Institutional aspects of EU-Russia Energy Cooperation (an overview of challenges and issues to be addressed)

1. Institutional aspects of EU-Russia Energy Cooperation(an overview of challenges and issues to be addressed) Michael I. S A V V A Deputy Director Department of Economic Cooperation Ministry of Foreign Affairs Russian Federation

2. State of play • The EU-Russia energy cooperation is doing well - Russian Exports of oil and gas have reached quite impressive figures • Cooperation is facing new challenges, particularly in Legal Capacity building - Negotiations on a number of important bilateral documents, referring to the energy cooperation, remind a stalemate situation

3. Success stories and valuable assets • EU-Russia Partnership and Cooperation Agreement - signed on 24.06. 1994 (Corfu Island); expired on 01.12. 2007; it is prolonged on a year by year basis according to the relevant provision of the Agreement • Draft EU-Russia Basic Agreement (intended to replace the expired PSA), negotiations started in 2008 • Set of bilateral agreements on energy cooperation between Russia and EU member-countries

4. Projects jammed in the pipeline • Transit Protocol (within the Energy Charter process) - negotiations started in 2000; never completed; as a result Russia officially informed the Depository on 20.08.2009 that it would not become a Party to the Energy Charter Treaty, signed in December 1994 • Draft Convention on Global Energy Security • Draft EU-Russia Agreement on joint functioning of the United Electric Energy System of Russia and Energy Systems of Estonia, Latvia and Lithuania in synchronous mode. • Draft EU-Russia Agreement on the implementation of international infrastructure projects intended for energy transportation

5. No generally recognized definition, so far ENERGY SECURITY Was ist das? (What is that?)

6. Supply and Demand equation • Consuming countries : Energy security = Security of supply unimpeded access to natural resources and uninterrupted supply of energy at a low price • Producing countries : Energy security = Security of demand sustainable demand and nondiscriminatory access to markets in order to sell the energy at a competitive price

7. Equator length -40.075,7 km Total capacity -164.000 km Natural Gas Pipelines of the Former Soviet Union CENTRE for GLOBAL ENERGY STUDIES 17 Knightsbridge, London SW1X 7LY, UK Tel: +44 (0)20 7235 4334 Fax: +44 (0)20 7235 4338

8. Merits and Benefits of energy cooperation • Russian exporters are making good money on the EU market • Triple benefit effect for the EU: - It gets energy resources, which are much needed to sustain its economic growth on a long term basis - The supply of Russian natural gas is supportive to the EU goals on reduction of greenhouse emissions - Money spent on energy products from Russia magically returns back to EU countries in form of Russian payments for equipment, goods and services

9. Caspian hydrocarbons as a major optionfor the diversification of energy supply … or why Russia is so important for the energy supply of the EU

10. Oil Production ofAzerbaijan and Kazakhstan (mln tons per year) Sources: International Energy Agency (IEA) Oil Information, 2011

11. Oil Production Azerbaijan, Kazakhstan and Russia (mln tons per year) Sources: International Energy Agency (IEA) Oil Information, 2012

12. Oil Production Azerbaijan, Kazakhstan, Russia and Saudi Arabia(mln tons per year) Sources: International Energy Agency (IEA) Oil Information, 2012

13. Gas Production (bln cub m)of Azerbaijan, Kazakhstan, Turkmenistan and Russia Sources: International Energy Agency (IEA) Gas Information, 2012 State Statistics Agencies of Azerbaijan, Kazakhstan and Russia

14. Try to bypass it …

15. ALL WE NEED IS … AN INTERFACE The first US-Soviet joint space flight APOLLO-SOYZ took place on 15 July 1975

16. The basic importance of sovereign equality • In particular, sovereign equality includes the following elements: • (a) States are judicially equal; • (b) Each State has the right freely to choose and develop its political, social, economic and cultural systems; • Declaration on Principles of International Law Concerning Friendly Relations and Co-operation among States in accordance with the Charter of the United Nations, G.A. res. 2625, Annex, 25 UN GAOR, Supp. (No. 28), U.N. Doc. A/5217 at 121 (1970).

17. Cooperation with Russia will be crucial for the energy security, economic growth and prosperity of the EU • The EU market will remain of strategic importance for Russia in the foreseeable future • Therefore, the EU and Russia are strongly motivated to further promote the energy cooperation • A new Institutional Interface in the form of an Agreement (or a set of agreements) is in great demand to grant non discriminatory access to markets, facilitate flow of capitals and protection of investments in energy assets • The principles of equal rights and mutual advantage shall be regarded as the basis for the Institutional Capacity Building in this area • Long term contracts and their essential provisions, particularly the “take or pay” rule, remain crucial for the reliable energy supply, as well as for a fair share of risks and benefits between producers and consumers of energy resources. CONCLUSIONS

18. Спасибо!Thank you!