Dear Ladies and Gentlemen,
First, I would like to express gratitude to you and the whole Georgian nation for moral solidarity and support to Euromaidan, to Ukrainian nation in the battle against ruling criminal regime and its Kremlin's lords. My deep gratitude to our friends and colleagues from the USA, Canada, Poland, Lithuania, Czech Republic and other countries, which express solidarity with our efforts.
Georgian full-fledged membership in the Energy Community will become a definitively positive fact for your country. This very thing will bring you closer to the EU. Irrespectively whether Georgia will be someday EU member or not, your energy sector will become an integral part of the European energy market after implementation of corresponding EU legislation. However, it is important to understand very clearly, what the Energy Community is and what it is not.
1. Signatory to the Energy Community Treaty makes you closer to the EU but it definitely does not open the way to the EU membership perspective. Here you should not have any illusions. Your country belongs to five states, which are important for the EU either as energy suppliers or as transit countries: Norway, Ukraine, Moldova, Georgia and Turkey. Ukraine and Moldova are ECT member states; Norway and Turkey have observer status and do not want to join the ECT. Georgia is a key transit country for oil and gas supply from Caspian region with a perspective to insert gas flows from Central Asia.
2. The ECT is a tool of influence of the European Commission on ECT signatories, but it will not become your tool of influence on Brussels. The maximum you may count on is the possibility to be heard. The ECT is the mechanism for EU energy legislation implementation into the legislative, regulatory and legal framework of the Treaty signatories, which are not the EU member states. It is the very attractiveness of the ECT.
3. The membership at the Treaty and the successful implementation of European energy legislation will have some positive impact on investment attractiveness of your energy sector for EU investors. As for investors from countries, where state-owned energy monopolies dominates (Russia, China, and Azerbaijan) usually they perceive country's ECT membership as a negative factor restricting impact on their activities.
4. I would like to share with you some conclusions regarding my country and its experience of 3 years membership at the ECT. Since February 1, 2011, Ukraine has been the signatory to the Treaty and has been implementing European energy legislation according to the Protocol on Ukraine's accession. However, I would not describe the implementation process as definitely successful. Speaking from the point of view as an independent think tank, I will state that this process is very slowly and problematic. I would not recommend it as a model for your country.
5. There are several reasons, why Ukraine's membership is not a successful one, at least during the last three years:
- The government, which is already dismissed, had only declarative approach toward prioritization of Ukraine's commitments under the Treaty, real priorities were concentrated on relations with Gazprom, which was and is vexed with the ECT.
- The government had populism view on Ukraine's European integration, energy sector reforms were simulated and did not bring any qualitative changes.
- Russia made all and very efforts to hamper closer relations between the EU and Ukraine, in particular in energy sector. It requested twice Ukraine's withdrawal from the ECT. The same request was made also to Moldova.
6. However, there are some problems in the Energy Community of European origin. The very first is a lack of the EU single voice, announced back in 2007. Declared by the EU single external energy policy is still only on the paper, influencing directly processes within Energy Community Treaty. The second problem is a lack of consensus regarding EU perspectives for several neighbouring countries, which are participants of the Eastern Partnership Program and important partners for the EU in terms of energy communication (supply and transit). If regarding Western Balkans Brussels has clear perception of these countries as the future EU members whether already realized (as it was in case of Croatia), realized later (Macedonia) or realized in the most postponed perspectives (Serbia), there are no such a vision toward Eastern Europe. Ukraine, Moldova and Georgia are not even identified as European countries to the full extent. It should be noted, that the EU does not dare to call new partnership program Eastern-EUROPEAN Partnership, having limited it to the vague Eastern Partnership. Therefore, Western Balkan countries in contrary to Eastern Europe have quite serious stimulus to implement the ECT as an element of the sectoral integration into the EU before gaining full membership. Bulgaria and Romania became signatories to the ECT after they had received clear EU membership perspective in two years.
Automatic ECT expansion to the Eastern Europe without a simultaneous solution of the question about European membership perspective for those countries creates huge problems for promotion of European rules of play in energy sector. Contrary to Western Balkans with a single European integration model Eastern Europe has an alternative Russian integration model. It is difficult to call it integration model in European meaning. It is rather a model for reconstruction of the Soviet space with dominant role of Russia and simultaneous deep limitation of allied countries sovereignty. This model reminds rather "Anschluss" and is of course unacceptable for political and economic elites in Eastern European countries. However, it is difficult for them to resist to pressure from Kremlin regime, which acts with clear awareness that the EU will stand aloof from, limiting the reaction to verbal rhetoric, as it was in case of Georgia in 2008 and as it is currently the case with Ukraine. The third problem results from two previous; it is instrumental insufficiency of the Energy Community Treaty. It should be noted that a breach of ECT obligations does not lead to any significant consequences. Ukraine's example is here very demonstrative. Failing to meet ECT obligations, the government has not only ignored warnings from Vienna and Brussels but also announced that Ukraine may even withdraw from the Treaty. During three years of membership, Ukraine warned twice about such an intention.
