European Energy Union: Is It Still Possible?

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The 27 member states of the European Union (EU) have demonstrated their inability to agree on an energy policy in the wake of the Russian-Ukrainian War. Because nations that influence decision-making processes, such as Serbia and Bulgaria, who are the members of the Union, cooperate with Russia in specific sectors. In addition to these countries, Hungary and the Czech Republic stated that they are in favor of continuing cooperation with Russia, although they do not oppose the EU’s decisions. For this reason, it is believed that it is challenging for the 27 EU member states to come to a consensus because it is not known whether any of the members will undermine the decisions, especially regarding the sanctions that will be imposed on Russia. Due to this, Germany and France came together and asserted that the EU’s negotiations with producer nations and import sources on the basis of individual nations diminished the Union’s bargaining leverage and that the Union should instead deal with these actors “as a single entity.”

As it can be recalled, on February 25, 2015, the EU Commission released a document in Brussels outlining a vision for the creation of the “European Energy Union.” When the situation brought on by Europe’s energy dependence on Russia is considered, it becomes clear why the members did not insist on the European Energy Union and were unable to implement it.

The EU has outlined the energy transitions of the member states of the Union and defined three key areas under its energy vision in the document. The first section examines ways to lower high energy prices so that the EU might become more competitive with other G7 nations including the United States (US), Japan, and China. In this context, the negative effects of electricity wholesale prices being 30% higher and natural gas prices being twice as high compared to US prices on the competitiveness of the EU were examined.

The significance of reducing external dependency on energy supply and diversifying supplier nations was underlined in the second section. In terms of foreign dependency, it was mentioned that the energy dependence of especially Germany, Slovakia, Czech Republic and Hungary on Russia reduced the bargaining power of the Union and negatively affected the economies.

Thirdly, the development of a unified energy market and network inside the EU was evaluated. The most important element here is the goal of guaranteeing the energy security of EU. It may be argued that the situation at Nord Stream 1 and 2 would not have reached this point and there would not be any EU countries reliant on Russia if the EU had begun to act in line with the methods and vision it sought in 2015. Therefore, the EU would not have been caught unprepared for the energy crisis.

The fact that the document from 2015 refers to a “energy union” built on a partnership, solidarity and shared confidence in energy security demonstrates how predictable the current situation actually was. The document’s emphasis on the value of solidarity in instances such as the cessation of the gas pipeline to the EU is the first and most crucial indication of this. In such a scenario, the EU envisaged to supply natural gas through the Central Asian countries by the Southern Gas Corridor.

The second indicator is the plan to position a liquefied natural gas (LNG) facility for Central and Eastern Europe in the Mediterranean region, like the one in northern Europe. Within this framework, the document had intended to establish a Floating LNG Storage and Gasification Unit (FSRU) in every nation with a coast and access to the Mediterranean, including France and Italy, as well as in countries with coasts on the Adriatic. In addition, the document had also considered the preparation of the funding system through a number of actions taken at the EU level. Therefore, a new vision was presented for both natural gas and the diversification of nuclear fuel imports.

The rapid removal of all obstacles to LNG imports from the US and other countries and the increase in LNG diversification show that the Union anticipated the current developments. In one article, it was emphasized that the effective use of resources within the borders of the Union and, in particular, the importance of renewable energy sources and shale gas.

Also highlighted are the establishment and secure management of oil and natural gas storage facilities. In this framework, the document mentioned that the supply gap would be addressed. Energy would flow between both the EU nations and the neighboring nations through one-way and two-way networks, especially during disruptions and crisis periods.

At the same time, the document guaranteed to standardize all kinds of energy contracts that the EU will sign with third parties and ensure the implementation of the EU legislation. On the one hand, this would be a process that would prevent member states from negotiating on their behalf, but on the other hand, it would ensure that the EU would be “united” thanks to compliance with standard contracts.

However, one of the most important goals contained in the document is that, just as Germany and France have raised the issue, it is planned that EU member states will make joint purchases using the demand consolidation method in times of crisis. This means that supply sources and sellers would be confronted with a single demand. The distribution of the resources could then be made within the EU. For example, a 150-billion-barrel oil contract would replace one for 5 million barrels, and the money would then be collected from the nations in accordance with the requests of the member countries. It is possible to interpret the European Energy Union document as EU’s confession. In particular, it was aimed to ensure the energy supply security of the EU, which is approximately 90% foreign-dependent in the field of energy, and to transfer the process to the European Energy Union and to end the negotiations between European countries one by one.

