Amber Bridge Fund » EU http://en.abfund.org Amber-Bidge Tue, 08 Mar 2016 21:48:18 +0000 en-EN hourly 1 https://wordpress.org/?v=3.9.40 The global gas market: An international perspective http://en.abfund.org/?p=1099 http://en.abfund.org/?p=1099#comments Sat, 19 Sep 2015 14:27:17 +0000 http://en.abfund.org/?p=1099
Mr. Pål Rasmussen is the Secretary General of the International Gas Union (IGU) and has 25 years of experience form the gas industry. Rasmussen holds a master degree in economics and management. Executive summary Natural gas has become fundamental part of the global energy mix. The increasing reserve base and well developed technical and commercial infrastructure place natural gas in an excellent position to be part of the long-term solution in meeting the global energy challenges. Benefits of using natural gas range from improved air quality in towns and cities, improved working conditions, a cleaner and more efficient local economy, more competitive energy supplies with better security and the prospect of prosperity for all. From an international perspective, we see the global gas ‘revolution’ as an ongoing dynamic and evolutionary process in which natural gas technology, investment and trade continue to develop and spread throughout the world. In this article, we will review some of the step changes in economics and politics that have created challenges or stimulated the global gas market since the start of this millennium, and discuss the implications for key regional energy markets, such as the Baltic Sea region. We should also remind ourselves of the ‘gas chain’ that has been the fundamental basis for long-term natural gas investment and expansion. We are now entering a new era, in which shorter-term and smaller scale investment is equally important, and this has fundamental implications for new markets and new uses of gas in all its forms. IGU has no doubt that minimising pollution and mitigating climate change must be central features of sustainable energy policy, both locally and globally. But policy makers must not forget the important role that natural gas already plays in helping us achieve a low-carbon future. Not only is natural gas the perfect partner for intermittent renewable energy sources, switching to natural gas now, instead of using more polluting fuels, is often the most efficient and timely solution. Finally, we will look briefly at how companies are adapting to the continuously changing international energy business. There are exciting developments taking place in the Baltic Sea region. Although the gas market here is small-scale by global standards, the Baltic Sea region is at the cutting edge of technology and is developing a gas industry with potentially wide impact.

Events that have influenced recent gas market development Fifteen years ago, at the be- ginning of the millennium, the world had experienced a decade of economic growth built in part on increased international trade and supported by greater free- dom in global capital markets.
The current drive for a low-car- bon energy solution had its roots in this period too, with the 1992 UN Framework Convention on Climate Change, which commit- ted National signatories to reduce their emissions of Greenhouse Gases. This led to the adoption of the Kyoto Protocol in December 1997, which entered into force in February 2005. This was also the decade of new developments in information technology and web- based communication that were to survive the ‘.com bubble’1 and become the mainstay of many ac- tivities in the world today. During the 1990’s, the gas in- dustry continued to invest for the longer-term, and as we entered the 2000’s gas market growth, which had averaged 2.1% rate over the previous ten years, was set to increase to an average of 2.8%. People active in the gas industry could see the benefits of natural gas and there were optimistic fore- casts about even stronger growth of global and regional gas markets.
An important political event in the Baltic region took place in June 2004, when Estonia, Latvia, Lithua- nia, and Poland joined the European Union along with the Czech Repub- lic, Cyprus, Hungary, Malta, Slo- vakia and Slovenia. This profound enlargement of the European Union has brought further challenges and opportunities for the integration of the ‘Internal Energy Market’, not least for investment in natural gas infrastructure and diversity of im- ported gas supplies for Europe. But, let’s fast-forward a few years to 2007, when a financial crisis was starting to cause some of the world’s largest banks to fall into administration. At the same time commodity prices, including energy, were rising: the follow- ing year, oil peaked at over $140/ barrel (bbl) during the summer. Despite this, as seen in Figure 1, 2008 was the year that global gas demand reached 3000 bcm for the first time. But then, the effects of the global economic downturn started to bite and demand in sev- eral markets collapsed with severe
effects on manufacturing industry and on energy demand, notably in some developed economies. Furthermore, 2009 began in Europe with a disruption of Rus- sian gas supplies through Ukraine. Although this was resolved more quickly than the similar contrac- tual dispute in 2006, the disrup- tion led to concerns about supply security and a renewed interest in geopolitics and the need for energy diversity. Globally, the economic squeeze reduced energy demand even with oil prices tumbling to be- low $40/bbl and natural gas prices falling too. For the first time in re- cent history, annual global gas de- mand decreased significantly (by 2.3% in 2009 compared with 2008). The long-term outlook for the gas industry seemed very chal- lenging, particularly in Europe. Overall, however, the IGU 2030 Gas Industry Study, presented at the World Gas Conference in Bue- nos Aires, looked forward to natu- ral gas increasing its market share from 22% to 25% of global energy consumption, and an even higher percentage if Governments would properly recognise the environ- mental benefits of natural gas. The new decade started opti- mistically, but April 2010 was to be a month of disruption and disasters; Volcanic ash from the eruption of Eyjafjallajökull in Iceland led to the closure of airspace over most of Eu- rope and a few days later the Deep-water Horizon drilling rig explosion killed 11 people, caused the rig to sink and oil discharge in the Gulf of Mexico. The year overall saw a re- surgence of natural gas across the world, while in the US natural gas prices stayed low and production increased to over 600 bcm, support- ed by the increasingly successful exploitation of shale gas onshore.
On 11 March 2011, a 9.0 magnitude earthquake caused a tsunami wave, which severely damaged the Fukushima Daiichi nuclear power plant. There were almost immediate political reac- tions across the world, including a decision by Germany to perma- nently close all its nuclear capac- ity by 2022. Separately, on a socio- political front, popular uprisings and demonstrations spread across much of North Africa and the Mid- dle East in a phenomenon that be- came known as ‘the Arab Spring’. 2011 was the year that the Inter- national Energy Agency (IEA) asked the question “Are we enter- ing the golden age of gas?”. Cer- tainly this seemed to be the case for the global LNG market, which expanded by 10%. The shale gas ‘revolution’ was progressing rap- idly in the USA. With self- suf- ficiency of natural gas in North America established, instead of importing LNG the industry was now signing the first export deals for future US LNG exports broadly priced at ‘Henry Hub plus’.
By May 2012, Japan itself had shut down all its nuclear reactors, but thanks to LNG imports it was able to use natural gas to make up much of the 30% loss of power generation capability. Globally however, international gas trade changed little year-on-year and surprisingly LNG trade actually decreased. Whilst the global gas market had become better connected than ever before the high spot price for LNG and fierce com- petition with coal for power gen- eration was having a dramatic ef- fect. 2013 saw a return to modest gas demand growth of 1.4% in the global energy market. During 2014, probably the most significant event was the de- cline in oil prices from well over $100/bbl to a range of $50-60/bbl by the end of the year. This has profound implications for the nat- ural gas industry and we will look at natural gas price movements late in this article. At the time of writing, authoritative global de- mand data for 2014 is not yet published, but indications are that the gas market has continued to expand, despite a further squeeze in Europe caused by slow economic growth, highly-subsidised renew- able energy and warmer than av- erage temperatures that reduced demand for space heating. Natural gas consumption in the European Union actually decreased by 11% to 409 bcm in 2014, and the industry is seriously considering strategic adjustments for the future.
Throughout all this, the natu- ral gas industry has developed and adapted to change. As the gas busi- ness has grown globally the interac- tions across the world have become increasingly significant, in particu- lar with many more countries in- volved in LNG trade. International relationships and trade in natural gas will be even more important in the future. This is particularly the case in Europe, where the decline in indigenous gas production seems inevitable. Reshaping the gas mar- ket in Europe to be ready for future challenges may well need to take a new course. There will still be ‘mega projects’ in other parts of the world, and there may well still be signifi- cant natural gas resources to be found and developed in some locations in Europe, but we are already seeing a new approach to the gas value chain developing. So that we can explore this phenomenon, I would like to de- scribe briefly the traditional gas business, including some basic technical information, so that we can understand better the invest- ments throughout the gas business and how they have been linked into a value chain. This structure is now starting to behave like a global network, with new delivery routes, new market sectors and new market participants doing business in new ways.
The natural gas value chain Natural gas is a mixture of hydrocarbons, of which by far the largest component is the simplest hydrocarbon, methane (CH4). Methane is an odourless, colour- less, non-toxic gas which is lighter than air. Synthetic natural gas and bio-gas are examples of increas- ingly important components that are being integrated into natural gas systems, but conventional and unconventional natural gas pro- duction, still provides more than 99% of global gas supplies. The gas business throughout the world has involved long-term invest- ment ‘from drill bit to burner tip’ to bring natural gas to final cus- tomers. The IGU diagram (Figure 2) illustrates, in a simplified form, the main components of the tradi- tional gas value chain. Exploration, production and processing Most of the natural gas that has been discovered so far was al- most certainly formed by similar biogenic processes to those that created oil reserves. Over millions of years the residues of decom- posed organic material under in- tense pressures and temperatures, have become hydrocarbon miner- als, including natural gas. These hydrocarbon minerals can be found both in the original source rock where they were formed (including shale formations) and also in more porous reservoir rocks that are the conventional oil and gas fields.
Natural gas also includes some heavier hydrocarbons, such as ethane (C2H6), propane (C3H8), butane (C4H10), and there can be a wide range of different non-hy- drocarbon gases that also occur in the mixture in the reservoir rocks. Indeed, gas production has often been a by-product of oil produc- tion and is then termed ‘associated gas’. Three different types of natu- ral gas production can broadly be categorise by the type of reservoir.

