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EU new policy plan targets energy giants

The European Commission proposed a new energy policy package on Wednesday, seeking to split European energy giants and curb foreign takeovers in an effort to boost competition and ensure security of supply. Gazprom ready for dialogue on EU energy supply reliability.

“An open and fair internal energy market is essential to ensure that the European Union can rise to the challenges of climate change, increased import dependence and global competitiveness. This is about getting a better deal for consumers and business and making sure that third country companies respect our rules,” said European Commission president Jose Manuel Barroso, who presented the third package of its kind. Despite progress made after the opening up of the European energy markets to competition, a process which started 10 years ago, the commission said there were still serious challenges regarding all aspects of energy provision and use. One outstanding problem stood with big European energy companies such as RWE and EON in Germany and EDF and Suez in France, which now control both the generation and the transmission of their gas and electricity.

The European Union’s executive arm has long sought separation of production and supply from transmission networks in the energy sector. In its controversial proposal, it listed two options, the so-called ownership unbundling and the approach of “independent system operator.” Under the ownership unbundling, an option preferred by the commission, EU energy giants will be forced to sell of their transmission networks. In other words, a single company can no longer own both transmission and be occupied in energy production or supply activities. The commission said ownership unbundling solves the inherent conflict of interest, which leads to discriminatory behavior. Network operators will no longer have related supply or production companies which they could treat differently from competing companies. It also guarantees non-discriminatory access to network information and provides unbiased incentives for investments, which will guarantee security of supply.

However, this extreme approach had already met strong opposition from several member states, notably Germany and France, which are home to some big names in the energy sector. The independent system operator solution will ensure similar results, provided that it is applied in full and provided it is combined with strong regulatory oversight, the commission said. The proposal was yet to win unanimous approval from divided member states. Currently, Britain, the Netherlands, Denmark, Belgium, Finland, Romania, Spain and Sweden support the unbundling of energy companies, while half a dozen others, led by France and Germany, reject it. The European Commission also proposed certain restrictions on foreign takeover in the energy sector, making it difficult for non- EU companies to acquire European transmission networks.

Currently, Russian state-controlled energy giant Gazprom, one of the largest suppliers of gas to the EU, is meeting resistance for its plan to by pipelines and other infrastructure. Gazprom is ready for constructive discussions on Russia’s reliability as an energy supplier to Europe, the Russian gas giant’s press secretary said Wednesday.

Sergei Kupriyanov’s comments follow the European Union’s announcement earlier this week that Gazprom and other companies outside the EU would face restrictions in buying up energy assets in the 27-nation bloc. The state-controlled giant currently supplies 25% of Europe’s gas, and has purchased stakes in EU energy companies. “Gazprom is a reliable supplier of gas to the EU and a large investor in the infrastructure that delivers gas to Europe. We share the main aim of the European Union - to ensure long-term reliability of gas deliveries to the EU,” he said. Kupriyanov said that after a thorough analysis of European Union initiatives and consultations with key EU bodies, Gazprom would present its own assessment on how the proposed measures will tell on supply reliability, competitiveness of the European energy market, and ultimately on hydrocarbon prices in Europe.

A source in Russia’s Economic Development and Trade Ministry said the EU-proposed measures could backfire at the EU, and that the ministry hoped the EU restrictions would not be implemented. “In our opinion, damage from such politicizing of investment issues will be reciprocal, but will hit the European Union more severely,” he said. The source said the European Commission’s initiative had been met with negative responses from large European energy companies, in particular Gaz de France and Germany’s E.ON, and a number of European economic analysts. However, Barroso insisted that the draft measures are not aimed against Russia, but at creating equal competition terms for the EU and foreign investors.

 
In August, the European Commission had intended to convene a group of government experts and representatives of fuel producers and consumers from EU member states to discuss Russian energy supply reliability, shortly after Gazprom threatened to cut its natural gas deliveries to Belarus by 45% as of August 3 over the country’s outstanding debt. However, Minsk backed down to Gazprom’s demands at the last minute, drawing on government reserves to pay the debt in full. Gazprom’s threat had sparked fears that Belarus could tap gas from pipelines transiting Russian gas to Europe in a replay of a bitter price dispute with Ukraine in early 2006, which affected supplies to European consumers. The dispute raised concerns in Europe over excessive dependence on controlled Gazprom as a supplier. (people.com.cn, rian.ru)