EU-Russia Dialogue on Gas: Roadmap and Beyond Gas Advisory Council Meeting Brussels, 14 June 2013

Roadmap: what’s for EU/RU gas relations? General Reference for EU-RU dialogue on gas; Non-binding, mutual advantages; Respect for sovereign energy policy decisions; Less uncertainty in long-term EU-RU gas relations; Identified risks aiming to achieve a "tolerable level of uncertainty" in long-term EU-Russia relations; Agreement on the main drivers, common themes, challenges and "no-regrets" options.

Input to the Roadmap: Expert reports from July 2011, Russian 2030 Energy Strategy, EU Energy Roadmap 2050, Other scenarios such as the IEA WEO Activity and reports of various TGs of the Energy Dialogue Serious work done, with serious input. However, expert reports, strategies, IEAs Outlooks are few years old; markets changing fast: will have to be revisited. This is a "living" document. Forward looking, regularly updated recommendations: a role for GAC

Input to the Roadmap: Gas chapter: most ambitious and challenging part of Roadmap. Discussions/reports/outcomes of the Gas Advisory Council – key input. The GAC to remain a main forum for Roadmap follow-up. Valuable GAC input in developing the chapter and reaching an understanding: Agreeing on the gas chapter of the Roadmap was by far the most challenging undertaking in the context of the ECRM negotiations. Should not create an extra group to do the implementation monitoring on these very specific issues: gas discussions should remain in the GAC, which brings the right people to do that.

Challenges ahead EU Russian Federation Completion of internal (gas) market Diversification of imports, pricing Investment – infrastructure to achieve key energy policy objectives Decarbonisation policy Regulated gas market, export monopolies Diversification of exports, pricing (Foreign) Investment - production Modernisation: economy and the energy sector Gas market dynamics: more questions than answers. Enhanced flexibility of gas markets brings more risks and uncertainties. Players need to reconfigure how to operate in the fluctuating environment. Work of GAC particularly relevant in this context (reducing uncertainties, info exchange with each other, stakeholders, policy-makers). Ground work on questions that are raised on the highest level by market players and politicians. Demand/Pricing: More flexibility in gas pricing structures today= more predictability in terms of gas demand in Europe. Further work on this in the WS would be useful Infrastructure, 3rd energy package: RU expressing discontent with an increased level of uncertainty. EU forthcoming and offering discussions (3rd package, SouthStream) and tailored solutions (Yamal, OPAL) in the context of the EU’s regulatory framework. Legal basis: need to advance on the energy provisions in the New Agreement negotiations. …and a weak legal basis for EU-Russia energy relations

Follow-up: GAC role ∙ Elaborate forward-looking recommendations to mitigate supply/demand and political risks. ∙ Work on concrete themes of cooperation of mutual interest to both sides: Energy Efficiency Alternative uses of gas, including in transport Development of CCS projects Pricing Approximation of market/trade rules Clear role for GAC: it is entrusted with elaborating forward-looking recommendations to mitigate the supply/demand risks and political risks in the EU-Russia gas relations. A broad mandate to issue recommendations on a broad range of topics. . Should focus on a few concrete issues where GAC's recommendations would be most useful. The GAC could identify/ agree on 2-3 of such key issues from those outlined in the Roadmap and prepare clear recommendations for the Energy PPC in 2014. On Approximation of rules: Should shift the focus to discuss more the situation in Russia: market, policies and agenda. Could only see the points of convergence if have enough info on the state of play on both sides. Approximation/Convergence of rules fit nicely into the overall EU-Russia Partnership for Modernisation agenda. Progress on the New Agreement negotiations would be a major step in this direction.

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