  • ‘Dry gas fields’ requiring very little processing of the reservoir fluids needed to achieve
  • pipeline quality gas;
  • ‘Condensate gas fields’ in which the heavier natural gas hydrocarbons can be separated as
  • natural gas liquids (NGLs); and
  • Oil fields with ‘associated gas’, sometimes with a natural gas
cap that can be produced sepa- rately or temporarily re-injected to enhance oil production. Development plans and in- vestment decisions depend on the expected relative revenue streams from the gas and liquid hydrocar- bons, but even for dry gas fields the reservoirs themselves can vary in fundamental characteristics like the permeability of the reservoir rock. Extremely tight formations (for example shale gas reservoirs) require stimulation to enable the natural gas to be produced. Natural gas is abundant, but the reservoirs that are simple in struc- ture and closest to markets tend to be developed first. This means that investors may face a choice between developing remote conventional gas reserves or more difficult unconven- tional gas that is closer to the market and requires use of new technology. In practice both types of investment has occurred; as new technology is developed and proven the tech- niques can be applied more widely and the global economic reserve base increases.
Natural gas occurs in other forms, most notably as methane hydrate crystals. This is potentially a vast future source of natural gas, but for which at present production technology has not yet found an economically viable solution. Once produced the natural gas is likely to need some processing. If it is dry gas with very few impurities then it might be sufficient to check the gas quality and make sure that it is adjusted to the correct pressure and temperature for the next stage of its journey. More likely, however, is that it will also be necessary to treat the ‘wet’ gas that has come from the upstream reservoir to deal with one or more components that need to be removed to satisfy the gas quality requirements for on- ward transportation. International and national high pressure pipelines The locations of natural gas reserves are more diverse than for oil, but even so a large proportion of natural gas needs to be transported from the producing countries and regions with more gas than is need- ed internally like Norway, Russia, Qatar, the Caspian area and North Africa to the consuming countries and regions with demand that can- not be satisfied by indigenous gas
supplies, such as Japan, China and the European Union. International high pressure pipelines provide direct links from producers to consumers. Good relationships with any transit country (through which the pipe- line passes) are essential to main- tain high reliability of gas supply. Technically, these high pressure pipelines are immense feats of en- gineering that continue to be the main way by which vast interna- tional flows of gas are transported. Because the pipeline usually locks the gas producer into a particu- lar route to a certain market, the commercial and political condi- tions both in the transit countries and in the downstream market are crucial. This leads investors to fa- vour projects that are backed by long-term contracts in which one party has a strong market position midstream or downstream. Globally, however, there is, in total, far greater investment in gas transmission pipelines tak- ing place within individual coun- tries, for example in the USA and in China. The shale gas revolution in North America changed indig- enous supply patterns and led to many new onshore pipeline pro- jects to enable higher levels of gas production to be brought to mar- ket. In the USA, however, several of the main shale gas formations are relatively well positioned, ei- ther with good proximity to the final market or in economic reach of existing infrastructure. In con- trast, the geographical challenge to deliver indigenous natural gas to the main consuming areas has been far more demanding in Chi- na. The final length of the second West-East Pipeline linking gas production in the west to con- suming areas in the east was over 8,700 kilometres, including both east and west sections and eight branches, making it probably the world’s longest natural gas pipe- line. Construction of a third West- East Pipeline, to bring additional supplies from Turkmenistan as demand for natural gas in China continues to grow, is scheduled for completion before the end of 2015.
Liquefaction, LNG shipping and regasification Gas liquefaction, so that nat- ural gas can be more easily trans- ported by ship (or occasionally by road tanker) to the market where it is then regasified, has become almost as important as pipelines as a means of international deliv- ery of natural gas. Liquefaction involves pre-treatment to remove oil condensates, purify the natural gas from pollutants like sulphur or carbon dioxide, remove any traces of heavy metals and control the moisture level. Then the processed natural gas is refrigerated to reach a temperature down to approxi- mately minus 161 degrees Celsius.
This refrigeration process involves compression, condensation and expansion of refrigerants that ex- change heat with the natural gas until it becomes a liquefied natural gas (LNG) occupying 1/600th of the volume. A large enough LNG fleet of ships (or road tankers) is essential to prevent bottlenecks developing in the supply chain. Since January 1959 when the Methane Pioneer set off for Europe with its modest cargo of liquefied natural gas from the Louisiana Gulf coast of the USA, international LNG trade has developed a global fleet that now amounts to over 380 active ships, the largest carrying up to 266,000 m3 of LNG. Annual worldwide de- liveries are equivalent to well over 300 bcm of natural gas, about 10% of global consumption. Some countries have long been reliant on LNG, and like Japan and Korea have based successful downstream markets on a range of LNG supplies, but with the growth of international gas trade many more countries now have LNG re- ception terminals and there is a flourishing market in LNG deliver- ies and diversions to the markets with highest value. This flexibil- ity is of course only possible when there are sufficient ships available (a diversion may well result in a longer route) and sufficient capac- ity in the regasification terminals to where a ship might be diverted.
The capacity in the regasification terminal comprises not only the delivery slot to enable the ship to be unloaded, but also short-term storage of the unloaded LNG and regasification (in which LNG is warmed up) before compressing the natural gas into a national or local transmission pipeline. LNG is set to be an exciting growth area, with bold and inno- vative solutions being applied both upstream and downstream. An example of upstream innovation is the Shell operated Prelude gas field development off the NW coast of Australia. Rather than pipe the produced gas to the shore, the pro- ject involves a very large liquefac- tion ship that will float above the gas field and load LNG into con- ventional LNG carriers for onward delivery to market. Downstream, there are many more innovations in the LNG market, as illustrated in Figure 3, which is taken from the IGU 2015 LNG Review. The ‘re-export’ market from receiving terminals is evolving to distribute LNG as a fuel to further downstream mar- kets. Thus supplying off-grid net- works with gas and fueling the heavy trucking business (e.g. in China, the USA and Europe) and bunker business for barges notably in Europe. In the not too distant future we might also see the deep sea shipping fleet becoming an im- portant market for LNG.
Storage The ability to liquefy natural gas means that it can be stored and made available at very high delivery rates, but the process of liquefaction and storing LNG is often expensive. In many parts of the world gas demand is very sea- sonal and the storage of very large volumes of gas that are needed (for example for residential space heat- ing in northern hemisphere win- ters) is best achieved underground in natural geological formations, particularly if such structures can be found near the local pipeline grid that serves the centres of gas demand. Most of these structures used to be oil or gas reservoirs, which benefit from unproduced ‘cushion’ gas as well as confidence that the natural integrity has been proven for containing reservoir fluids at high pressures. Occa- sionally the geological conditions are right for gas storage in highly permeable rock that benefits from a hermetically sealed cap, like the sandstone formation in Latvia that allowed the development of the 4.4 bcm (2.3 bcm working volume) Inčukalns Underground Gas Stor- age (UGS) Facility, one of the largest in Europe. In all forms of UGS an im- portant component of the storage facility is the ‘cushion’ gas that remains in the store so that a rea- sonable withdrawal rate can be achieved. The ‘working gas’ in the store is injected (compressed) into the UGS on top of the cushion gas and it is this working volume that is taken out for the heating season or for other commercial reasons during the storage cycle.
Another form of UGS, which offers potentially higher delivery rates albeit sustainable perhaps over a number of weeks rather than throughout the winter months, is salt cavities. Here, the storage cavities of the optimum shape and size are leached out from the un- derground salt formation. The ability of storage facilities to add flexibility to the gas net- work and to help balance the in- puts and off-takes of gas suppliers is extremely important. Increased
use of intermittent renewable en- ergy sources creates more stress on energy grids. The ability of fast- response gas storage to respond to within-day fluctuations is allowing new dynamic ways to use storage, particularly for portfolio optimisa- tion and improvements in overall efficiency in liberalised markets. In comparison with the dif- ficulties of storing electricity or stockpiling coal, natural gas pro- vides very efficient and highly ef- fective ways of storing potentially vast amounts of energy with mini- mal impact on the environment and with the ability for rapid re- sponse through already connected networks. In aggregate this may also provide sufficient flexibility for national or regional ‘strategic’ purposes.
Local transmission and distribution The energy carried though a typical gas transmission pipe is far more than can be transmitted through the biggest high voltage electricity cables. Gas in the trans- mission system is at high pressure (typically 50-80 bar) and, depend- ing on the final use, may pass through a series of pressure reduc- tions, metering and quality checks leading to low pressure distribu- tion pipeline systems with their own pressure and flow controls and final metering at the supply point of the end consumer. Technology is enabling gas operations and gas markets to develop in ways that should lead to further efficiency improvements in grid operation and utilisation. Smart grid tech- nology as well as Smart metering still have a long way to go but have already demonstrated significant fuel savings through grid optimi- sation at Transmission level. The regulatory focus in com- petitive supply markets tends to be on the pipeline systems, with regional groupings of energy regu- lators aiming to enable third party access (TPA). In Europe, of course, we have ACER, the Agency for the Cooperation of Energy Regulators, which is instrumental in encour- aging a consistent approach to all
the gas transmission grids in the EU. Other regional regulatory ini- tiatives aim to foster competition and introduce incentives particu- larly for the interconnection or expansion of gas infrastructure in less developed markets. Whilst transmission and dis- tribution pipelines can become relatively safe cash-generating as- sets in a mature market, the ini- tial investment typically requires large capital input for a low-mar- gin business that is not provid- ing an economic return until the market has grown, and may take decades to reach payback. Initial downstream investment is often at least partially in public ownership, with the distribution (pipeline) ac- tivity in the same company as the local monopoly gas retail business. Clarity about government policies for public and private ownership is essential to avoid problems for po- tential investors. The regulatory regime must also be clear, so that the access conditions are under- stood and the tariff structure does not distort the market. LNG provides an alternative approach to the local distribu- tion of natural gas, by LNG road tanker (sometimes referred to as a virtual pipeline). As the markets expand for natural gas as a land vehicle fuel, either as LNG or CNG (Compressed Natural Gas), as well as fuel for ships, the use of these ‘virtual pipeline’ routes could add greater flexibility and security to the energy system as well as ena- bling locations to be serviced that might otherwise be sub-economic.
Utilisation The economic availability of natural gas combined with its quali- ties of efficiency, quality, reliability, convenience and responsiveness to the consumers’ needs make it an ideal choice for a wide range of uses in many part of the world. High efficiency gas boilers are the mainstream residential gas appliance in many countries. Commercial customers also pre- fer natural gas for space heating, either directly or as the fuel for a Combined Heat and Power system. Gas is also an ideal fuel for district heating systems and makes an excellent partner with intermit- tent renewable energy sources like wind and solar power. Industrial gas demand requires a more competitive offering in rela- tion to other fuels, but the proven high efficiency appliances that al- ready exist for natural gas could be a springboard for further growth in the manufacturing sector. Natural gas is also a useful feedstock for the petrochemical industry, and there are indica- tions that this use is developing in some producing nations as an alternative to exporting LNG or constructing a new international pipeline.
Whilst at a relatively low level, the use of natural gas as a trans- port fuel is possibly the most rapid- ly growing sector across the world. There are encouraging signs both onshore, with compressed natural gas fuelling millions more cars, trucks, busses and lorries, and off- shore with LNG-fuelled ships be- ing favoured over more polluting rivals in environmentally sensitive areas like here in the Baltic Sea re- gion. The Gas Target Model for Eu- rope, published by the Agency for Cooperation of Energy Regulators in January 2015, includes projec- tions of new uses of gas in the EU across four main areas, which are closely linked either with renew- able energy or LNG: • Natural Gas Vehicles (NGVs) using CNG or LNG; • Water transportation; • Power to Gas (P2G) technologies, using surplus renewable energy; and • Virtual Pipelines (Truck loading of LNG). With the right political support and economic stimulus, Fig- ure 5 shows that the contribution from these sectors could be very significant on a European scale within just five years. Globally, however, the use of natural gas for high efficiency, low-emission power generation re- mains the largest and most impor- tant growth sector, but the pros- pects vary across different regions of the world. How much and how rapidly the global gas market will grow is dependent on fundamen- tal economics, which in turn are influenced by political attitudes to energy and to climate change.
Wholesale gas prices and how they are formed? Natural gas prices, and how they are formed, influence the economic viability of investment and market development. One as- pect of the IGU Committee work over the last ten years has been to monitor wholesale gas price trends. There are several aspects to this work, which are described in detail in the 2015 Report by the IGU Strategy Committee. Whilst the global energy markets are better connected than ever before, the average wholesale natural gas prices at the beginning of this year at Henry Hub in the USA were under $3/million British thermal units (mmBtu), Europe was around $7-8/mmBtu and Japa- nese LNG over $15/mmBtu.
Figure 6 shows how natural gas prices rose in these three mar- kets during 2007 and 2008, and then collapsed following the oil price fall in summer 2008. Whole- sale gas prices are formed in dif- ferent ways throughout the world. Where price formation is based on traded gas markets, as in the USA and the United Kingdom, an adjustment to the perception of available supply and demand for natural gas is quickly reflected in the wholesale price. Price forma- tion that contractually links the natural gas price to an index of a competing fuel (e.g. crude oil as in many Japanese LNG purchase con- tracts, or oil products as in many Russian international sales con- tracts) both delay and dampen the changes. By the summer of 2009 natural gas wholesale prices across the world had ‘bottomed- out’, but with the oil-indexed prices re- maining significantly higher than the traded gas market prices.
Then, in 2010 divergence into three clear pricing areas occurred, with the US shale gas surplus keeping Henry Hub prices low and, with no physical ability to export the surplus gas (instead the USA exported some displaced indig- enous coal) while the gas prices in Europe and Asia were pulled up
by the higher oil price and the in- creased gas demand. IGU has carried out several sur- veys to determine how the methods of gas price formation have changed over the last decade. During this time there has been a slow move- ment away from ‘oil’- indexation and an increase in gas market based pricing where this is technically pos- sible. Regulatory and government determinations of wholesale gas prices still remain important, par- ticularly in less developed markets, but the types of regulatory controls are themselves changing to more cost- reflective methods. The trend towards wholesale natural gas prices being based on the prices in traded gas markets has been driven by the expansion of gas-on-gas competitive markets in which consumers have been able to seek suppliers with the lowest price offerings. At the same time, the contractual linkage of the nat- ural gas price to relatively high- priced oil products has placed the agreements with traditional large gas supplying countries like Russia under considerable pressure. With the fall in oil prices the differen- tial between oil-indexed and gas hub traded prices is now changing. But already in Europe2 overall, as shown in Figure 8 there has been sufficient confidence in the traded gas markets to link more than 60% of the physical wholesale gas sales to the prices at gas hubs in com- petitive markets.
A partnership with renewable energy There is a growing realisa- tion that natural gas can be a per- fect partner for renewable energy. There are, however, difficult chal- lenges in making investment deci-
sions in capital intensive projects when the plant is not expected to operate most of the time. Some bespoke projects already successfully combine gas and re- newable energy because of the lo- cal circumstances, but in general an energy market design is needed to ensure that there can be widespread and large-scale implementation. The way natural gas is priced can also influence whether the best environmental choice are made, and this can work both ways. Where the wholesale natural gas price is too high then efficient low emission gas-fired CCGTs can- not compete with cheap coal-fired plant, whereas if the gas price were unusually low (as occurs in parts of the Middle East, for example) then worthwhile renewable energy pro- jects face undue economic barriers. Governments or their agen- cies have an important role to help the market achieve the best eco- nomic solutions for sustainable and secure development of the energy system. Among the things that IGU has recommended are:
  • to encourage investment in re-search and technology to deliv-er their political objectives;
  • to avoid picking winners and losers, but rather to incentivise those industries that deliver re- sults (e.g. better to have a ‘cost for carbon’ than ongoing sub- sidy of a particular source ofenerg y);
  • to ensure that there are no un-due subsidies or taxes that dis-tort the market; and
  • to see first if the removal ofexisting incentives or obliga- tions would be a more efficient solution than adding a new in- centive or obligation on energy companies.There are already signs that, with such good practice, the world might be turning a corner and get- ting CO2 emissions on a downward trend. In March 2015, the IEA an-
nounced that global anthropogenic CO2 emissions had stabilised in 2014 while world GDP increased (by 3%). This was the first time in 40 years that the global economy grew without increasing emissions, and was attributed to changes in ener- gy consumption patterns in China and OECD countries. Increased use of solar and wind energy no doubt contributed to this success, but the continuing shale gas revolution in North America combined with the expansion of the Chinese natural gas market were probably decisive factors that have enabled CO2 re- ductions from the world’s two dom- inant energy consumers. Adapting gas business models to the changing energy world Investor groups associate companies with a particular part of the natural gas value chain be- cause the risks, required skill sets, and critical success factors vary considerably. Often there are dif- ferent laws and fiscal systems gov- erning the upstream, midstream and downstream components. To manage the commercial risks, however, companies have often sought to integrate along the value chain, particularly if there are is no developed trading hub availa- ble to enable them to manage price and volume risks.
Throughout the gas chain the investor assesses and manages the risks in the hope of achiev- ing a return on their investment. Commercial risk relates primarily to the investment and operating costs and the volumes and prices of gas. Political and regulatory un- certainties can be the determin- ing factor as to whether or not the commercial risk is acceptable.
Whatever the prevailing ide- ology and legislative systems, suc- cessful natural gas development and continued industry growth needs to be based on co-operation and mutual commercial prosperity all along the value chain. Business models, however, continue to change. Physically, the gas industry still relies on large infrastructure to create the back- bone of the business, but increas- ingly there are many smaller pro- jects that, joined together, create an even stronger market. We can image this as a large single chain being slowly replaced by a woven mesh that is both more flexible and more resilient for the benefit of the final customers. Within this mesh there should be room for local en- ergy sources, whether synthetic natural gas, bio-methane or shale gas, as well as a diversity of tradi- tional and conventional deliveries of LNG and pipeline gas.
In conclusion: the Baltic Sea re- gional gas market in focus The gas market in the Baltic Sea region is quite diverse internally, but until re- cently it was characterised by a lack of connectivity with the rest of Europe and a lack of supply diversity in most countries. There have already been some investments made to address these issues, notably with the LNG reception terminal at Świnoujście in Poland and the Klaipėda floating LNG storage and regasification facil- ity in Lithuania. Since 2010 Finland has had an LNG production facility in operation at Porvoo in the South of the country. Plans for LNG terminals at the port of Turku and at Tornio in BSR Policy Briefing 1 / 2015 the North aim to bring LNG directly to Finland, making the gas and fuel markets more versatile and supplying LNG for vessels operating on the Baltic Sea. There are several other LNG im- port, storage or redistribution pro- jects under consideration, including a large-scale terminal at Inkoo near the landing point of a proposed Bal- tic Interconnector offshore pipeline linking the Estonian and Finnish gas markets. A further dimension would be a St Petersburg LNG facility. This idea was re-launched last year as a project in which the plant’s output would be supplied to the Kaliningrad area and also used for bunkering and
small LNG cargoes in the Baltic Sea region. Encouraged by the new SECA (Sulphur Emission Control Areas) rules, ferries are changing fuel to LNG. In Sweden (Gotenburg), fer- ries have already switched to LNG as bunker fuel, being much more environmentally friendly than the Marine Fuel Oil that was previously used In addition to the well-known Nord Stream offshore pipeline de- velopment, there have also been enhancements to the onshore pipe- line systems to allow reverse flow from Germany to Poland, and to in- crease the capacity to Denmark and Sweden. Plans for further intercon- nection seem limited because of un- certainty about future gas demand growth in the region. Transporting gas as LNG may well allow better economic options in such cases. In Poland, where natural gas is recognised as an environmentally advantageous replacement for coal- fired power generation and where indigenous shale gas production remains a real possibility, the na- tional demand for natural gas is ex- pected to rise significantly. In some countries in the Baltic Sea region however, the national energy plans suggest that natural gas consump- tion is expected to be displaced by renewable energy. Each country may well have a different optimum balance, but we can learn two les- sons from what is happening in the rest of Europe and indeed through-out the world. Firstly, gas markets that are better connected can sup- port each other at times of stress or disruption of the energy markets, and secondly the increase in the use of intermittent renewable energy sources requires a reliable low-car- bon partner such as natural gas. For a sustainable future it is important to retain, and better to grow, the share of gas in the energy mix.
Technology continues to de- velop and to provide solutions for the variety of energy challenges faced in the region. Here you are at the cutting edge, breaking new ground with the Klaipėda floating LNG terminal in Lithuania, exploit- ing bio-gas potential for vehicle transport in Sweden and creating Synthetic Natural Gas from wood in Finland. Developments in the fuel and bunker market already make this the primary local growth area Notes:
for LNG. Further developments in utilisation of gas in all its forms will help to expand the global market and establish natural gas new sec- tors with overall benefits for energy efficiency and the environment. We live in a complex world of change, with wide ranging risks that are faced by countries and com- panies. Here in the Baltic Sea re- gion, as in the rest of the world, we need to strive for closer cooperation and to improve our shared commer- cial and technical understanding of what is needed to facilitate invest- ment in the gas market. This will help to deliver a secure low-carbon energy future for us all. Let the dynamic evolution continue! Published in BSR Policy Briefing 1 / 2015, Centrum Balticum, www.centrumbalticum.org 
]]> http://en.abfund.org/?feed=rss2&p=1099 0 The crisis of the European integration project: lessons for everyone and for Baltic countries http://en.abfund.org/?p=1092 http://en.abfund.org/?p=1092#comments Thu, 10 Sep 2015 12:34:40 +0000 http://en.abfund.org/?p=1092

