Mr Tusk, on what planet do you live (and in which century)?

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HUNGARY-GAS CONFLICT-01The Polish Prime Minister Donald Tusk proposes to counter the EU’s dependency on Russian gas by forming an “energy union” – a “single European body charged with buying its gas”. According to Energy Post’s editor-in-chief Karel Beckman, this implies that we should fight the Russians by imitating the Russian command-and-control system. Apparently Mr Tusk has not understood what the EU – or EU energy policy – is about. 

Politicians tend be great opportunists. Let’s say it goes with the job. But opportunism can be carried too far.

The Ukraine crisis has led to plenty of odd policy recommendations, but the plea by Polish Prime Minister Donald Tusk in the Financial Times (21 April 2014) for a “united” European energy policy takes the cake. If it came from some random Wall Street Journal op-ed writer we could safely ignore it. But this was written by an important EU leader and presumably meant to be taken seriously.

For those who have not read the piece, let’s first hear what Mr Tusk has to say. He writes that “excessive dependence on Russian energy makes Europe weak”, which is “basic economics. A dominant supplier has the power to raise prices and reduce supply.”

The way to “correct this market distortion”, writes Tusk, “is simple. Europe should confront Russia’s monopolistic position with a single European body charged with buying its gas.”

After the EU has established this Super-Monopoly, says Tusk, “Europe should undertake the lengthier task of breaking up the Russian gas monopoly and restoring free market competition.”

How would this work? Tusk proposes that the EU set up a singly agency for the entire EU, an “energy union”, on the analogy of Euratom, which should buy and distribute natural gas for the whole of the EU. This “energy union” would be founded on the five principles.

“First, Europe should develop a mechanism for jointly negotiating energy contracts with Russia. It would be created in stages. Initially, bilateral agreements would be stripped of any secret and market-distorting clauses; then, a template contract would be created for all new gas contracts; finally, the European Commission would be required to take a role in all new negotiations.”

“Second, mechanisms guaranteeing solidarity among member states should be strengthened in case energy supplies are again cut off, as they were in the cold winter of 2009 when Russia’s previous dispute with Ukraine stopped gas flowing to a number of EU nations. Europe must be safe in the knowledge that its gas supply is assured, its storage facilities are sufficient and its gas networks are uninterrupted.”

Who does Mr Tusk suggest would run his “Energy Union”? Mr Oettinger?

“Third, the EU should support the building of adequate energy infrastructure. Today, at least 10 EU member states depend on a single supplier – Gazprom – for more than half of their consumption. Some are wholly dependent on Russia’s state-controlled gas giant. In countries where the security of supply is weakest, storage capacity and gas links should be built with the help of the EU. Such projects should enjoy the highest permitted level of co-financing from Brussels – 75 per cent.”

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