Geopolitics of EU energy supply

As one of the world's largest importers of oil, gas and coal, the EU is a major player on the international energy market. However, it remains a dwarf on the political stage as member states keep the upper hand on foreign policy.
With external dependence on imports forecast to grow steadily, the EU has started to integrate energy aspects into relations with third countries. We hereby bring an overview of relations with key regions for supply and transit.

Latest and next steps:
The EU internal market for oil and gas should be completed by 2008
The geopolitical aspects of Europe's external energy policy remain within the competence of EU member states' foreign policies and a matter of national sovereignty. However, the progressive incorporation of previously secluded energy markets into one single block, combined with the EU's exclusive competence when it comes to commercial relations with third countries, is slowly driving the issue up the EU political agenda.

Oil and gas reserves are unevenly distributed around the globe, and the largest reserves are situated in politically or economically insecure regions (Middle-East, Russia). North Sea oil and gas fields have already been exploited passed their peak, leaving Europe dependent on third countries for future supply.
The Commission Green Paper on security of energy supply (November 2000) drew a sobering picture of the EU's energy situation. If no action is taken, it predicted, the EU's energy dependency will climb from 50 % in 2000 to 70 % in 2030.

The particular situation for the main imported fossil fuels was described as follows:

Oil:
-- 45 % of EU oil imports originate from the Middle East;
-- by 2030, 90 % of EU oil consumption will have to be covered by imports

Gas:
-- 40 % of EU gas imports originate from Russia (30 % Algeria, 25 % Norway);
-- by 2030, over 60 % of EU gas imports are expected to come from Russia with overall dependency expected to reach 80 %.

Coal:
-- by 2030, 66 % of EU needs is expected to be covered by imports.

Issues:
EU-Russia Energy Dialogue
Launched in October 2000, this bilateral energy dialogue is aimed at securing Europe's access to Russia's huge oil and gas reserves (the country holds one third of world gas reserves).
The dialogue is based on the assumption that interdependence between the two regions will grow -- the EU for supply security motives, Russia to secure foreign investments and facilitate its own access to EU and world markets (the EU is responsible for over half of Russia's trade turnover). One key aspect in the negotiation is whether the EU will support Russia's bid for accession to the World Trade Organisation (WTO).

Issues addressed in the framework of the dialogue include:
-- Opening Russia's domestic energy market to competition (According the Centre for European Studies -- CEPS --, Gazprom would control around 70 % of Russian gas production and enjoys a monopoly situation in terms of exports);
-- improvement ofbusiness environment, including investments;
-- cooperation on climate change under the Kyoto Protocol;
-- nuclear safety and decommissioning (avoiding another Chernobyl)

However, a breakthrough on the Energy Dialogue is still in the waiting. EU-Russia energy relations remain highly dependent on broader EU-Russia negotiations on the "four spaces" -- economic, legal, security, research -- on which progress is slow. Meanwhile, bilateral deals between Russia and separate EU states continue to prevail over a specific EU approach.
-- DG Energy & Transport: EU-Russia Energy Dialogue
-- DG Energy & Transport: EU-Russia Energy Dialogue -- issues being addressed
-- DG Energy & Transport: EU-Russia Energy Dialogue -- Fifth Progress Report (Nov. 2004)
-- DG Relex: EU/Russia: The four “common spaces”
-- US Energy Information Administration (EIA): Russia

EU-OPEC energy dialogue
The EU currently imports around 40 % of its oil from OPEC. Concerned about growing global competitionfor access to scarce oil resources, the EU held its first bilateral meeting with OPEC on 9 June 2005.
Issues addressed in the dialogue include oil prices, greater data transparency on stocks and investment needs, especially for refineries in consuming countries. The OPEC delegation promised the EU sufficient oil supplies and prices ranging between $ 35 and 55 a barrel.
-- Council Presidency: EU-OPEC Energy dialogue -- Joint press release (9 June 2005)
-- DG Energy: Oil pages
-- DG Energy: EU crude oil imports (volumes and prices)
-- OPEC: Official website
-- OPEC: Oil outlook to 2025

Caspian region -- the Baku-Tbilisi-Ceyhan (BTC) oil pipeline
The Baku-Ceyhan-Ceyhan (BTC) oil pipeline was opened on 25 May 2005, connecting the Azerbaijan capital on the Caspian Sea to Turkey's east Mediterranean coast. The pipeline was mainly built to relieve the West's oil dependency on the unstable Middle East and the OPEC producers.
The pipeline has the potential to turn some of the poor countries of the region (Azerbaijan, Georgia, Kazakhstan and -- to a lesser extent -- Turkey) into wealthy energy states and change the political balance of power in the region. Russia, which has been bypassed, is one of the biggest losers of the project, both economically and politically.

