The EU is playing checkers; Gazprom is playing chess

DOMINIQUE FAGET/AFP German Chancellor Angela Merkel, in a 2006 press conference with Tony Blair, said the European Union needed to work towards a common energy policy to limit the influence of Gazprom, the Russian-controlled energy giant. Merkel’s statement came after Russia, unhappy with the Orange Revolution in the Ukraine, turned off that country’s gas in ...

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599179_070921_eu_05.jpg

DOMINIQUE FAGET/AFP

German Chancellor Angela Merkel, in a 2006 press conference with Tony Blair, said the European Union needed to work towards a common energy policy to limit the influence of Gazprom, the Russian-controlled energy giant. Merkel's statement came after Russia, unhappy with the Orange Revolution in the Ukraine, turned off that country's gas in the middle of the winter. Not long after, Merkel pirouetted and signed a unilateral deal with Russia to supply about 90 percent of German energy. Other large countries have signed similar deals (all under different terms). So much for EU solidarity.

However, smaller EU countries have become increasingly concerned about Gazprom as it has expanded its business interests in Europe. On Thursday, EU Competition Commissioner Neelie Kroes presented what she said was a concrete step to counter the company's influence. According to Forbes, the European Commission is expected to publish a new law that mandates separate ownership for non-EU gas distribution and gas production companies. This is known as "unbundling," and it means that the same company cannot produce and distribute the gas. Because the measure is clearly directed at Russia, it has become known in the EU as the Gazprom Clause.

DOMINIQUE FAGET/AFP

German Chancellor Angela Merkel, in a 2006 press conference with Tony Blair, said the European Union needed to work towards a common energy policy to limit the influence of Gazprom, the Russian-controlled energy giant. Merkel’s statement came after Russia, unhappy with the Orange Revolution in the Ukraine, turned off that country’s gas in the middle of the winter. Not long after, Merkel pirouetted and signed a unilateral deal with Russia to supply about 90 percent of German energy. Other large countries have signed similar deals (all under different terms). So much for EU solidarity.

However, smaller EU countries have become increasingly concerned about Gazprom as it has expanded its business interests in Europe. On Thursday, EU Competition Commissioner Neelie Kroes presented what she said was a concrete step to counter the company’s influence. According to Forbes, the European Commission is expected to publish a new law that mandates separate ownership for non-EU gas distribution and gas production companies. This is known as “unbundling,” and it means that the same company cannot produce and distribute the gas. Because the measure is clearly directed at Russia, it has become known in the EU as the Gazprom Clause.

On the surface, this law suggests a shift towards a common energy policy. But a deeper examination shows it has no teeth. First, Germany, Italy and France will oppose the deal, as they all have national utility companies with substantial foreign ownership. They do not want to break up those firms, which would be required by the proposed law. Without both of those countries on board, it’s unlikely the law will make it through the EU parliamentary process. 

Perhaps anticipating this opposition, the Commission also presented a second plan that allows joint ownership as long as an independent operator controls one of the companies. In other words, Russia would have to create a separate company to distribute gas, while Gazprom produces it. This separation is insignificant, as both companies answer to the same master.

So, the Commission’s victory for collectivism appears to be a hollow one. Until more forceful steps are taken towards EU consensus, Russia will keep striking unilateral deals with European countries, making a common energy policy less and less likely.

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