Mezhevich Nikolay Maratovich — Doctor of Economic Sciences, Professor of the School of International Relations, Head of the International Master’s Program “Baltic and Nordic Studies” at the Saint-Petersburg State University, Chief Researcher at the Institute of the Problems of the Regional Economy of the Russian Academy of Sciences, Saint-Petersburg.

Sazanovich Liudmila Sergeevna — PhD student of School of International Relations Saint-Petersburg State University, Saint-Petersburg. 

 

Currently, many researchers have noted that the European Union is in crisis. Obviously, at this stage, the original conception of the founders of the EU is no longer relevant: the rapid expansion of the borders, European integration, causing internal political and economic problems, security problems and many other undermine the stability of the Union. The aim of the article is an attempt to analyze the negative factors, influencing the development of the EU, as well as to suggest possible scenarios of its further development. The relevance of this study lies mainly in the fact that it combines the study of political, economic, social and security aspects. To achieve the objectives of the study one has chosen a systematic approach to the study of international relations. It is important to note that for further successful development and existence of the EU it is necessary to resort action in the present time, primarily to stabilize relations with Russia.

 

The European Union is going through a difficult time. Trying to forestall instability on its borders, it becomes a source of turbulence. Less flexible and slower, the EU is increasing the apparatus of bureaucratic pressure, trying to silence the growing dissatisfaction. As if caught in the trap of “bad infinity”, the European Union can not find a solution to internal and external problems, growing like a snowball.

The famous British historian Eric Hobsbawm, with reason, “cut” the twentieth century by 23 years. From his opinion, it began in 1914 with World War I and ended in 1991 after the collapse of USSR.1 This approach is debatable but understandable. The significance of both 1914 and 1991 for the European, and world history is obvious.

The beginning of the European integration is now described in the textbooks – The Schuman Declaration, who on May 9, 1950, being the French Minister of Foreign Affairs at that time , addressed the Government of Germany with a proposal to create a French-German Coal and Steel Community. The importance of the Schuman Declaration rapidly emerged beyond the bilateral relations between France and Germany. The concept of “general framework of economic development, which would be the first step towards the European federation” had such potential that it was enough for the rest of the policies and practices of the European Economic Community – the European Union up to the end of the XX century. Approaches of Schuman – Monnet were simple but revolutionary at that time. Overcoming the old tradition of nationalism by creating a united Europe on the principles of democracy, economic prosperity and social consensus, peace and equal cooperation, the architects of the EU hoped for a long and successful life of the European project in the XX century. The twentieth century of European integration began in 1950 and ended in the early years of the new century.

