Solution to EU-Russia co-operation treaty impasse could be imminent

Nov 10, 2007 01:00 AM

The Russia-EU summit in Lisbon offered a few signs that the current chill in relations between Moscow and Brussels could be easing. But the chances of overcoming the fundamental divisions between the two sides appear as remote as ever.
The main breakthrough in Lisbon came in the form of signals that prospects for negotiations on a new Partnership and Co-operation Agreement (PCA) between Russia and the EU including a new framework for energy trade and investment are looking a little brighter. At what is still set to be his final EU summit as Russian president, Vladimir Putin said difficulty over a new PCA "is one of the acute problems".
But he went on to say: "I expect talks on the new treaty will start in the near future."

In theory the current PCA, dating from 1997, expires at the end of this year, but will remain in force in practice provided neither side seeks to scrap it. Poland previously prevented the European Commission from embarking on negotiations for a more ambitious deal as Russia has been blocking Polish meat imports on hygiene grounds.
The new treaty is supposed to establish a framework for a more united approach to negotiations with Russia.

Polish problem
Just under a year ago, the previous Polish government effectively derailed the planned start of negotiations, insisting that Russia lift the meat import ban and drop its long-standing opposition to the energy charter treaty. But a new government in Warsaw has allowed Russian meat inspectors back into Poland, a necessary step towards eventual resolution of the meat trade row. And it appears to have dropped the earlier insistence on energy charter ratification, which Moscow had more or less said it will never do.
In another sign of improving relations, EU and Russian leaders used the Lisbon summit to formally establish an early warning system to flag up any imminent interruption in energy flows. This idea was floated after Russia shook the confidence of EU customers in central Europe in January this year by cutting off, without warning, oil transit through Belarus in a row over duties and tariffs. This stoked up earlier fears that followed disruptions in gas supplies through Ukraine and Belarus.

Nonetheless, a senior European Commission official forecast after the summit that it might take the presence of France as president of the EU in the second half of next year to get talks on a new PCA properly launched. Portugal’s immediate successor as EU president will be another small country, Slovenia, for the first half of 2008. And the forthcoming negotiations are likely to be tough.
The EU and Russia remain at odds over reciprocity in energy investment, with Brussels seeking a similar legal framework on both sides and Moscow seeing the issue as one of financial balance. Putin told Portuguese Prime Minister Jose Socrates and European Commission president Jose Manuel Barroso: "When we hear from some European capitals that the Russians are coming with their horrible money to buy everything, that makes me laugh."

Brussels latest reform proposals to oblige EU energy conglomerates to sell off networks contain safeguards against non-EU companies like Gazprom buying such networks up. Moscow has complained that this is discriminatory. Putin told his EU counterparts that Russian investment in the EU is only a tenth of EU investment in Russia, and most of it is private. He pointed out that even state-run Gazprom is also investing on behalf of its minority of foreign shareholders.
Talks on the PCA will be a breakthrough of sorts. But the two sides will struggle to find a common language.

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