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European security issues

20 - Relations with Russia on energy issues

Grade: B
Unity 4/5
Resources 4/5
Outcome 5/10
Total 13/20
Scorecard 2010/11: C+ (9/20)

In 2012, the European Commission took a potentially important step to enforce its market rules in the energy sector by investigating Gazprom.

Russia remains the EU’s most important supplier of gas, providing over one third of gas imports. But the relationship is interdependent: when it comes to its gas exports, the EU remains Russia’s most important customer. The EU hopes to anchor this strategic relation in the Energy Charter Treaty, which has been ratified by 48 countries but not by Russia (and four other countries). Moscow also remains a staunch opponent of the EU’s plan to fully liberalise its energy market, which Russia considers a direct threat to its business interests in the EU. 

Although the Energy Charter Treaty remained unratified by Moscow, the European Commission took a potentially important step to enforce its market rules in the energy sector by launching an anti-competition probe against Russian state energy giant Gazprom for possible abuse of its dominant market position in Central and Eastern Europe. Europeans held together and let the European Commission carry on the investigation. But Russian President Vladimir Putin responded with a decree that required Gazprom and other “strategically important companies that do business overseas” to obtain approval from the Kremlin before providing information to foreign regulators. Shortly after the European Commission launched the investigation, Lithuania announced that it would sue Gazprom for almost €1.5 billion for overcharging the country for gas deliveries. In 2012, Gazprom paid $4.3 billion in “retroactive discounts” to settle price disputes with its clients in Germany, France, Poland, and Italy; prices for its clients in Austria, Italy, and Slovakia were also lowered.

Meanwhile, the exploration of unconventional gas, which could further reduce European dependence on Russia, proceeded at a rather slow pace as EU member states took different views of the dangers and potential of “fracking”. Bulgaria, France, and Germany banned the technique because of concerns about its impact on the environment and Romania imposed a moratorium, which, however, the new government might lift in 2013. Poland and the UK were among the few member states that continued exploration.