Atlantic Council

European Energy Security Challenges and Transatlantic Cooperation in 2015

Keynote Speech:
Miguel Arias Cañete,
Commissioner for Climate Action and Energy,
European Commission

Frederick Kempe,
President and CEO,
Atlantic Council

Richard Morningstar,
Founding Director, Global Energy Center,
Atlantic Council
David Koranyi,
Director, Eurasian Energy Futures Initiative,
Atlantic Council

Time:  1:30 p.m. EDT
Date:  Tuesday, February 3, 2015

Transcript By
Superior Transcriptions LLC

FREDERICK KEMPE:  Good afternoon.  I’m Fred Kempe, president and CEO of the Atlantic Council. 

And I’m pleased to welcome you this afternoon to the third event produced by our brand-new Global Energy Center.  Don’t be mistaken, for three decades or so we’ve been doing work in our Energy and Environment Program on energy issues, but we relaunched the program and center this year to give it even more reach into geopolitical issues, into the global trends issues of energy, into sustainability issues, technology issues, to broaden the scope and broaden the reach of the energy center.

But we’re absolutely delighted that Commissioner Cañete is here because at the core still will be the good work that we’ve always done on trans-Atlantic questions regarding energy, which probably have never been more important with all the changes in terms of energy production in the United States, and obviously the challenges that face us with Ukraine.

The Atlantic Council is proud to host this discussion on Europe’s energy security and trans-Atlantic cooperation on energy and climate issues with the European Commissioner for Climate Action and energy, Miguel Arias Cañete.  We were proud to host him at our 2014 Energy and Economics Summit in Istanbul in November.  And we’re delighted that the commissioner is joining us again during his first visit as commissioner to the United States.

It is an understatement to stay that the discussion today is timely and significant.  As Vladimir Putin – President Putin continues his military push into Ukraine which, many believe threatens the trans-Atlantic community as a whole, key allies are made vulnerable by their dependence on energy imports when countries are willing to use energy as a weapon. 

This is particularly the case in Central and Eastern Europe, prompted by the Ukraine crisis but rooted in deeper structural challenges facing EU energy markets.  Brussels is in the midst of a fundamental rethinking of its energy policies, diversifying its energy supplies and bringing integration to the next level by building a European energy union. 

For these reasons, Commissioner Cañete has an increasingly challenging and increasingly important job.  He will grapple with not only the Ukraine crisis, but also the upcoming Paris climate summit, and addressing energy issues in the context of TTIP negotiations.  I’m looking forward – I’m sure we are all looking forward to hearing how he plans to navigate this very challenging year ahead.

For people who don’t already know, Commissioner Cañete is a distinguished Spanish politician from the center-right Partido Popular.  He served in the Spanish civil service as state attorney before becoming a professor of law.  Later, he returned to government as a member of the Parliament of Andalusia, the European Parliament, the Spanish Senate and representative from Madrid before assuming his current role on November 1st of last year.

Mr. Commissioner, we’re delighted to have you with us today.  We’re – and let me turn the podium over to you to hear your insights on the energy security situation in Europe, the European energy union and trans-Atlantic cooperation with energy.  And then, after that, we’ll have a moderated conversation between the commissioner and the founding director of our Global Energy Center, Richard Morningstar. 

Mr. Commissioner, the floor is yours.

MIGUEL ARIAS CAÑETE:  Well, good morning, ladies and gentlemen.  Thank you for inviting me today to talk about European energy security and our trans-Atlantic cooperation.

Before I start, I must congratulate Ambassador Morningstar, because it was his idea back in 2009 to establish European Union-United States ministerial energy council.  His initiative reinvigorated the energy dialogue between us.  I attended my first meeting of the European Union-United States Energy Council last December.  Right away, I appreciated the level of close cooperation and dialogue on energy issues.  I have no doubt I would not be addressing you today, were it not for Ambassador Morningstar.  So I offer my thanks and admiration for all he has done to strengthen trans-Atlantic energy ties.

Ladies and gentlemen, in Spanish we have a saying:  “La union hace la fuerza.”  It means “In unity there is strength.”  To me, this idea should underpin everything we do on energy security, and my speech today will explain why.

