Publication: Eurasia Daily Monitor Volume: 3 Issue: 43

A Black Sea-Caspian focus would highlight the opportunities for common EU-U.S. policies on energy security. The timing seems ideal for the forthcoming EU Green Paper on Energy to recommend joining forces with the United States to reactivate the major projects drafted in the 1990s for direct access via the Black Sea region to Caspian oil and gas. Those are: the EU’s Traceca (Transit Corridor Europe-Caucasus-Central Asia) project, practically abandoned at inception, and the U.S.-initiated East-West Energy Corridor, which is only materializing from Azerbaijan to Turkey, but stopped short of extending as planned in the 1990s to the far larger eastern-shore reserves in Kazakhstan and Turkmenistan.

In the intervening decade, European and overall Western energy requirements have increased, even as supply risks posed by rogue or war-torn countries — and, this winter, by an unreliable Russia — are multiplying. The EU Paper ought to make clear that monopolization of access to Caspian hydrocarbons is unacceptable (a principle that can also form a basis for EU-U.S. policy coordination) and that the EU has legitimate, indeed pressing, interests in obtaining direct access.

Once it defines the main policy goals, the Energy Paper ought to recommend real empowerment of existing EU instruments for implementation: the Energy Commissioner’s office, the EU’s Special Representatives for the regions, and the EU missions in energy-producing and key transit countries.

Those instruments have long been disabled in the Black Sea and Caspian regions due to the absence of a common energy policy in Brussels. Thus, EU Council spokespersons insisted that Ukraine and Moldova’s gas problems with Russia this winter were bilateral issues, seemingly ignoring the adverse impact on EU transit interests. The EU Energy Commissioner inaccurately characterized the Russia-Ukraine gas crisis as a commercial dispute, and described Russia as a reliable long-term supplier even after the second and third rounds of supply shortfalls, caused by never-explained sabotage of three supply lines in the North Caucasus and an ostensibly “unforeseen” deep freeze in Siberia, respectively.

A credible Energy Paper needs to demonstrate that the EU means business in the Black Sea and Caspian regions. Brussels must include energy supply and transit as high priorities in the mandates of its Special Representatives for the South Caucasus and Central Asia and of its missions in Ukraine, Georgia, and Kazakhstan. The EU can also propose launching and institutionalizing discussions with Turkmenistan and Uzbekistan on commercial development of their energy deposits and a European alternative to the Russian monopsony.

The EU also needs to step in with expert assistance to Ukraine and Moldova as these re-negotiate their gas agreements with Russia under pressure. Russia seeks to extend its dominance over gas transit to EU countries by acquiring incremental control over Ukraine’s pipeline system and full control over Moldova’s, leveraging the supplier’s monopoly. Ukraine now apparently wishes to extricate itself from the dangerous five-year agreements it signed in January and February with Gazprom and RosUkrEnergo; while Moldova faces the March 31 expiry of its interim agreement with Gazprom. At Chisinau’s initiative, Kyiv and Chisinau jointly requested the EU in January to provide advice on the formation of market prices for gas supplies and transit and to delegate expert observers to the Ukraine-Russia and Moldova-Russia negotiations. The EU missed that unprecedented opportunity in January. It must seize it now.

Preventing a transfer of Ukraine’s gas transit pipelines to some form of “joint” Russian-Ukrainian control (as a guise for Russian de facto control) is a major EU interest in Europe’s East. Moscow holds out two rationales for such a transfer: price and debt relief, and investment for the pipelines’ modernization in Russian co-ownership. Such a transfer would increase Gazprom’s market dominance in the EU as a whole and would place Ukraine’s immediate neighbors in the EU under pressure to cede portions of their national infrastructure to the monopoly supplier. Meanwhile, Ukrainian authorities’ gross mismanagement of gas negotiations with Russia (and of energy policy generally) translates into political and strategic vulnerability of the country, which in turn jeopardizes Western geostrategic interests throughout Europe’s East and the Black Sea region.

Before Ukraine’s energy predicament deepens any further, the EU can immediately offer to send a task force of experts to Kyiv for an overall assessment of the situation. The assessment process could soon evolve into an EU-Ukraine standing consultative mechanism that could help formulate an energy strategy of Ukraine, map out energy sector reforms, plan the modernization of its aging transit systems for gas and oil to the EU, and consider the formation of a European investment consortium to overhaul those systems as an alternative to a Russian-dominated consortium.