The European Commission approved the plan to regulate the energy market of the European Union on Wednesday. The plan stipulates restrictions to foreign companies to purchase energy assets in Europe. To put it in a nutshell, the Commission banned Russia’s giant Gazprom, which already owns a package of euro assets, from conducting future investment activities in Europe. European officials described the new measures as the protection of competition, whereas investors, market members and the general public refer to them as protectionism and a wish to endorse their rules of the game outside the EU.
The plan, as officially approved at a session of the European Commission, contains a paragraph about the mandatory division of assets of European energy corporations into smaller companies. Only international agreements of the European Union with third countries could be a condition to overcome such acquisitions, the President of the Commission Jose Manuel Barroso said speaking about the package of measures to regulate the energy market of the European Union.
Barroso said that the Commission simply intended to create equal conditions for investors both in the EU and in third countries. In addition, the official said, the Commission had a goal to protect fair competition. To crown it all, Barroso stated that the measures of the European Commission were not aimed against Russia.
However, Barroso’s words do not deceive anyone even in the West. The official’s hackneyed statements about the protection of competition were given a sound scolding in the German edition of The Financial Times. The newspaper wrote on September 3 that EU’s laws prohibit the nationality-based discrimination of investors. The EU can not conduct special economic activities with Russia because it would undermine Europe’s free economy principles.
Barroso stated that the proposition of the European Commission was not a protectionist effort. “We want to be open, but we must not be naïve,” said he commenting on the so-called principle of reciprocity. According to this statement, restrictions to non-European state-run companies to conduct non-commercial investment activities in the European energy industry include restrictions to those countries that limit the investments of EU-based companies.
“There is no goal to put obstacles on the way of companies from third countries in their aspiration to play a big role on the European energy market. It goes about a need for them to follow the rules together with European companies,” the chairman of the European Commission said.
An expert of the French Institute of International and Strategic Research (IRIS), Laure Delcour, echoes Barroso’s words. The expert said that if Russian companies wanted to access the European investment market freely then Russia had to guarantee the same rights to European companies. The European Commission does not believe that it could be possible for the time being. European companies do not have free access to the Russian energy market, because the market is based on state monopoly and is closed for competition, EC’s officials say.
Nevertheless, the number of Western market members, who are ready to work on the Russian market in equal competitive conditions, is not that large. Large joint projects are basically realized on the base of the production sharing agreement. The quality of this cooperation leaves much to be desired. Foreign companies resort to various tricks to cut their costs as much as possible and demonstrate a higher cost of their participation.
Barroso, the European Commission and other lobbies that do not wish to let Russia access the European Union, do not wish to pay any attention to it and continue to propagate their do-it-as-we-want policy. They do not even try to conceal their straightforward disdain for Russia. EU’s Competition Commissar Neelie Kroes released a sensational statement a couple of months ago saying that Russia’s Gazprom could be excluded from the NordStream construction project as soon as EC’s plans came into effect. That was a very surprising statement to make. If the European Commission intends to strike Gazprom out of the deal it means that the entire project will be doomed. German corporations BASF and E.ON own almost 50 percent of NordStream, whereas Gazprom acts as the major partner. It looks like the European Commission is willing to set up the command economy in Europe which would be administered from Brussels.
Another argument of the European Commission is connected with Russia’s disagreement to ratify the Energy Charter, which would supposedly boost the liberalization of Europe’s energy market and reduce prices. Experts find such statements ridiculous.
“The propositions of the European Commission contradict to the European Energy Charter and cause direct damage to customers, the population of Europe first and foremost. This will raise prices on energy resources and consequently decrease living standards in the region and considerably cut the share of the middle class,” Ivan Polyakov, a member of the Russian public organization Business Russia said Wednesday.
According to Mr. Polyakov, the price growth on energy sources will become a logic outcome of the EC’s requirement to split the assets of European energy corporations. “Russia needs to take a more active effort to clarify the competitive advantages of its infrastructural presence on the market. The most important of these advantages include stable prices and reliable shipments,” Polyakov said.
Analysts also say that the plans of the European Commission to liberalize energy markets have already raised concerns with old-time members of the European Union – Germany and France. Energy giants Electricite de France and E.ON, which operate in the two countries, may suffer damage as a result of the imminent “market” reform. The EC’s plans, which will be very hard to implement, will lead to the hidden redistribution of energy assets on Europe’s energy market and eventually initiate a series of legal disputes between its members.
Thus, as Laure Delcour points it out herself, the protectionist measures of the European Commission are based on certain economic and political reasons rather than on a wish to follow a way of democratic development and worry about rights and freedoms. “The measures are dictated by discrepancies with Russia and different approaches of the two sides to energy. The European Commission is trying to take control of the energy sector to protect the market under competitive conditions,” the French expert acknowledged.
“It goes about a certain uneasiness of the European Union. The suppliers of energy resources are very powerful countries financially. They will be able to buy up sales and distribution networks in an instant. The planned protective measure is a matter of state protectionism which contradicts to the liberal spirit of the European Union,” the president of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin said. The EC-led transformation of the European Union into the energy corsair of Europe does not bring any good to either European consumers or European companies. It only creates a negative image for the EU.
Translated by Dmitry Sudakov
Following the summit in Riga on November 30, NATO Secretary General Jens Stoltenberg explained how the alliance could respond to Russia's 'new aggression against Ukraine.'