I’m going to start with a few reflections on the challenge we face in the European Union today.  Then I will set out how we are going to respond to them domestically.  And finally, I will talk about the role of transatlantic cooperation and what else I think we can do together.

First, the challenge.  A reliable flow of energy is vital for our modern economies and societies.  Energy is the engine of our growth, the foil of our economy and bedrock of our industry.  This is why it is crucial that we have competitive, secure and sustainable supplies.

Today, the global energy map is being redrawn.  Global energy demand will increase by one-third by 2040.  Much of the growth will come from emerging economies, with China and India alone counting for half.  The European Union, meanwhile, will decrease our share of global energy demand from 12 percent today to 8 percent in the year 2040.

But while the overall importance of the European Union on global energy markets will decline, global energy markets will be increasingly important for the European Union.  Why?  Largely because of the decline of our domestic production of fossil fuels.  We will offset this decline with growth of domestic renewable energies and through energy-efficiency measures.  I can say with this confidence because we already have clear, binding targets for the year 2030:  a 40 percent reduction in greenhouse gas emissions, a 27 percent improvement in energy efficiency and 27 percent of renewable energy in our energy mix.

But this will not make us energy independent overnight.  Europe’s oil dependence is double what the United States was just before the 1979 oil crisis.  For gas, we import a third of what we use from Russia, and the current crisis in Ukraine has shown just how vulnerable this dependence make us.  And yet, we have been here before.  In 2006 and 2009, events in the East left many European citizens without gas.  Anyone can see a pattern here, and can also see and draw a clear lesson:  When it comes to energy, don’t put your fate in the hand of autocratic regimes.  Yet, through great crisis can come great opportunity.  Europe has seized this opportunity.

I would like to discuss now what we are doing to improve our energy security.  In the aftermath of Russia’s illegal annexation of Crimea, European leaders adopted a European energy security strategy.  This set up a number of measures to improve Europe’s security.  However we quickly show that we needed a more decisive and ambitious approach.  So, in June 2014, Europeans agreed to create an energy union.  Why?  Because “la union hace la fuerza” – because to be secure, we must first be united.

At the end of this month, the 25th of February, the European Commission will present the details of the energy union.  It will be based on five closely related dimensions.

First, supply security.  We will double our efforts to diversify energy suppliers, sources and roles.  The recent (southern ?) saga can be both a lesson and an opportunity.  From now on, we will focus on projects that expand our diversity of supply.  The Southern Corridor project will be a top priority.

Secondly, a competitive and complete European Union-wide internal energy market.  We plan to speed up the building of cables that unite the market physically and (codes ?) that connect it technically.  This will make, with the regulatory new provisions, our market a haven for friendly investors and a hassle for monopolistic bullies.

Thirdly, reducing energy demand.  The cheapest and the most secure energy is the energy you do not use.  For every 1 percent improvement in energy efficiency, European Union gas imports fall by 2.6 percent.  We are coming forward with new measures and new legislation to drive efficiency and increase private-sector funding. 

Fourthly, the decarbonization of the energy mix.  The more we rely on domestic low-carbon energy, the less we import.  In my native Spain, renewables have reached 50 percent of all installed power capacity.  We want to go farther, both for the climate and for security.

And finally, research and innovation.  Our focus is promoting the technologies that will drive not just Europe’s energy transition, but the world.  This means renewables, smart grids, smart homes, electromobility, carbon capture and storage, and safe nuclear.  Together, these measures will make a stronger, unified Europe, ready to stand tall against those who use energy as a political weapon.

But true strength is never acting alone, but acting alongside friends.  And in the field of energy, the European Union has no greater friend than United States.  I would like to turn, finally, to the topic of our cooperation.

Today, we stand together on climate.  We have common strategies on how to arrive to Paris and have an ambitious, binding agreement in order to fulfill the demands that science impose on us to control the increase of temperatures in the world by 2 degrees centigrade.  We stand together on new technologies and standards.  And we are discussing currently an ambitious trade and investment agreement that, from a European point of view, should have an energy chapter.  And we stand together for Ukraine.  Our strength is our unity:  “La union hace la fuerza.”