It seemed that new XXI century of European integration began in advance with the conclusion of the Treaty on European Union, which was signed on February 7, 1992 in the Dutch city of Maastricht and entered into force on 1 November 1993, but this period turned to be surprisingly short. Beneath our eyes, in summer 2015 the European integration project suffered tardy resuscitation and … died. It died in the proper sense of the word: the EU died in the form in which it had been planned by Schumann and Monnet. However, the death of the integration project in the post-shumann model does not mean the collapse of the great European idea, and does not necessarily lead to the collapse of the whole Europe. Europe has been and will be, but it will be different. The current model has as much in common with great European ideas as the ideas of utopian socialists in France and UK with the North Korean practice. Why?

The EU Treaty proclaimed as the key objective the creation of Economic and Monetary Union and the introduction of the single European currency, which could potentially bring economic integration to a new level. However, at the same time it launched a campaign of large-scale expansion of the European Union. In 1993-2007 the number of EU members doubled. Only the entry of Finland, Sweden and Austria may be regarded as a simple quantitative increase. Extensions in 2004 and 2007 significantly worsened the economic performance of the EU. At the same time Greece, Portugal and Spain faced the problem of financial equilibrium. “Because of the scale of the expansion the European Union faced the problem of “assimilation” and therefore became more focused on its own challenges”.2 A new class of euro wanderers-bureaucrats, even without reading M. Djilas and M. Voslensky, formed precisely in line with their expectations, but not on the Yugoslavian or Soviet base, but in the heart of Europe: Brussels, Strasbourg, Frankfurt am Main, Mons. For them progress on the European career was more important than issues of national economy and analysis of the integration problems. We are seeing the result: the process of European integration has created a supranational bureaucratic monster that subjugated not only local government circles, but also the idea of ​​integration itself. Now the result has gone to the second plan, the most important things are process, operation, reproduction, “sealed” in a closed-loop circulation of bureaucracy.

The more time passes from 2004, the more evidence there is that it was the end of the first era of European integration and the beginning of the second. The first, in fact, was the Western European and successful, the second, with a certain degree of conventionality can be called eastern European and its success is a big question. EU-12 (as of 1995 EU-15) and EU-27 are qualitatively different integration associations. Despite the validity of the new strategic program of expansion and deepening of integration, adopted in the early 1990s, the scale of the consequences of this decision and qualitative changes in the EU were not interpreted as they deserved. They were underestimated, probably for the reason that the political “summit” of EU member states, predominated complete confidence in the value of the European project and the ultimate success.

EU, really achieved a high level of cohesion, could have begun the optimization of achieved, but instead became interested in the policy of expansion, the neighborhood and so on. It had excessively bloated ambitions and virtually no funds for large-scale geopolitical projects, and certainly no adequate political analysis. The fact that the Baltic States were appointed as the major European “progressors” in the framework of “Eastern Partnership” did not require any additional comments. Based on the logic “if the system works, why it should be changed”, they wanted to integrate Ukraine in the same way as Estonia. However, local Ukrainian specificity was not taken into account.

And there is specificity. The economic potential of the Soviet Ukraine was second only to four big European countries. But today’s GDP of Kharkov region, for example, is more than Estonia’s GDP (of course, the earned part, not what is sent from Brussels).

Awareness of the problems in assessing the validity of reality happens in Europe after a long delay. The quote from the analytical report of the Affairs Committee of the House of Lords: “EU and Russia: before and after the Ukrainian crisis” (2015): “The Committee believes that the European Union and therefore Britain are guilty, that they have entered into this crisis, without being aware of what is happening, like a sleepwalker. Lack of strong analytical resources, both in the UK and the EU, in fact has led to a catastrophic misunderstanding of climate on the eve of the crisis”.3

However, the main problem is not the analysis, but that the West, considering itself a global center, strives to new peripheral space, even, in fact, without its sole purpose – to find new markets for its products, to ensure the influx of cheap labour and access to other resources. Along the way, it solves the problem of preserving the attractiveness of the EU as an integration project – it is important in terms of intra-European political process, so it uses any means. Thus, the problem lies not only in adequate quality of evaluation of integration. An ambitious program of “Eastern Partnership”, which implies a de facto extension of the EU’s borders to the Caspian Sea, is not only dead, but did everything to ruin the whole working model of European integration. “The fear and anger of the fathers of EU diplomacy, that Russia is once again becoming too powerful and rich, and therefore dangerous for Europe, led to a fatal error: “Eastern Partnership” from the original project of European integration of post-Soviet space, has become a platform for attempts of political and economic isolation of Russia. It eventually provoked an acute crisis in Ukraine. So current problems of the EU are to a large extent the work of its own hands.4

Problems of European integration are evident today not only to Europeans, but also for the whole world. The former model of European economic and political integration has exhausted itself. Based on modern Greek history, Aeschylus, Aristophanes and Euripides could have created decent work – a comedy, a tragedy and a drama. What looked like a triumph of the EU, caused mixed consequences and obvious failures, and the expansion speed to the new frontiers of European integration seemed to be haste. Of course, the external factor – global financial crisis – has played a huge role in the current misadventures of EU: “Strategies, built on ideas from the past, including problem-solving through the manipulation of competitive exchange rates, are failing”.5

However, the first difficulties arose prior to the crisis, and the root of this “emergency” state of the EU should be found inside it. United Europe is developing much slower than the global economy. In 2015 and in the coming years, the economy of European macro-region will be in a very difficult situation. Europe cannot respond quickly to the changes. Despite the diversity of the structures of European economies, the industrial sector in Europe in the whole is stagnant, so the potential for a return to a sustainable growth is limited. Although the EU remains a key industrial entity, since 2008 the industry cut 3 million jobs, while industrial production fell by 10%.6 At the end of 2014 the total economy of the 18 countries using euro, rose only by 0.9%.7

In 2015, economic recovery of the European Union will be even more uncertain. The weakness of demand is a chronic disease. Germany will remain the driving force of the European economy, but it will not have such power, as two years ago. In France, economic growth will be around 0.7%. Italy must overcome the remains of the crisis, but the euro zone as a whole is unlikely to reach more than 1% growth and will not significantly change the official unemployment rate, which now stands at 11.7%.8

The head of the European Central Bank Mario Draghi stated, that in 2015 the European Union can face the threat of deflation and the risk to maintain low rates of economic growth, but the term “crisis”, according to him, does not currently fit to describe the situation in the economies of eurozone.9 It was said in January, when all economic parameters were approximately the same as in June. So now, in autumn 2015, is it also not a “crisis”? According to forecasts, recently published by IMF, the growth rates in 2015-2016 in the EU will not exceed 1.5-1.6% (assuming that the crisis in relations with Greece will be settled). In the developed world as a whole, they will increase from the current 1.8% to 2.4%.10 Thus, if the situation in the global economy is not ideal, the European is just bad. And M. Draghi’s comment about “no crisis” in this sense, is comparable only to that of the known expression of the hanged and the rope.

Constraining factors also lie outside the economy – in political and socio-cultural spheres. Historical memory, cultural heritage of Antiquity and Christianity, suffered by Europe losses in two world wars influenced the formation of European values ​​to a large extent. It should be noted again: it is not a crisis of the European idea, it is a crisis of specific practice of its implementation in the political sphere. Not the dip of the European Constitution led to the growth of euroscepticism, but euroscepticism, based on an understanding of the ineffectiveness of post-Maastricht model of EU led to the failure of the European Constitution. Errors in internal and external relations, economic failures, consequences of arrogant decisions taken on the basis of geopolitical, “value” and not pragmatic reasons: “The EU from a sample of reasonable foreseeability became, in fact, one of the most obvious sources of global uncertainty”.11 Therefore the destruction of the current model of European integration is inevitable.

The report of Notre Europe, dedicated to the restructuring of the EU-USA relationship, written in 2010, noted: “In the absence of a common foreign policy on major strategic issues, the EU is unable to influence events beyond its borders”.12  Among the authors of the diagnosis are P. Prodi, G.Verhofstadt, Buzek, Y. Fisher and others. Now, in autumn 2015, it should be clarified, if the EU is able to set the agenda in its borders.

At present time there is a discussion about the so-called “realistic European force”, partly written with the American approach to “smart power”. As in the American case, we are talking about a combination of “hard” and “soft security”. However, it is not difficult to notice fundamental differences of the European prerequisite from US realities. Important, however, is not adequate theory, but realistic practice. “American leadership after the Cold War and NATO’s eastward expansion hoped that the Old World would be able to solve at least its own problems, but time after time it turns out – whether Balkans, Middle East, or single currency – that Europe is not in a position to do it”.13 But could it be otherwise?

In Europe there can be no effective «hard security». Is it possible to build an independent foreign policy based on borrowed security from overseas? One should recall the article of the American political scientist Robert Kagan “Power and Weakness,” published in 2002.14 His idea is the following: the US created hothouse conditions for the European Union. America carries on its shoulders the burden of responsibility, and the EU is engaged in chatter and mutual persuasion. Counting on the law, it actually mired in complacency and conformism. Personal and social status of R. Kagan obliges us to be attentive to his estimates.

Patterns of American neocons, unfortunately, are demanded by the European Union. Robert Cooper, director general of the Department for External and Politico-Military Affairs of the Council of the EU, said: “NATO and the US’ military presence in Europe  gave confidence that the US would protect them from the Soviet Union. (…) NATO summed everyone to voluntary dependence on the military power of the United States. NATO managed to establish a system of collective security in the best sense of the word – security requirement, which for centuries separated Europe, now has united it. So it’s how the European Union appeared.15  He calls NATO as the defense against chaos as the key element of “post-balanced” Euro-Atlantic security system (after the reunification of Germany, the end of the Cold War and the collapse of the Soviet Union). “And the most logical way to end the chaos is the colonization”.16 Economic toolkit of the EU is derived from military might of NATO forces, controlled by the United States and stationed in Europe. Not Coal and Steel Union, but namely NATO is the backbone of the modern European Union. This is another symptom, confirming not only inevitable death of the European project in the current form17, but also the impossibility of joining the Eurasian and European projects in modern conditions.

Membership in the European Union is no longer the final aim of integration aspirations of a country to the West, but only an intermediate step on its way to the main goal – NATO membership. The signing by Ukraine, Georgia and Moldova Association Agreements with the European Union was presented as a purely economic event, but in fact turned out to be one of the hidden ways of NATO expansion: the retraction of the countries in the military-political cooperation with NATO is formally done through rapprochement with the EU.18

This circumstance is one of the main obstacles to expand the process of economic cooperation between Russia and the EU at full – in this tango, apparently, there would be the third party for long. This third is the United States, and through it – NATO.

