European Upstream Energy Cooperation: Political Risk, Milieu-Shaping and Politico- Commercial Relations in the Caspian Sea Region
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EUROPEAN UPSTREAM ENERGY COOPERATION: POLITICAL RISK, MILIEU-SHAPING AND POLITICO- COMMERCIAL RELATIONS IN THE CASPIAN SEA REGION Edward James Armstrong Stoddard The thesis is submitted in partial fulfilment of the requirements for the award of the degree of Doctor of Philosophy of the University of Portsmouth. Submission: December 2013 ABSTRACT The development of an energy role for the European Union has been a divisive area of EU policy. The competing interests and differing perspectives of member states, EU institutions and commercial energy players have hampered the development of downstream European internal energy markets, obstructed the construction of mid-stream transportation routes that would diversify European energy supplies and hindered the EU’s ability to ‘speak with one voice’ towards major suppliers. However, despite widespread scholarly coverage of EU energy issues, the tri-lateral upstream interaction between European institutions, member states and energy companies in the countries where oil and gas are produced has received less academic attention. This thesis seeks to address this lacuna in the literature through an examination of upstream intra-EU cooperation in the Caspian region. This study finds that the EU’s upstream oil and gas policy in the Caspian is, relatively speaking, more coherent than many other areas of European energy policy. In the Caspian, European convergence forms, in particular, around the EU’s collective political risk mitigation and market facilitation role. Employing an interdisciplinary International Political Economy approach, the thesis examines how the EU’s model of European energy supply entails dependence on the commercial sector which compels political actors to support companies in strategic regions through milieu- shaping energy governance and commercial (energy) diplomacy. The thesis demonstrates how European actors share similar upstream risk perceptions, promote overlapping security and market-based policy perspectives and how both member states and companies increasingly encourage an EU foreign policy role in meeting these upstream challenges. In doing so, this research examines the EU’s risk-mitigating external energy governance, the EU’s diplomatic practice in upstream energy and the dynamics of European politico-commercial interaction in the Caspian - core aspects of an under- researched, but ultimately increasingly cooperative, part of EU external energy policy. i CONTENTS ABSTRACT ................................................................................................................................................................. i DECLARATION ..................................................................................................................................................... vii LIST OF TABLES ................................................................................................................................................. viii LIST OF FIGURES .................................................................................................................................................. ix ABBREVIATIONS ................................................................................................................................................... x ACKNOWLEDGEMENTS .................................................................................................................................... xii RESEARCH DISSEMINATION ........................................................................................................................ xiii PUBLICATIONS AND ABSTRACTS ......................................................................................................... xiii CONFERENCE PAPERS GIVEN ................................................................................................................ xvii CHAPTER ONE ........................................................................................................................................................ 1 EUROPEAN UPSTREAM OIL AND GAS COOPERATION IN THE CASPIAN: RESEARCH AIMS AND CONTEXT ........................................................................................................................................................ 1 Thesis focus ..................................................................................................................................................... 5 THE ARGUMENT: ENERGY SECURITY RISK, POLITICAL RISK AND POLITICO-ECONOMIC COOPERATION IN UPSTREAM ENERGY ................................................................................................. 7 Theoretical approach ............................................................................................................................... 10 RESEARCH AIMS AND QUESTIONS ........................................................................................................ 16 CHAPTER OVERVIEW .................................................................................................................................. 17 RESEARCH CONTEXT: A REVIEW OF RELEVANT THEMES IN THE LITERATURE ............ 19 The persistent difficulties of forming a coherent EU energy policy: A hesitance to cede sovereignty in a strategic area ............................................................................................................. 19 The multiple challenges of the Caspian: Post-Soviet rentierism, resource nationalism and regional competition ................................................................................................................................ 27 EU Upstream energy policy in the Caspian ...................................................................................... 38 Politico-commercial relations in foreign energy policy ............................................................... 42 CONCLUSION ................................................................................................................................................... 47 CHAPTER TWO .................................................................................................................................................... 49 THEORISING EU ENERGY COOPERATION IN THE CASPIAN REGION ......................................... 49 Eclecticism and the philosophical approach of this thesis.......................................................... 50 THE NEED FOR AN ECLECTIC APPROACH TO THEORISING ENERGY INTERACTION IN THE CASPIAN .................................................................................................................................................. 53 Current conceptualisations of European energy policy: Explaining policy failure and divergent politico-economic ontologies ............................................................................................ 54 A POLITICO-ECONOMIC FRAMEWORK OF ANALYSIS FOR ENERGY POLITICS .................. 60 ii USEFUL THEORY: HEURISTIC THEORETICAL MODELS FOR THE STUDY OF EU UPSTREAM COOPERATION IN THE CASPIAN ................................................................................... 68 1. Analysing the structural challenge of the Eurasian operating context: Territorial non-coincidence, politico-economic heterogeneity and natural resource-based interdependence ......................................................................................................................................... 68 2. Analysing the EU’s upstream role and objectives: Milieu-shaping and state economic functions .................................................................................................................................... 72 3. Analysing EU upstream cooperation: Market-authority ‘bargains’, catalytic diplomacy and resource dependency.................................................................................................. 79 CONCLUSION ................................................................................................................................................... 83 CHAPTER THREE ................................................................................................................................................ 84 RESEARCH METHODS ...................................................................................................................................... 84 VALIDITY, TRANSFERABILITY AND EMPATHETIC NEUTRALITY ........................................... 84 Internal validity .......................................................................................................................................... 85 Transferable but not generalizable .................................................................................................... 87 Empathetic neutrality: Avoiding bias ................................................................................................. 87 CASE STUDY: THE CASPIAN REGION .................................................................................................... 89 DATA COLLECTION AND ANALYSIS ...................................................................................................... 90 Data Analysis ............................................................................................................................................... 93 CONCLUSION ................................................................................................................................................... 95 CHAPTER FOUR .................................................................................................................................................