EU Energy Policy and Infrastructure Development -
The Role of the Visegrad Countries

Conference Recap

On November 4, 2008 CEU’s Center for EU Enlargement Studies hosted an international conference entitled „EU Energy Policy and Infrastructure Development - The Role of the Visegrad Countries.” The event formed part of the activities held in the framework of the project “Strengthening Central European contribution to the Eastern dimension of EU's CFSP” supported by the Intarnational Visegrad Fund, with the participation of leading think tanks from V4 countries.
Péter Balázs , director of CENS in his opening address underlined that the main added-value of new member states into the EU’s foreign policy could be a renewed impetus into its Eastern dimension. This can be divided into three parts: the central dimension consists of Poland, Slovakia, Hungary and Romania who can enhance the approximation of Ukraine and Moldova to the EU, while at the same time also help improve EU-Belarus relations; Romania and Bulgaria as Black Sea countries can strengthen the Black Sea dimension which is becoming crucial not least because of energy security; lastly, the Baltic countries foster a confrontative relationship vis-á-vis Russia, which should be improved. At the same time the EU is not willing to accept the fact that Russia is not conforming to its rules, while Russia on the other hand will not take the EU seriously as long as it is unable to speak with one voice.
Heinz Huthmacher (director of the Budapest office of the Friedrich Ebert Stiftung) called for a strengthening of the common energy policy in which respect he believes that the role of the Visegrad countries will play an increasingly significant role.

PANEL I: ENERGY SECURITY AND RUSSIA

András Deák emphasized that the concept of energy security means security of supply only for consumer countries. In case of producer countries however, other legitimate demands should be taken into consideration (such as security of demand) in the course of bilateral relations. Mihály Bayer (Hungarian Ambassador-at-large for the Nabucco project) (download presentation) pointed out that diversification of energy sources means reduction of dependence from Northern-African gas in case of the old member states, whereas in case of the new member states it means reducing dependence from Russian gas. The possibilities for increasing energy security for Hungary include: Nabucco, South Stream, LNG, underground gas storages, NETS, and increasing its share of renewable and nuclear energy. Bayer also emphasized the importance of supporting the fourth energy corridor (from the Caspian and Middle East region towards Europe) for Hungarian diplomacy.
Marek Senkovič (Slovnaft, chief economist) (download presentation) agreed with increasing energy efficiency, however pointed out that ETS and the Robin Hood tax contributes to decreasing competitiveness. European oil refineries should concentrate on higher value-added products (Slovakia and Hungary are already good at this), while the relocation of refinery capacities to outside the EU should be avoided at all costs!
According to the analysis of Marcin Kaczmarski ( Marcin Kaczmarski, Center for Eastern Studies, Poland, Center for International Relations) Russia plays a policy of carrots and sticks of its own towards EU countries based on what degree their national policies confirm to Russian interests. He also pointed out that no EU-wide energy policy is feasible in the short-run, therefore a regional Visegrad cooperation is highly desirable first.

Jiri Schneider emphasized that energy is the last instrument available for Russia in its foreign relations, while during the Cold War other means were at its disposal. Therefore it is misleading to think of it as a reliable supplier country. He agreed that a common energy policy in the EU is at this point less realistic, therefore drafting some behavioral guidelines would make sense that would need to be considered when negotiating bilateral long-term contracts, for instance. In the case of Iran, gas supply should be decoupled from the issue of nuclear energy.

PANEL II: POLICY FRAMEWORKS AND ECONOMIC DEVELOPMENT

Jean-Arnold Vinois represented the European Commission from its DG Energy and Transport, Energy Policy and Security of Supply Unit . He asked for patience in relation to energy security and suggested that in the meantime we concentrate on field that we can influence ourselves (renewable energies, efficiency, common voice). He drew attention to some goals also supported by the Commission: Baltic and Mediterrenean connections, South corridor, north-south connection in Central and Eastern Europe (New Europe Transmission System).
A very pragmatic approach was articulated by Andreas Goldthau (download presentation) of CEU’s Department of Public Policy, who emphasized that EU-Russian relations would be mutually beneficial for the two sides if it was based on trust and accountability. In order for this to happen, precise goals have to be formulated and consistently represented. Energy security should for instance not be mixed with questions of human rights.
Severin Fischer (download presentation) from the Institute for European Politics, Berlin agreed that a common voice is necessary for building a common energy policy which is unrealistic so long as national interests dominate the relations.
Lucia Najslova (Slovak Foreign Policy Association) warned that the credibility of the EU in the neighborhood region is decreasing. It is understandable that the Turkish partner is not willing to sing the Energy Charter if the EU is not willing to open the chapter on energy in its accession negotiations.

PANEL III: INFRASTRUCTURAL DEVELOPMENTS - PIPELINES

Mihaela Preda (the Authority for State Assets Recovery, Romania) (download presentation) presented the Romanian energy mix, which shows a 29% energy dependency, that scores far below the EU average (54%). Moreover they are continuously developing renewable and nuclear energy resources.
Giorgi Vashakmadze (download presentation) in his presentation on the White Stream underlined that the EU has to buy great amount of gas (100-150 blm 3/year) in order for the Caspian countries to be worth it to counter Gazprom’s interests. He agreed that the availability of more transit routes would decrease the risks of transit. However, the investments backing White Stream are not yet clear.
The Turkish position was presented by David Tonge of the IBS Research and Consultancy (download presentation). Turkey’s consumption of energy keeps on increasing, which results in the harsh negotiation position. This however backfires in many cases – the South Stream project for instance was due to the reluctance of Turkey to expand the Blue Stream.
Natália Socó of the Hungarian energy group emphasized the differences between the world market of crude oil and gas (download presentation). The crude oil market is genuinely competitive, where prices have a signaling function, whereas gas transit is still a natural monopoly even if transit plans can compete. She also pointed out the role of public-private partnerships in constructing secure infrastructure, since pipelines that yield no return cannot be constructed on solely market basis.

PANEL IV: INFRASTRUCTURAL DEVELOPMENTS - GRIDS

Pavel Šolc (download presentation) director of the Czech CEPS outlined some of the problematic points of regional grid integration. While the infrastructure is physically integrated, there is no joint regulating agency behind it. Therefore it may happen that network development is financed by one state, while the others enjoy the benefits of increased capacity. As the current infrastructure and regulatory mechanisms are not efficient, he proposed increasing public involvement, and perhaps even the establishment of regional TSOs.
The financial crisis may actually have some positive affects of Ukraine, according to Ildar Gazizullin, (International Centre for Policy Studies, Kiev) (download presentation) as it may result in the internal increase of oil and electricity prices, which will draw closer to the decreasing world market prices. While the approximation of regulation to EU standards in energy efficiency or transit and nuclear security is highly desirable, the domestic political crisis is delaying its implementation.
Only the fourth of Moldovan electricity demand is covered by domestic production, therefore the priority for the country is connection of the systems with Ukraine and Romania integration – as Alexander Oprunenco of the Expert Grup pointed out (download presentation). Subsidies of consumer and producer prices should be phased-out and joining the UCTE and the Energy Community should become strategic goals.
Gábor Tari (MAVIR) assessed Hungarian cross-border network development and integration plans. He emphasized that approval phase as well as the development itself of these plans stretches a long time. Therefore TEN-E resources should be put to use in these fields as well.

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