deliberations on the body were still in an early stage, but that it was "not a big structure".

According to Commission estimates, 70% of the EU's energy will come from outside the Union in the next 20-30 years, compared with 50% today.

"Increasing dependence on imports from unstable regions and suppliers presents a serious risk," the report says.

One EU diplomat said that the measures would be useful in developing the Union's liquefied natural gas terminals and the infrastructure to bring gas and oil from central Asia. Both measures are seen as essential if the EU is to diversify sources of supply beyond Russia, which currently provides more than 60% of gas supplies to some member states.

The renewed focus on developing energy ties with producers in Norway, Turkey and central Asia was welcomed by diplomats from some of the EU's easternmost member states.

The paper advocates expanding the Union's internal energy market to include the EU's neighbours.

"Neighbours would gradually create around the EU a shared regulatory area with common trade, transit and environmental rules," says the draft.

It is hoped that expanding the internal market would improve investment in infrastructure in major energy-producing regions.

This week the International Energy Agency's Director Claude Mandil warned that the Russian state-owned giant Gazprom would face a shortfall in supplies by 2010 if investment in infrastructure was not increased.

Hans van der Loo, the head of Shell's EU liaison office, said that a simplification of the rules and an improvement in relations between the EU and its major suppliers would help business and investment.

Diplomats said the paper was likely to be influential in setting out the EU's policy ahead of the G8 summit in St Petersburg in July, which will focus on energy.

Article anticipates the presentation by the European Commission of a paper on the foreign policy dimensions of energy supply. The proposals, jointly drafted with staff from the Council of the EU, were expected to be adopted by the Commission on 24 May 2006 and would be discussed by EU leaders at the European Council, 15-16 June 2006. Plans included the setting up of a permanent group of analysts who would help limit potential risks to EU energy supplies.