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Research Report


John Roberts
David Koranyi
Ian Brzezinski
Copyright Date: Aug. 1, 2016
Published by: Atlantic Council
Pages: 35
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Table of Contents

  1. (pp. 1-1)
    David Koranyi and Ian Brzezinski

    Twenty-five years after the fall of the Berlin Wall, much progress has been made toward fulfilling the vision of a Europe whole and free. However, work remains to complete a critical element of this vision, the creation of a single European market. That will require the development of infrastructure networks that bind together the economies of Central and Southeastern Europe with the rest of European Union.

    The Atlantic Council and Central Europe Energy Partners (CEEP) rolled out their report, Completing Europe—From the North-South Corridor to Energy, Transportation, and Telecommunications Union, at the Council’s Energy and Economic Summit in Istanbul...

  2. (pp. 3-7)

    The issue confronting the European Union (EU), the Energy Community, and the member states of these two organizations is how to provide the firm infrastructure basis for the impending EU Energy Union and to ensure energy security throughout Europe, whether inside or beyond the EU.

    Significant steps have been taken toward this goal in the year since the Atlantic Council, Central Europe Energy Partners, and the Central & Eastern Europe Development Institute published their report Completing Europe: From the North-South Corridor to Energy, Transportation, and Telecommunications Union under the chairmanship of former US National Security Advisor and former Atlantic Council Brent...

  3. (pp. 8-8)

    While understanding the need to consider how best to ensure the strategic aspects of gas supply security, the European Commission’s main focus remains the alignment of markets, in effect, the demolition of tariff and non-tariff barriers that prevent markets developing between countries as well as within countries. “If there is not liberalisation, if the network codes are not in place, you will not see gas flowing across borders,” one senior European gas official said recently.⁶

    In general, the Commission considers that while spot markets are developing quite well, it still faces problems in merging wholesale markets. The need to find...

  4. (pp. 9-9)

    Europe’s energy security problems—and also its issues concerning differential prices for imported Russian gas—vary from country to country. But broadly speaking, as of mid-2016, it seems reasonable to consider three broad regions of Europe separately, whilst fully acknowledging that any major effort to attain Pan-European energy security, at least so far as gas is concerned, requires all three regions to be interconnected.

    The three regions are:

    Southeastern Europe;

    Northern Europe; and

    The Baltic.

    This section will largely focus on Southeastern Europe—defined for the purposes of this report as the countries lying to the south of the Danube,...

  5. (pp. 10-15)

    In Dubrovnik, on July 10, 2015, energy ministers or senior officials from thirteen countries in and around Southeastern Europe, together with the European Commission’s two most senior energy officials, signed up to an Action Plan intended to create an integrated gas market within their region that would “pave the way for the closer integration of the EU and Energy Community energy markets” and thus further develop the European Energy Union.⁹

    The Action Plan for Central Eastern and South Eastern Connectivity (CESEC) specifically proposed seven priority projects for the countries gathered in Dubrovnik: Albania, Austria, Bulgaria, Croatia, Greece, Hungary, Italy, the...

  6. (pp. 16-16)

    The core issue concerning northern Europe is not so much the development of commercial interconnections as the question of how to ensure that commercial projects under way or expected in the near future can be integrated and upgraded to form a coherent network. This issue was addressed in the Atlantic Council’s Completing Europe report of 2014,17 which specifically recommended the development of a 15 bcm/y capacity bidirectional pipeline between Lwówek in Poland and Sisak in Croatia, through the Czech Republic, Slovakia, and Hungary, together with 6 bcm/y connections to Poland’s new LNG regasification plant at Świnoujście and Croatia’s planned LNG...

  7. (pp. 17-17)

    The Baltic was once the most vulnerable area in terms of susceptibility to Gazprom cut-offs. No longer. An FRSU at Klaipėda in Lithuania, the development of a gas pipeline from Poland, and plans for an interconnector between Finland and Estonia are all helping to ease the situation.

    On October 15, 2015, EU President Jean-Claude Juncker, together with the heads of government of Poland, Lithuania, Latvia, and Estonia, signed a joint declaration in Brussels on the construction of the Gas Interconnector Poland—Lithuania (GIPL), with construction to start by the end of 2019. The €558 million, 534 km pipeline, the first...

  8. (pp. 18-18)

    There are two key questions that still require answers concerning financing of EU gas interconnections. The first is who can provide financing for commercial projects. The second is who can provide funds for more strategic projects. Some EU member states have sought to place the financing responsibility for both elements in the hands of commercial companies. For example, the UK government has told companies that they have to operate in a commercial market, but that they also have an obligation to supply. This coming winter may provide a stern test of the effectiveness of this approach.

    In general, however, the...

  9. (pp. 19-21)

    While there are a host of specific problems that need to be addressed in terms of the development of individual cross-border interconnections, there are also two more general problems that need to be tackled. One is corruption; the other is Gazprom.

    To a certain extent the two problems are interconnected. Solo incumbency—the presence of just one significant supplier in an individual market—promotes bad practice. In recent presentations, senior officials trying to address the issue of how best to create well-functioning energy markets in southeastern Europe voiced the following comments:20

    “We have seen in the past what incumbents do,...