Communication from the Commission to the European Council External energy relations – from principles to action
Date: 2006-10-12
Institutions: European Commission
Subjects: EU relations, competitiveness, energy policy, security of supply, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.10.2006 
COM(2006) 590 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN COUNCIL  

External energy relations – from principles to action 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN COUNCIL  

External energy relations – from principles to action 

The  European  Council  of  March  20061  endorsed  the  Commission  Green  Paper's  proposed 
objectives  for  an  energy  policy  for  Europe  -  long-term  sustainability,  security  of  energy 
supply and economic competitiveness, in line with the Lisbon strategy for growth and jobs. 
The June 2006 European Council2 subsequently adopted a set of recommendations proposed 
jointly by the Commission and the High Representative/Secretary General of the Council3. 

(1) 

Coherence is central to achieving these objectives : coherence between the internal 
and external aspects of energy policy, and between energy policy and other policies 
that  affect  it,  such  as  external  relations,  trade,  development,  research  and 
environment.  A  coherent  approach  is  key  to  ensuring  that  external  energy  policy 
provides guarantees in terms of security of supply, while at the same time ensuring 
projection  of  the  objective  of  sustainability  at  international  level.  To  ensure 
coherence, major and urgent decisions are needed. 

(a) 

A  major  potential  strength  of  the  Union  lies  in  the  realisation  of  its  internal 
energy  market.  It  reinforces  economic  competitiveness,  increases  diversity, 
improves  efficiency,  fosters  investment  and  innovation  and  contributes  to  the 
security of supply. Member States should promote the principles of the internal 
energy  market  in  bilateral  and  multilateral  fora,  enhancing  the  Union's 
coherence and weight externally on energy issues. The pull of the EU internal 
market  will  also  be  strengthened  if  interconnection  is  improved  and 
competition rules are fully respected.  

(b)  Major  investments  are  needed  to  create  the  necessary  interconnections  inside 
and outside the Community in order to ensure the diversification of routes and 
sources  of  external  energy  supplies.  The  EU  should  help  to  create  the 
environment for private capital flows and offer political and financial support 
to economically feasible projects, as appropriate. 

(c) 

Energy  efficiency  should  be  pursued  as  the  most  effective  policy  that 
contributes  to  all  three  energy  policy  objectives,  including  the  reduction  of 
import  dependence.  There  are  significant  opportunities  for  the  EU  to  lead 
common  international  action  to  reduce  the  growth  in  worldwide  energy 
demand,  improve  energy  efficiency,  combat  climate  change  and  encourage 
greater sustainability. This is just one area where the EU's lead in cutting-edge 
environmental  and  energy  technologies  makes  it  an  attractive  international 
partner. 

(d) 

The EU and its Member States should promote, both internally and externally, 
the  acceleration  to  a  low  carbon  economy,  including  emissions  trading.  This 

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Document 7775/1/06 REV 1, Brussels European Council 23/24 March 2006, Presidency Conclusions. 
Document 10633/1/06 REV 1, Brussels European Council 15/16 June 2006, Presidency Conclusions. 
Document 9971/06. 

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(2) 

(3) 

will address the issues of climate change and sustainability, as well as climate 
security.  Early  action  can  support  the  development  and  use  in  the  EU  and  in 
third countries of renewable energies (wind, solar, biomass, hydro, geothermal) 
and  clean  hydrocarbons,  including  coal,  bringing  benefits  in  terms  of 
leadership in developing international markets. Nuclear energy is seen by those 
who  follow  this  path  as  an  element  in  energy  security  and  a  low  carbon 
economy. 

The Union should use all its weight in current and future bilateral negotiations and 
agreements, offering balanced, market-based solutions, first of all with its traditional 
suppliers,  but  also  with  other  main  producing  and  consuming  countries.  The  EC 
should  be  a  key  driver  in  the  design  of  international  agreements,  including  the 
extension  of  the  EC  energy  regulatory  framework  to  neighbours  (the  Energy 
Community), the development of the Energy Charter Treaty, the post-Kyoto regime, 
a framework agreement on energy efficiency, the extension of the emission trading 
scheme to global partners, the promotion of research and the use of renewable energy 
sources. The role of the EC in international organisations and fora needs to be further 
developed. Member States and the Commission should coordinate their positions in 
order to speak with an effective, common voice. 

EU-Russia  energy  cooperation  is  crucial  in  ensuring  energy  security  on  the 
European  continent.  Russia  is  already  the  origin  of  around  25%  of  oil  and  gas 
consumed  in  the  EU.  The  growing  demand  for  energy,  in  particular  gas,  points  to 
even higher volumes of energy imports from Russia. The foreseen negotiations on a 
new  comprehensive  framework  agreement  within 
the  post-Partnership  and 
Cooperation  Agreement  (PCA)  offer  an  opportunity  to  agree  on  the  objectives  and 
principles  of  energy  cooperation  in  a  balanced  and  mutually  binding  manner.  This 
would not only have an impact on the conditions for EU-Russia trade and investment 
in the energy sector, but would also extend across the economy, thus supporting the 
industrial diversification and technological development that Russia seeks. It would 
also bring benefits to transit and producer countries in Eastern Europe, the southern 
Caucasus and Central Asia. Such an agreement with Russia, confirming both market 
economy principles and the relevant principles of the Energy Charter Treaty, could 
also  remove  many  of  the  current  obstacles  to  Russia’s  eventual  ratification  of  the 
Energy Charter Treaty. 