On climate, I have met this week with my friend Todd Stern.  We shared many ideas on how to reach a global deal in Paris in December.  A legally binding climate deal would be the greatest single act for sending long-term clarity to the markets.  And we will only get there if the United States and the European Union are on the same page and the same wavelength.

On new technology, we are working together on nuclear fusion, on smart grids, on hydrogen fuel cells, on electric vehicles, and in many other fields.  To take one example, the Argonne National Laboratory and European Commission Joint Research Center are running our joint program on e-vehicles and smart grids.  And we are also working to coordinate policies, set compatibility standards and incentives.  These will help promote the market uptake of these technologies.

And finally on Ukraine, our cooperation there has been immense.  From reform message in Ukraine to sanctions against Russia, from reverse gas flows from Slovakia to Ukraine, to integration of Southeast Europe and the European Union energy market, all have been driven by European Union and United States cooperation.  Together, then, we already have achieved so much, but we could still achieve so much more.

The best way to do this is through our transatlantic market, the world’s largest trade and investment zone.  Total United States investment in European Union is three times higher than in all of last year.  European Union investment in the United States is eight times that of our investment in India and China combined.  Energy needs to be a key part of the Trans-Atlantic Trade and Investment Partnership discussions.  Our transatlantic energy approach needs to be embedded in this new agreement.  We need detailed provisions and promote common standards for the energy sector, and we need gas to be traded freely across the Atlantic.  And we should not stop with the TTIP.  We should promote our approach globally, particularly in countries where the state plays an excessive role in the energy sector.  The goal is a stronger set of rules for the energy sector in the entire multilateral trade system. 

To sum up, Europe faces a time of severe energy security challenges, but I am optimistic.  I know we can build a more secure and stable future.  The foundation will be a new energy union for Europe, and the very first block will be a stronger transatlantic partnership.  I hope I can count on your support to cement that partnership and take it to the next level.

It has been a pleasure for me to address such a distinguished audience here today, and thank you very much for your attention.  (Applause.)

DAVID KORANYI:  Commissioner, thank you very much for these very insightful, very comprehensive remarks.

Let me introduce myself.  I’m David Koranyi.  I’m the director of the Atlantic Council’s Eurasian Energy Futures Initiative.  I’m also responsible for the Istanbul Summit’s agenda that takes place every November.  And we had the great pleasure of having the commissioner there last November, as Fred mentioned at the beginning.

We have about 25 minutes left, so – and we also want to leave some time for questions from the audience.  So let me just quickly turn to the commissioner and then bring in also Ambassador Morningstar who, in addition to being the founding director here, also is a former special envoy on Eurasian energy issues and a former U.S. ambassador to Brussels, could present an American view, a Washington perspective on all these issues, but with a deep embeddedness in Brussels and in Brussels politics.

As I said, we have limited time because the commissioner has a plane to catch.  So I have just two questions right at the front, commissioner.  One is, you mentioned the Ukraine crisis and the importance of diversification, and you underlined the need for the Southern Gas Corridor.  There will be about 10 BCM of gas coming from Azerbaijan towards the end of this decade.  And the strategic concept of the European Union was to build up the Southern Gas Corridor as a(n) energy superhighway that will bring additional quantities – 30, 40, 50, 60 BCM at some point.

Yet, at the same time, all the additional sources along the Southern Gas Corridor are problematic.  You have Central Asia, Turkmenistan in particular, that is problematic.  You have the Eastern Mediterranean.  You have Iraq, potentially Iran at some point if they resolve the nuclear issues.  So I just wanted to ask you how do you see those additional resources coming online, whether the Southern Gas Corridor could turned – could be turned into something really strategic?

 And then a related question with regard to South Stream.  Are you concerned that the new Russian plans with regard to the Turkish stream, the abandonment of the original plan of South Stream and bringing gas through Turkey, could somehow interfere with the Southern Gas Corridor?

MR. CAÑETE:  Let me keep with the first question and then we’ll go back to the second one.

