EUROPEAN FOREIGN POLICY SCORECARD 2012

European security issues

20 - Relations with Russia on energy issues

Grade: B-
Unity 3/5
Resources 3/5
Outcome 5/10
Total 11/20
Scorecard 2010/11: C+ (9/20)

Despite Moscow’s lack of interest and member states’ diverging interests, the EU succeeded in putting in place a legal framework for a more competitive energy market.

Russia, which provides more than a third of the EU’s gas imports, plays a big role in the EU’s energy security. The EU hopes to base its energy relationship with Russia on the Energy Charter Treaty, but Russia refuses to ratify the charter. Russia also opposes the EU’s so-called Third Energy Package (TEP), which promotes liberalisation of the gas and electricity market and came into force in March 2011. Its provision forcing EU countries to “unbundle” companies in the gas sector – that is, separate production and supply from transmission networks – has become one of the most contentious issues in EU–Russia relations. There is also ongoing arbitration about gas prices between Gazprom and a growing number of EU companies including German energy giants E.ON and RWE.

Despite Moscow’s objections to the TEP, some member states have taken necessary steps to liberalise their gas markets, including unbundling their gas sectors. However, the European Commission estimates that only one-third of states will follow Estonia and Lithuania, which already declared that they would fully unbundle theirs. Others, including Germany and France, will probably let companies establish independent subsidiaries to manage transmission networks instead of full unbundling. Some member states such as Bulgaria and Italy have already indicated that they would support exemption from the TEP for the South Stream pipeline, which is promoted by Russia, while Poland, Estonia and Romania vocally oppose it. The absence of a coherent approach means that the pan-EU playing field for Gazprom and other energy giants may become more competitive but will not be completely level.

While member states dithered in 2011, the European Commission took the initiative and used its powers to enforce competition rules for the common energy market. In September, antitrust officials made surprise raids on firms in 10 member states, including Gazprom’s operations in the Czech Republic and Germany and on some of Gazprom’s EU partners. As a result, the EU is now in a stronger position to enforce anti-monopoly measures against EU and Russian gas businesses operating in the single market.

Member States
Leaders:  Czech Republic - Estonia - Lithuania - Poland - Romania
Slackers: Cyprus - France - Germany - Italy - Slovenia