Interview of Minister in charge of Energy and Infrastructure of the Eurasian Economic Commission Adamkul Zhunusov to the magazine “Caspian Energy”: “Unlike the EU the integration processes within the EEU are going at a faster pace”

The bilateral agreements will regulate the relations in the field of supply of these energy resources   Caspian Energy (CE): Mr. Zhunusov, an agreement about Eurasian Economic Union gained force early in 2015. What have been the results of the activity in the field of FEC? What is the distinctive feature of cooperation between the members of the EEU (Eurasian Economic Union)? Adamkul Zhunusov, Member of the Board Minister in charge of Energy and Infrastructure of the Eurasian Economic Commission: According to the agreement about the Eurasian Economic Union, Member States are developing a long-term mutually beneficial cooperation in the energy sector, implementing a coordinated energy policy and carrying out a step by step building of the common market of energy resources (electricity, gas, oil and oil products) in order to ensure efficient use of the potential of fuel and energy complexes. An agreement about methodology of development of indicative (predictive) balances of gas, oil and oil products within the framework of the Eurasian Economic Union, signed this year, will promote efficient use of the entire energy potential and optimization of interstate supply of energy resources. The heads of our states approved the relevant concepts in 2015-2016 in order to develop common markets of energy resources within the framework of the EEU. Programs, aimed at conducting certain activities to have the markets shaped, are under development now. Creation of equal conditions, letting players of EEU’s common markets of energy resources carry out an economic activity, is a ground for shaping and developing these markets. Companies of the member states will be able to supply gas, oil and oil products in common oil-gas markets without any limits under market prices, set also at stock exchanges. As far as concrete results are concerned, it is noteworthy that the volume of electricity trade between EEU member states totaled 6.3 bln kWh (or 0.5% of total electricity production) in 2015. This indicator has a potential and conditions for increase by 6-7 times, based on the capacities of transmission networks and economic interest of the market participants. EEU countries agreed to develop cooperation on basis of equality, mutual benefits, without causing damage to any of the member states and observance of the balance of economic interests of entities of common markets of energy resources. Besides, considering the importance of the energy sector for economies of all member states of the EEU, the parties agreed that before they have common markets of oil, gas and oil products shaped, the relationship in the field of supply of these energy resources will be regulated by the two-sided agreements signed between them. We have created consulting bodies under the European Economic Commission in order to arrange cooperation between the member states in solution of the assigned tasks. There are constantly operating working groups engaged in forming common markets of energy resources. Leading experts from the Union states work for these groups. A dialogue has been established with the science and business communities. Performance of special science-research operations has been organized.   Development of the honest competition through provision of the equal access to common markets and transportation systems plays a key role …   CE: Which conditions does the agreement provide and will the countries-participants enjoy a free access to oil and gas transportation export infrastructure? Adamkul Zhunusov: As I have already mentioned, the Supreme Eurasian Economic Council (i.e. Presidents of the EEU states) approved a Concept of shaping the common electricity market on May 8 of the last year. The Concept of the common market of gas and common markets of oil and oil products of the EEU was approved on May 31. Today we have moved to the next step, namely, to the development of relevant programs of shaping of common markets. The programs are based on the following principles fixed in the Concepts: it is the development of competition, setting of the market pricing for energy resources, lack of technical, administrative and other barriers for energy resources trade, development of the transport infrastructure, as well as provision of non-discriminatory conditions for economic entities of member states in common markets of energy resources.  The program of shaping a common electricity market of the EEU is planned to be approved by the end of this year while the program on gas, oil and oil products shall be approved till January 1, 2018. Development of the honest competition through provision of the equal access to common markets and systems of transportation of energy resources, non-discriminatory and transparent distribution of free capacities (technical capacities) of these systems between these market participants plays a key role in shaping of common markets and requires adoption of single rules of access to oil-gas and electricity infrastructure as well as mutual trade rules. The draft of the program on shaping a common electricity market provides development of such rules. Such measures of the program imply arrangement of the centralized electricity trade and forming of the information exchange between the market entities. The program activities will end up with the adoption of the international agreement about shaping of the common electricity market. The EEU agreement implies entrance of the mentioned agreement into force no later July 1, 2019. The activities of the programs on gas, oil and oil products must be carried out until January 1, 2024. As soon as they have been completed, the member-states will conclude international agreements about shaping of common markets of gas, oil and oil products of the Union, containing also single rules of access to transportation systems of these energy resources. It assumed that common markets of gas, oil and oil products will start fully operating no later than January 1, 2025. Based on the Agreement about EEU, the member states ensure a free access for economic entities of other member states to gas, oil and oil products transportation systems on basis of single principles, conditions and rules. The parties agreed that transportation and transit of these energy resources, including for export from the Union area, will be provided within the framework of operation of common markets of oil and oil products.   The Treaty of the Union does not envisage provisions regarding a single foreign policy in relation to the third countries   CE: How will the EEU position itself in foreign energy markets? Will the EEU act on the international arena as a successor of the member states, that is, pursue a single foreign policy? Adamkul Zhunusov: Under the Treaty of the Union member states develop a long-term mutually beneficial cooperation in the energy sector and follow a coordinated energy policy. The Treaty of the Union does not envisage provisions regarding a single foreign policy in relation to the third countries. However, in order to promote energy security of the member states and strengthen their positions in the world oil/petroleum products markets the Parties agreed under the approved Concept for Establishing of Single Oil/Oil Products Markets of the EEU: - to contribute to implementation of large cross-border investment projects in the oil sector; - to promote more efficient positioning of the oil industry of the member states and to use global value chains from production to processing and marketing of oil and oil products, to increase volumes of transit of oil and petroleum products from the third countries through the territory of the member states; - to create infrastructure, financial, economic, technical and technological conditions for expanding the involvement of economic entities of the member states in the international oil/oil products trading. With regard to the gas market, the relevant Concept highlights the intention of the Parties to consult on issues regarding gas transportation and supply to the third countries to the areas of delivery, where the member states compete or may potentially compete with each other.   