In our planning, the Southern Corridor, we have first the supply from Azerbaijan, which is clear, it’s there.  All the consortiums are doing the investments, their pipelines.  All are being on schedule.

On the other side, we’ll have very soon trilateral meetings with Turkmenistan in order to learn – conversations to try, that would – we have more quantities in the next future and we have a real important pipeline.  There might be problems, but I think this is a marketplace that’s convenient for them also.  So for Turkmenistan it’s very positive to use this corridor and to supply the European Union with this – (inaudible) – in a solid market and a stable market.  So we’ll start – we are going to rely on this conversation.

We are in the process of having two different – two different processes at the same time.  We want to develop the Southern Corridor, it’s clear.  But as South Stream has been canceled, in Southeast Europe, we also have to develop infrastructures.  So what we are doing now, we have convened on Monday in Sofia a high-level group with all the ministers of the area in order to analyze the situation of actual gas-transport infrastructures in the area – what are the problems, to make them more efficient, and to build the new interconnectors. 

We have to – we are going to launch interconnectors to connect Bulgaria and Hungary, Bulgaria and Serbia, and Bulgaria and Romania.  And then we have actual – the grid of supply of the area, seeking that they at least can have three different sources of supply – Russian gas, gas from Azerbaijan in the future, LNG with – from the area of Croatia.  So we want to organize this in a different way so that they are not only dependent on one kind.

On the question of South Stream, we assume – we take for granted what the Russians have said, assume this would not build.  For us Europeans, it was not a priority because it didn’t diversify neither our suppliers, neither our routes.  It was the same.  So our main opposition was that the Russians didn’t comply with European regulations in any aspect – public procurement, access to pipelines, everything – TSOs, regulation, anything.  They didn’t want to comply.  We stick to our – to our rules and it has not been built.  And for us, it’s a clear-cut case they will not build it.  We are not annoyed.  We are going to give priority to Southern Corridor and develop interconnections in Southeast Europe.  So that’s it.

And the first question was?

MR. KORANYI:  I think you answered both of them.  (Laughter.)  One was South Stream and the other one was about the Southern Gas Corridor. 

MR. CAÑETE:  And this – and this actually has been a very good opportunity because in the past we were not so much concerned solving the problems in Southern Corridor, but because there was South Stream coming at the same time.  But now we have clear view and there’s work to be done.  Let’s concentrate on what’s possible.  And I think it’s very – it’s very positive for security of supply and diversification of supplies and routes.  In the end, it will be very positive for the European Union.

MR. KORANYI:  Thank you.

Ambassador, if I –

MR. CAÑETE:  And may I say another thing?  Sorry.  It’s that we are in a – in a – in a situation now in which we have the capacity to raise finance because the Juncker plan has provided – will provide for 350 million euro of reasonable costs that we’ll be able to finance very much important infrastructures all over Europe.

RICHARD MORNINGSTAR:  Let me – first of all, thank you for your overly kind comments during your speech. 

But on the questions that you – that you asked, David, let me say – make a few points.  First of all, the Southern Gas Corridor is only one thing.  Yeah, it’s important and it needs to be a priority, but the EU is doing a lot of things that is going to create more energy security, Southern Corridor being one thing.

Second, the – yeah, it will be only 10 BCM coming to Europe in 2019 or 2020, but that’s not a static number.  There are additional projects that will be developed in Azerbaijan or off the coast of Azerbaijan during the 2020s.  The pipeline – in fact, one of the conditions of choosing the trans-Adriatic pipeline and TANAP is that they are expandable as more gas – as more gas becomes available.  You know, we’ll see what happens with Iran, with the KRG and other sources.

Turkmenistan.  (Chuckles.)  I’ve been working on Turkmenistan since 1997 or 1998, and I’ve often said, not during my lifetime.  (Laughter.)  But on the other hand, that doesn’t mean it won’t happen because I’m getting up there in age.  (Laughter.)  But –

MR. CAÑETE:  We must try anyway.

