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Home , Margaret Thatcher

HOMf " 7 ENS’95 Conference Seminar on Sustainable Energy Production and Consumption, Stavanger, Norway, 23 August 1.995 NEI-NO—704

ENERGY CHARTER AS MEANS OF ACHIEVING SUSTAINABLE ENERGY PRODUCTION AND CONSUMPTION .RECEIVED Address by R.F.M. Lubbers, , The Netherlands QQJ f b 193B OSTI The Conference on the European Energy Charter came to a conclusion on the 17th of December 1994 at Lisbon, where signators of the final act of the Conference of 50 states of the European Commission participated. On that occasion that final act was

signed by 45 states and the European Commission, and the resulting Energy Charter

Treaty, and its protocol on Energy efficiency and the related environmental aspects, were signed by 41 and 39 states, and of course by the European Commission.

I am citing a document of the International Energy Agency by illuminating for those who are interested more in particular, about what is happening therespeaking about truce? ft A ATP

I thought maybe it is better that I go back a little bit in history. From 1994 then come

back of course to the future, to describe for you a little bit how it came to such an initiative. It was in the spring of 1990 that we had this very special situation, the end of thecold war, the end of , what was going to happen? And we, that is the

members of the , the European Community still at that time, not the , were preparing a meeting iuDublin, in Ireland, in June that year, and I was one of the members. I got some reports being the Prime Minister, about the opinions of our German friends, our French friends and our British friends, and it was clear that there was a strange situation to that extent that everybody was enthusiastic and wrote to each other and said toeach other: we have to do something now to heal

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Portions of this document may be illegible in electronic image products. Images are produced from the best available original document. Europe, tounite Europe, but how to do that, and there there were strong differences of opinions.

I remember that President Mitterand supported to a certain extent by the

Helmut Kohl, was very much in favour of the credit instrument, which would involve

large sums of money and finance them to make it possible for them to recover, sort of

martial plan you could say. Margaret , the British Prime Minister of that time, was very sceptical about this.Nonsense, and when she said nonsense, she meant

nonsense. was basically at the side of President Mitterand but had his doubtsa little bit, and had of course his own agenda thinking ahead already about the

relation to unification and of what kind of money that would be needed ,and what sort of

deals to be made with the Russian authorities, would it be possible for them to achieve

that.

Anyhow, there was not a clear-cut decision of Jacques Delour,the President of the Commission. It was impossible for him to do because of thesedifferences, and then myself preparing myself for that meeting, it came to my mind as a former minister responsible for economy and energy, that maybe we could do something with the theme

energy. Why that?

There were several reasons for me to be thinking in that direction. I thought we need an instrument, an instrument for-real investments in the former . It is more important with real investments than financing investments. Anyway, we have to bring there the know-how. This will be for a certain period an economy in transition which will badly need know-how to give shape and substance to another form of economy. And I think maybe here we can give some form of textbooks, economists and money, but will that do the job, or will they need many skills of capacities,technical knowledge, and is that not very much related to real investments?

2 My second thought was thinking about real investments. I think that energy is a very goodone, because in our part of Europe those who are active in energy are able public

companies or let us say market orientated companies,not just the national companies, but all those people working there have something in common, they realise that energy is just not another product, it is always done in a concept of a combination in order to be efficient according to the systematics of market economies. But at the very same time it is related to responsibilities of government, so they give it a certain room and space to do your business with the same always between business and government. So that could be attractive because the people there knowing that sort of business could convey more easily their knowledge, technological and managerial, how to run a company to that part of Europe.

Another consideration, just the thinking about the economic potential, of the former

Soviet empire. It was very clear from the outset that they had an enormous potential in energy, and that it could be attractive to explore that and to get the currency to finance other investments they needed.

The final element in my personal analysis was that I knew a little bit from being in the field of energy that we needed an increase in production. I did not foresee'at that time the shrinkage so far of the Russian economy itself, but I thought it would be wiser for the European continent to be not too dependant from other continents, especially not from the OPEC countries in the future. So that was another motivation, the geopolitical consideration for the continent, I mean Europe as such. So I brought that together in a system, it was called the Energy Charter, Co-operation of the European

States.

But now I have to admit one of my mistakes as well. I saw it as such an enormous opportunity in 1990 that my thinking was going back to the very beginning of the 3 European community, and many of you know how it began after the second world war,

for a political reason to avoid another war to start in Europe between France and

Germany. After all there was where it all began, in ‘45 and later on when the six

founding members, the Be-Ne-Lux, Italy, France and Germany went together.

And really it started with the very first initiative with cold and still communiting

because there was an analysis that was that of a strategic importance to organise to

take the teeth out of the monster making war to each other, so to say.

And I came to the conclusion that maybe we have to set not identical, but a little bit similar an energy community, community in that sense that we have a still and cold

community in order to be capable to realise things not only nice wordsand talksand

say to each other: would it not be a nice idea to work together and so on, but togive institutionalconcrete form to this idea.