Bilateral trade relations -- including the 1995 customs union -- as well as the EU's possible enlargement to Turkey form part of the wider geopolitical context of the BTC pipeline.
-- UNECE: Caspian sea region countries joint statement on global energy security (15 July 2005)
-- Commission: Speech -- Commissioner Piebalgs: “Baku-Tbilisi-Ceyhan pipeline is a milestone project for security of supply” (25 May 2005)
-- DG Relex: The EU's relationship with the countries of Eastern Europe & Central Asia
-- Mission of Azerbaijan to the EU: Energy dialogue
-- Baku-Tbilisi-Ceyhan (BTC) project
-- US Energy Information Administration (EIA): Caspian Sea region
-- US Energy Information Administration(EIA): Caucasus region
-- Institute for the Analysis of Global Security: BTC pipeline: not yet finished and already threatened

Middle East and Persian Gulf countries
The EU has the ambition to become a significant actor in the Middle East peace process and a stabilising agent for the region as a whole. Aside from its dialogue with OPEC, the Commission has put bilateral cooperation agreements in place with the six Gulf States represented in the Gulf Cooperation Council (GCC).
A free trade agreement with GCC States has been put back on the negotiation table in 2001 after it was abandoned in the early nineties. GCC states hold 45 % of the world's oil reserves. All GCC states are part of OPEC except Bahrain and Oman.

-- Commission: Commissioner Piebalgs launches reinforced energy dialogue with oil and gas producing countries of the Gulf Cooperation Council region [FR] [DE] (2 April 2005)
-- DG Relex: Making the EU a factor in the Middle East
-- DG Relex: The EU & the Gulf Cooperation Council
-- DG Relex: EU-Iraq relations
-- DG Relex: EU-Iran relations
-- DG Transport & Energy: EUROGULF: An EU-GCC dialogue for energy stability and sustainability (Giacomo Luciani, European University Institute, Florence -- 2 April 2005)

Southern Mediterranean (including Turkey, Middle East and North Africa)
Launched in 1995 in Barcelona by Foreign Affairs Ministers, the Euro-Mediterranean Partnership draws together the EU-25 and 10 countries in the south Mediterranean (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority, Syria, Tunisia and Turkey). Libya has observer status since 1999. The objective is to gradually set up a Euro-Mediterranean free-trade area by 2010.
Maintaining access to Algeria's gas reserves is of primary importance to the EU if it wants to maintain its supply dependency on Russia to the minimum. The Algerian economy is largely dependent on hydrocarbons (oil and gas), which make up 97 % of exports, contribute 30 % of GDP, andfund 65 % of the State budget. The EU takes 62.7 % of Algeria's exports and supplies 58 % of its imports.
-- DG Relex: Euro-Mediterranean Partnership/Barcelona Process
-- DG Relex: EU-Algeria relations

South-East European energy community
The treaty establishing the Energy Community of South East Europe (ECSEE) is to be signed in the summer of 2005 with ratification to follow soon after. The ECSEE is a legally binding treaty covering the electricity and natural gas sectors. It is aimed at putting the signatory countries in line with EU energy legislation in order to establish an integrated market.
Its members include Austria, Greece, Hungary, Italy and Slovenia on the EU side, and Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, Romania, Serbia and Montenegro, Turkey and Kosovo on the other side. The treaty is designed to satisfy the political and economic goal of stabilisation and development of SE Europe.

-- DG Relex: EU and South East Europe countries create a new Energy Community
-- DG Energy: speech by Commissioner Piebalgs - Energy Community is a key to the stabilisation and development of South East Europe (10 Feb. 2005)
-- Commission/World Bank: Energy in South East Europe -- Regional Policy for a Regional Market
-- Commission/World Bank: Energy in South East Europe -- Oil and gas networks
-- Commission/World Bank: Briefing notes: Energy Community of South Eastern Europe
-- Commission: Transport and Energy infrastructure in South East Europe (15 Oct. 2001)

Baltic Sea Region Energy Cooperation (BASREC)
BASREC was launched in 1999 by energy ministers of Denmark, Estonia, Finland, Germany, Iceland, Latvia, Lithuania, Norway, Poland, Russia and Sweden and the European Commission. Issues discussed include security of energy supply in the context of growing dependency from Russia, gas transit routes in the region, and progress on electricity and gas interconnections.
Environment issues on the agenda include energy efficiency, climate change, and renewable energies such as bio-energy.