MR. MORNINGSTAR:  But I would be – but I would be happier than anybody if there were a trans-Caspian pipeline.  It is difficult.  Turkmenistan is demanding – has been demanding guarantees of large volumes of gas, which the EU institutionally – purchase of large volumes of gas, which institutionally the EU can’t do, I don’t think, as well as – as well as very, very strong political guarantees.  And they are – you know, it’s a reality.  They are under a lot of pressure from Russia and Iran.

On the other hand, having said that, it may be more possible to develop a trans-Caspian gas pipeline looking out now four, five, six, seven years down the road because at least now there’s something.  There really is a Southern Gas Corridor.  And so one could argue, why should Turkmenistan have taken the risk when – until they were – until they were certain that there actually could be an outlet for this gas.  But I do think it’s going to be – continue to be difficult, but maybe not impossible.

On Ukraine, on South Stream, I think the EU deserves a tremendous amount of credit for sticking to its regulations, its legal structure, and to the point that the Russians finally understood that, you know, they’re really not going to get South Stream.  And I think the Russians also understand that for the foreseeable future, one way or another – at least on the energy side – they’re going to have to deal with Ukraine and deal with the EU going through Ukraine.  I think that’s why you were able to reach an agreement, as tenuous as it might be, this past summer.

And I also think it’s critically important that the EU, as I’m sure you will, follow your own laws, because it’s much easier at the end of the day to rely on your legal system for the reasons of making it – for the reasons South Stream became impractical, than it being a political issue.  And it can be to some extent, at least, depoliticized by sticking to the laws and saying, as you said, hey, Russia or anybody else, you can do whatever you want in the EU as long as you comply – as long as you comply with our laws.  And I – and I think that’s absolutely critical.

Turk Stream and bringing gas down to Turkey and then back into Europe.  I learned 15 years ago when Blue Stream was being constructed – or was being proposed that – I never thought it would happen, but I learned never to say never.  So I’ll never say never, but it just doesn’t seem to be very practical.

MR. CAÑETE:  Yeah, the Russians are going to pay for the offshore part.


MR. CAÑETE:  They say so.

MR. KORANYI:  Speaking of reliance on legal frameworks and obeying the European Union legislation, what’s happening with the Gazprom investigation? 

MR. CAÑETE:  It’s on track.  (Laughter, laughs.)  Commissioner Vestager is following very closely, and that’s what I can say today.  It’s on track.  We are seeing all the legal aspects very clearly because it’s an important case and the European Union must be on a very sound legal basis.  As ambassador said very properly, we apply on our rules.  The commission is obliged to implement a community (liaison ?).  That’s the role of the commission.  But we must do it through a very good case.

Remember that the Russians have taken the third energy package with the European Union to the WTO, so they are questioning all our rules at the moment, right?  So this is a – even if the procedures are very slow.  But our investigations are on track and we will deliver in due course.  (Laughs.)

MR. KORANYI:  Thank you.

Before I throw the floor open to questions from the audience, just one last question.  There is this, as far as I understand, somewhat controversial idea about a joint gas purchasing agency on a European level.  And –

MR. CAÑETE:  No, we are not discussing an agency, no.  That’s a possibility that would be discussed on a voluntary basis.  It’s not for agencies.  It’s for companies, provided it’s – the compliance with WTO rules, with competition rules, with internal market rules.  So it’s something that’s being studied.  It’s not we’re making an agency of the European Union to buy gas, and it should be done in exceptional circumstances of security of supply.

But this – within the framework we are under it’s a possibility that’s been studied.  You remember well it was President Tusk from Poland who made the initial proposal at that time.  We are trying to assess the viability, but it’s not creating a European agency of purchasing gas, a new monopoly.  No, no, we are – we are free traders, my friend.  (Laughs.)

MR. KORANYI:  There are still some countries who hope about that, though.

MR. CAÑETE:  There is some confusion, but we – it will be made very clear.

MR. MORNINGSTAR:  You’ve raised all the possible issues with it.  All I – my only additional comment is I’m not holding my breath.  (Laughter.)

MR. KORANYI:  Let me throw the floor open.  Fran, if you could just briefly identify yourself.  Alex?

Q:  Fran Burwell from the Atlantic Council here.