7. A particular problem is the challenge on the part of the Russian Federation to the EU energy policy. Russia defied the EU, striving not only to prevent the spread of the European rules in the post-Soviet space, but also to affect Brussels to revise some of the key provisions of the EU energy legislation, such as the Third Energy Package. In the post-Soviet space, Russia is trying to maximize the lobbying communication mechanisms with the aim to deform legislative and regulatory framework in one or another country on its favour. The usual method is a promise of gas preferences in exchange for not implementing the norms of the European energy legislation. The Government and the President of Ukraine have had the illusions, that without irritating Russia, they would be able to achieve the revision of discriminatory gas contracts of 2009. However, as we can see, it did not work. The gas contracts remained unrevised, an implementation of Second Energy Package is not completed, and the uncertainty concerning the Third Energy Package persists. That is, the benefits of the situation get neither Ukraine nor Energy Community and the EU but a third party.
At the same time, the EU faces a choice: to promote European principles of the energy markets functioning or to support the relations with Russia and it prefers the second. Certainly, first, this applies not only to the EU as a whole but also to the key member states, traditionally oriented to the Russian Federation in the field of energy. Thereby, the EU value structure devaluates, undermining the confidence in Europe and not only concerning the sphere of energy.
8. The fifth problem is a lack of contractual arrangements laid down in Chapter IV of the Mutual Assistance. Thus, during gas crisis of 2009 the Energy Community did not make any influence on the events. The only thing that Energy Community can do is to give consultations and advices in case of crisis uprising.
9. A real thing that Energy Community lacks is the solidarity mechanism in the case of the third party actions against one or several member states of the Treaty. The bright example is the Russian project "South Stream", which is a bypassing one in relation to Ukraine, Moldova, Romania, and directed to deprive this countries of their transit function of gas supply to the EU and to cause the economic damages. Moreover, Russia demands to withdraw the project from the Third Energy Package. However, neither Energy Community nor the European Commission has no objection to project implementation, limiting it selves only by observations, that the project must meet the European energy law. Therefore, do not be surprised if some time after the accession of Georgia to the ECT, Russia will demand from you to give access for "Gazprom" to your pipelines, basing its claim on the EU Third Energy Package. However, you will not find solidarity in Brussels and Vienna.
10. Now, let us talk about the future of Caspian and possibly Central Asia gas transit through Georgia. As you know, "Nabucco" broadly represented, as the EU priority number one is no longer relevant. In fact, "Nabucco" became a symbol of collapse of the EU external energy policy. Azerbaijan and Turkey now prepare to implement the project TANAP. Gas to it will come from the Caspian Sea through Georgia. One should pay attention to some of the trends the European gas market and Russian gas policy. The EU gas market is becoming more competitive thanks to LNG. LNG from the U.S. will come earlier than gas from Shah Deniz to the EU gas market. This will already happen in 2016. Russia, having lost in recent years a significant proportion of the EU gas market due to the price escalation policy, will take steps to recover the lost positions. Herewith, the work will be done in two directions. The first direction is a more flexible pricing, an access of independent gas producers to gas export, but keeping "Gazprom" as a single export channel. The second direction is the elimination of competitors. In this sense, the gas flows from the Caspian Sea and in the future from the Central Asia are competitive to traditional gas flow from Siberia. As well as pipeline projects designed to bring new gas to the EU market by the independent from Russia route.
11. Russia is implementing a large-scale economically senseless pipeline project "South Stream" to bring gas from Siberia and Yamal to Southern Europe. Moscow for several years unsuccessfully has been trying to get the priority status for it from the European Commission and the exclusion from the Third Energy Package. One of the arguments is the so-called transit instability through Ukraine, which they confirm using gas crises of 2006 and 2009. Now, in order to finally reach an agreement with the EU on "South Stream", Russia not only uses the political crisis in Ukraine, but also actively affects it, trying to demonstrate to Brussels once again the need of bypassing Ukraine. Transformation of Ukraine into the "dark zone" fits best to "convincing argument" of Russia in Brussels. Now, if to make an extrapolation to the South Caucasus and consider that "Gazprom" does not need a competitive gas from the Caspian Sea on the not enough capacious market in Southern Europe, it is possible to conclude that, in your region the destabilization scenario can be expected. According to the logic of the Kremlin, it should be another argument for Europe in the benefit of the "stable" gas supplies from Russia via the no transit direct "South Stream" compared with supplies from the unstable Caspian region through the unstable South Caucasus.
12. We would like this scenario to remain in the category of hypothetical, but events in my country should be taken into account in Georgia, the EU and NATO. Therefore, membership in the Energy Community, the future Association Agreement with the EU (if it is signed) are undoubtedly positive developments in your country, but they do not solve the problems of security and mutual aid. These problems should be addressed through the United States and NATO. Moreover, that MAP was promised to Georgia in Bucharest in April 2008. EU is passive, weak and helpless when it comes to Russia. We saw this in the case of Georgia in 2008, now it is seen in Ukraine. Probably gas corruption forces have already won the European values in Brussels.