The assessment of the impact of NATO in the system of foreign policy-making in Europe should be based on the principle of actually used three keys, each of which is sufficient to achieve a decisive influence on the foreign policy of a European state. The first key is direct control over the foreign policy of the state. It works in case of a country within the block, and in relations with formally neutral states outside NATO but participating in affiliate programs of the Alliance. The second key is control through the structure of the NATO. The third key is cooperation through the coordination structures of the European Union focused on foreign policy and defense decisions. The combination of these keys provides the US and NATO control over not only military, but also economic projects in Europe.

One should note the contradiction of political and economic goals of the United States towards Europe. In economic terms, Europe would be consistent with Canada’s status and the nature of economic growth in Europe in such case would depend on the United States to the same extent as it is happening in contemporary Canada. However, from the standpoint of policy, the United States  complies with the rules of the game last few decades: Europe pretends it has foreign policy and the US continues to manage it.

The United States, who has been perceiving Europe only as junior partner for a long time, doesn’t have any illusions about the real situation in the EU. As an example, one can refer to a publication in the prestigious American edition «Foreign policy», where the author proves the existence of five problems of the European Union: 1) excessive expansion; 2) collapse of the Soviet empire; 3) euro crisis; 4) deterioration of the situation in the region; 5) sustainable nationalism.19

Of course, let’s not overlook the fact that the vectors of geopolitical interests of the leading states of the EU are often different.  German policy in the Balkans, French in Africa, do not “overlap” with the policies of other European centers of power. In other cases, the apparent intersection could be noted. A classic example is Ukrainian conflict. Plus in the European Union there are neutral (or trying to be) states: Italy, Austria, Finland, and partly Hungary, Slovakia and the Czech Republic, for example. Their voices are quite significant. And a number of new Member States rightly regard foreign policy initiatives of “old” Europe as a threat to subsidies in the address of the European budget.

However, it doesn’t affect general line against Russia and its integration initiatives (other than the “integration of integration” and it is worth recalling the idea of D. Medvedev of a common Euro-Atlantic security system, so categorically rejected by the West). During 2014, EU leaders have repeatedly said they would not change its policy with regard to Russia, instead they planned to change the foreign policy of Russia, even if it affected the economy of Eastern Europe.

In this context, economic suicide of the Baltic states is significant: countries, loudly demanded to “punish Russia,” are suffering now from the sanction war most of all (turnover of the port of Tallinn, “dipped” by 20.7% in the first half of 2015, compared with the same period last year. There are growing problems in Riga and Ventspils. Export to Russia is continuously reducing, Russian tourists are leaving the market of the Baltic states).

Various tools to “punish Russia” can certainly aggravate the efficient development of our country. However, one should keep in mind the warning of two senior experts, recently officials of US State Department: “So far, the West was more aimed at punishing Russia and its leaders … than at solving the problems in the relationship, which brought the parties to a dead end”.20 The practice of realization of the “Eastern Partnership” by West expected work on a well-known principle of “Me – head, you – fool”. Minsk, Yerevan, Baku didn’t agree with this approach. Finally Kiev, put by the European Union in a situation of “either with us or against us”, has been forced to postpone the issue of European integration until 2016. This practice meets huge resistance in Chisinau and Tbilisi. Symptomatic detail: according to the US National Democratic Institute in May 2015 about a third of Georgians supported integration into the Eurasian Union (31%)21, in August 2014 the figure was 20%, and in November 2013 – 11 %.

What are the possible scenarios of European integration? The choice is not rich.

1. The destruction of the current model of European integration. The unification of Europe, at least in its current form, cannot give a synergistic effect and is not able to bring it to a new level of global influence, relevant to the existing potential. Economic policy of the EU is a problem which has no practical solutions. Its current model is operating at full capacity.

2. “Cosmetic” repair of the current model of European integration. Reform of European integration, understood as a limitation of spatial expansion, rejection of the expansion of the eurozone at any cost, removing the UK “outside European integration”, establishment of effective cooperation with all economic partners and, above all, with Russia are the minimum key points of the reform today.

 

List of References:

  1. Hobsbaum E. Epoha krajnostej: Korotkij dvadtcatyj vek (1914—1991). M.: Izdatelstvo Nezavisimaia Gazeta, 2004. 632 s.
  2. Hirdman S. Rol Rossii v Evrope // Moskovskij centr Karnegi. M, 2006. – s.19.
  3. See more: The EU and Russia: before and beyond the crisis in Ukraine / House of Lords, European Union Committee. 6th Report of Session 2014–2015. London, February 2015. URL: www.publications.parliament.uk/pa/ld201415/ldselect/ldeucom/115/115.pdf
  4. Urbanovich Ia. Voinstvennye strahi Vostochnoj Evropy. 03.04.2015. URL: http://ria.ru/analytics/20150403/1056439589.html
  5. Dixon H. How to counter Europe’s rising populism // International New York Times, November 24, 2014. – P. 22.
  6. Alvaru Santush Pereira, Hose Manuel Soria, Korrado Passera, Arno Montebur, Philipp Resler Novaia industrial`naia politika Evropy // «Ekspert», №7 (839), February, 18 2013.
  7. Manukov S. Hermaniia podtianula evropejskuiu ekonomiku / «Expert Online», February, 14 2015. URL: http://expert.ru/2015/02/14/ne-vse-tak-ploho/
  8. Evropa 2015: god neuverennosti http://euroua.com/europe/eu/3557-evropa-2015 02.01.15
  9. Dragi: ekonomiku ES zhdet zatiazhnoj period slabosti. January, 2 2015. URL: http://dv.ee/novosti/2015/01/02/dragi-jekonomiku-es-zhdet-zatjazhnoj-period-slabosti
  10. Jean-Pierre Robin. Le FMI estime l’Europe en voie de guerison // Le Figaro, 15 avril 2015. – p.23.
  11. Lukjanov F. Oborotnaia storona Gretcii / Rossijskaia gazeta. July, 8 2015. URL: http://www.rg.ru/2015/07/07/kolonka.html July, 8 2015.
  12. Reshaping EU-US Relations: a Concept Paper. Reflection Group: Romano Prodi, Guy Verhofstadt (co-chairs), Jerzy Buzek, Etienne Davignon, Jacques Delors, Joschka Fischer, Paavo Lipponen, Tommaso Padoa-Schioppa / Notre Europe, 2010. – p. 12.
  13. Lukjanov F.A. Stabilnost radi vyzhivaniia // Rossiia v globalnoj politike. July, 13 2015. URL: http://www.globalaffairs.ru/redcol/Stabilnost-radi-vyzhivaniya-17579.
  14. Kagan R. Power and Weakness // Policy Review, № 113, 2002.
  15. Cooper R. The European Union and the Habsburg Monarchy // Transit. Europaische Review, 10.12.2012. URL: http://www.eurozine.com/articles/2012-12-10-cooper-en.html
  16. See more: Cooper R. The breaking of nations: order and chaos in the twenty-first century. New York, 2003.
  17. See more: http://www.format-a3.ru/events/event-212/
  18. Ukraina, Gruziia, Moldaviia: put v NATO cherez Evropejskij soiuz. K sammitu NATO v Uelse September, 4-5 2014 goda. Analiticheskij obzor / Centr mezhdunarodnoj zhurnalistiki i issledovanij «Rossiia Segodnia». 2014 g. 74 s.
  19. Stephen M. Walt, Does Europe Have a Future? // Foreign Policy. July 16, 2015. URL: http://foreignpolicy.com/2015/07/16/does-europe-have-a-future-stephen-walt-testimony-house-foreign-affairs-committee/
  20. Charap S., Shapiro D. Kak izbezhat novoj holodnoj vojny // Rossiia v globalnoj politike. October, 14 2014. URL: www.globalaffairs.ru/ukraine_crysis/Kak-izbezhat-novoi-kholodnoi-voiny-17041
  21. Za ES – 68%, NATO – 65%, Evrazijskij Soiuz – 31% – rezultaty oprosa NDI. 11.05.2015. URL: http://www.apsny.ge/2015/soc/1431371449.php\

List of literature:

  1. HobsbaumE. Epohakrajnostej: Korotkijdvadtcatyjvek (1914—1991). M.: Izdatelstvo Nezavisimaia Gazeta, 2004. 632 s.
  2. Hirdman S. Rol Rossii v Evrope // Moskovskij centr Karnegi. M, 2006. – s.19.
  3. See more: The EU and Russia: before and beyond the crisis in Ukraine / House of Lords, European Union Committee. 6th Report of Session 2014–2015. London, February 2015. URL: www.publications.parliament.uk/pa/ld201415/ldselect/ldeucom/115/115.pdf
  4. Urbanovich Ia. Voinstvennye strahi Vostochnoj Evropy. 03.04.2015. URL: http://ria.ru/analytics/20150403/1056439589.html
  5. Dixon H. How to counter Europe’s rising populism // International New York Times, November 24, 2014. – P. 22.
  6. Alvaru Santush Pereira, Hose Manuel Soria, Korrado Passera, Arno Montebur, Philipp Resler Novaia industrial`naia politika Evropy // «Ekspert», №7 (839), February, 18 2013.
  7. Manukov S. Hermaniia podtianula evropejskuiu ekonomiku / «Expert Online», February, 14 2015. URL: http://expert.ru/2015/02/14/ne-vse-tak-ploho/
  8. Evropa 2015: god neuverennosti http://euroua.com/europe/eu/3557-evropa-2015 02.01.15
  9. Dragi: ekonomiku ES zhdet zatiazhnoj period slabosti. January, 2 2015. URL: http://dv.ee/novosti/2015/01/02/dragi-jekonomiku-es-zhdet-zatjazhnoj-period-slabosti
  10. Jean-Pierre Robin. Le FMI estime l’Europe en voie de guerison // Le Figaro, 15 avril 2015. – p.23.
  11. Lukjanov F. Oborotnaia storona Gretcii / Rossijskaia gazeta. July, 8 2015. URL: http://www.rg.ru/2015/07/07/kolonka.html July, 8 2015.
  12. Reshaping EU-US Relations: a Concept Paper. Reflection Group: Romano Prodi, Guy Verhofstadt (co-chairs), Jerzy Buzek, Etienne Davignon, Jacques Delors, Joschka Fischer, Paavo Lipponen, Tommaso Padoa-Schioppa / Notre Europe, 2010. – p. 12.
  13. Lukjanov F.A. Stabilnost radi vyzhivaniia // Rossiia v globalnoj politike. July, 13 2015. URL: http://www.globalaffairs.ru/redcol/Stabilnost-radi-vyzhivaniya-17579.
  14. Kagan R. Power and Weakness // Policy Review, № 113, 2002.
  15. Cooper R. The European Union and the Habsburg Monarchy // Transit. Europaische Review, 10.12.2012. URL: http://www.eurozine.com/articles/2012-12-10-cooper-en.html
  16. See more: Cooper R. The breaking of nations: order and chaos in the twenty-first century. New York, 2003.
  17. See more: http://www.format-a3.ru/events/event-212/
  18. Ukraina, Gruziia, Moldaviia: put v NATO cherez Evropejskij soiuz. K sammitu NATO v Uelse September, 4-5 2014 goda. Analiticheskij obzor / Centr mezhdunarodnoj zhurnalistiki i issledovanij «Rossiia Segodnia». 2014 g. 74 s.
  19. Stephen M. Walt, Does Europe Have a Future? // Foreign Policy. July 16, 2015. URL: http://foreignpolicy.com/2015/07/16/does-europe-have-a-future-stephen-walt-testimony-house-foreign-affairs-committee/
  20. Charap S., Shapiro D. Kak izbezhat novoj holodnoj vojny // Rossiia v globalnoj politike. October, 14 2014. URL: www.globalaffairs.ru/ukraine_crysis/Kak-izbezhat-novoi-kholodnoi-voiny-17041
  21. Za ES – 68%, NATO – 65%, Evrazijskij Soiuz – 31% – rezultaty oprosa NDI. 11.05.2015. URL: http://www.apsny.ge/2015/soc/1431371449.php\
]]> http://en.abfund.org/?feed=rss2&p=1092 0 Is the experience of the Nordic integration applicable to the Eurasian economic union? http://en.abfund.org/?p=1109 http://en.abfund.org/?p=1109#comments Wed, 24 Dec 2014 17:57:38 +0000 http://en.abfund.org/?p=1109 Voronkov Lev Sergeevitch, Doctor of History, Professor the Chair of European integration, MGIMO University, Ministry of Foreign Affairs of the Russian Federation. 