Could you be more specific, Commissioner, about what you’re looking for in an energy chapter in TTIP?  My understanding from the American side is that if TTIP succeeds that the market-access issues will be resolved, but you mentioned also standards for the energy sector.  So could you say a word about what else you hope to achieve?

MR. CAÑETE:  No, we – for example, we would like it to address the problem of public intervention in pricing of energy, monopolies, dual pricing – different dual pricing for internal consumption, security in offshore drilling – that’s common rules for security in offshore drilling.  There are serious aspects that can be covered, and many more than can be developed.

The problem is energy is such an important chapter in the world, not in TTIP.  At the moment, energy is a – is a major concern in economic thinking, but it’s a major concern in geostrategical thinking also.  So it’s at – it’s in top on the political and economic agenda all over the world.  If we are going to make a 21st-century trade agreement which might be the model for the future, it’s worth having a look at energy. 

Energy is not like other commodities.  It’s not – it has goods – aspects of the goods regulation.  It has aspects of the services regulation.  But there’s many other aspects, no?  And it’s not very well covered, we understand, in traditional trade agreements.  But that is a possibility if there is – if there is not an energy chapter, what we would like is alternatives, we’ll look at – on other chapters, no?  But it’s worth looking, solving problem.

Now we are facing problems, for example, in biofuels with the different sustainability criteria.  We are facing problems with our bundling, which prevents American companies who want to invest in our grids to do so if they own power plants in the United States.  So there are many areas in which we can accommodate in a – in these difficult trade negotiations, which are going to be – of course, they are not this year. 

If they happen this – the trade agreement we have done much – earlier before.  But when two blocs of this nature, of such importance, make a trade agreement that can be the model for the future, for us, it’s of the utmost importance, TTIP.  We attach it the utmost importance, and we will have the closest cooperation with the American administration to do it, a very balanced and sound agreement.  And you have very good negotiators and – but we also have them.  (Laughter, laughs.)  Cecilia Malmström is a very good one, but your United States trade is also outstanding.  So they will reach compromises, I’m sure.


MR. KORANYI:  Just to put you on the spot there, a follow-up on Fran’s question.  My understanding is that there is a fair amount of hesitation or reluctance on the American side.


 MR. CAÑETE:  It is, it is, it is, it is.

MR. KORANYI:  How do you – how do you explain that?  Why is this imbalance perception?

MR. CAÑETE:  You have lots of experience in trade agreements.  Usually energy has not been in any of them.  It’s a new item.  And I think it is very well-addressed in other chapters.  And that’s one the messages – (inaudible).

There is not a lot of (interest ?), yes, if I may say so, but I came, yes, to explain the case, make clear our position.  We have submitted a draft to American administration in 2013.  With all it was contains, it was filtered through the Huffington Post immediately – leaked, no?  (Inaudible) – leaked, leak – (inaudible).  But it was there, so.  But in the end the important thing is that the treaty reflects very well all the substantive aspect that may make trade and investment in the – in the energy sector very clear cut for everybody – for us and for you.


MR. MORNINGSTAR:  I don’t have a whole lot to say about it.  Frankly, I’m fairly agnostic with respect to the issue.  I know that the – our administration is not – is not in favor of it.  I’d want to – I would want to understand more what would the energy chapter in fact be?  What would be in it?  Can it be better – can it better be handled in other – in other fora or not? 

And my guess is, is that the TTIP is going to be – as you said, is going to be extraordinarily difficult.  And maybe it’s as simple as not want to – not wanting to have another complicated section that may be – you know, that may be unnecessary.  On the other hand, it might turn out that there’s not a whole lot of downside to it.  So I think we just have to see how the discussions – you know, the discussions work out.

MR. KORANYI:  Exhibit A, the imbalanced perceptions between the U.S. and the European Union, not including energy in TTIP.  Please.

Q:  Hi.  Lisa Friedman from ClimateWire.  Thanks so much for doing this.  How nice to see you outside of the madness of Lima.