Somy paper in Dublin was based on the consideration I’d just given to you, but an instrument suggested to see into the possibility of an energy community to heal, to unite Europe. At that time when I spoke about energy, it was real energy, not just oil and gas,

I includedcoal, I included nuclear energy, very much for safety reasons and environmental reasons. I mean the whole discussion of the dependency of OPEC goes

back for myself to 1973,first of all because at that particular period I was minister of the economic affairs, and the International Energy Agency we created in the spring of

1974 was just in order to have an answer to that.

But all of you know that since then the ecological aspects have become more and more important. 1990 was in that sense also different from 1973, so the ecological and security considerations were important for me and also for that purpose I thought about setting upa community to be effective, but that was one bridge too far . Because what

4 proved not immediately in Dublin, but quickly after, that there was an enormous resistanceagainst that aspect of my proposal. Why?

For several reasons. One of them was that at that very moment the European

Commission had begun to become active in liberalising the market for oil and gas in

Europe. That story which is going on still started at that period. So it was totally

contrary to experts in Brussels. himself said OK, but what is the most

important is the political concept that those people are active on energy. No my god, we

are just liberalising the whole thing if in those sowonderful cooperations that Mr Lubbers is describing between business and government is a wrong sort of co-operation. We should open the windows and make it a market thing as such.

And so said the large companies themselves as well. Not the national oil companies,my god, again this rat tapeof a community. But we thought we had overcome this, and more generally, all of us said this is triumph of market economy against plans economy, so the best we could do is a minimum of planning or no planning at all, let the market do the job. The three reasons against it, specialists in Brussels, multinationals and the general thinking in the market killed my idea immediately on that particular aspect.

But at the very same time politically the Helmut Kohl’s, the ’s, the Francois Mitterand’s but all the others, had said several times, and basically also Jacques Delors, we are in favour of that, we have to remember that in the autumn 1990 we had in Paris an important meeting in the context of the CEC and everybody - ; . applauded and it was in their communique which would give shape to this idea and so on and so forth, sowhat came, what was the result of all this? That gradually shifted, the original idea to a European charter which was signed to cumber many countries I can say thisa little bit modest with words, intentions but not more than that, it gradually shifted to the ideaof a treaty which is basically a treaty to protect investments and to purport investments. 5 The sectorial treaty, we have sort of treaties, protection treaties between countries but

this is for a sector and specific which you need of course when you think about transport for example and tax problems and what have you. So it shifted into that direction.

After some period in which it was considered as a hobby for a small group of people, it

came gradually to certain results . Why? The climate changed a bit in Europe itself, I

mean the European Commission, changed a bit its attitude, because they found out in their discussions with experts from the other side in the energy market in Europe that

it is a little bit too simple to say this is just a product. We are not going into details about that discussion, it has changed a bit, the results especially in Russia and other so-

called cis-republics were such that one was not enthusiasticabout a market system

only, so maybe we need such a thing.

And even multinational companieswere less negative because they said to me : we do not need such a treaty, but it could be handy if you have the negotiations with them, because then you can list the type of problems we have to face doing investments there, and then they can change their own laws and adopt tothe system, sort of a cheque-list

for us in our contracts, and hopefully their parliaments and their ministers willchange their attitudes, and in fact they proved to be right. Because especially the last year the duma was very active based on a number of considerations of that treaty which is now

signed, to come by the Russian republic and they are taking the consequences , for

excample the very important thing like national treatment, it should have the same treatment if you are an outsider coming to the country as a national company. I don’t

know if Norway is already that far in this situation as Russia, and yousay yes, yes, I hear.

So I find that maybe it is interesting for you tohear a little bit about the history of all this. Gradually it came to a modest treaty which was signed upon by I don’t know the

6 exact number of countries , certainly not by all. After I think some hesitation also

Norway signed it. Why a little bit of hesitation? '

If you are a producer and owner of natural resources the bells that ring of course is that

of suvereignity for our citicens, this is our property and so on and so forth. So it was not easy and also Russia itself in the beginning had big problems to see thisas a good idea.

As long as it brought them money and technology it was allright, but when obligations were involved and a certain loss of suvereignity it was more did , and then we had the

special complication which is still going on with the of America. I do not know if this was another mistake I made at the beginning. I designed this for the

European continent, but reflecting how to do it and how too implement it, I thought it might be useful to include from theoutset large counties like the United States and

Japan, of course as well and Australia, and what have you, but especially the United States became a problem for us, for us I mean the people who engineered all this.

There was partially of course the same feeling of that what I described, you just need the market system and the attitude of multinationals, but it was a little bit more involved, because when the processwas going on they started to realise that signing such an agreement as in Russia it is binding, it has obligations for the whole of the territory. The same happened in the United States and people of the hill there in

Washington became very scared about the possibility to explain that tothe more and more autonomous individual states in the United States of America, and uptil now the

United States have objections.

