Looking Back at 2006 in Europe

2006 Review: Europe's year in energy

By Stefan Nicola

Energy security concerns and super-mergers dominated Europe in the beginning of 2006 before experts and politicians began focusing on a much-greater problem -- that of climate change.

Europe's energy year started with a wake-up call for Western European politicians, when in January Russia temporarily shut off natural gas supplies to Ukraine over a price row, until Kiev agreed to pay higher prices. The row reminded Europe's politicians of Russia's hegemonic position when it comes to supplying energy to Europe, sparking calls for closer energy cooperation. Energy security became the topic of the moment, further fueled by rising oil prices.
Moscow has since been accused of using its vast oil and gas reserves as a foreign policy pressure tool, and Russian state-controlled energy giant Gazprom, the world's No. 1 gas firm, was seen as the Kremlin's economic branch. The Russian government at the Group of Eight summit in St. Petersburg, Russia, in July, put the issue energy security atop the agenda to demonstrate its newly acquired status of an energy superpower.

A German energy expert, however, said the political agitation in Western Europe was exaggerated. "That was bordering hysteria," Roland Goetz, energy expert at the German Institute for International and Security Affairs. "For years, Russia was seen as a solution to energy supply problems and high oil prices, and all of a sudden it was seen as unreliable."

However, European Union officials remain wary of increasing delivery dependence on Gazprom, which is 51 percent-owned by the Kremlin, which appoints the company`s senior managers.
"This is not a company that is playing by OECD rules," said Friedemann Mueller, another energy expert at the institute, referring to the Organization of Economic Cooperation and Development, in an interview with United Press International earlier this year. Gazprom's bids for getting access to end consumers in Europe were met with discomfort, but recent deals with Italy and France show the tide may be turning -- after all, Russian gas still is substantially cheaper than gas from Norway, Europe's No. 2 supplier.

Money also was the main, but not the only subject in a series of large mergers in the European energy sector this year. The other subject is government protection. In what observers say was a bid to fend off a takeover bid from Italian rival Enel, France was accused of orchestrating a merger between French companies Gaz de France and Suez earlier this year.

Eon, the German energy giant, during the past months tried to buy Spanish competitor Endesa, but despite a bid worth $50 billion, Madrid put several conditions and restrictions on the sale, favoring a domestic merger between Endesa and Gas Natural instead.

The European Commission, the EU's executive arm, decided to take action: In a decision earlier this month, it ordered Madrid to remove the hurdles by Jan. 19 or face legal action -- a call on Europe's governments to finally enable free competition on the European energy market.

A call on the world's governments -- a wake-up call -- was delivered in October, when former World Bank chief economist Nicholas Stern said in his report that failure to tackle climate change would cost the global economy some $7 trillion dollars by 2050, followed by social unrest. "Without action, droughts, floods and rising sea levels would mean that up to 200 million people could be displaced," the report said.

The Stern report and Al Gore's documentary on climate change urged politicians to focus more on lowering greenhouse gas emissions, and rightly so, Goetz said. "This is by far the world's greatest problem, and, unlike energy supply problems, there comes a moment when you can't control climate change anymore," he told UPI.

The report thus has unsettled the world's politicians. Germany, which takes over the EU and G8 presidencies in 2007, said it will make climate protection one of the key issues of its G8 summit, which will be held in June 2007.

But other recent politic signals -- Canada just joined the United States in ignoring the Kyoto Protocol, which regulates greenhouse gas emissions -- prove that the tide has not yet turned in a positive direction, Goetz said. "This will be a problem that will dominate for the next years," Goetz said. "If emissions continue to climb, soon enough, nature will hit back."

Stefan Nicola is a staff writer for United Press International