EU PLANS TO WEAN
The European Union sketched out new plans to reduce its dependence on Russian natural gas and to bolster its energy security while warning Moscow not to cut off gas supplies to Ukraine.
The push to forge closer energy ties among the bloc's 28 countries and find alternative suppliers has intensified over the past weeks, as Russian threats to shut off the flow of gas to Ukraine raise the specter of supply disruptions for Europe as well.
The Ukraine crisis has galvanized the EU into mapping out a new energy-security strategy for the 28-country bloc that will be discussed by EU leaders at the end of June.
"The great game of geopolitics is making an unwelcome return and this is being felt particularly in the area of energy," European Commission President José Manuel Barroso told a conference on energy security in Brussels on Wednesday, in which he outlined proposals to increase the resilience of Europe's energy market. He referred to the Ukraine crisis as a wake-up call for Europe.
At the heart of the plan, set out in a draft document seen by The Wall Street Journal, is the aim of reducing the bloc's dependence on Russia, which supplies over 30% of the EU's gas, making it by far the largest, single supplier.
In the short term, the commission says steps must be taken to mitigate against a possible "major disruption" of natural-gas supplies this coming winter, according to the document. It said it would focus its efforts on the six EU countries that are 100% dependent on Russian gas—such as Latvia and Estonia—by increasing gas stocks and developing emergency infrastructure such as extra gas storage.
Longer term, the commission wants to boost gas imports from Norway and Algeria and explore future gas ties with Mediterranean countries such as Israel, Greece and Cyprus.
The commission will also propose building more terminals for liquefied natural gas along Europe's shorelines to receive greater supplies from Qatar and the U.S., from which it expects to start exporting gas as early as 2018, thanks to the U.S. shale-gas boom.
It also wants to create a so-called southern gas corridor that would allow gas to flow from the Caspian Sea, in a direct challenge to South Stream, a $16 billion Russian pipeline project that would feed gas into Southeastern Europe and bypass Ukraine.
Europe has viewed with alarm the deadlock between Kiev and Moscow over gas prices that has deepened since the ouster of Ukraine's former President Viktor Yanukovych, a Russian ally, in February and Moscow's subsequent annexation of Crimea.
Russian state-owned gas giant OAO Gazprom GAZP.RS +12.23% has given Kiev a deadline of May 31 to settle its arrears of around $3.5 billion. It has warned that continued nonpayment would result in a cut in gas flows to Ukraine. That could affect EU countries, given that Ukraine serves as the main transit route for Russian natural-gas deliveries to the Continent. Some European countries were left without electricity in the midst of winter in 2009, when an earlier dispute prompted Russia to interrupt supplies, and are worried about a repeat.
In a letter to Russian President Vladimir Putin, Mr. Barroso urged Gazprom on Wednesday to ensure that "gas flows should not be interrupted" and that the two sides pursue efforts to overcome the impasse.
To bolster its energy defenses, the EU has said it also wants to overhaul the Continent's energy infrastructure, installing more interconnectors that would allow gas and electricity to flow in two directions. Such a move would help connect the bloc's 28 fragmented national markets into a single energy market.
The commission, the EU's executive, also calls on countries to explore ways to reduce their energy imports by boosting the use of the clean energy sources such as solar and wind, improve energy efficiency and explore new potential sources such as shale.
Although most of these ideas aren't new, they are now gaining more currency in Europe. Poland, a former Soviet-bloc country, has been at the forefront of pushing for an EU "energy union" and has proposed a controversial mechanism that would allow the EU to jointly negotiate energy contracts with Russia. The commission and countries such as the U.K. have resisted the idea, saying market forces and improved infrastructure should drive energy-price harmonization.
"EU energy policy has basically been defined by its absence until now," said Dieter Helm, professor of energy policy at the University of Oxford. "The Poles saw a moment in which Europe can do something. But my guess is that any progress is going to be incremental. "
The commission's proposals, which aren't yet final, will need to be approved by EU member states, in a process that would likely trigger protracted negotiations.
Policy makers in Brussels have acknowledged they face a monumental task if they want to significantly change Europe's energy landscape, some of which will meet resistance from countries such as the U.K., if they are seen as ceding greater powers to the EU. They also acknowledge it would take up to a decade to turn all the plans into reality.
"As there is no miracle solution for increasing energy security, we have to address the issue from different angles. We need to diversify our supplier countries, especially in the field of gas," EU energy commissioner Günther Oettinger told Wednesday's conference.
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