I wanted to steer this towards the Paris negotiations.  You talked about, a few minutes ago, the importance of a legally binding agreement.  The U.S., of course, does not want a legally binding agreement.  Do you see a compromise on that?  And where is the compromise?

MR. CAÑETE:  The European position is very clear.  When we are in Paris, we will defend this binding agreement, clear targets, accountability and that everybody’s committed to fulfill the compromise, no, within that – the structure of a legal – of a protocol.  It’s the good one, but there are other views.  And in international negotiation, there is always – there are always compromises. 

But our starting position is very clear-cut.  We maintain a dialogue with our American friends to understand which are the preferred formula.  There are also countries like New Zealand which are very – they have positions very similar to the ones from the United States.  And always when we go to these COPs there is room for compromise. 

We went to Lima.  We wanted many things.  We obtained some of them, others not.  For example, for the European Union, it is very important to have an assessment system of the places of the different measures under the United Nations framework.  We didn’t get it.  But nevertheless, we supported the agreement. 

We are in permanent contact to understand well how the United States wants to deliver fulfillment of the compromise if the targets are not in the binding part of the agreement.  It’s an ongoing process.  We will arrive to Paris.  And the good thing in Paris is that all the countries make mitigation commitments and they are important enough to cope with the requirements of science.

MR. KORANYI:  Ariel.

Q:  Ariel Cohen, Center for Energy, Natural Resources and Geopolitics.

In terms of diversification of sources of natural gas, Eastern Med presents vast resources, regulatory mismanagement and geopolitical problems.  You could, theoretically, encourage Turkey to provide a corridor for both Israeli and Cypriot gas.  If Turkey is – if you’re open to moving forward on expanding – (inaudible) – with Turkey.  What is your view of five to 10 years perspective on Eastern Med for – as a source for the EU?  Thank you.

MR. CAÑETE:  I am not very – I am not very optimistic in the next five years that we can open new possibilities.  We are going to stick to working on the actual framework that will take us efforts during the next five years to develop, but I’m not so clear that we can open Israeli possibilities, Cyprus and Turkey.  Turkey’s going to concentrate themselves in building the new infrastructures under the Turk Stream, Russian and their parts, and it would be difficult to establish other projects.

In my opinion, for the next five years – but five years is a lot.  If you ask me, when I end my mandate in five years, probably I will have a different view.  But at the moment, I will concentrate more efforts in Turkmenistan, even if it’s impossible – and ambassador has more knowledge than me.

MR. MORNINGSTAR:  The Eastern Med makes Turkmenistan look simple. 

MR. CAÑETE:  That’s why!  (Laughter.)  That’s why.

MR. MORNINGSTAR:  But the – but the –

MR. CAÑETE:  Between two things that are fairly impossible, I’ll stick to follow-up your efforts.

MR. MORNINGSTAR:  (Laughs.)  But what’s just a shame about the Eastern Med is never has there – there never has been a – well, rarely is there a situation where there can be so much benefit to many countries and so many people where accomplishing it is so difficult.  (Laughter.)

MR. CAÑETE:  It’s only 2,000 years that the thing is going.  (Laughter.)

Q:  Thank you, David.  It’s Dana Marshall with Transnational Strategy Group.  And thank you, Commissioner Cañete, for condensing a huge subject into a short talk.

Talking about things that may be easy, let me turn to another possibility for Ukraine, and that’s your project of common interest, the Krk Island Project, Croatia.  I wonder if you could focus a little bit of attention on that.  I understand that you are going to be prioritizing that project, a study perhaps.  I wondered to what extent might American companies be able to be involved in that project.  Where is it going?  Is it a realistic possibility of getting LNG into that part of Europe?

MR. CAÑETE:  I’m sure we are going to develop because one of our part of diversifying supply routes and sources is develop LNG across all the European Union and establishing some hubs in the area.  So, for us, LNG is thus being a priority.  In the past it wasn’t.

Now we are going to try to develop all the interconnectors – an interconnector through France, through the Pyrenees and connecting Spain and France, to use all the net of gas plants that are across Spain.  And we have a surplus of capacity in Spain, enormous at the moment, and we don’t have capacity of making the gas flow through pipelines through France.  We are going to have a summit on the 4th of March with France, Portugal, Spain and the European Commission to try with solve problems and develop the connections.  And the right discussion now is that everybody wants to have a hub in his house.  The Greek (want that ?), Bulgaria has one, Croatia wants to have one. 

