Tuesday, March 14, 2006














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Europeans must act collectively on energy strategy
Javier Solana

          Energy security has shot to the top of the European and wider international agenda. It is easy to see why. Europe will be importing a growing amount of its energy needs from abroad. We already rely on external sources for 50 per cent. Most estimates suggest this will rise to 90 per cent for oil and 70 per cent for gas by 2030. Russia's recent disputes with Ukraine, Georgia and Moldova over the terms of gas supplies have concentrated our minds.
If we are importing an ever greater amount of energy from abroad, we need to discuss this with foreign partners. It also makes sense to do this together, as Europeans. We are already working together on liberalising and integrating energy markets within the European Union. It makes sense to complement this with concerted action on the external side. If you negotiate together, you will have more influence.
It is misleading to describe energy questions solely in terms of dependence. Yes, "we" need to buy from abroad. But exporters need to sell. That the EU imports 30 per cent of its energy needs from Russia is now familiar. Equally significant is that Russia gets 20 per cent of all export earnings from selling gas to Europe. This is a relationship of interdependence. To manage interdependence adroitly, you need partnership and trust.
Three factors make energy different from other products. First, hydrocarbons are sometimes located in unstable countries. Second, long-term and large-scale investments are needed to bring deposits to consumers. Third, global energy markets function imperfectly, notably in gas, where there is no real spot market. For all these reasons ' governments have a role in energy policy, both to set a framework for companies to plan and operate within and to negotiate directly with other governments. The question is not whether energy and politics are connected but how. We have to find the right balance between a market-driven and a more strategic approach.
In terms of the foreign policy aspects, what could Europe do? A good starting point would be to give more prominence to energy issues in our political dialogues with producers such as Russia, Saudi Arabia, Algeria and others. If we want a diversification of supplies, including alternative modes of transport and delivery, we must talk about this with supplier and transit countries (plus industry). We also need to step up our dialogue on energy with other consumers such as the US, China and India.
Some question whether our member states, given their different outlooks and interests, can agree on a substantive set of messages. More dialogue, they say, sounds good. But what are we going to say? My answer would be that we should stress that most producers and all consumers have a shared interest in maintaining a stable, transparent framework in which the pricing mechanism can function as freely as possible. This means no unilateral measures and no "politicisation" of energy exports to punish foes or reward friends. What we need is an orderly combination of markets, law and consensual negotiations.
When enunciating these principles, many Europeans may think of Russia, which is chairing the Group of Eight leading industrial nations this year and has chosen energy security as its focus. But they are relevant for all producers and consumers. For global security it is vital that China, India and others believe that a predictable and transparent global energy order will work for them, too.
The role of politics is to balance different considerations - for instance, energy versus non-proliferation or human rights concerns. Moreover, politics is essential for fostering trust and confidence on which so much depends in energy matters.
In turn, confidence is built through dialogue and common projects, such as co-operation on developing new pipelines, protecting facilities against terrorist attacks or using satellites to monitor the security of supply.
So we should not just talk to supplier and transit countries - be it Russia or those in the southern Caucasus, the Caspian Sea or West Africa. We also need to do practical things together.
Last, we have to step up our engagement in the Middle East, which will remain the mainstay of Europe's energy imports for years to come. It is worth remembering that the only time oil supplies have been interrupted in the past 50 years was as a result of conflict in the Middle East.
In each of these areas, there is a strong case for acting collectively, as Europeans, rather than each on our own. The time has come to forge a European energy diplomacy, based on common interests and shared principles.
The writer is European
Union high representative
for foreign policy.
FT Syndication Service


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