This article argues that there are no common standards of integration, applicable to all countries, regardless of their economic situation’s specificity and level of development as well as of the nature of their commonly agreed objectives they seek to achieve by means of integration. The purpose to create a single internal market in the EU has determined the toolkit of the European integration, the nature and powers of the EU institutions through which it is carried out. The author argues that the construction of the integration processes in the post-Soviet space in general and within the Eurasian Economic Union (EAEU), in particular, in the image and likeness of the EU is not only unjustified, but also harmful. The founding treaty of the EAEU does not contain the purpose to construct a single internal market. The article emphasizes the high level of regional integration achieved by the Nordic countries, which has not been affected by the pattern of the EU integration. The Nordic integration began with the formation of a common labor market and creation within its framework of necessary conditions for high labor mobility. The objectives of the integration efforts of the Nordic countries, fundamentally different from the EU, are reflected in the nature of the institutions of regional cooperation and in the methods of their activity as well. The author recommends attentively looking at the Nordic integration experience to use its elements in the post-Soviet space. 

Introduction

Apart from Europe, integration processes cover today also other regions of the world, including the post-Soviet space. Such processes involve states with different levels of economic development, size, demographics, natural resources, quality of human capital, a position in the international division of labor, degree of development of market relations, participation in various international organizations and agreements and other indicators. It would be at least imprudent to assume that states entering integration processes must obey certain universal laws, undergo the same stages of integration, and create similar bodies with identical powers. The content of integration activities to a certain extent depends on the objectives of a particular state.

The European Union without proper justification is considered to be a benchmark of integration, and an example of how integration processes allegedly should unfold in the former Soviet Union. Common theories of integration, based on the experience of the EU, are designed to ascribe versatility and traits of objective law to the EU integration processes. However, copying of the EU integration experience can have very negative consequences for integration processes in the post-Soviet space. It would be advisable to study more closely the integration experience of other countries, particularly the Nordic countries, examine features of their integration model, and the problems that they solve by means of integration.

Trade and economic relations do not automatically evolve into integration. Free trade zones and customs unions can be considered as means of such relations. However, not all the participating countries are willing to develop integration. The North American Free Trade Agreement (NAFTA) and the European Free Trade Association (EFTA) can serve as examples. Negotiations on a free trade area between the EU and NAFTA do not mean that their member countries are eager to take the path of integration.

A transition to conscious actions enabling convergence and merging of economies of states is equivalent to a strategic choice of ways for their further development. When deciding on joining an integration process one should have a clear idea of its long-term common goals so that participating states could use economic, political, legislative, social and other activities for the achievement of these objectives. A long and gradual character of integration requires reliable protection against fluctuations of the political and economic environment. Therefore a contractual basis is employed for this purpose and integration processes are carried out within the established permanent international intergovernmental organizations.

Initially, western European countries were planning to use development of integration processes to put an end toan infinite chainof warsbetween France and Germany that had been shaking Europe for centuries. Combined withthe continued presence of the troopsof the Western Allieson the territoryof the Federal Republic of Germany andinclusion of the latter in the North Atlantic Treaty integration processes were believed to help create realobstacles for therevivalof German militarismand reliablemonitoring toolsfor theeconomic and political developmentof Germanyafter the SecondWorld War.

These initial policy objectives, as they were successfully achieved, gradually began to take second place. The progressive extension of the EEC membership created a need for efficient development of its growing economic space, reduction of costs in cross-border commercial activities, providing conditions for profitable operation of companies in the participating states. As a result, integration processes within the EEC began to focus on the creation of a single internal market of the Community and on ensuring the most favorable conditions for the most competitive economies and companies of the member states not taking into consideration domestic production of each country.

The adoption of the Single European Act and the introduction of free movement of goods, services, capital and persons have determined the main tools for the creation of such a market. Efforts for consolidation of a single EU internal market and expansion of its rules to other states are camouflaged with attractive formulations such as “cohesion policy”, “neighborhood policy”, “Eastern Partnership”, etc. These perform more likely the functions of “soft power” of the EU rather than reflect the true essence of such activities. The European Commission has received the exclusive power to fully protect and improve the single internal market on the so-called “supranational” level, which is the most favorable for the most competitive economies and companies.

Often, the so-called “European idea” seems to be an ideological forerunner of the Western European integration. Some Russian and foreign experts believe that we will soon witness a political union of the member states of the EU capable of becoming a new state formation. Cooperation of the EU member states in the field of foreign policy, security and defense, domestic policy and justice and many other areas should be regarded as a step in this direction. However, the new Head of the European Commission Jean-Claude Juncker said he was not going to create the United States of Europe and that he did not believe that “a united Europe could be constructed in opposition to a nation-state” (9, p.7). In fact, these areas of cooperation serve the practical needs of a single internal market and reinforce international ambitions of the EU by means of foreign policy and security.

Despite the common historical destiny, continued co-living in joint states, their geographical, cultural, linguistic and ethnic similarities, comparability of sizes, similarity of political cultures and political orders (2, pp.615-617), the Nordic countries do not aim at getting united into one single state. The “European idea”, despite the fact that these countries belong to Europe, has not had a considerable influence on their relationship. Three of the five countries in the region are relatively young independent states. Norway gained independence in 1905, Finland – in 1917, and Iceland finally became an independent state in 1944. That’s why these countries do not allow any attacks on their recently-found sovereignty in integration processes.

However, the Nordic countries have consistently highlighted the importance of regional cooperation for them. In 1939, the Swedish Foreign Minister Rickard Sandler said: “The North will be a political reality to the extent to which the nations are convinced that their welfare is provided by the Nordic cooperation and solidarity” (7, p.37). In March 1948, the Danish Prime Minister said in Stockholm: “Whatever happens, our peoples should be together. It would be unfortunate if we parted ways”(10, p.35). “We live in difficult times – the Prime Minister of Norway Einar Gerhardsen said in February 1953 – when the very environment necessitates that small countries that have a lot in common and that are located side by side, hold together” (5, p.217). Although regional cooperation has always enjoyed wide support among the Nordic public, however, as it was acknowledged in February 1953 by the Danish Prime Minister Hans Hedtoft, their cooperation “had been quite irregular and random” for a long time (10, p.98).

To date, the Nordic countries have reached the most advanced and deepest level of regional integration of all known examples, with an integration path that is significantly different from the EU. Studying its features may be of interest to potential participants of integration processes in the post-Soviet space.

 

“The Road Map” of the Nordic integration

Integration processes in the European North have taken as a base the indisputable fact that the joint efforts of the Nordic countries can better protect their common interests than if they were acting separately. Regarding the Nordic integration processes it is appropriate to cite the Swedish scientist G. Adler-Karlsson: “Instead of looking for guidance in doctrinal theory, we have always preferred to find the best solutions that are practically achievable under given circumstances” (1, p.22).

In the early post-war years, the Nordic countries faced similar economic difficulties. In April 1948, the four Scandinavian countries officially joined the “Marshall Plan”. Within its framework, Denmark, Iceland and Norway received US aid in the form of gifts, Sweden – in the form of loans (7, p.276). As a result, they were able to partially upgrade their fixed capital in industry and agriculture and to restore economic ties among the countries of the region. Sweden, for example, was paying for the US loans with ships for Norway.

This was also encouraged by lower customs duties in comparison to other Western European states, significant devaluation of the Scandinavian currencies in 1949 (exchange rate of the Norwegian and Swedish Krones to the American Dollar fell by 30%, the Danish krone – by 44%), as well as their accession to the European Payments Union (EPU) in 1950, which resulted in a partial reversibility of Scandinavian currencies within the EPU. As a result, the value of exports in each of the Scandinavian countries in 1948-1951 more than doubled (7, pp.276, 277).

Although Finland did not join the “Marshall Plan”, it was also receiving individual loans from its funds, as well as from the Export-Import Bank of the United States, the International Bank for Reconstruction and Development and from Sweden. By the end of 1956 the total amount of foreign loans in Finland was more than 68 billion FIM, with the share of loans from the US and Sweden being equal to 85% of that amount (4, p.18). By the beginning of the 1950s, the Nordic countries managed to complete the reimbursement of indirect losses caused by World War II (7, p.278).

In 1950 the North Economic Cooperation Committee that was established in February 1948, recommended that the Nordic countries participating in the “Marshall Plan” should begin creating a Nordic customs union. However, differences between the countries did not allow them to implement either this or any of subsequent attempts to create such a customs union. This gave impetus to the search for other ways of the “Nordic cooperation”.

In the late 1940s, Sweden was experiencing a rapid industrial rise and faced labor shortages. Other Nordic countries had problems with employment. As a result, steps were taken towards a more rational use of labor resources at the level of the Nordic region and towards formation of a common labor market. In 1951, Denmark, Norway, Finland and Sweden concluded a convention that allowed their citizens to be employed in any of the Nordic countries without prior permission from the authorities, and agreed to facilitate moving of citizens from one country to another. In 1954 they created a regional free market for labor, and in 1957 they completed the design of a passport union. In the second half of the 1970s the passport and visa regime and customs checking were abolished for the citizens of the Nordic countries at border crossings. Icelandjoineditin 1982, FaroeIslands – in 1992.

In order to increase labor mobility within the region the Nordic countries took a series of synchronous measures in social policy and social legislation. In accordance with the Convention on Social Security, approved in 1955, citizens of these countries received the same rights, privileges and responsibilities regarding the size of the basic pension, old-age pensions, unemployment, disability, occupational injuries and sick leave, as well as additional payments when moving from one Nordic country to another. They were given an opportunity to enjoy the same social benefits as nationals of the host country.

The first steps in the field of subregional integration in the North of Europe were aimed at ensuring establishment of a general labor market, which were accompanied by adoption of a series of laws and administrative measures aimed at improving mobility and ensuring social rights of migratory workers. The labor market became a vast sphere of common interests of the Nordic countries, which became one of the key areas of their subsequent integration efforts. In the course of its creation, harmonization of legislation became the most important issue, which later evolved into one of the skeletons of the Nordic integration.

