Gas Transit in Eurasia: Transit Issues between Russia and the European Union and the Role of the Energy Charter

Abstract

This paper deals with the structure of the legal relationship relating to gas supplies and, specifically, to gas transit issues between Russia and the EU. The first section examines the evolution of the contractual structure of Soviet/Russian gas supplies to Europe, based on the Groningen (Dutch) concept of long-term gas export contract (LTGEC). The second section analyses new transit risks, both within and outside the EU, in the gas value chain of Russian gas supplies to Europe (within the area of responsibility of Russian exporters); these transit risks appeared after dissolution of the COMECON and the USSR. The paper then provides a more specific analysis in the third section of the new transit risks outside the EU which reflects the result of steady move from political to market-based pricing within CIS and, in section four, new transit risks within the EU which reflect the liberalisation processes within, and enlargement of, the EU energy market. Solutions for transit risks and where they are best provided -within WTO or ECT and its draft Transit Protocol – are examined in section five and section six examines, one by one, the key debated transit issues and draft solutions within Energy Charter framework, including the new Russian initiative (of 21 April 2009) on the new international energy order. The conclusions contain a road map to finalise the draft Transit Protocol to allow Russia to ratify the ECT.