Following the announcement of the shared Polish-French idea to develop an EU Energy Union, we’ve asked ECFR staff from Berlin, Rome, Sofia, Warsaw, and Madrid, to contribute to our “View from the capitals” series. How do the different member states view the proposal? Are the governments going to support it?
The 10th anniversary of Poland’s European Union membership, commemorated on 1 May, was not only an occasion to celebrate but also to take tangible steps towards achieving political goals. Just a day later, Warsaw hosted the European gas summit with – among others – Günther Oettinger, the EU energy commissioner, and Russian and Ukrainian ministers to talk about the difficult issues regarding gas and oil imports from Russia. The Ukraine conflict has had a considerable impact on Poland’s geopolitical environment after ten years of relative stability and security. In fact, shared European concerns made more urgent as a result of this conflict have no doubt prompted Poland to propose a major European policy initiative: to set up an energy union& to enhance EU energy security and solidarity by reducing Europe’s gas dependence on Russia.
In an opinion piece for the Financial Times as well as in a widely distributed non-paper, the Polish government sketched out the idea of “returning to the roots of the European Community”, which was based upon the integration of the steel and coal industries, and adopting the template of the newly established banking union for the energy sector. "Regardless of how the stand off over Ukraine develops, one lesson is clear: excessive dependence on Russian energy makes Europe weak", Polish Prime Minister Donald Tusk wrote in the Financial Times.
The six-point initiative for an energy union builds upon ideas put forward in the past by the European Commission, but it also includes new elements. It proposes that the EU develops reliable “solidarity mechanisms” to help its member states in the case that gas supplies are cut off and envisages the EU as a funder (up to 75 percent) of infrastructure projects, like gas storage facilities, interconnectors, and Liquid Natural Gas (LNG) terminals. The full use of the EU's existing fossil fuels, including coal and shale gas, would be another pillar of an energy union – reflecting clear attempts to shift the focus of the EU’s energy policy from ambitious climate goals to security goals. "In the EU's eastern states, Poland among them, coal is synonymous with energy security. No nation should be forced to extract minerals but none should be prevented from doing so – as long as it is done in a sustainable way”, says the Polish proposal.
As part of the proposal, the Polish government has also suggested concluding import agreements with liquid gas exporters and strengthening the existing Energy Community of the EU and eight of its eastern neighbours, created in 2005 to extend the European gas market eastward. But the most original, far reaching, and controversial aspect of the Polish concept of an energy union is to create a single European body or at least Europe-wide binding regulations for negotiating gas contracts with external suppliers (like Gazprom) for the whole EU (all member states). Given the fact that Gazprom is using the fragmentation of the EU’s energy policy and markets to enhance its monopolistic practices (imposing higher gas prices for some countries, most notably in Eastern Europe, and offering lower gas prices to other countries), introducing such a mechanism would give the EU a stronger, more united bargaining position.
Tusk’s proposal has been largely positively, if not enthusiastically, received in Poland, with most commentators and experts welcoming the timely response to the threats revealed by the Ukrainian crisis. The fact that the EU’s increasing gas dependence on Russia (from 22 percent in 2010 to 30 percent of EU gas consumption in 2014) is not only an economic reality but also a geopolitical risk factor has been widely acknowledged in Poland for many years. The developments in recent months seem to reaffirm the Polish position and have helped other EU countries to gain a better understanding of it.
Interestingly, gas does not play a prominent role in the Polish energy mix. It comprises only 13 percent of the demand for primary energy and just 3 percent of electricity consumption. Yet, 60 percent of Poland’s overall gas consumption (16 billion cubic metres a year) is imported from Russia and due to the lack of meaningful alternatives, Poland is paying one of the highest prices for gas in Europe (around $500 per 1,000 cubic meters). Poland has invested much hope in shale gas, which may prove to mark a decisive step towards a differentiation of energy resources and greater import independence. But the shale gas programme is still facing a lot of bureaucratic hurdles, and tapping shale gas on a meaningful scale is not expected to happen in this decade.
While shifting the European debate from climate issues to the energy security realm has also met support from within the Polish public, different and more sobering opinions have highlighted, among other concerns, that not all EU member states view energy dependence on Russia as equally risky. In particular, Poland’s insistence on reconsidering the role of coal in the EU energy mix will not necessarily find a lot of support, some experts have said. Others have argued that the energy union project will be part of a grand bargain at the EU level over the climate and energy package; in order to make its new initiative successful, Poland will need to show more flexibility with regard to the ambitious EU climate policy goals that it currently opposes. Since the formation of an energy union would take time, other elements of the EU energy policy will be not less important for Poland in the short- and medium term. For the Polish energy producers interested in a long term policy framework providing for the security of their investments, a compromise on the future direction of the EU climate and energy, currently under discussion, seems to be particularly relevant.
Poland’s stance on EU energy policy has been quite ambiguous so far. Warsaw has stressed the need for more solidarity while also displaying reluctance to deepen and further liberalise the common energy market, fearing for the central position and interests of the Polish state-owned energy giant PGNiG. Poland has also been very careful regarding interconnectors with Germany as they might be used to transport more Russian gas to Poland – serving the interests of German companies and not Polish security needs. The energy union proposal thus marks a shift in the Polish policy towards more EU integration in the energy sector.
According to Polish government sources, initial meetings about the proposed energy union in Paris, Berlin, and Madrid as well as with Commissioner Oettinger have been encouraging. French President FrançoisHollande openly supported the idea and said that it should be considered a Polish-French proposal. German Chancellor Angela Merkel also received the project warmly, but expressed doubts over Tusk’s idea to implement a common contract scheme. In fact, centralising EU gas imports in one public authority would run counter to the tendency in EU energy policy to decentralise, deregulate, and introduce as much market competition as possible (though one can question the extent to which it is the market that governs the energy relations between Gazprom and its European partners). No doubt, the issue of regulating gas import contracts on the EU level will be the most crucial aspect of the energy union, but, at the same, it will also be the one where achieving consensus will be most difficult.
Yet, Tusk’s visits to European capitals suggest that the potential for synergising the national interests of EU member states in the realm of energy is there, and the energy union project may set off a new debate on how to strengthen the security of all EU member states and contribute to the prosperity of their citizens. Interestingly, the Polish initiative was also warmly received in Madrid, which obviously hopes that, if formed, it could help push forward one of Spain’s central energy policy goals: building a gas interconnector between Spain and France. This link, which was agreed upon by the European Council in 2002 in Barcelona, could help Spain sell its cheap Algerian gas to consumers in other parts of Europe. Due to the opposition of French energy giants, however, no progress has been made since then. The Polish proposal, if taken seriously by the European Commission and the heads of states, may help to advance this project. Also, Polish sources argue that building the Franco-Spanish interconnector would be a decisive step in energy market integration in Europe, thereby opening the whole of the EU to alternative gas sources (North Africa, Spanish LNG terminals).
The European Commission will present its ideas for an energy union soon, and they will be discussed by EU heads of states and governments at the European Council meeting in June 2014.
This blog is part of a series of views from the capitals on a European energy union. You can find the whole collection here.
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