Unification of legislation of the Nordic countries began in the 19th century and reached a high level even before the start of integration processes between them. At that moment they had unified legislation on the activities of banks, in the field of property, commercial and civil law, as well as in the field of insurance, property possession, etc. The authors of the book “Scandinavia between East and West”, published in 1950 in the US, noted that “there are far more similarities between the laws of the Nordic countries, than, for example, between the laws of New York and Florida states” (10, p.109). The Northern Commission on cooperation in the field of law continued those efforts.

Within the framework of EFTA, which Denmark, Norway and Sweden joined in 1959 (Finland joined in 1961 and Iceland in 1970), the Nordic countries managed to reduce customs duties and abolish quantitative restrictions in mutual trade in industrial goods. The share of inter-Scandinavian trade, that previously had been 5-6% of the total value of foreign trade in the Nordic countries, significantly increased in the mid-1960s. The import share reached 19.2%, while the share of exports totaled 22.5%. By the beginning of the 1970s, the Scandinavian countries occupied the first place in trade with each other. Their share reached 87.7% of EFTA imports and 63.5% of EFTA exports (11, p.268). Trade between the countries in the region became a significant factor in their development and an another sphere of their common interests.

Despite the differences in the national security doctrines, the Nordic countries continued foreign policy cooperation also in the postwar period. Periodic meetings of the Prime Ministers, regular meetings of foreign ministers and representatives of the countries of the region to the United Nations Organization, permanent official contacts among the foreign ministries at the ambassadorial level and direct personal contacts among Heads of their divisions and departments, weekly meetings of Heads of delegations and daily meetings of delegates and representatives of the Nordic countries in the committees at the sessions of the UN General Assembly became common practice.

At the plenary sessions of the General Assembly of the United Nations from 1956 to the beginning of the 1970s, they voted together on international issues in more than 80% of cases. Introduction within EFTA of a duty of 15% on imports of processed goods by Britain in October 1964 had caused solidarity actions the Nordic countries that achieved its abolition in November 1966. At the talks in the “Kennedy Round” (end of 1966 – spring 1967) the Nordic countries, acting jointly, managed to get concessions from the EEC on reductions of tariffs for their trade (11, pp.272-273). Thus, the small Nordic countries received strong indications of the effectiveness of their foreign policy cooperation in ensuring common interests.

After weighing the priorities of their further development, the Nordic countries, while in EFTA, made a strategic choice in favor of regional integration and signed the Cooperation Agreement between Finland, Denmark, Iceland, Norway and Sweden (“the Helsinki Agreement”) on March 23, 1962, in Helsinki. It became the legal basis document for their further cooperation and a “road map” of their integration efforts (12). This document with account of later amendments is still valid to this day.

Embarking on the path towards integration, the Nordic countries were certainly not striving to unite into a single state, and did not aim at creating a single internal market. Their integration model is initially aimed at strengthening mutually beneficial foreign-policy cooperation of small sovereign and independent states, which, by means that are inherent in integration processes in the economic sphere, purposefully and pragmatically strengthen and extend old areas and create new areas of common or identical interests. This allows to build close and long-term cooperation on the international arena on a firm and constantly expanding basis of fundamental interests of socio-economic development, rather than on a shaky basis of temporary political arrangements and agreements and short-term, transient and situational factors.

A natural outcome of such an integration model is an influential community of states that preserve complete freedom in their economic and political decisions. The ability of such a community to effectively promote and protect common interests on the international arena is constantly growing with a simultaneous increase in the political weight of this community in the world. For a group of small countries such interaction becomes an essential element of national security and independence of each of them. On issues where their positions and interests diverge, they operate as separate and independent sovereign states.

In the Helsinki Agreement the Nordic countries defined top-priority areas of common or similar interests, for further expansion of which they decided to use their integration efforts. This document identified further measures for support and development of a common market of labor. In the sphere of legal cooperation they pledged to facilitate acquisition of citizenship of one Nordic state by nationals of another Nordic state, to seek to achieve maximum uniformity of legislation in the field of private law, as well as rules relating to criminal offenses and punishment. It recorded, in particular, an agreement to provide opportunities to investigate and prosecute crimes, committed in one of the countries in the region, in the other Nordic countries and enforce decisions of courts and other authorities of all states in the region on their territories. These provisions are intended, among other things, to ensure proper compliance with legislation by migrating citizens of Nordic countries.

The “road map” of regional integration includes a wide range of pragmatic measures of cultural interaction, which aims at preventing painful political, economic, social and cultural problems of integration of migrant workers from the other Nordic countries into the social and cultural environment of the recipient countries. It was decided to include in the curricula of Nordic schools studying of language, culture and social conditions of the other states in the region, and to provide an opportunity for students to study and take exams in the other Nordic countries.

The Nordic countries jointly fund committees of the Nordic cooperation in the field of primary, secondary and higher education, as well as adult education, regional programs of mobility for students and university teachers, pupils and school teachers. Their school and university curricula, textbooks and examination systems are standardized. Studying the languages of neighboring peoples is coordinated by the Secretariat of the northern languages and literature courses on the northern languages.

The Nordic countries have decided to ensure mutual recognition of diplomas at all levels of education, to coordinate employment services of the Nordic countries, harmonize qualification requirements for professions and work for the recognition of professional qualifications obtained in all countries of the region. They also agreed to work closely in the field of adult education, to unify the application of national provisions relating to workers’ health, occupational safety, and to develop further exchanges between the countries in the field of literature, painting, music, theater, cinema and other cultural industries. The Nordic Culture Fund, founded in 1966, funds cultural projects within the region. There have been set up and in operation also numerous joint organizations of the Nordic countries in the field of culture and media.

As a result, citizens of the Nordic countries have a privileged position on their labor markets compared to citizens of other EU member states. Article 2 of the Helsinki Agreement contains a provision that “in the development of laws and regulations in any of the Nordic countries, citizens of all the other Nordic countries receive the same rights as citizens of this country”. Moreover, this provision should be applied “to all spheres of jurisdiction affected by the Agreement on cooperation”. In other words, citizens of the other Nordic countries shall not be considered as foreign labor on the labor market of each of these countries.

Having started integration processes with creating a common labor market and providing measures to promote their mobility, the Nordic countries have agreed to extend integration onto other areas. In the area of economic cooperation, they decided to hold consultations on economic policy issues, coordinate the measures they take regarding the impact of external factors on the economic cycle, to provide freedom of movement of capital among countries in the region, stressing that joint decisions in this area should ensure common interests of the Nordic countries in the field of payments and currency, and adhere to the division of labor among countries in matters of production and capital investment, as well as create favorable conditions for direct cooperation between the companies of two or more Nordic countries in these areas.

While regularizing the relations with the European Union, each of the Nordic countries was addressing possible consequences of their decisions for the Nordic cooperation. Supporters of the “People’s Movement against the EEC”, that was founded in 1971, were speaking, for example, of the need to strengthen the Nordic cooperation along with protection of the Danish national identity (6, p.517).

Denmark’s entry into the EEC in 1973 and the subsequent conclusion by the other Nordic countries of agreements with the EEC on the duty-free trade of manufactured goods helped to keep the trading mode, which existed among the Nordic countries in the framework of EFTA. Denmark’s membership in the EEC did not cause any specific problems for the Nordic cooperation until the conclusion of the Maastricht Treaty in 1992. Its implementation was threatening to cause irreparable damage for the “Nordic cooperation”.

As a consequence, the Danish referendum on the accession of Denmark to the European Union gave a negative result. Ultimately Denmark joined the EU, but on special conditions, and the rest of the EU member states were forced to accept them (6, p.550). Special conditions for joining the EU in the future were also specified by Sweden. One of such conditions was smooth continuation of the “Nordic cooperation” (8, pp.77-79).

As part of the integration efforts the Nordic states began to work closely together in the field of scientific research and coordination of the use of allocated resources with the greatest efficiency, including establishment of joint structures and institutions to combine their academic potentials and financial capabilities.

The Nordic countries conduct numerous joint research projects, coordinate national science and technological programs. The main driving force in this area are joint academic institutions ensuring high standards of research, that are difficult to achieve at the national level. Among them are the Northern Academy of Innovation Research, Northern Institute for Theoretical Physics, Nordic Council for Arctic Medicine Studies, Northern Research and Production Program on Biotechnology, Nordic Volcanological Institute, Northern Arctic Program of Humanitarian Studies and others.

The scope of their integration efforts includes further cancellation of trade barriers among the Nordic countries, coordination of their technical and administrative customs regulations, simplification of customs procedures, development of transport communications and trans-border trade, joint economic development in adjacent areas of two or more Nordic countries, joint efforts to ensure their interests in international trade.

An important area of the Nordic integration, defined by the Helsinki Agreement, was the Nordic cooperation in the field of transport and communications, as well as environment. The Nordic countries hold mandatory consultations for construction of transport and communication networks, which involve two or more Nordic countries, and coordinate efforts to improve road safety. Border passport control has been simplified.

Countries in the region take into account environmental interests of the other Nordic countries on an equal basis with their own interests both in the legislative process and in the practical application of the laws. They harmonize rules for the protection of the environment, agree on standards and define criteria for pollution, coordinate activities aimed at flora and fauna conservation.

Important areas of agreed integration measures also include official statistics, health and medicine, production of alcoholic beverages, mutual recognition of licensing procedures or certification in the field of medical, technical and other security controls, coordination on issues of child and youth policy.

Given the characteristics of the Nordic integration model, special attention is paid to strengthening of the cooperation at the European and international level, designed to provide “opportunities for joint extraction of benefits for citizens and companies of the Nordic countries”. The governments of these countries are held responsible for ensuring mutual interests and values as it is specified by the Helsinki Agreement. Various government authorities of the region can directly communicate regarding issues that do not fall under the exclusive competence of their external relations. They coordinate activities to provide assistance to developing countries, jointly distribute information about the Nordic countries and Nordic cooperation, and provide support for Northern European citizens by diplomatic missions.

The Nordic integration is characterized by pragmatism and focus on solving specific problems. Implementation of the reached agreements dictated by long-term strategic interests of the Nordic states, allows to strengthen their cooperation in international affairs by constantly expanding the range of their common essential interests. As a consequence, the nature, structure, functions and powers of international bodies of the Nordic cooperation significantly differ from those existing in the EU.

The “Nordic cooperation” is performed in the framework of the Nordic Council, the Nordic Council of Ministers, at the meetings of Heads of governments, by specialized authorities of the Nordic countries and by special cooperation bodies.

One of the fundamental principles of the “Nordic cooperation” is active participation of the public in discussions and decision-making in this area. Practical implementation of this principle is the Nordic Council established in 1952. It was determined in the Helsinki Agreement as an “elected public assembly of the Nordic countries” and a form of cooperation of their governments. Its Charter has been adopted by each Nordic country as an internal act which has the force of law. This body is not endowed with legislative functions. It is authorized to investigate the main components of the Nordic cooperation, to adopt recommendations, prepare research reports and other documents. The members of the Nordic Council may make inquiries to the governments or to the Nordic Council of Ministers on the issues of the “Nordic cooperation”.

