Germany highly critical of EU energy package

19.09.07 @ 17:36

  1. By Renata Goldirova

BRUSSELS - The European Commission president has thrown his weight behind a sweeping reform of the EU energy market, which ultimately should see the break-up of the bloc's energy giants.

  • "Tough, long and difficult" negotiations are expected (Photo: EUobserver.com)

"The commission is clear that the status quo cannot continue...Without change, distortion of competition and fragmentation of the market will continue", Jose Manuel Barroso said on Wednesday (19 September), after the commission gave the green light to the package.

Mr Barroso has also urged the EU capitals as well as European lawmakers "to move quickly to agree these proposals", arguing "EU citizens have every right to expect that we act to energize Europe".

Brussels has clearly spelled out its preference for full ownership unbundling, requiring a company to split its production and transmission wings.

"This is by far the most effective approach", the commission chief said, adding an increasing number of member states are already going down this route.

This could be achieved in two ways – companies may either sell their transmission networks to an independent investor or form new separate business through a shares split.

Dismissed by Germany

Although Mr Barroso anticipated that the negotiations on package will be "tough, long and difficult", Germany's reaction was unusually critical of the proposals.

German economy minister Michael Glos said "the high quality and security of German electrical power networks should not be put in danger."

"The package is all in all too bureaucratic and leads to a high regulatory burden."

Germany "strictly rejects" ownership unbundling, said Mr Glos adding that he is "very sceptical whether through the focus of the commission on ownership unbundling, a way for more competition is found."

"The contrary is more likely," he stated. Germany, along with France, had been the strongest opponents of the unbundling option in the run up to the publication of the proposals.

'Gazprom clause'

The commission also received criticism from elsewhere – albeit more veiled – for another part of the proposal on protecting the EU energy market.

Reacting to Brussels' energy package, Russian state-owned energy giant Gazprom indicated it would present its evaluation of the way these measures will affect security of supply, the competitiveness of European energy markets as well as energy prices in Europe.

"Gazprom has an important contribution to make to the debate about regulation of the energy sector in Europe and feels certain that its voice will be heard", the company's Sergei Kupriyanov said in a written statement.

He has also rushed to remind Europe that "Gazprom is a reliable gas supplier to the European Union and a major investor in the infrastructure which brings gas to Europe".

Under the proposed restrictive rules, foreign buyers who wish to purchase an EU network will have to follow the same unbundling requirements as the union's own firms.

In practice, third countries as well as their individuals should not be able to acquire control over an EU transmission network unless there is agreement between the EU bloc and the companies' country of origin.

However, Mr Barroso has refused to label the safeguards as protectionism – or the Gazprom clause as it has quickly become known.

"This is about fairness; it is about protecting fair competition. It is not about protectionism", he said.

A quarter of the bloc's gas as well as quarter of its oil originates from Russia.

Despite the expected difficulty of the negotiations, the European Commission believes an agreement could be thrashed out under France's six-month EU presidency, starting in July 2008 – with Mr Barroso firmly putting the ball in member states' court.

"Today we put everyone before their responsibilities. If the results are lacking it will not be because of a lack of ambition on the part of the commission", he concluded.