Wednesday

27th Jul 2016

EU seeks oversight powers on energy security

  • New oversight powers target Russian supplier Gazprom, without naming it directly (Photo: gazprom.com)

The European Commission wants to vet all major new gas deals with non-EU suppliers under extra powers unveiled on Tuesday (16 February) to prevent the type of supply crises seen in 2009.

Under the proposal, member states would be obliged to share details of forthcoming accords with non-EU countries on issues such as prices, maximum daily volumes and conditions for suspending deliveries.

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EU officials would then issue “recommendations” that the member state would have to follow, or risk ending up in the EU court in Luxembourg.

The commission called for a similar regime on contracts between private companies, which are normally subject to commercial secrecy, if those contracts gave a non-EU supplier 40 percent of more of a single country’s market share.

It also said EU states should be obliged to share gas with their neighbours in the event of a supply crunch to cover essential services such as hospitals and schools, which would take priority over domestic industrial users.

Supply crunches

Introducing the measures, which must be approved by member states and by the European Parliament before they become law, EU energy commissioner Miguel Arias Canete said: “To prevent gas supplies' crises, national policies are not enough.”

Alluding to Russia’s invasion of Ukraine - an attack by the EU’s main gas supplier on its main transit state - he said: “With political tensions on our borders still on a knife edge, this is a sharp reminder that this problem is not just going to go away.”

He added that previous energy security upgrades still left the EU “vulnerable” to major disruptions.

He also noted that up to one third of member states’ 124 intergovernmental energy supply pacts currently fall foul of EU law.

The first gas crunch in recent times came when Russia cut the supply to Belarus, a minor transit route, in a commercial dispute in 2004.

It did it again via Ukraine in 2006, and again also via Ukraine in 2009. The 2009 crisis led to blackouts in Russia-dependent states such as Bulgaria at the height of winter.

But Russian gas kept flowing in the Cold War and its main supplier, Gazprom, has kept it flowing despite the Ukraine war, which began in 2014.

But the EU itself, back in 2014, proposed potential economic sanctions on Russia that would stop oil and gas imports in the event of a serious escalation of the Ukraine conflict.

Nord Stream controversy

Russia is also in talks to double the capacity of its Nord Stream pipeline to Germany, despite the Ukraine crisis, with construction of the new leg dubbed Nord Stream II to start in April.

Canete noted the Nord Stream II project had become “highly political” after eastern and southerly EU states accused Germany of breaking EU solidarity.

He said the commission is still assessing whether the project conforms with EU law on third-party pipeline access and on decoupling production and distribution assets.

He added that if Germany went ahead, the new deal would also be subject to the 40 percent or more oversight clause.

"If it goes over the threshold, all contracts with the supplier have to be notified," Canete said.

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