Energy will be a leading priority when France assumes its half-year turn to preside over the European Union, beginning July 1.
French Prime Minister Francois Fillon recently asked Claude Mandil, former executive director of the International Energy Agency, what France should do to enhance EU energy security.
Mandil said that whether national or European, an energy policy should simultaneously pursue three main objectives: supply security, climate change amelioration, and economic growth.
“None of the measures taken should achieve one object to the detriment of the other,” he said.
Addressing supply security, he said most supply interruptions are due to internal causes, such as the electricity breakdowns in Europe and Japan, rather than to import shortages.
“In an open economy, imports are not a real problem,” Mandil said. Aiming for so-called energy independence is a notion that “could lead to absurd and costly decisions such as the development of biofuels.”
Supply risks exist, he admitted, “and serious crises will crop up in the years ahead,” but import risks have three causes: lack of investments in all energy sectors, lack of transparency, and lack of flexibility and choice, giving the impression that Europe has little margin for maneuvering.
However, whenever energy security is at risk, he said, the EU doesn’t speak with a single voice and will never do so unless greater solidarity is achieved among member states and responsibility is shared. Developing energy flows within the EU is required as is working to achieve a real single energy market.
“The mission of regulators is essential and should extend to security,” he added.
European solidarity does not mean strategic gas stock builds as the European Commission is advocating, he said. Through agreements with industry, about 10% of its peak consumption could be put on the market via interruptible contracts, triggered by a collective decision of EU leaders when a shortage occurs. Development of interconnections would ensure that the gas circulates easily within the EU.
Russian relations
Mandil said relations with Russia remain too confrontational, with the EU giving the impression of “having its back to the wall.” Instead of trying to “reform” Russia, and insisting that it join the Energy Charter, “which it will never do,” he said, the EU should reduce its dependence on Russia through energy efficiency, LNG development, renewables, and nuclear power. Heavy gas users such as Germany and the Baltic countries should develop LNG import capability to lessen their reliance on piped gas from Russia, although Mandil insists Russia has always been a reliable supplier to them.
The Nabucco gas line is the typical example of how confrontation with Russia can be counterproductive, explained Mandil. The project was to carry Caspian Sea gas through Turkey to EU countries as an alternative to gas transported from Russia and was described as a means of countering Russia’s “domination” over the gas market.
The result was contrary to expectations as Russia reacted swiftly, depriving Nabucco of its gas by setting up its own long-term contracts with East Caspian gas producers, and launching the South Stream gas line, thus dividing Nabucco supporters.
Mandil’s conclusion is that Nabucco will now only be built if it is supplied with either Russian or Iranian gas or both. Iranian gas is out of the question until international tensions over its nuclear program are eased. But Mandil suggests that one day Nabucco could benefit from Iranian exports and should stand by to take advantage of such a possibility. He also advises that if Nabucco is built, Russian gas must be accepted, and the gas line must be built not against Gazprom but with Gazprom.
As with Russia, Mandil advocates organizing relations with Central Asian-Caspian Sea countries on a new basis, keeping up a modest but nonstop dialogue with these countries. Turkey, a major gas transit country, should be included in this permanent dialogue with the EU, he insists.
France likely will take some of these positions during its EU presidency, possibly clashing with the EU Commission on a number of controversial subjects. In any case, the report will be discussed “in detail,” over the next few weeks within the Prime Minister’s cabinet, presumably to sort out the wheat from the chaff.