Fencing Out Russia
The Financial Times has an interesting piece today on a developing European Union strategy that's explicitly designed to prevent outside countries from buying up energy properties for political purposes. The story is based on a leak of internal EU working papers. The upshot: the disclosure takes the vagueness out of Western Europe's attitude toward Russian acquisition of its pipelines and refineries -- the writers of the papers are clearly worried that Europe will be treated like some former Soviet states.
Here are the two key sentences from the FT piece: An internal Commission document about the implications of unbundling, seen by FT Deutschland, the Financial Times' sister paper, says the EU could be "vulnerable to a strategy of third countries to dominate the EU markets not only in terms of supply but also by acquiring the networks". The document explicitly warns about situations "where investment is driven by other motives than economic ones". Read story
Steve's comment: Of the EU states, Poland has most openly discussed the issue of state- owned and private Russian companies buying parts of Europe's energy infrastructure. It has said in so many words that it is not going to risk its independence after the decades it took to take it back from Moscow.
The likelihood is that broader support has formed within Europe to prevent its energy assets from being swallowed up by wallet-thick petro-states like Russia and also Saudi Arabia.
Russia bristles at such attitudes, calling them hypocritical. And it is true that some of the criticism from Europe and the U.S. has been self-serving and at times hysterical.
Yet Moscow is short-sighted if it believes that no one has taken account of its behavior in Central Asia and the Caucasus.
Since the 1991 Soviet breakup, oil and natural gas export pipelines that pass through Russia have been routinely blocked or bottled up to use by Kazakhstan and Turkmenistan. A needed expansion of the export pipeline from Kazakhstan's supergiant Tengiz oilfield has been blocked at least partly for Russian geopolitical reasons (in order to counterbalance the U.S.-backed Baku-Ceyhan pipeline by forcing Chevron to help build a rival pipeline through Bulgaria and Greece to the Mediterranean). And Georgia has regularly suffered oddly timed cutoffs of its natural gas supply.
In part there are financial reasons for these acts; but the over-arching explanation is that Russia has a history of bullying whom it can, and attempting to keep its former colonies under its thumb.
The working papers no doubt will go through revisions. But there is no doubt that Europe will adopt some sort of legal mechanism to make it harder for outside countries to buy its energy assets.
How stringent that mechanism is will depend on how convincing Russia is that its treatment of its former Soviet colonies has been an aberration.
Here are the two key sentences from the FT piece: An internal Commission document about the implications of unbundling, seen by FT Deutschland, the Financial Times' sister paper, says the EU could be "vulnerable to a strategy of third countries to dominate the EU markets not only in terms of supply but also by acquiring the networks". The document explicitly warns about situations "where investment is driven by other motives than economic ones". Read story
Steve's comment: Of the EU states, Poland has most openly discussed the issue of state- owned and private Russian companies buying parts of Europe's energy infrastructure. It has said in so many words that it is not going to risk its independence after the decades it took to take it back from Moscow.
The likelihood is that broader support has formed within Europe to prevent its energy assets from being swallowed up by wallet-thick petro-states like Russia and also Saudi Arabia.
Russia bristles at such attitudes, calling them hypocritical. And it is true that some of the criticism from Europe and the U.S. has been self-serving and at times hysterical.
Yet Moscow is short-sighted if it believes that no one has taken account of its behavior in Central Asia and the Caucasus.
Since the 1991 Soviet breakup, oil and natural gas export pipelines that pass through Russia have been routinely blocked or bottled up to use by Kazakhstan and Turkmenistan. A needed expansion of the export pipeline from Kazakhstan's supergiant Tengiz oilfield has been blocked at least partly for Russian geopolitical reasons (in order to counterbalance the U.S.-backed Baku-Ceyhan pipeline by forcing Chevron to help build a rival pipeline through Bulgaria and Greece to the Mediterranean). And Georgia has regularly suffered oddly timed cutoffs of its natural gas supply.
In part there are financial reasons for these acts; but the over-arching explanation is that Russia has a history of bullying whom it can, and attempting to keep its former colonies under its thumb.
The working papers no doubt will go through revisions. But there is no doubt that Europe will adopt some sort of legal mechanism to make it harder for outside countries to buy its energy assets.
How stringent that mechanism is will depend on how convincing Russia is that its treatment of its former Soviet colonies has been an aberration.
Labels: european union, natural gas, oil pipelines, Russia, Russian oil
3 Comments:
If the proposed rules become reality, will the European Union have conflicting policies towards the Central Asian states? The EU wants them to be independent but at the same time it would be blocking the kind of acquisitions that would boost those countries' independence. As you noted the other day, downstream acquisitions are essential if, say, Kazakhstan's oil company were to become a truly global major.
The balance points between journalism, fiction, political reality are borders without controls. No doubt rightly so.
There is Oxford/London, there is Boston-Cambridge/DC (even New Haven) and then there are acute people who write between. Sometimes in fiction.
Am wondering about the 'muddy line' (not muddy boots) between life and fiction. Not speaking politik. Just fiction and sure knowledge. Difference is doubt, 'suggestion', the unknown. I salute HWH for looking at a new surveillance issue. Am old enough to remember McCarthy. How wonderful that a blog marries research, conjecture, and fiction.
Eric, for some time, EU countries have mulled the issue of Russian ownership of its assets. It does not want to appear to be creating a blacklist; on the other hand it wants to be cautious. So some sales -- even of large assets -- will go through depending on the country. For instance, Germany and Italy seem a lot less put out by such sales, while Poland and Lithuania are concerned. Somewhere in the mix, Kazakhstan and -- if it so wishes, Azerbaijan -- will pick up assets.
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