CE: Is it intended to establish a single network of export oil and gas pipelines? Will the Customs Union members have a privileged access to oil and gas assets of the member states? Adamkul Zhunusov: The concepts do not envisage establishing a single network of export oil and gas pipelines. It seems too early speaking about its putting in place, since establishing of single markets of gas, oil and oil products is aimed primarily at meeting the domestic energy needs of the Union member states. At the same time the Concept for Establishing of Single Oil/Oil Products Markets provides for, as it was already stated, ensuring transit and transportation of oil and oil products, including for export from the EEU space, as well as promotion of the development of the transport infrastructure through joint activities. With regard to access to the oil and gas infrastructure, in the framework of operation of single markets for gas, oil and petroleum products it must be ensured for all market participants on a non-discriminatory and equal basis according to common regulations to be included in relevant international treaties and enter into force no later than 1 January 2025. As far as the issue of access to other assets is concerned, it should be noted that the EEU’s Concept for Establishing of Singe Oil/Oil Products Market provides for implementation of activities in the field of production, transportation, supply, processing and marketing of petroleum and petroleum products in the territory of one member state by economic entities of another member state (including implementation of joint projects).   CE: What are the main differences between the principles of development of the EU and the EEU? The EU began as an economic association of the leading European economies and currently it is a huge 500-million market with enlargement perspectives. What about EEU? Does it have similar or even broader prospects? Adamkul Zhunusov: The EU, which currently brings together 27 European member states, has reached the highest level of integration compared to other integration institutions. The path of EU’s formation was long and difficult. The idea to establish the EU was initiated as far back as 1950. The integration process began in 1957, when the Customs Union and the single domestic market were established, and the European Economic Community (EEC) of 6 countries was created. The Single European Act was signed in 1986. It provided for the implementation of 279 activities with the aim to complete the formation of the single internal market by the end of December 1992. In 1992, the Maastricht Treaty was signed to transform the EEC into the European Union (12 countries) and thus declared the creation of the Economic and Monetary Union of the EU, which ended on January 1, 2002 with putting euro in circulation in 15 countries. Unlike the EU the EEU is a relatively young association and the integration processes within it are going at a faster pace. This can be explained by the two factors, namely by the will of presidents of the partner countries and the reintegration nature of the integration process itself. The Treaty on the Establishment of the Eurasian Economic Community or EurAsEC was signed in 2000. A new association, namely the Customs Union of the three partner countries - Belarus, Kazakhstan and the Russian Federation – was established in 2010. In December 2010, the package of 17 agreements forming the Common Economic Space (CES) of the three states of the Customs Union was signed. Other 55 documents for full-scale operation of the EEA were worked out and signed from 2011 to 2014. The Eurasian Economic Union consisting of the three states started to work on January 1, 2015, later joined by the KyrgyzRepublic and others. The EEU targets to create a single market for goods, services, capital and labour resources within the Union. In the process of establishing the Eurasian Economic Union we apparently used the experience of the European Union adapted to our conditions. As for the energy sector, for example in the process of working out the Concept for Establishing the Single Electricity Market of the EEU we used the experience of establishing and regulation of the internal electricity market of the European Union. Thus, the EEU countries agreed that national electricity markets should be preserved, but at the same time, coordinated and centralised electricity trading should be organised like it is practiced in the European market. In terms of regulating the single energy market, unlike the European Union our countries went their own way and abandoned the formation of supranational regulatory bodies, suggesting addressing emerging issues in the process of market operation by means of cooperation between national ministries, system operators and other infrastructure organisations.   CE: How prioritised will be efforts for development of the alternative energy sector, deployment of renewables and cutting-edge energy saving technologies? Adamkul Zhunusov: The Eurasian Economic Commission has come out with the initiative to expand the areas of integration of the EEU member states. As for the energy sector, we offer to speed up work on cooperation in the field of renewable and alternative energy sources (solar energy, wind energy, geothermal energy, biogas and bioethanol, small-scale hydropower generation, nuclear energy), as well as modern energy saving technologies. Renewable and alternative energy sources are energy sources of the future. Their use will enable to reduce the dependence of economies of the EEU member states on non-renewable energy sources, reduce volumes of harmful emissions into air, and improve the ecological situation. Currently, these factors are of particular relevance. Energy efficiency and energy saving are the most important methods to address losses in production, distribution and consumption of electric and heat energy for the sectors of economy and population. They enable significant savings of energy resources, improve economic competitiveness and bring it to a cost-effective level, improve the ecological situation and welfare of people. We propose to complement the EEU Treaty with a number of articles that specifically address these issues. It seems appropriate to work out and approve at the EEU level relevant concepts and programmes on cooperation in the field of development of alternative and renewable energy sources, as well as energy efficiency and energy saving. Currently, all EEU member states have adopted and are currently implementing similar in content policy documents on these subjects with the high potential for harmonization or unification. The similar practice exists in other integration associations such as the European Union. Thus, our task is to unite efforts of government agencies, public and business sectors, scientific institutions of our countries to work out common solutions on this issue in order to improve the quality of life of people.