With  the  current  levels  of  investment  in  production,  transport  and  distribution  of 
energy  products,  concerns  have  been  expressed  that  Russia  may  not  be  able 
adequately to satisfy the growing demand on both its export and domestic markets. 
There should, therefore, be a strong joint effort to improve the energy efficiency of 
the Russian economy. For this to become possible, framework conditions regulating 
and fostering energy trade and cross investments between the EU and Russia would 
be  required.  Linked  to  this,  the  EU  should  develop  its  cooperation  with  Russia  in 
implementing  Kyoto  commitments,  to  foster  technical  innovation  and  improve  the 
efficiency of the energy sector. 

The  EU  and  Russia  should  see  mutual  long  term  benefits  from  a  new  energy 
partnership, which would seek a balance between expectations and interests of both 
sides. The equation is the following: 

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(a) 

(b) 

(c) 

Russia seeks ways to secure energy demand presented by the EU market. The 
EU  needs  Russian  resources  for  its  energy  security.  There  is  a  clear 
interdependence. 

Russia  wants  a  stronger  presence  in  the  EU  internal  energy  market,  ensured 
long term gas supply contracts, the integration of electricity grids and free trade 
for  electricity  and  nuclear  materials,  as  well  as  the  acquisition  and  control  of 
downstream  EU  energy  assets  (gas  and  electricity)  and  EU  investments  and 
technology for the development of the Russian energy resources.  

The  EU  wants  non-discriminatory  and  fair  treatment  from  Russia  in  their 
energy relationship, in terms of supply from Russia and in terms of access to 
the Russian market for EU investors; a  level playing field in terms of market 
conditions,  investment  and  acquisitions  in  the  upstream  and  downstream 
Russian  energy  infrastructure  and  resources;  third  party  access  to  pipelines 
within Russia, including those for transit of energy products from the Caspian 
region and Central Asia; respect for competition rules as well as high levels of 
environmental security and safety. 

In  its  proposal  for  negotiating  directives  for  a  new  framework  agreement  with 
Russia,  the  Commission  has  suggested  how  our  energy  relationship  with  Russia 
could  be  enhanced.  Closer  ties  with  Russia  should  seek  to  eliminate  remaining 
barriers  to  trade  and  investment,  promote  regulatory  convergence  and  facilitate  the 
sharing of technology, thus widening and deepening our energy relationship. Mutual 
benefits for the long term could be anchored through creating a level playing field, 
predictability and reciprocity in terms of:  

(a) 

upstream and downstream, domestic and foreign investment; 

(b)  market opening, and fair and non-discriminatory access to transport networks, 

including for purposes of transit of energy products; 

(c) 

(d) 

(e) 

convergence  of  energy  policies,  legislation  and  regulations  regarding  the 
functioning  of  markets,  including  trade  rules,  as  well  as  safety  and  security 
issues; 

compliance  with  the  high  standards  of  EU  regulations  concerning  the  safety, 
security and environmental aspects, in particular for the purpose of electricity 
trade, as well as respect for competition rules; 

joint implementation of energy efficiency and savings, renewables and research 
measures. 

It  is  essential  that  Member  States  have  a  common  understanding  on  the 
proposed  approach  on  the  principles  for  a  future  energy  partnership  with 
Russia,  to  be  considered  in  the  framework  of  the  post-PCA  agreement.  The 
Union should use all opportunities to convince Russia of the mutual interest in 
such an exercise. 

(4) 

EU  energy  cooperation  with  other  third  countries  remains  a  top  priority, 
independent of EU-Russia negotiations. It serves the EU’s and the transit countries' 

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security of supply, help the reforms in partner countries and facilitates the producer 
countries’ access to EU markets. Cooperation is also pursued with important energy 
consuming  countries.  Diversity  of  type  of  energy,  of  country  of  origin,  and  of 
country of transit are essential to ensure the EU's access to clean and secure energy. 

The EU is  surrounded by  almost 80% of the  world’s hydrocarbon resources. There 
are  important  energy  producers  in  the  Mediterranean,  Black  Sea,  Caspian,  Middle 
East  and  the  Gulf  regions  as  well  as  in  the  North  (Norway),  with  which  the  EU  is 
building strengthened cooperation. The aim is to create a wide network of countries 
around  the  EU,  acting  on  the  basis  of  shared  rules  or  principles  derived  from  the 
internal market. 

