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Three Seas Initiative and Energy Diplomacy: Find the Compromises

18.07.2017 | By Natalia Slobodian

The EU has achieved much in terms of the building pipeline interconnections between the member states to increase the resilience of the EU internal energy market. But little progress has been made toward creating a more coherent EU foreign and energy policy. This problem may be inherited by countries of Three Sees Initiative (TSI) so it’s important to find a compromise in the energy dialogue between them.

The difficult elements of the energy dialogue Three Sees Initiative

Still, the most debated element of EU external energy policy is the series of bilateral agreements with the member states with Gazprom. These deals undermine a solidarity and common approach at the EU level in relation to both energy and foreign policy with Russia. In the wake, it undermines the EU’s ability to speak with a common voice on security and foreign policy issues involving Russia. And this problem may be inherited by TSI countries. Now some of the states, for example, Austria, Czech Republic, Bulgaria, and Hungary, have a special view on the energy dialogue with Russia.

As well the situation around Nord Stream 2 is rather illustrative. The EU’s action plan dictates the EU should implement the energy diversification seeking new suppliers around the Caspian Sea and in North Africa—that is, countries other than Russia. But the member states often do the opposite. For instance, Berlin and Vienna are going to expand the existing gas pipeline (Nord Stream) with Russia thus some countries took moderately a wait-and-see position about the mentioned project.

Indeed, we are witnessing on the ground is very different. After long and controversial debate the European states usually a find general solution, but using a one-for-all approach in bilateral affairs is difficult. «The biggest problem for the European Commission is that in practice, it isn’t enough tools at its disposal to keep member states in check diplomatically,» – mentioned the experts of the Carnegie Europe Centre (http://carnegieeurope.eu/strategiceurope/62161). In the wake, countries of Three Seas Initiative may have an identical problem with implementing approach of the one-voice energy policy. For nowadays it’s problem is visible.

It is worth emphasizing that gas sector should be the primary cooperation elements in the project of TSI. But this ambitious plan can be broken on a particularism of the individual states. It seems that some countries of TSI may be not interesting to change the gas supplier. So, Austria which company OMW is one of the investors in the project of Nord Stream 2 anticipates on the cheap Russian gas and thus, we can assume, that Three Seas Initiative is not a vital project for Vienna.

The energy dialogue with Budapest is very difficult. In the eve of TSI Summit in Warsaw Hungarian politicians signed an agreement with Gazprom, under which Hungary will benefit from the transmission power of the Turkish Stream and from 2019 will buy about 8 bcm of Russian gas (annual demand is around 9bcm). So, it will be hard to find more space for the U.S. LNG or Norwegian gas on the Hungarian market. Also, Bulgaria which is 100% dependent on the gas supplies from Russian tries to negotiate a long-term agreement with Gazprom and not to consider the energy dialog in the framework of TSI as a key interest. The Czech government demonstrates a reserved attitude to TSI strengthening cooperation with German energy companies.

Simply put it means that Three Seas Initiative is losing the gas markets at the start and has not balance and understanding as in the internal and in the external energy diplomacy. For example, Poland, Baltic and Balkan states consider the USA as a key partner of the Initiative at the same time Austria, Czech Republic, Hungary, and Bulgaria have geopolitical orientation on the Russia. In the wake, the inside conflict of interests between Three Seas countries is visible and a compromise should be found between too short a period.

Results of survey «Energy diplomacy as an element of energy security»

With the aim to estimate the mechanisms of implementations, instruments and other aspects of energy diplomacy issues, a survey of high-level experts from the EU states and Ukraine has been conducted. The results of the survey could be interested in Three Seas countries because experts of the mentioned states took part in it. In the framework of the article, we would like to introduce the issues about instruments and priorities of energy diplomacy as well as involving EU states in the energy security of the third countries.

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The survey took place from November 1, 2016, to March 31, 2017. The high-level experts of energy security, foreign policy, and crisis management issues were the participants in the survey.

The geography of the survey was Poland, Ukraine and EU member states including Belgium, Bulgaria, Estonia, Hungary, Ireland, the Netherlands, Germany, Spain, Slovakia, the Czech Republic, France, and Austria. All survey participants were invited via email to answer the questions or for a personal interview. At least,124 questionnaires were sent. In summary, 52 replies were received, including 22 from EU member states respondents, 21 from Polish respondents and 9 from Ukrainian respondents.

