Ukraine Crisis as the Opportunity of Energy Solidarity in the EU

Abstract

This paper explains how the EU has strengthened energy policy based on “solidarity” with the Russia-Ukraine gas disputes in 2006, 2009 and Ukraine Crisis. The European Commission succeeded in framing gas disputes as an urgent issue requiring an EU-level solution. As a result, energy solidarity has been one of the fundamental principles in the article 194 of the TFEU and the energy policy has been shared competence between the EU and Member States. European Energy Security Strategy made with Ukraine Crisis in 2014 proposes Energy Union that will pool resources, connect energy networks and unite negotiating power with one voice.

But there must be a long way to achieve intended objectives of Energy Union, because creating Energy Union is related to restructuring institutions that had supported stable energy relations between the EU and Russia for more than 40 years. Energy infrastructures (pipelines, storage utilities and so on) and the price formula (long-term contracts, destination clauses, take-or-pay clauses, gas prices linked to oil prices and so on) were the common institutions between two regions. The stable relations have deteriorated by institutional changes in the energy market. The EU promotes internal energy market integration through unbundling and mandatory third party access by the Third Energy Package and the Competition law. The EU’s new liberalised market model with diversification of energy suppliers and energy mix is no longer the one that Russia used to share with the EU. Internal energy market integration reinforced by the energy solidarity principle improves the EU negotiating power with energy suppliers. The EU is building a “wider regulated area” by “exporting” the EU energy regulations and directives to neighbouring countries and even to Russia. Russia is forced to abolish destination clauses, reduce prices and loosen take-or-pay clauses to keep its market share in Europe, although she, depending on the vertically integrated energy companies such as Gazprom, is reluctant to adapt to conditions changing in the European energy market.

Ukraine Crisis is often recognised as the issue of energy security, because Ukraine monopolised pipelines between the EU and Russia. Since 2006, the European Commission has been using Ukraine Crisis to enhance energy security policies of the EU and competence creep in the energy policy. Now Energy Union is officially one of the priorities of the new Commission.

But the EU will be confronted with difficulties in and out. First, creating Energy Union may be with creeping competence of the Commission in the energy policy and may cause dissatisfaction, even opposition to integration from Member States with different energy mix. Second, there are problems of external dimensions of Energy Union. It is difficult to ensure consistency between the energy policy and the external policy of Member States, because they are different both in energy mix and energy suppliers. And Energy Union must set a stable framework to enable the project finances to develop energy resources in Russia and so on, because most of Member States depend on imported energy from them. Energy Solidarity is crucial to overcome these difficulties.