In private discussions they have sometimes told me another story because, we are living in the best of the world and they think it an excellent idea and you should sign it and you should try to convince all counties totie up to this treaty and it would then be the perfect instrument for us as well, because if it was implemented in the law system in the former Soviet Union and if you were accustomed tothat you can have profit from that as well, this is sort of a free rider situation, which was very attractive for them, and still very attractive.

Anyhow, I think this is an instrument and a tool that can be useful, but it is just a tool,

let us be frank about it. If business can be done without such a treaty, then we do not

need this treaty at all, and why should we do that. And some business is done, but it is

going rather slowly, and as I said earlier, my impression is that some of the needed

improvement in actual legislation is coming out of this treaty already, and it can be

useful also in the future when companies have a deal there that there is a possibility to go to the judge and say: listen, there is this treaty, this goverment cannot do thisor that, and that is a new thing in this investment protection treaty.

I do hope that as I said that it will not only be signed by all the old counties except the United States of America and still Canada has not signed,but that it will be ratified and that it can expanded into other areas. It is still a very modest treaty and we need it of course in both ways for new and exdsting investments, maybe we can broaden the scope a little bit further.

As I said I do not think it is useful to go into details of what is on the table, you have the

—^ documentation of the International Energy Agency and there will come this autumn a

special book by Thomas Welde, of TheUniversity of Dundee, a specialdepartment there which prepared all technical and juridical aspects of it. We are quite fascinated with it, but it will take up too much time here. • .

Allow me to say a few words more in this historical perspective and then maybe still * - ' have some time left for discussion. The ecological aspect, I mentioned it already, seems

to me very important, and the ecological aspect is related very much tothe transfer of

technology, and therefore I still think that the basic idea of energy co-operation theon

European continent, even when you would have started with the aspect of ecology, 8 would have been a wise proposition and still very important, and if what was told this morning, some companies like Ruhrgas, Gasoline?-, Gaz de France and others are going there, maybe some from Norway here as well is good in itself.

This morning I made a small remark about the political aspect of the whole of the

European continent to heal the political situation. If need be to discussthis further on,

I am prepared to dothat, but let me explain why I am a little bit fascinated by this aspect as well.

1973 I mentioned the oilcrisis, spring 1974 special conference in Washington, chaired by . I still remember Kissinger saying there: what we need in the United

States of America is autonomy, a balance in energy like for instance the Netherlands today. And he sincerely thought that would be possible. Later on he watered down this ambition, and he said : As long as we import not more than 50% is no problem. Last year, this year, it is already morethan 50 % imports in the United States. Nobody has a problem with it, it seems.

We have things under control, we were successful in the Kuwaiti thing, and what have you, and now America strong enough, we can’t afford that risk. I am not so sure myself, and we are not going to make the same mistake that at a certain moment we say: how stupid it was that we could not organise ourselves.

A further remark I want to make is on the scope of the several fields of energy. I found it a pity that in other areas co-operation is slower. I give you an example: Nuclear energy, the minister, said this morning to leave it out because there are uncertainties and risksand leave it out, but there is a reality of nuclear of course, especially in the former Soviet Republics, and this is in my opinion a side of Europe that is a little bit underdeveloped.

9 There the strange thing is that have in certain areas a very concrete co­

operation, for example in their success of ending the and thedemolishing of

the former missile systems, and why was this? There was a deal made between the

United States and the former Soviet Union to utilise the uranium plutonium coming out

and make it such that it can be used in the nuclear units in the United States or in

improving the units here of course, but it was bought by the Americanswho havea control on it. They have done the deal for 50% of the storage, the other 50 % is just in the air there with all the risks of course of pleurifiration? and what have you of selling it

out.

So this is one element. Coal was not very much pleaded for this morning, neither by the Minister, but there is a reality of course in central and eastern Europe of coal, but not only there, but also in other countries and continents. I think technological advance in

using coal is of enormous importance and I am very happy that there is such a progress, as I said this morning in the utilisation of coal.

^ So I do dope that some part of my original ideas about co-operation in the energy part in

the co-operation between former central and eastern Europe and this western part will

get more substance in the future. ..

Is it all going too slowly? I have two remarks, from one aspect yes, if we hear or saw these conferences the enormous damage which is going on and the risks and

uncertainty, then we really need to go fast. At the very same time when I myself a little bit disappointed it took somuch time to come from such an idea in 1990 and to 1994, in December, one concrete result and then it will take still further time .

I studied a little bit in theother initiatives of the past. Then I realised for example that

our famous GATT system, we are talking trade as well here, starting when was it, in 10 1947 or 1948, immediately after the second world war, took a very long period before it became a really efficient and effective system.

So that I shall add to the picture so what we really need here, and where I had my short introduction, is the ambition and I am talking now as a European, the first place to see that energy is a basic thing also in relation to ecology and that it is essential to find an answer on the continental scala, integrated continental scala, and as Dutch former Prime Minister I had of course to that some hope that it has to be part of an international co-operation, transferring technology to other continents, working together and so on and so forth.

Thank you.

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