The document was also a document for the European energy union, especially for the development of cooperation with alternative producers and alternative transit countries. Looking at the document, it is seen that the names of the four countries are listed bottom to bottom within the framework of the strategic partnership. These include Algeria, Azerbaijan and Turkmenistan, and Türkiye as a reliable transit country for the transportation of Central Asian natural gas. Apart from these four countries, Africa and the Middle East were also included in the document as a secondary region.

Within the framework of the Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans-Adriatic Pipeline (TAP) system, there is a reliable and low-cost route from Azerbaijan and Turkmenistan to Europe, called the “Middle Corridor”.

As can be understood, if the Southern Gas Corridor was given due importance in the context of the European Energy Union, it would even be possible for the Russia-Ukraine War to never break out. Because one of the reasons for the publication of the document in 2015 is Russia’s annexation of Crimea. After the annexation, the EU had predicted that Russia would create a conflict in Ukraine.

If the energy union in question had been established, Russia probably would not have been able to afford a war with Ukraine. Because the EU’s dependence on Russia would have decreased from 40% to 15%. A Europe dependent on Russian natural gas by 15% would not have been all that affected by the war, and Russian President Vladimir Putin would not have dared undertake such a war either.

It is not too late for the EU’s effective use of the Southern Gas Corridor, taking other alternative West African and Middle Eastern resources, especially Algeria, Azerbaijan and Turkmenistan, and in this context, the European Energy Union being brought to the agenda again, quickly approved, and the sole authority being turned over to it. From the perspective of the EU, the process makes this inevitable. On the other hand, the possibility of political schemes should not be disregarded. At the time the document was put forward, the European Commission Energy Officer stated that a more active role should be taken in order to bring Turkmen natural gas to the EU. But this plan has somehow been destroyed. In the same way, if the EU follows the rhetoric of the Greek Cypriot Administration (GCA) and Greece, the goals of the union may be wasted with dreams of the Eastern Mediterranean natural gas, which will never come and will not meet the expectations of the EU, even if it does, and a pipeline that will not exist. Whoever blocks this community will be truly responsible for the economic recession Europe has fallen into.

In the light of the information, it can be stated that it is important to bring the relevant document back to the agenda.  In this context, the establishment of the European Energy Union as soon as possible and the participation of states that stand out as supporters or observers of this union, especially Azerbaijan and Turkmenistan, as natural partners of this union, can be considered as a solution to the EU’s energy crisis.

Dr. Cenk PALA
Dr. Cenk PALA
Dr. Cenk Pala, with his vast industry experience in the Eurasian gas pipeline business, is a leading figure in all aspects of both Turkey's energy security and the Southern Energy Corridor debate. Mr. Pala started his career as an academic in the fields of History of Economics and petroleum & energy economics at Gazi University between 1990-1997. He joined BOTAŞ Petrol A.Ş. in 1997 and was appointed as the Head of Strategy and Business Development in 2001. He has carried out pre-feasibility, feasibility, marketing, finance, legal studies and lobbying activities for various pipeline projects including BTC Crude Oil P/L Project, Turkey-Greece (ITG) Natural Gas Pipeline Project, Turkey-Greece. Dr. Cenk Pala also represented BOTAŞ in the "Industry Advisory Panel" of the Energy Charter in Brussels. From March 2008 to June 2013, Dr. Pala served as General Manager of the German gas company E.ON Ruhrgas AG and as a Board Member of the company's Turkish subsidiary based in Ankara. In 2011, he was appointed by the shareholders as Turkey Representative of the Trans-Adriatic Pipeline (TAP) and served until June 2016. Dr. Pala joined Gazprom subsidiary South Stream Transport BV in January 2017 as State Affairs Coordinator for TurkStream Project and remained with Gazprom until September 2018. As of October 1, 2018, Dr. Pala joined EQUINOR Turkey BV as Deputy Country Manager. His main responsibility is stakeholder management and coordination of external relations within EQUINOR's Thrace upstream activity and potential renewable energy investments in Turkey. He is currently coordinating the negotiations of ERSAN Oil Refinery (the only onshore private refinery investment in TR) with potential partners, investors and financial institutions. He is a prolific speaker at international conferences on the energy sector and has published numerous works on academic energy economics, oil history, oil crises and the seven sisters, regional and global pipeline politics, and the global oil and gas sector. Dr. Pala holds a BA and MA in Economics from Gazi University and a PhD from Hacettepe University. He is married with two children and speaks English.