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Expert: Russia needs to know new rules of energy business
Published: 27 February, 2012, 18:34
TAGS: Natural resources, Putin, Russia and the global economy
Russian PM Vladimir Putin says the new European Union energy policy aimed at separating energy production from distribution increases energy security risks for EU. Experts say re-writing the rules of energy market may damage not only Russian, but European
“The Third Energy Package, backed by the European Commission and aimed at squeezing out integrated Russian companies, is frankly not conducive to stronger relations between Russia and the EU,” Putin wrote in an article called “Russia and the changing world”. He stressed, “The package aggravates the systemic risks to the European energy sector and scares away potential investors in new infrastructure projects.”
He argues the so-called third energy package is designed to restrict Russian energy companies, especially gas producers, from the European market.
The third energy package may first and foremost affect Russia’s Gazprom, which is involved both in transmission of energy and its production from using their privileged position on the market.
Mr Putin has called for deeper economic cooperation in energy in order to create a common European energy complex. “The Nord Stream gas pipeline under the Baltic Sea and the South Stream pipeline under the Black Sea are important steps in that direction. These projects have the support of many governments and involve major European energy companies,” Putin wrote.
Experts agree with Putin, pointing out the third energy package would bring uncertainty to the European energy market and would bring investor confusion.
“The European Union now plans to rewrite all the rules and that’s why it is very important, because we must understand what the scheme of our business will be between Russia and Europe after 2020 when most of the contracts between Russian and European consumers will come to an end,” explained Konstantin Simonov, the head of National Energy Security Fund of Russia.
He went on: “The EU says it will be an absolutely new system; it will be a spot market, there will be no need for long-term contracts. But it is a serious question if there are no long-term contracts. What will be the level of consumption of Russian gas after 2020? Now we must understand what will be the rules of our business.”
The level of consumption of Russian gas in Europe determines the amount of investment in European gas infrastructure. Low consumption means Gazprom won’t be interested in investment, explained Mr Simonov.
The European customers are likely to be first affected by the new regulations, experts warn. “Gazprom won’t be the first victim of this process; European customers would be the first victims. Europe will have to find this money and the investment [for gas infrastructure]”, Simonov said.
27.02, 17:43
Russian markets circling before election landsRussian markets are all calm and quite ahead of the Presidential elections the coming Sunday, as investors prefer to sit and wait. The political factor is already priced in, experts agree, yet, there’s still concern over what policies will come next. |
28.02, 09:47
1 comment
Market buzz: Investors remain calm as oil prices ride highAnalysts expect a mildly positive dynamic on Russian markets amid neutral investor sentiment and high oil prices. |
@GarryB
I’m Australian so i totally understand what you are talking about , but let me put this forward:
A/ The Government or state can continue to hold ownership of the assets and the source.
B/ they then "Sell" at a fixed or variable cost the "product" to a field of distributors.
C/ in that source cost is the built in price for asset upkeep.
(optional)C/1 outsource assest upkeep again to third party contractors that will compete for the work.
seems complex?
what's my point?
the energy efficiency variable, and that is nothing to do with power energy I’m talking about the efficiency created in the form of extra capacity energy by a competition in a “fair” market.
well the point here is the "profit" if the field of distributors are really even or even if they are spread between fixed and large and small buyers, some companies will choose to run a "low cost" model and supply energy to develop horizontal client base, these much more efficient companies will grow.
Cost would drop, employment rise, and competition increase, with lost of other unnamed benefits
.
non of what i said above is anything close to what we have, either here or in Russia, only advantage that the Russian Nation has is that they can start from a point of developing policy, where as we would need to wind back or undevelop "bad" policy.
It does not take a genius to figure out that any contract between two parties is a mutual agreement and of benefit to both parties fro example a contract fixes agreements on above all :
1. price
2. supply
interestingly , i assume (but know nothing) that this design is an effort (or would be sold as such) to create distribution competition and lower the cost to the consumer, but unfortunately with all best intentions a consumer -(EU) can not design policy for a supplier - (RU) there is a larger contract that is between the two, and they -(EU) do not control the assets in question to design policy over, thus breaking some basic rules in that whole equation.
In domestic issues a nation can set policy such as this to develop real competition , over those assets they control, splitting distribution and source or core, and there is no reason why any resulting domestic distributor could not compete for EU business, .. If , if that is what policy the Federation develops , but that is up to them, not the EU.
Otherwise if we go back to point 1. up there “Price“ , it's possible that no contract means literally price can change from day to day (why not minute to minute) and based on things like , um literally the weather, or how the supply corporation "feels" that day, or if someone had a coffee that morning?
literally chaos the "bad" type.
A gas pipeline to Germany was built during the Cold War, so it is ridiculous pretending that Russia is going to use gas supply to blackmail Western European nations....In fact, it is the U.S. the one which is blackmailing Western European nations with its pet gas projects like "Nabucco" which live in a contradiction because the main supplier, Iran, at the same time suffers a U.S.-led embargo. Americans think that by the end of the year that problem will be "solved" (invasion or regime change in Iran), but probably the result by 2013 will be the opposte and the "Nabucco" project will feel more the scarcity of gas supply. So, "South Stream" becomes the only viable alternative for European supply, as Germany undrestands after a long commercial relationship with the Russian Federation.