In July 2005, Russia announced that work to build a EUR 5 bn gas pipeline to link St Petersburg to the German town of Greifswald under the Baltic Sea would begin in September (the North-European pipeline project). The Baltic route was preferred to alternative ones under the Amber and Jamal-Europe 2 projects originally foreseen to run through Poland, Lithuania, Latvia and Belarus.
-- BASREC: News
-- BASREC: About

Arctic energy agenda
A first round table of political and industrial decision-makers from Norway, Russia, the US and the EU took place on 7 July 2005.
"The Artic region is believed to be one of the most important remaining petroleum provinces", the participants stated in a declaration after the meeting. The Barents Sea, it was added, "represents an opportunity to become a new European petroleum province". The declaration highlighted the vulnerability of the marine environment as a particular challenge to the development of industrial activities in the Arctic.
-- Norway Ministry of Petroleum and Energy: The Arctic Energy Agenda/Declaration (7 July 2005)
-- BarentsObserver.com: Oil and energy

EU-Norway energy dialogue
Norway is the world's third exporter of natural gas and a major supplier of oil and gas to the EU. A meeting between Energy Commissioner Andris Piebalgs and Norwegian Minister of Petroleum and Energy on 6 July 2005, confirmed both sides interest to cooperate on energy issues.
It was agreed to strengthen cooperation on energy efficiency, renewable energy, and security of energy supply, including exploration and production activities in the Arctic area. It was agreed that the Commission would join an informal forum established by Norway, the UK and Denmark to discuss issues related to the use of CO2 for enhanced oil recovery and storage in the North Sea. EU-Norway meetings will from now on take place on an annual basis.
-- EU-Norway Energy dialogue: Joint press release (6 July 2005)
-- Non-paper: CO2 capture and storage and enhanced oil recovery (6 July 2005)
-- Norwegian mission to the EU: Policy areas -- Energy

Africa -- Gulf of Guinea
With countries such as Angola and Nigeria now in the league of major global oil suppliers, other countries in the Gulf of Guinea are seeking to emulate their success. EU relations with the region are at the moment centred on development cooperation with the Economic Community of West African States (ECOWAS). Relations focus on peace, security and good governance aspects with a strong emphasis on economic and trade integration.
-- Luxembourg Presidency: Peace, security and good governance are the central points of the EU-ECOWAS ministerial meeting
-- US Energy Information Administration: Economic Community of West African States (ECOWAS)
-- US Energy Information Administration: Nigeria
-- US Aid: West African Power Pool (WAPP)

Positions:
Energy Commissioner Andris Piebalgs has made external energy policy relations one of the six priorities of his mandate. Speaking at the World Energy Council in March 2005, Piebalgs said the EU could bring leverage to the member states energy policies, saying "the new neighbourhood policy is particularly apt in the energy field".
He said that future EU-Russia cooperation could be extended to include energy efficiency and technology transfer, following Russian ratification of the Kyoto Protocol in 2005 (speech).

Speaking on 10 October 2004, at the European Policy Centre -- a Brussels think tank -- former energy commissioner Loyola de Palacio emphasised the close relation between geopolitical stability and energy supply security. She noted that affordable oil and gas prices in Europe had so far been secured by sufficient supplies to meet the growing demand. But this would not last forever, she warned.
"We need to be realistic about our interdependence with other countries -- producers, transit countries and other consuming nations -- and develop our policies accordingly," Palacio said. Encouraging openness in energy commerce was a key geopolitical aspect, she said. This would require closer cooperation with supplying partners and policies to encourage geopolitical and economic stability in supplier and transit nations.

The World Wide Fund (WWF) has recently launched a campaign to raise the issue of energy and climate change in EU foreign policies. According to the global conservation organisation, EU foreign policy communities and energy and environment ones currently lack the mutual know-how and dialogue to complement each other.
Director of the WWF's EU office, Tony Long says energy talks currently held in the framework of the European Neighbourhood Policy (ENP) are focused chiefly on enhancing EU security of supply, trade and infrastructure aspects but contain no specific objectives on the environment or climate protection. He added the ENP gave no sensitivity to $ 60 barrel of oil scenarios and belongs to "an old mentality and an old Commission". He then called for a new climate and energy dimension to be added to the ENP and for the Parliament to be fully engaged in the policy definition process.