And a hub is not a political decision.  A hub is established because there’s (liquidity to this ?), there is regulatory security, there is facilities and it’s much more complex.  But everybody wants a hub, a gas hub, in Europe at the moment.  But there will be a clear – (inaudible).  Where, it’s up to –

MR. KORANYI:  Let me – in the interests of time, let me collect two or three questions and then we’re going to have to wrap up.

Sir, please.

Q:  Hi.  I’m Doug Hengel from the German Marshall Fund.

You said that in unity there is strength, and I think few would debate that.  But I would say that, the history of Europe’s discussions about energy policy, there’s been as much disunity as unity.  And I know you’ve solicited input on the energy union from some member governments and, based on their reactions – what’s leaked in the press – you have some views that would give more power to Brussels, others that want to retain national authorities on that.  So how do you achieve this solidarity and unity that you talk about when there’s so many differences among the member governments?

MR. CAÑETE:  If I can answer this one, the project of energy union have full support.  Then, when we start applying and you start to regulate and things, you may have some opposition in some countries.  Mainly, we face problems with coal because, in order to maintain our core production and power plants with coal, we have to deliver that carbon capture and storing techniques are efficient.  And that is a main problem.  But there’s full unity. 

Now nobody discuss the first chapter of our energy union, which is security of supply.  In the markets, everybody wants intelligent grids and wants interconnection.  There are some problems with interconnections, but broadly there is huge support for developing further interconnections for the Baltics, for the Iberian Peninsula.  There is also support for the – for synchronizing the Baltic electricity grid with Europe, and they synchronize with the Russian system.  There is full support for that.

Of course, if you propose to have a single regulator in the European Union, it will be fairly impossible.  But if you propose that ACER, which is the association of regulators, may – is more active – (inaudible) – we have delivered a system of unity.  Our TCOs are integrated in our European association.  They stand – that’s unity.  We are approving network codes that are making that all our grids can talk with each other and we can control them.  There are many, many elements. 

Of course, there might be disagreement, but in renewables our problems – everybody is developing renewable.  The problem is that we have to harmonize state aids so that there is a playing level field of competition amongst member states.  Up to now, there has been full support.  When we can implement the legislation, things become more difficult, of course.  But the general ideas, that we have a wholesale market that works and a retail market that doesn’t work and needs streaming, is important. 

That we have – we must (afford ?) the problem of capacity markets and reserve capacity at the – with some European coordination is established.  It’s not easy, speaking with 20 member states.  It’s not easy at all.  But I think we will be able to make progress.

MR. KORANYI:  One final question, please, in the back.

Q:  Brian Beary, Washington correspondent Europolitics. 

You mentioned on TTIP that you’d like gas imports to – free trade in gas imports.  You didn’t say anything about oil and the U.S. ban on exporting crude oil.  Is that just because gas is what Europe is more interested in importing from the U.S.?

MR. CAÑETE:  No, I mentioned gas by accident, but oil also is included.  No, I didn’t – I was not excluding anything, OK?  Anything, you know?

MR. KORANYI:  That was an easy answer and the perfect end, I think, so –

MR. CAÑETE:  The problem is I am leading these days with the problems of guarding the gas supply winter – for the next winter.  But I am obsessed with gas at the moment – (laughter) – and forget that oil is also present in the U.S. 

MR. KORANYI:  We wouldn’t blame you for that.  So, with that, the commissioner has to catch a plane.  So I just want to thank him and thank Ambassador Morningstar for joining him for this splendid discussion.  It was a very rich discussion – unfortunately, rather short.  But we are hoping to get the commissioner back at some time later this year to talk about the progress he achieved on all these issues.  So, Commissioner, thank you so much.  (Applause.)

MR. CAÑETE:  Thank you, Ambassador.  We will miss each other.  And when I am in Turkmenistan, I will remember it.