The Nordic Council of Ministers (NCM) is a body of cooperation among governments. It is responsible for the interaction between them and the Nordic Council on the issues relating to their joint actions. It takes decisions aimed at implementing the provisions of the Helsinki Agreement and the other agreements among the Nordic countries. The overall coordination of the Nordic cooperation rests with Prime Ministers. They are assisted in this by the Ministers responsible for this cooperation, and the Heads of state and government secretariats, that are members of permanent national committees of the Nordic cooperation.

The Chairman of the NCM is responsible for the coordination of the Nordic cooperation and initiatives for related matters. His or her decisions are taken unanimously and are binding. In the case of making decisions on issues requiring parliamentary approval, they will not take effect until the approval of the relevant national parliament. The NCM reports annually to the Nordic Council on the problems and prospects of the Nordic cooperation. At the same time, the Prime Minister of the presiding country shall submit a special report on cooperation among the governments of the Nordic countries regarding European and international affairs.

In other words, effective management of integration processes in Northern Europe are ensured by the northern cooperation bodies not endowed with any exclusive powers, special competences or so-called “supra-national” functions. These are not necessary as unanimous decisions of the Nordic Council of Ministers are binding and enforceable for the Nordic countries.

As a result of the consistent implementation of the Nordic integration model there is constant strengthening of the Nordic cooperation on international issues and convergence of their positions on many international issues. All the five Nordic countries have become members of the Council of Baltic Sea States (CBSS), the Barents Euro-Arctic Council (BEAC), the Arctic Council. They all participate in the activities of the “Northern Dimension”, despite the fact that some of them are not directly related to some of the regions listed here.

Before Finland and Sweden joined Denmark as members of the EU in 1995, Iceland and Norway joined the European Economic Area (EEA) in 1992. Its terms provided maintenance of the conditions for further practical realization of the integration model for all of the Nordic countries, along with participation in free movement of goods, services, capital and persons across borders with EU member states and joining the Schengen area (3, pp.126-127).

Denmark and Sweden stipulated for themselves special conditions for participation in the EU and Norway and Iceland did the same for the EEA. These conditions provide opportunities for further development of the “Nordic cooperation.” An important step in this direction was concluding of an agreement among the Nordic countries on cooperation in the field of defense (NORDEFCO) on 4 November 2009. This marked a qualitatively new stage in the development of their interaction on international issues and was a direct consequence of the deepening of the Nordic integration. In the EU framework they included clauses regarding their participation in the common EU policy on security and defense.

Integration scenarios for the Eurasian economic union

Integration processes in the post-Soviet space should develop with due regard to the characteristics of the participating countries and specific tasks, which they intend to solve by means of integration. Already at an early stage there should be formulated overall strategic and intermediate goals that member states intend to achieve with the use of integration mechanisms. Depending on the nature of these goals specific mechanisms for achieving them should be identified, as well as the specific role of integration levers, adapted to the economic, political, social and other conditions of the existing economic space.

General wordings of very vague objectives of the EAEU purposes, such as strengthening and modernization of the economies of member states, their convergence, increase of their competitiveness in the global markets, direct integration processes at servicing some of the current needs and improving of the existing situation according to the formula “movement is all, the ultimate goal is nothing”, rather than at achieving more or less distinct strategic objectives.

Such an approach allows little for conscious, focused and consistent creation of long-term legislative, economic, political, social and other conditions that would provide close interaction, interpenetration and fusion of economies of the countries entering the path of integration, as it does not contain any motivation that is crucial for them.

Orientation of the EAEU member states in their integration efforts on the experience of the EU, including institutional experience, would mean that they intend to build on the territory of the former Soviet Union the same single internal market, aimed at serving the needs and creating the best opportunities for extraction of benefits of the most competitive economies and companies of the member states and the EU. For most post-Soviet states, economic conditions of which have not yet recovered and have not acquired the necessary level of development and competitiveness, a rigid imposition of such rules could have a devastating effect on domestic manufacturers and economic independence as it happens with the economies of the East European EU member states. There are serious doubts that exactly this objective is optimal for integration processes in the post-Soviet space because of the large differences between the CIS and the EU as well as among post-Soviet states.

An institutional model of integration reproducing the one in the EU may also be unattractive for them as it envisages delegating of a part of sovereign powers of the member states to some supranational international executive authorities. For many post-Soviet states, that only recently gained their independence and sovereignty, an idea of a new superstate in the future is unattractive, and practical steps in this direction are considered counter-productive. There are also serious doubts that such a development will meet the fundamental interests of Russia and its companies, because overcoming of social and economic underdevelopment in these countries will be largely their duty.

It is obvious that the member states of integration processes in the post-Soviet space and the Eurasian Economic Union (EAEU) should identify those areas of common or similar interests that they would like to form with integration mechanisms, and, relating to them, identify specific tools for their practical implementation. Taking into consideration differences among post-Soviet states, discussions on common or similar interests of states and possible areas of their integration efforts can be performed both among all the participants of integration processes, and between different groups of states with regard to their economic specialization. Without this, they are doomed to copy existing integration models, which is currently the case.

It is advisable in this context to determine which of the following is preferable for Russia and other members of the EAEU: (a) creation of a single internal market of the EU-type, or (b) promotion of division of labor between the member countries and development of specialized production industries with the help of selective integration measures in each of the countries, or (c) purposeful formation of areas of common economic, social and other interests of the members states of the EAEU in order to strengthen the foundations of their close cooperation in the sphere of foreign policy, security and defense policy, or, finally, (d) flexible combination of these measures with the account of development specifics of each of the post-Soviet states and the whole former Soviet Union. The general philosophic idea of the integration model of the Nordic countries and its individual elements can represent for Russia and other post-Soviet members of the EAEU a certain conceptual and practical interest.

When selecting areas of application of integration mechanisms one should pay attention primarily to those areas that, being inherited from the Soviet past, still remain essential for the economy. This could include, for example, infrastructure links among post-Soviet states. Further development and deepening of such links in the present circumstances with the use of integration mechanisms could be of mutual benefit and could contribute to the formation of common interests in this area.

Efforts related to regulation of labor markets in the post-Soviet space and its social and cultural reinforcements could be of paramount importance for application of integration measures, taking in to account the fact that the dynamics of the demographic situation in various countries of the CIS significantly differs. Cooperation in the field of educational and cultural policy, focused on servicing current and future needs of the labor force market and scientific and technical cooperation, could also become a program of long-term integration efforts of member states of the EAEU.

A specific feature of the new independent post-Soviet states is their continued breakaway from a single legal system of the Soviet Union. Therefore, cooperation in the field of law among them as a whole is unlikely to be successful. It should be selective and primarily related to the areas of interaction that will be identified as priority objects of their integration efforts.

Obviously, one can offer a lot of other areas to coordinate integration efforts in the post-Soviet space both with account of its specificity and experience of other integration groups. However in order to do this, it is necessary to determine what integration model and what strategic objectives potential participants would like to implement. The impression is that this is not completely clear yet.

 

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Pokhlebkin V.V. Skandinaviya: tendenzii sovremennogo razvitiya/ “Mezhdunarodniye otnosheniya v Zapadnoi Evrope”. Pod redakziyeyi D.E. Melnikova. Moskva, Izdatel’stvo “Mezhdunarodniye otnosheniya”, 1974

Helsinkskyi Dogovor o sotrudnichestve mezhdu Daniyeyei, Finlandiyeyi, Islandiyeyi, Norvegiyeyi I Shveziyeyi (http://eulaw.edu.ru/documents/legislation/eur_int_law/nordic.htm)

]]> http://en.abfund.org/?feed=rss2&p=1109 0 RUSSIA’S INTERNATIONAL DIALOGUES http://en.abfund.org/?p=12 http://en.abfund.org/?p=12#comments Mon, 21 Jul 2014 09:01:32 +0000 http://en.abfund.org/?p=12 Development strategy for Russian Arctic zone

On February 20, 2013 the Russian president approved the Development Strategy for the Arctic Zone of the Russian Federation up to 2020. The document stipulates international cooperation tasks in the Polar region, the development of a single Arctic transportation system of Russia, and the formation of a competitive science and technology sector.

The Strategy determines the basic mechanisms and means of achieving strategic goals and priorities in sustainable development of the Russian Arctic zone and ensuring national security. The implementation of the Strategy will provide for a complex increase in competitive advantages of the Arctic zone of the Russian Federation in order to enhance Russian positions in the Arctic, promote international security, maintain peace and stability, and mount international cooperation.

Finnish president visits Russia

On February 11-12 President of Finland Sauli Niinisto visited the Russian Federation. On February 12 the presidents of Russia and Finland discussed prospects of bilateral cooperation in trade, economy, and investments. As trade turnover between the two countries has decreased, Vladimir Putin expressed gratitude to his counterpart for the visit and for bringing a big group of businessmen as “the state of economy and jobs greatly depend on their work”. Sauli Niinisto recalled that “we have lived through difficult times before and always found a w ay out of the situation.”

The same day the Russian president and his Finnish counterpart met Finnish businessmen. Vladimir Putin said, in particular, that “last year a record number of people crossed the Russian-Finnish border – 12.7 million people. We have agreed to continue liberalizing visa regimes to create the best preconditions for the development of business contacts.” In his turn, the president of Finland said “people-to-people contacts comprise a major factor not only in economy where they are definitely important. They play a big role in making neighbors better know each other and customs of peoples which is very important.”

On February 11 Sauli Niinisto had a meeting with Russian Prime Minister Dmitry Medvedev.

Interview of Dmitry Medvedev with Handelsblatt newspaper

On January 28 the German Handelsblatt newspaper published an interview with the Russian prime minister. Dmitry Medvedev spoke about priorities which Russia plans during its presidency in the G20 in 2013 and then in G8.

The Russian prime minister positively assessed euro zone prospects. However he said its initial scheme was complicated as “a strong currency serves various economies, including weak ones. It is unprecedented in world history. It is clear that either the economies have to become stronger or they will have to stop using euro.”

Russia-EU summit

On December 21, 2012 Vladimir Putin participated in the Russia-EU summit in Brussels. Addressing a plenary meeting the Russian president expressed his attitude to the so-called Third Energy Package: “We believe it is an absolutely wrong and even uncivilized decision. If a document is adopted it has to cover all deals concluded after the adoption. But you adopted a document which covers everything concluded before – it brings chaos and undermines trust in joint work.”

After the summit Vladimir Putin, European Commission President Jose Manuel Barroso, and President of the European Council Herman Van Rompuy gave a joint press conference. Rompuy said “we have very constructively and frankly discussed all these issues. I want to thank the president of the Russian Federation for the efficient and constructive exchange of opinions.”

 Dmitry Medvedev meets Frank Walter Steinmeier

On December 17 Russian Prime Minister Dmitry Medvedev met in Moscow Frank Walter Steinmeier, the leader of the German Social-Democratic Party faction in Bundestag. Five years earlier Medvedev and Steinmeier attended a gala startup of the Yuzhno-Russkoe oil and gas condensate field in Yamalo-Nenets autonomous district of Russia. The field offers the main resource for the Nord Stream gas pipeline and is the operational base of the joint venture of Gazprom, BASF and E. ON.

From the websites of the press services of the Russian president and government

 

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