Dear Ladies and Gentlemen,
Let me start by stating the evident. The European Union is a key energy partner of our country. So it will remain for the foreseeable future, whatever change the dynamics of energy sector development in Russia and in the EU might bring, in particular with respect to diversification of markets of Russian hydrocarbons. Cooperation with the European Union in gas production, transmission and supply is one of priority areas of Russian energy policies. Today, natural gas supplies from Russia account for more than 20% of total EU consumption, making up more that 33% of total EU gas imports. On the other hand, more that 55% of Russian gas exports go to the EU.
The long-term and mutually beneficial nature of Russia-EU energy cooperation can not be called into question. Over decades of energy supply to the markets of countries that are today EU member states, the Russian side has proved its full reliability as a partner.
Interdependence is the core qualitative attribute of such cooperation. It allows, on the one hand, to ensure significant budget income for the Russian Federation and, on the other hand, guarantee the European Union supply of energy resources needed for sustainable development of its economy in required volumes and at acceptable prices. These prices are established on the basis of market rules.
In this context, I can not but state that today, as we all know, the gas sector is, unfortunately, the most politicised element of Russia-EU energy cooperation. The media compete in inventing the wittiest headlines, be it articles on yet another "gas dispute" between Russia and the EU, or the need for the EU to adopt urgent measures to cast off the fetters of its gas dependency on Russia, and so on. At the same time, to be objective, one should acknowledge that these sometimes "hysterical" sentiments provoked by those who are apparently not interested in developing our bilateral partnership cooperation, do not prevent the relevant Russian and European Commission branches from intensifying their cooperation, including in the gas sector, both in the framework of the Russia-EU Energy Dialogue and under other initiatives. I could highlight in this respect the successful launch of the Gas Advisory Council (composed of leading Russian and EU experts) and preparation of the Russia-EU Energy Cooperation Roadmap for the period until 2050. Work on finding mutually acceptable solutions for the energy chapter of the draft Russia-EU New Basic Agreement is continuing.
The challenges that we faced during the last extremely cold winter we managed to overcome in the spirit of constructive cooperation, thus providing another proof of enhanced mutual trust in the field of energy.
Of course, one needs to remember that importance of energy cooperation for both parties often corresponds with the scale of problems arising from time to time that are an objective reflection of dialectics of the supplier-consumer relations. Certain difficulties related to the developing EU energy legislation are representative in this regard. We recognise the objective nature of its evolution aimed at establishing a single energy market. At the same time, this evolution should, in our view, be first of all aimed at encouraging market actors to invest in the energy sector: our partners from the European Commission estimate the investment needs of the EU energy sector until 2050 at 1,5 2 trillion euros. Such enormous capital injections will only be possible if this sector is attractive to investors. In reality, however, energy regulation measures adopted by the European Commission over the last few years have paradoxically had an opposite effect – companies invest in the energy infrastructure almost exclusively by virtue of exemptions from EU directives. This refers in full measure to the EU “Third Energy Package” – regulation that objectively limits investment possibilities for companies, in particular those from third countries, in the field of EU gas transmission and gas distribution infrastructure.
We assume that the European Commission and national regulators of EU member states should consider this when implementing the “Third Energy Package” provisions – at the end of the day, it is sustainability of the whole EU economy that is at stake. There have been cases, though, when implementation of these provisions directly infringed upon legitimate investment interests of energy companies, in particular Russian ones. I believe that OPAL and NEL pipelines and the situation around the assets of Gazprom and its partners in Lithuania will not stay out of sight during today’s discussions. By the way, we have been closely following the developments related to the conflict situation between Argentina and Spain whose Repsol company risks losing big assets overseas. The arguments in support of investors' rights and against unilateral measures introduced by authorities – Argentinean authorities, in this case, - that are heard from representatives of the European Commission can be well applied by us in reverse situations, like the above-mentioned Lithuanian one. I am sure that they will be considered in Brussels as earnestly as the EU expects them to be considered in Buenos Aires.
Both Russia and the EU should bear in mind that energy cooperation in the gas sector is a two-way street, and ignoring the interests of one’s partner can do significant and – more importantly – unjustified harm to the partnership as a whole.
In this context, I can not fail to touch upon the issue concerning the approval by the Council of the EU of a mandate for the European Commission to conduct trilateral EU-Turkmenistan-Azerbaijan negotiations on a legally binding agreement on implementation of the Trans-Caspian gas pipeline project.
We believe that such a large-scale infrastructure project in the Caspian Sea can not be implemented in a situation when the legal status of the Caspian Sea is not defined. Unfortunately, promotion of the project initiated by the European Commission in cooperation with the two Caspian littoral countries without taking into account concerns of other countries of the “Caspian Five” can only be interpreted as ignoring the current international legal situation in the Caspian Sea.
