The European Energy Union
The European Council's recent declaration on the European energy market reflects to a large extent a compromise between the German position and the plans of Eastern European states.
On 19 March 2015, the European Council issued a declaration on the European energy market, reflecting to a large extent a compromise between the German position and the plans of Eastern European states, the most noteworthy being Poland. Former Polish Prime Minister and now President of the European Council tried to push the idea of common purchasing and common negotiating for gas delivery contracts with third parties. Tusk’s idea reflects the concern that countries with (formally) good political ties with Russia could get a considerably different price for the very same Russian gas, and, moreover, that Russia could use its leverage as a monopoly-supplier to small Eastern European states for strategic and political purposes.
Germany wasn't very happy with the Tusk proposal.
Germany wasn’t very happy with the Tusk proposal. Beyond Schröderian lobbying of the gas industry, there are real reasons behind Germany’s hesitation. The proposal would strengthen the role of states and intergovernmental agencies vis-à-vis private industry – something Germany rejects for both ideological and practical reasons. If the European demand side would become a matter for public administration, it would decrease the incentives for companies to increase competitiveness and probably make the European gas market as a whole more sluggish and expensive. Germany has a very competitive domestic energy market with many profitable companies competing for their regional share. They don’t want to put the breaks on this, especially as the “Energiewende” – the closure of nuclear power plants and the increase of renewable energies – already puts some burdens on domestic industries. Germany wants to increase energy independence by linking several national markets and making energy a tradable good within Europe.
On the other hand, Germany, France or Spain enjoy the luxury of a functioning domestic energy market because, as countries, they are relatively big and wealthy. The notion that the market should take care of the energy needs – particularly the interconnecting infrastructure to trade electricity or gas between states – may be a feasible idea for Western Europe. But in many small Eastern and Southeastern European states, the markets are simply too small and local energy enterprises have too little capital at hand to make that happen. And for obvious reasons, they should not rely on Russian capital to realize domestic infrastructure projects, as Austria or Hungary did.
The war in Ukraine may have brought European leaders closer, but it is still not close enough.
So the current resolution is a mix of all ideas. There is the possibility for member states to unite on agreements with supplier and transit countries, but it is not a mandatory for all EU member states. There is a proposal to fund and develop new strategies on renewable energy – something that will go well with the domestic audience in Germany. And there is the plea to accelerate interconnecting infrastructure between national markets, although there is no further details on whether there will be EU funding for certain projects. While the rigorous enforcement of EU law was pledged, there is still the provision for gas suppliers to keep sensitive contractual details from the public. The latter was a wish from large German companies regarding their contracts with Gazprom, and will allow governments like Hungary to proceed with a very murky, intransparent energy policy. While the council has acknowledged these issues, it has yet roll out a big strategic vision to solve them. The war in Ukraine may have brought European leaders closer, but it is still not close enough.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.