What could effective energy policy tools be used as preventive instruments in solving energy conflicts? What should the instruments of energy diplomacy be?

The respondents of our survey defined three main instruments of energy diplomacy including a crisis-management approach (42%), negotiations (25%) and, finally, financial and economic blockade/trade embargo (20%). An ideal energy crisis-management system should be based on a well-functioning liberalized market where demand and supply are the basic tools for balancing. To reach these ideal conditions, there must be competition among external suppliers to the EU, and regulations that are binding on the internal market must be also applied to external energy companies.

NS 2

The crisis-management approach as an instrument of energy diplomacy has a high degree of importance for Ukrainian experts (62%). The European and Polish respondents estimated in equal share the role of the crisis-management mechanisms (EU – 38%, Poland – 34%) and negotiations (EU – 38%, Poland – 25%) as a preventive instrument in the solving of energy conflicts. From the point of view of Ukrainian (25%) and Polish (25%) experts, a financial and economic blockade or a trade embargo could also be an effective instrument of energy diplomacy at the same time only 8% of the EU experts took attention on this instrument. It possible means that the EU experts high estimate business risks and possible loss of their energy companies.

In the EU Energy Diplomacy Action Plan, it states that “work should continue to enhance existing and to establish new energy cooperation and dialogues with increasingly important producing states or regions, transit states or regions, countries of the neighborhood as well as key global and regional strategic partners and interlocutors”. What type of cooperation and dialogue should be the priority in EU Energy diplomacy?

50% of survey respondents believe that «support diversification supply project (sources, suppliers, and routes) is the preferable form of cooperation and dialog. In addition, 5% of respondents mentioned that establishing an information exchange mechanism with regard to intergovernmental agreements between member states and third countries is also important. These two issues could be linked to the concept «energy security». Following, it seems that the problems of energy security are notable for a majority of respondents. It is also noteworthy that «scientific and innovation cooperation» as well «development strategic partnerships with exporters and transit countries» were mentioned in an equal share – 15%. First and foremost, these two replies are closely linked because the basis of a strategic partnership is the investigation and innovation research.

Ns3

The Energy Diplomacy Action Plan stated that foreign policy efforts should also focus on creating business opportunities in and with third countries, including by raising awareness of third countries about the EU’s leadership in energy technologies and assisting in the promotion of the export of energy technology. Does this mean that the EU will work to increase the energy security of third countries?

Simply put, the sense of this question was whether the EU should support/protect the energy security of Ukraine. In summary, two-thirds of survey participants expressed confidence that this is what must be done. Curiously, all Ukrainian experts replied «yes» to the question, while only 32% of EU and 58% of Polish respondents believe that EU energy diplomacy should work to increase the energy security of third countries.

It seems that European experts are rather critical regarding EU investment in the energy security of third states. It is imported to highlight that the majority of experts from Baltic and Balkan states as well as Slovakia named that energy security is vitally important for their security as well. Meanwhile those EU countries which have not a common border with non-EU states insisted that it is an additional burden on the budget of the Union

Conclusions and recommendations

  1. The global energy landscape today is changing rapidly. The growing Asian thirst for energy could motivate Russia and the U.S. to change their export energy flows. Other players are now appearing on the global energy scene, and competition is increasing in the field of security of supply. So, the energy diplomacy of the TSI could be valuable in facing not only crises but also future challenges and perspectives.
  2. The key element of Three Seas Initiative is energy. So, energy diplomacy instruments should be used to open up opportunities for cooperation with producer and transit countries, including Ukraine. Creating a system in the framework of the TSI that establishes trust between member states in delivering cooperative responses in times of crisis is a key goal. It should be explained how it could be done.
  3. The next important goal for the future success of Three Seas countries energy diplomacy is to define the political and economic instruments of impact and specify the package of PR-instruments for the aforementioned goals.
  4. The success of TSI energy diplomacy will depend on 2 factors: firstly, to implement and promote EU rules and values of the energy policy; secondly, close collaboration among regional think tanks, research centers, universities and other institutions in the field of energy policy and security.

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Prof. Nataliia Slobodian is a non-resident expert at the NCSS. She is graduated Taras Shevchenko National University of Kyiv and obtained his doctorate in historical science from Taras Shevchenko National University. She is a member of the Public Council in the Ministry of Energy and Coal Industry.

International_Visegrad_Fund,_emblemo_bluaThis text was created thanks to support of International Visegrad Found.

Photo: public domain

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