Thursday, July 18, 2024
 
 

Russian Energy Exempt From EU Sanctions

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At the European Council meeting on 20-21 March, the Crimea crisis was discussed by EU leaders. However, the EU sanctions imposed on individuals over Russia’s annexation of Crimea from Ukraine will not affect EU-Russia energy relations so far.

Chief executive officers of Russia’s two biggest companies – Gazprom’s Alexei Miller and Igor Sechin of Rosneft – are notably absent from the final sanctions list.

Wim Vandenberghe, an energy expert on EU regulatory and competition law at Dechert LLP in Brussels, told New Europe on 21 March that both Russia and the EU do realise that they are energy interdependent and seek to avoid an energy war. “It’s not only a question for Europe about security of supply it’s equally a question for Russia of security of demand. In that view both sides will be careful a bit not to escalate it,” he said.

Vandenberghe reminded that soon after the European Commission launched a competition investigation against Gazprom there was some kind of escalation when Russian President Vladimir Putin adopted a decree on strategic sectors.

“That was a little bit of a power game between the two sides. But very soon it went silent and you can tell that both parties are working on some kind of settlement that is acceptable to Gazprom as well. And the EU is happy to do that rather than the formal decision,” Vandenberghe said, adding that is an example that Moscow and Brussels realise that energy is so important for both of them that they will take steps to diffuse any tension. “Especially on energy everything depends on trust and being reliable — as a buyer and as a seller and both sides realise that,” he said.

Regarding Crimea and whether the EU-Russia spat would prompt more EU pressure on Gazprom and its South Stream pipeline, Shane DeBeer, an expert on Russian law at Dechert LLP, told New Europe on 21 March that Gazprom was already under a great deal of pressure about unbundling and the anti-monopoly probe that he doesn’t believe that the Russian company will necessarily feel any worse pressure than before.

“How much you want to connect the approval process, the exemptions process on South Stream, with politics – they are saying that these decisions are not made on a political basis but there is a certain amount of discretion involved,” DeBeer said, reminding that the EU has made statements that the approval process is going to get stalled on South Stream.

“Gazprom obviously doesn’t like that because Russia’s policy generally – and Gazprom’s in particular – has been to have alternative pipelines in order to avoid exactly the problem that happened with Ukraine in 2009,” he added.

DeBeer noted that Russia’s pipeline capacity is far in excess of what the resource-rich country is capable of producing west of the Urals. “The reason for that is redundant pipeline capacity because of these kinds of problems – problems where the pipeline through Ukraine might get blocked,” he said. Russia’s Nord Stream gas pipeline, for example, is not operating anywhere near full capacity right now.

In addition, Vandenberghe said there is a whole set of EU rules that were imposed to make Europe’s internal gas market more stable.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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