There are different tools that could be used to pursue this goal. There are the existing 
and  future  bilateral  agreements  with  energy  producer  and  transit  countries,  such  as 
the PCAs, the Memorandum of Understanding on Energy Cooperation with Ukraine 
and the Association Agreements with Mediterranean countries. In addition, there are 
the  European  Neighbourhood  Policy  Action  Plans;  the  foreseen  memoranda  of 
understanding  with  Algeria,  Azerbaijan  and  Kazakhstan;  Euromed  energy 
cooperation;  the  Baku  initiative;  and  the  EC-Norway  energy  dialogue.  Energy 
relations  have  also  been  reinforced  with  other  important  energy  producers  such  as 
OPEC  and  countries  in  Latin  America  and  Africa,  which  are  increasing  their 
hydrocarbon  output  and  have  the  potential  to  go  even  further.  As  for  energy 
consuming  countries,  cooperation  is  also  being  developed  with  the  United  States, 
India  and  China.  An  efficient  monitoring  and  implementation  of  these  initiatives  is 
essential,  and  needs  to  be  fully  supported  by  the  EU’s  trade,  development, 
environment and competition policies. 

The  Energy  Community  Treaty  entered  into  force  on  1  July  2006  and  extends  the 
relevant EU energy acquis to the Western Balkan countries. The implementation of 
the  Treaty  will  improve  energy  security,  create  a  regional  energy  market  and 
encourage  vital  investments.  The  inclusion  of  Norway  and  Ukraine,  which  have 
already formally applied to join the Energy Community Treaty, should be considered 
at the earliest possible moment. Further reflection needs to be carried out concerning 
other  possible membership applications.  In the Black Sea and Caspian Sea Region, 
the 'Baku initiative' energy policy dialogue can be expected to galvanise the countries 
of the region to tackle shared challenges in cooperation with the EU and help boost 
new supplies from central Asia to the EU. 

Turkey is becoming a crucial energy hub for supplies from the producer regions and 
is thus of strategic importance for the EU's energy security. The enlargement process 
with Turkey could contribute to promoting the early adoption and implementation of 
the  EU’s  energy  acquis  by  Turkey,  while  Turkey's  early  accession  to  the  Energy 
Community  Treaty  could  also  speed  up  this  process.  Co-operation  on  pipeline 
projects  such  as  the  Nabucco  project  and  further  projects  from  the  Caspian  basin 
should  be  realised  in  the  most  effective  manner.  A  rapid  alignment  of  Turkey  with 
EU energy standards and policies would be highly beneficial for realising Turkey’s 
great potential as a major energy hub. 

The  EU’s  financial  cooperation  instruments  should  be  mobilised  in  full  to  promote 
the restructuring and development of the partner countries’ energy sectors, regional 
cooperation,  infrastructure  interconnections,  new  pipelines,  energy  efficiency  and 

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(5) 

renewable energy sources for our mutual benefit. The recent case of a joint proposal 
from  the  EU,  the  European  Investment  Bank  and  the  European  Bank  for 
Reconstruction  and  Development  for  the  financing  of  hydrocarbon  infrastructure 
projects  in  the  framework  of  the  EU-Ukraine  Memorandum  of  Understanding  on 
energy cooperation has demonstrated that powerful synergies can be created when all 
EU  instruments  are  put  at  the  service  of  a  strategic  EU  objective  in  a  coordinated 
manner.  The  recently  adopted  Global  Energy  Efficiency  and  Renewable  Energy 
Fund will help to find additional financial resources. 

It  is  important  rapidly  to  build  up  relations  with  strategically  important 
neighbours of the Union. Member States need to support the ongoing bilateral 
and  regional  energy  cooperation  partnerships  with  the  main  EU  energy 
partners, including the gradual extension of the principles of the internal energy 
market through the European Neighbourhood Policy and the efficient use of all 
financial  instruments  which  the  EU,  the  European  Investment  Bank,  the 
European  Bank  for  Reconstruction  and  Development  and  other  international 
financial institutions can put at the disposal of the EU's energy security. 

To  ensure  efficient  follow-up  and  coherence  in  pursuing  the  above  mentioned 
initiatives and processes, it will be crucial for EU partners to be constantly informed 
and aware of developments, and ready to share essential information with each other 
in case of an external energy crisis. For facilitating such exchange, the Commission, 
the Council Presidency and the General Secretariat of the Council are preparing the 
establishment  of  a  network  of  energy  correspondents  to  assist  the  EU’s  early 
response  and  reactions  in  case  of  energy  security  threats.  The  objective  of  such  a 
network  would  be  to  prepare  the  ground  for  actions  and  decisions  in  case  of  an 
energy security crisis by collecting, processing and distributing reliable information 
relevant to the security of energy supplies to the EU. The network would also draw 
preliminary analysis and assessments in view of providing an early warning when the 
objectives of energy security may not be achieved. 

The  network  should  be  composed  of  energy  experts  from  Member  States,  the 
General Secretariat of the Council and the Commission. It should operate through a 
specific communication system and meet on an ad hoc basis. 

In order to facilitate the implementation of a common and coherent external energy 
security policy and constitute an important instrument by which the EU could have at 
its  disposal  an  early  warning  system  to  promote  its  preparedness  for  energy  crises, 
the  Member  States  should  agree  to  the  establishment  and  implementation  of  the 
network of energy correspondents. 

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