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Excess liberalisation of EU energy market to lead to gas price hikes

October 04, 2011, 12:09 UTC+3

In the view of Ivan Grachev, the current situation on financial markets is a sad example of such “over-liberalisation” of the energy market

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BRUSSELS, October 4 (Itar-Tass) — The policy of excessive liberalisation of the EU energy market will four times increase natural gas prices by 2020, deputy chairman of the State Duma Committee for Energy Ivan Grachev told Itar-Tass. He takes part in a roundtable discussion on EU-Russia energy dialogue and issues of energy security that opened at the European Parliament on Monday evening.

“We believe the very philosophy of the European Commission’s course towards liberalisation of the energy market, up to the requirement to divide the operators of production and transport energy capacities is wrong,” he stressed. “It will only result in increasing the uncertainty on the gas market, which would entail diminishing the investors’ interest in it, and this, in turn, will not allow to develop new gas fields. Our analysis shows that as a result of this policy, gas prices in Europe will increase four times by 2020.”

In the view of Ivan Grachev, the current situation on financial markets is a sad example of such “over-liberalisation.”

“The US mortgage market, deprived of effective state control has led to a financial explosion in 2008,” he stressed.

“This situation confirms that it is necessary to find a delicate balance in the energy industry between, on the one hand, a system of long-term contracts (on gas supply) that is strengthened by reliable government regulation of the energy market and, on the other hand, the liberalisation of its individual segments,” the Russian parliamentarian said.

Grachev noted that in 10 years the European Union would need an additional 100 billion cubic metres of gas annually.

“This is caused, in particular, by the objective growth of energy consumption, depletion of Europe’s own gas fields and the European countries’ consistent refusal from nuclear energy,” he said. “The first economy of the Euro zone - Germany, which by 2023 will shut down all its nuclear power plants, serves as an example.”

Another factor of the gas consumption growth in Europe, according to Ivan Grachev, are the environmental ambitions of the European Union, which intends to achieve by 2020 a 20-percent reduction in the greenhouse gas emissions, compared with the 1990 level.

“Without natural gas, which is the most environmentally friendly source of energy it is impossible to attain these goals,” the RF parliamentarian concluded.

According to the European Commission, Russia and the European Union are natural partners in the energy sector. Russia has been a reliable supplier of energy into the European Union for many years, despite periods of internal difficulties. Likewise, the European Union continues to be the dominant market for Russian energy exports. This strong mutual interest and interdependence means that energy is an ideal sector in which relations can be progressed significantly – a kind of test case – for the further development of an EU-Russia strategic partnership. Success in the energy sector could then serve as a model for other areas of common interest.

The energy sector in Russia represents a major opportunity both for foreign investment and for export revenues. The need for new capital in the sector has been estimated at between 560 and 650 billion euros over the period to 2020.

The Energy Dialogue with Russia has rapidly become one of the key issues in bi-lateral EU-Russia relations and one in which the format of frank, open discussions have already permitted substantial progress to be made.

The overall objective of the energy partnership is to enhance the energy security of the European continent by binding Russia and the EU into a closer relationship in which all issues of mutual concern in the energy sector can be addressed while, at the same time, ensuring that the policies of opening and integrating energy markets are pursued. With the strong mutual dependency and common interest in the energy sector, according to the EC.

Russia is already the largest single energy partner of the EU and is bound to become even more integrated in Europe’s energy equation. Russia has been a most reliable energy supplier, always respecting the dates, amounts and prices concluded even during periods of internal political turbulence or dramatic world market developments. In this respect, Russia deserves to play a role in the EU internal energy market subject, however, to conditions of reciprocity in market principles, mechanisms and opportunities, as well as equivalent environmental standards.

Both the EU and Russia recognise the importance of working together towards a strategic EU-Russia energy partnership, given the importance of ensuring adequate energy supplies and appropriate energy prices for economic development across the whole of the European continent, as well as the long-term nature of investments in energy production and transport, according to the EC. The energy partnership aims to improve the investment opportunities in Russia’s energy sector in order to upgrade and expand the energy production and transportation infrastructure as well as improve their environmental impact, to encourage the ongoing opening up of energy markets, to facilitate the market penetration of more environmentally friendly technologies and energy resources, and to promote energy efficiency and energy savings.

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