Let me remind you that the Teheran Declaration adopted at the Caspian summit in 2007 provides that all major issues concerning activities in the Caspian Sea should be jointly resolved by the states of the “Caspian Five” – and no one else. Therefore, any decision on the Trans-Caspian pipeline has to be adopted by pentalateral consensus.
The experience of the Nord Stream pipeline implementation has well demonstrated that even with regard to open seas, environmental expertise is conducted by all parties that can possibly face an environmental impact. As for the Caspian Sea, it is an enclosed water reservoir with high seismic activity and large-scale tectonics of the basin. Construction of the Trans-Caspian pipeline would therefore inevitably affect all the “Caspian Five” states. Thus we view the construction of the Trans-Caspian gas pipeline on the basis of close-circuit decisions as risking significant escalation of the situation in the region. An attempt to implement the project would, inter alia, negatively impact the negotiation process on the legal status of the Caspian Sea with largely unforeseeable consequences.
The European Commission is well aware of the position of the Russian side on this issue. I would like to hope that our partners will apply efforts necessary to prevent their unilateral actions significantly damaging not only the process of resolving the legal status of the Caspian Sea in the interests of all “Caspian Five” states, but also the very reputation of the European Union who on other occasions declares time and again its commitment to international law.
At the end of the day, creating favourable conditions for companies operating in the market is one of the main tasks of politicians who define the vector of intergovernmental energy cooperation, and the interests of the Russian business and of the EU energy companies are, undoubtedly, those of enhanced mutually beneficial interaction.
Such cooperation also manifests itself in implementation of a fundamental pillar of EU external energy policy – that is, diversification of energy sources and their transportation routes to EU markets.
Of course, this strategy is reasonable from the energy consumer's point of view – in this context Russia is ready to contribute to ensuring energy security of our European partners through implementation of new projects, including the construction of South Stream, a pipeline whose feasibility and resource base are undisputed among experts.
At the same time, I would like to stress that in the long run South Stream and gas pipelines implemented in the framework of the EU Southern Gas Corridor will not be competitors. On the contrary, they will complement each other – all available estimates, including those of the European Commission itself, suggest that gas demand in the EU will only grow, so there should be enough room for all projects in the market. The tragic events at the nuclear power plant in Japan that prompted many EU member states to revise their position on nuclear energy is another argument in support of this forecast. Obviously, the sharp reduction in nuclear power generation capacity in EU countries will require compensation of the lost energy volumes through other energy resources. Under this scenario, the importance of natural gas for ensuring sustainable development of the EU economy can not be overestimated.
Thus, the notion of "mutual exclusion" of the gas pipeline projects mentioned above is nothing more than just a counterproductive attempt to score political points by provoking negative sentiment concerning the already unprecedentedly politicised gas sector.
Since the prospective role of South Stream as an important tool for strengthening energy security of South-East Europe is recognised by both the European Commission and representatives of EU member states concerned (major companies from a number of EU member states are involved in the project), I would like to express the hope that this gas pipeline will be included on the list of EU priority infrastructure energy projects (the so-called "projects of common interest") along with pipeline projects belonging to the Southern Gas Corridor that have long ago gained political support from Brussels. We expect that the EU will need new gas pipelines as, for all the rapid development of energy efficiency and energy conservation technologies as well as of new energy sources and the anticipated increase in LNG supplies to EU markets, there will be no real alternative to pipeline natural gas in the foreseeable future. Neither can it be replaced by shale gas for a number of reasons which both gas experts and our partners from the European Commission are well aware of.
In Russia-EU gas relations over the last years we have witnessed situations when political decisions or positions of the parties could compromise the interests of business: take, for example, the debates on the practice of long-term contracts. In such cases, it is always worth asking oneself: what would be better for companies that are the source of investment in the gas sector? I am sure that in the case of long-term contracts both EU and Russian companies would give a simple answer: unlike spot contracts, long-term contracts allow forecasting the market dynamics and building fixed costs into the final price of the product. Perhaps in other aspects of our gas cooperation governmental and intergovernmental bodies should also give more consideration to the interests of market operators in order not to slow down the sector development but rather to facilitate it.
Naturally, the interests of the European Union as consumer and of Russia as supplier are far from being identical on all parameters. Nevertheless, they are united by a common goal – ensuring stable growth of economies of both by creating conditions for fruitful cooperation of their energy sectors, including in the gas area. Let me assure you that Russian diplomacy will spare no effort to see this goal achieved.
