The World Petroleum Congress, a highly respectable forum whose history dates back to 1993, is supposed to facilitate communication within the energy sector. The 20th World Petroleum Congress which convened in Doha, Qatar, in December, 2011, became the scene of a continuing dispute between Russian energy minister Serguey Shmatko and European Commissioner for Energy Günther Oettinger as at the moment the relations in the energy sphere between Russia and the EU are stuck at a fairly low point. Diplomatically, Russia's European partners avoid painting the situation in overly dark colors, but the regulations imposed in line with the EU Third Energy Package ignited serious controversy early this year. Moscow blames the European Commission for the de facto collapse of the energy talks: speaking at the Sixth International Energy Week in October, 2011, S. Shmatko charged the Commission with indiscriminately brushing off all of Moscow's suggestions which could help adapt the European legislation so as to accommodate Russia's interests. New problems kept arising ever since, with Moscow and Brussels expressing chronically incompatible views on what was happening.
From Oettinger's perspective, the raids which targeted the offices of the European counterparts of Gazprom were completely legitimate and should not have drawn a negative reaction in Moscow (Oettinger, however, declined to elaborate on the substance of the investigations). In contrast, Shamtko described the raids as unprecedented and said they fit into a broader campaign against the Russian energy giant, with the information collected likely to be used to exert pressure on Gazprom. Brussels' rejecting the Gazprom bid to have the Trans- European Network (TEN) status assigned to the South Stream pipeline led Shmatko to conclude that the whole system of the relations between Russia and the EU was being put in jeopardy. Dialog between Moscow and Brussels over all contentious issues is sure to extend into the future, but it is clear that the disagreements marring it are fundamental. Europe's axiom is that tighter competition among suppliers would automatically translate into lower energy prices on its market, while the Russian energy minister argues that inserting additional resellers into the supply chain linking producers and end buyers actually causes the energy prices to climb.
Overall, Russia and the EU appear to be in the process of drifting apart. At the World Petroleum Congress, Shmatko stated Russia's strategic commitment to the eastern avenue for its energy export, while Oettinger seized the opportunity to demonstrate Europe's interest in greater energy import volumes from the country hosting the forum. Oettinger's recent projection for the EU uptake of natural gas from Russia was an increase from the current 125 bcm to 130-145 bcm annually, but the figures gauged against wider forecasts of the European energy import dynamics show that Gazprom's market share in Europe is being downscaled.
Qatar's contribution to global gas trade factors principally into the context. In 2010, Qatar ranked third worldwide in terms of the natural gas reserves (13.5%), production (117 bcm), and export (95 bcm), and was the global leader in LNG export (with the 25% of the world's total)2. The same year, the list of EU importers of LNG from Qatar included Great Britain (13.9 bcm), Italy (6.2 bcm), Belgium (5.8 bcm), Spain (5.5 bcm), France (2.4 bcm), and Portugal (0.1 bcm), with the cumulative EU share of Qatar's gas export reaching 32%. Germany exemplifies the European trend to increasingly rely on Qatar as the energy supplier. German chancellor A. Merkel and diplomacy chief Guido Westerwelle visited Doha in 2010 and the ruling emir of Qatar Hamad bin Khalifa Al Thani came to Berlin the same year. German president Christian Wulff and economics and technology minister Philipp Rösler have been in Qatar twice in 2011. The agenda of Rösler's tour was built around a bilateral partnership, one of its elements being Germany's involvement in the Qatar Vision 2030 program supposed to channel a hefty $190b into the energy transit infrastructures and educational system of the country. Qatar is similarly ready to invest in Germany: in 2009, the state-run Qatar Investments bought appreciable stakes in Volkswagen and Porsche for Euro 5b and 7b. Reportedly, Qatar's present-day plan is to spend Euro 25b to buy into Hochtief.
Importantly, Doha recently proved ready to align its policies with those of the West in dealing with the developments in Libya and Syria, and the November incident involving Russian ambassador to Doha does not appear to be a coincidence considering the above. Though, as a reaction to the use of force against its diplomat in Qatar, Russia even called for a transfer of the session of the UN climate talks from Doha to Korea, Moscow is certainly interested in normal and potentially deeper relations with Qatar, for which shared interests in the energy sphere could provide a solid basis. Cooperation rather than competition is the generally preferable option for both Russia and Qatar, a key common point being the adherence to the gas-oil price link which these days is routinely being called into question. The emir of Qatar stressed at the November, 2011 Gas Exporting Countries Forum that exporters should not renege on the absolutely fair demand that the gas-oil price link stay in effect, called for explaining globally the ecological advantages of reliance on natural gas, and suggested stepping up the gas market and technology information swaps. Notably, Russia's Gazprom is advancing a similar agenda.
Europe, in the meantime, is pressing for the abolition of the gas-oil price link, and a large portion of the European Energy Commissioner's talk at the World Petroleum Congress revolved around the idea. Berlin's motivation in the case combines the explainable desire to negotiate lower gas prices with a thinly veiled attempt to cause suppliers to clash over the German market. The Energy Commissioner made it clear that suppliers' market shares would correlate with their openness to compromise in price-slashing disputes. The approach seems hard to reconcile with the energy disposition in Germany where a decision to shut down all nuclear generating capacities by 2022 was made in the wake of the Fukushima accident. Both chambers of the German parliament put stamps of approval on the plan back in June, but it remains hitherto unclear whether the German government intends to build gas-burning power plants to offset the drop in electric power generation. Economics and technology minister Rösler holds that 17 gas-burning utilities have to be phased in by 2022, but the German environment minister argues that completing the construction of coal-burning plants would be enough to solve the problem. Oddly enough, neither of the two invokes gas import as a pertinent theme.
The European Commissioner implicitly criticized suppliers at the Congress in connection with the 30% gas price bracket from country to country across the EU. The truth to be faced, however, is that in Germany, for example, taxes account for nearly 50% of the end-buyer tariffs. It should be further noted that the end-buyer tariffs tend to vary widely regardless of the energy market diversification. In Germany, the price swings measure 35%, in part due to regional circumstances, but in part – to the cacophony in the policies of utility companies marketing directly to customers. Calling gas exporters to cap energy prices is essentially a form of demagoguery. On the one hand, the West will certainly take advantage of moderate oil prices to boost the renewables sector – when the oil costs used to be low in the 1990-ies, the German consumers were deliberately confronted with rising prices as a way to infuse finances into energy generation from renewable sources. On the other, today’s oil price growth is largely driven by political risks which the West serially creates, as could be seen during the Arab Spring and the NATO campaign in Libya. Currently the oil prices are responding nervously to the escalation which the US and Israel are provoking around Iran. The opposition mounted by Greece, Italy, and Spain – the countries heavily dependent on the oil fed from Iran – did kill the chances for an oil embargo against the country at the December 1 EU summit, but attempts to impose one will resume at the January, 2012 summit of the EU diplomacy chiefs. London is about to slap its individual sanctions on Iran even ahead of the meeting, plus Australia, Japan (10% of whose demand for crude are supplied by Iran), and the US have already rolled out their own sanctions. Shmatko laid out Russia's position at the World Petroleum Congress with utmost lucidity: no support for sanctions against Iran can be exacted from Moscow. The course highlights Russia's firm solidarity with other energy exporters and the independence of the energy policies pursued by Moscow.
