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Home Publikacijos Lithuanian Energy Security in the Light of EU – Russia Energy Dialogue

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State monopoly

When it comes to energy security, there is a fundamental lack of a common view between Russia and the European Union. The Russian President, Vladimir Putin, has several times stated his wish for the Russian state to dominate the energy sector. President Putin also never made a secret of his views on energy security. For him, energy security is the business of states and the appropriate state organs, not privately owned corporations.46 But the fact that large energy companies are mainly owned by the government is not a trend we find in Russia alone. According to The Economist, the national oil companies owned or controlled by the governments of oil-rich countries, which manage over 90% of the world's oil, depending on how you count. Of the 20 biggest oil firms, in terms of reserves of oil and gas, 16 are national oil companies.

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The priorities of EU energy policy

Energy is not a question that has just sprung up recently. Energy matters played an important role at the birth of modern Europe as we know it. It is no surprise that the foundation of the European Union itself lies in the European Coal and Steel Community (ECSC) and European Atomic energy Community (Euratom). In the late 1990s Europe witnessed a concentration of European markets, when a small number of companies emerged as energy giants. Most of the companies were result of mergers and acquisitions. According to Helm, it is worth noticing the reaction of the Commission, since it not only failed to stop this creation of energy monopolies, but at times even actively encouraged it. This was one of the first cases when the European dimension was ignored, since by increasing competition in the national markets potential competitors on the European stage were eliminated.

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EU and Solidarity, or what’s wrong with it

In the long run, European Union could achieve the desired level of stability of energy supplies; the question only is at what price and at which environmental costs? Natural gas is not the only option for Europe, since it would be possible to cover the production of electricity by a mix of nuclear energy, carbon and renewable energies without relying on natural gas. Bio-fuels could eventually substitute for oil imports. But at current stage of technological development the cost of such liberty would exceed the advantages. But it is important to raise this question because, according to Keppler, the key challenges in Europe is to make the political choices between the competing objectives of security of supply, environmental objectives and cost minimisation.88 In his critique of the communication “An energy policy for Europe” of January 2007 Helm argues that even though this package brings all various strands within a single set of papers, the connections between them are far from apparent. He argues, that the reason behind this is partly the timing: the main driver is the DG Competition and its conclusions dominate the communication.

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Towards a new energy policy

On the European level, there are now quite a few documents concerning the energy policy, strategy and security. In 2005 in Hampton Court Summit held under the British presidency of the EU, heads of state agreed to formulate a long-term Common Energy Policy. It was the first time that the agenda of competition had been brought together with the external concerns about Russia and import dependency within the EU. The Hampton Court Summit was followed by a Green Paper in 2006. At the core of these papers was the idea of completing the physical networks – the European grids. And whilst these two separate strands of policy – competition and security of supply – were being developed, a third strand was the development of climate change policy in general, and the EU ETS (Emission Trading Scheme) in particular. Finally, again quite separately, the EU was engaged in two parallel negotiations with Russia: on the Energy Charter and the Transit Protocol, and on the Partnership and Cooperation Agreement.

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The turning point – Ukrainian crisis

A turning point in the EU Russia energy relations as well as a turning point in the perception of Russia as a reliable partner was after the Russia – Ukraine gas dispute in 2006. The dispute was between Russian gas supplier Gazprom and Ukraine over natural gas prices and the very start of it was in March of 2005. When the two parties were unable to reach an agreement to resolve the dispute, and Russia cut gas exports to Ukraine on 1 January 2006. The supply was restored on in four days when a preliminary agreement between two gas companies was settled. Since Ukraine is linked to the Western European gas markets, this gas dispute reduced gas supply to France, Italy, Austria, Hungary and Poland by as much as 35%, which coincided with a particularly cold winter and heavy snowfall in Western Europe. Even though Russia argued that Ukraine has diverted millions of cubic meters of gas destined to Europe through the Druzhba pipeline and both countries failed to reach a deal over gas prices, this gave grounds for the EU to question Russia as a reliable business partner. Ukraine indeed is the middle man in terms of imports from Russia. The map below shows how many gas pipelines run through Ukraine to the Western Europe.

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