Riddle for Cañete: Companies Look East, Politicians Look Down
Several facts suggest that the freshly appointed Miguel Arias Cañete could have a difficult time at the helm of the Energy Portfolio, pulled from many sides and limited by several constraints.
Also putting climate issues aside for a moment and focusing just on the oil and gas industry, Cañete will probably struggle to satisfy 28 governments and hundreds of companies. That is why the best he can do at the moment is to maintain the pace set by his predecessor Günther Oettinger, keeping the momentum going, well aware of the difficulties he is about to face.
DIFFICULTY 1 - RUSSIA: COMPANIES LOOK EAST, POLITICIANS LOOK DOWN
“The problems we have with Russia are obvious” Cañete said on Tuesday, referring to the tendency of Russia to use gas as a political tool.
Many commentators are also focusing on Gazprom’s recent tendency to ship lower volumes of gas than booked by some of its European customers.
These two arguments are legitimate and relevant, but probably not that much of a headache for Cañete. The Commissioner’s real problem about Russia stems from different viewpoints within the European Union.
After some teetering at the beginning of the year, many European companies are now well aware of Russian centrality in Europe. It comes as no surprise that several firms voiced their interest in keeping their partnerships with Moscow.
“We have a stable, complementary relation with Russia. It is a successful relation” Torsten Murin, Vice President of Wintershall Holding, said during the conference at the European Union on Tuesday.
Probably thinking that their current solidarity could be rewarded in the future with more favourable conditions (or lobbying to preserve existing interests), Austrian, French, German and to a lesser extent Italian companies voiced the centrality of Russia over the last weeks.
But the political climate is quite different.
“I don’t see Russia as a reliable partner” Adina-Ioana Valean, Vice-President of the European Parliament, said with a hint of irony.
Valean advocated a stronger focus on LNG and a lower dependence on pipeline gas, and Wintershall’s Murin immediately replied, expressing a diametrically opposed position.
“Politicisation of decisions does not lead anywhere”, Murin added, implicitly suggesting that Europe is approaching energy issues in a similar way to Russia.
In a sense, Murin is nothing but right. Like Moscow, Brussels is somehow drifting away from the neoliberal principles that brought to its formation. But how would that be possible for Brussels to let the market decide, when some of form of intervention is clearly needed?
The clearest example has to do with Ukraine: How to please the companies that legitimately invested in the South Stream project, while avoiding consequences on Kiev? The new pipeline threatens to deprive Ukraine’s budget, but a U-turn on the project would have an impact on the companies with a stake in South Stream AG - Eni (20%), Électricité de France (15%), and Wintershall (15%). How to strike a balance?
In this sense, Cañete is expected to promote economically-viable politicised decision and politically-feasible financial support. Clearly, the task - and a decision on the South Stream project - is almost daunting.
DIFFICULTY 2 - COMMON PURCHASING OF GAS AND CLIMATE CHANGE: LEGISLATION
On Monday, vice-president for Energy Union Maroš Šefčovič said that European authorities should focus on common purchasing of gas.
“We are the biggest energy consumer in the world… We should do our best to explore common purchasing of gas” Šefčovič said.
The concept, previously proposed by Donald Tusk, could affect Cañete’s efforts. But how?
The idea of a strong energy union would create significant difficulties in the implementation process, with overlapping competences and conflicting interests. Considering that he is already called to take Oettinger’s seeds and make them trees without watering them down (his already called to translate the 2030 Framework for Climate and Energy Policies into laws), Cañete could be easily dragged in a sea of laws. But that's not what he wants. The new European Commissioner seems to be reluctant to spend too much time on legislation.
“In this Commission we will not overlegislate” Cañete said on Tuesday.
DIFFICULTY 3 - CANETE WILL MISS A STRONG “EXTERNAL” SUPPORT…
Oettinger’s main strength was his affiliation to the CDU, the political party of Germany’s Chancellor Angela Merkel.
The trilateral negotiations with Russia and Ukraine have been a proof of Germany’s ability to broker important negotiations. But the relative success was quite contingent. Oettinger's good fortune had to do with a concerted effort of two important authorities: a European Commissioner and the leader of the most important country in Europe. The combination of the two gave more weight to Oettinger’s words. At the same time, his strategy was more rooted in reality, as he also capitalised on Merkel’s meetings with Russian President Vladimir Putin.
… BUT THERE ARE ALSO SOME GOOD REASONS TO BE OPTIMISTIC
Some good news came from Italy and Spain. Recently, the two Mediterranean countries passed new laws to incentivise domestic production. This could turn out to be a positive signal and Cañete could take advantage of the growing focus on indigenous production.
The fact that several companies already showed some commitment to invest in explorations in the two countries clearly suggest that Europe is still an attractive place for the gas industry.
Additionally, some companies already came up with innovative solutions, suggesting that the European industry did not give up. For instance, Enel’s recently announced the first plant in the world to integrate geothermal and biomass. In this sense, as a consequence of the existing challenges, European engineering traditions could re-emerge, living up with the expectations of European authorities and of the gas industry.
“I see a turning point… We start speaking with one voice… But also we start to work on all these innovative ideas” Thierry Deschuyteneer, Vice-Chair of GasNaturally, confirmed in his speech at the European Parliament.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci