European Neighbourhood Watch

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1 European Neighbourhood Watch Issue 17, June 2006 Editorial. This mid-summer season sees two dominant activities for the EU s wider European policies, first evolution in next stages of enlargement and neighbourhood policies, and second attempts to define its energy security interests, especially with Russia. In the first category the European Council adopted some significant texts. There are movements in relations with a continuous chain of states from Croatia though the Balkans to the Black Sea. For Bulgaria and Romania the EU remains convinced that accession can become possible on 1 January While Croatia s candidature seems straightforward, Turkey s is hedged with tricky conditions, which are only implicit in the text. Effectively the text is asking for Turkey to recognize the Republic of Cyprus, which for an independent observer - would itself be quite reasonable if the Greek Cypriot government would for its part agree to lift the trade and air blockade of Turkish Cyprus. This quid pro quo is proposed by Turkey, but the Greek Cypriot government seems adamant in vetoing this. The scenario is therefore one of the Turkish negotiations heading towards impasse, with consequential risks of serious political and financial tensions in Turkey. The rest of the EU should rise to its responsibilities here, rather than hide from them as at present. The Western Balkans receive reconfirmation of their European perspectives, Montenegro s independence is recognized, and a new agreement is signed with Albania. But Serbia is very unhappy, as a speech by Prime Minister Kostunica underlines. Romania hosted a Black Sea Forum in Bucharest. While not a decisive event in itself, this huge meeting served as a reminder by Romania that the EU is about to become a Black Sea power, which the EU itself seems to ignore still for the time being. An important piece of text is found under the heading General questions of future enlargement (see next page). This is inviting the Commission to prepare a special report on the EU s so-called absorption capacity for further enlargement. This obscure expression now becomes official Eurospeak for what is going to be a long and difficult debate on the EU s future enlargement policy. With the G8 summit in St. Petersburg due on July, there have been recently a series of texts from the G8 and the EU setting out positions on energy security. Is there to be any real deal at St. Petersburg, or just a load of fuzzy language? The acid test of this is whether Russia agrees with the EU on the draft Transit Protocol to the Energy Charter Treaty. Our impression is that the ongoing talks around this issue have been testing the possible ground for agreement, but that a real deal will be probably evaded. We would like to be wrong on this. Our next July edition will tell us. Table of Contents: ENLARGEMENT... 2 European Council Presidency Conclusions on Enlargement... 2 WESTERN BALKANS... 3 European Council Presidency Conclusions on the Western Balkans... 3 EU External Relations Council Conclusions on Montenegro... 4 Signature of an EU-Albanian Stabilisation and Association Agreement...5 Kosovo and the future of Serbia... 6 BLACK SEA... 7 Joint Declaration of the Black Sea Forum... 7 A Synergy for Black Sea Regional Cooperation, CEPS Policy Brief 105/June ENERGY & RUSSIA... 9 Pre-Summit Statement by G8 Finance Ministers... 9 European Council Presidency Conclusions on Energy An External Policy to serve Europe s Energy Interests, EU Commission Paper European Parliament Resolution on the EU-Russia Summit MIDDLE EAST European Council Presidency Declaration on the Middle East The issue is not whether Hamas recognises Israel EUROPE IN THE WORLD Europe in the World, Commission Communication Economic Review of ENP Countries... 19

2 ENLARGEMENT European Council Presidency Conclusions on Enlargement, Brussels, June Link Bulgaria and Romania [Extract] It is the Union's common objective to welcome Bulgaria and Romania in January 2007 as members of the Union if they are ready. On the basis of the Commission's Monitoring Report of May 2006 the European Council confirms this position. While commending both countries for the reform efforts undertaken lately, the European Council calls on Bulgaria and Romania to rigorously step up their efforts to tackle decisively and without delay the remaining issues of concern as mentioned in the commission's May 2006 report. The European Council remains convinced that, with the necessary political will, both countries can overcome the deficits stated to reach the envisaged date of accession on 1 January It therefore welcomes the intention of the Commission to present its next monitoring reports by early October at the latest. It encourages Member States to complete the ratification of the Accession Treaty on time. General questions of future enlargement The European Council reaffirmed that it will honour existing commitments and emphasized that every effort should be made to protect the cohesion and the effectiveness of the Union. It will be important to ensure in future that the Union is able to function politically, financially and institutionally as it enlarges, and to further deepen Europe's common project. Therefore the European Council will, at its meeting in December 2006, have a debate on all aspects of further enlargements, including the Union's capacity to absorb new members and further ways of improving the quality of the enlargement process on the basis of the positive experiences accumulated so far. It recalls in this connection that the pace of enlargement must take the Union's absorption capacity into account. The Commission is invited to provide a special report on all relevant aspects pertaining to the Union's absorption capacity, at the same time as it presents its annual progress reports on enlargement and the pre-accession process. This specific analysis should also cover the issue of present and future perception of enlargement by citizens and should take into account the need to explain the enlargement process adequately to the public within the Union. Turkey The European Council reviewed progress made in the acquis screening and welcomes the start of substantive accession negotiations with Turkey. Turkey is expected to share the values, objectives and the legal order set out in the treaties. The Union is committed to support Turkey in its efforts to comply with the Unions standards and membership obligations, including the Copenhagen criteria. The European Council recalls, in line with previous conclusions, that the current negotiations are based on each country's own merits and that their pace will depend on each country's progress in preparing for accession measured against the requirements set out in the Negotiating Framework. This includes the fulfilment of Turkey's obligations under the Association Agreement and under its Additional Protocol, full implementation of which will be evaluated in 2006 as agreed in the Declaration of the European Community and its Member States of 21 September 2005, as well as the implementation of the revised Accession Partnership. The European Council recalls that the Council will ensure, in the course of 2006, a follow up on the progress made on all the relevant issues included in the above mentioned Declaration. The European Council calls on Turkey to intensify the reform process and to implement it fully and effectively, so as to ensure its irreversibility and sustainability as well as to progress towards the complete fulfilment of the Copenhagen political criteria, including the commitment to good neighbourly relations. In this context, any action which could negatively affect the process of peaceful settlement of disputes should be avoided. 2

3 Croatia The European Council reviewed progress made in the acquis screening and welcomes the start of substantive accession negotiations with Croatia. Croatia is expected to share the values, objectives and the legal order set out in the treaties. The Union is committed to support Croatia in its efforts to comply with the Union's standards and membership obligations, including the Copenhagen criteria and good neighbourly relations. The European Council recalls, in line with previous conclusions, that the current negotiations are based on each country's own merits and that their pace will depend on each country's progress in preparing for accession measured against the requirements set out in the Negotiating Framework. This includes the fulfilment of obligations under the Stabilisation and Association Agreement as well as the implementation of the Accession Partnership. The European Council encourages Croatia to continue its reform efforts and to achieve sustainable progress towards the fulfilment of EU standards. WESTERN BALKANS European Council Presidency Conclusions on the Western Balkans, Brussels, June Link Western Balkans [Extracts] The European Council reconfirmed the European perspective of the Western Balkans as set out in the Stabilisation and Association Process, the Thessaloniki Agenda and the Salzburg Declaration of March In this respect, the European Council confirmed that the future of the Western Balkans lies in the European Union. Each country's progress towards the European Union will continue to depend on individual merits in meeting the conditions and requirements set forth in the Copenhagen criteria and in the Stabilisation and Association Process, including full cooperation with the ICTY and maintaining good neighbourly relations. All Western Balkan countries have in the last year made significant steps along their road towards the EU, with EU membership as ultimate goal in conformity with the Thessaloniki Agenda. The Council welcomed the initial progress made in the implementation of the Commission's Communication "The Western Balkans on the Road to the EU: consolidation stability and raising prosperity". The European Union will continue assisting the Western Balkan countries through practical measures to make the European perspective more tangible and is looking forward to concrete results in the near future notably in areas such as regional free trade and visa facilitation in line with the common approach. The European Council welcomes the intention of the Commission to extend and to intensify its cooperation with the European Investment Bank and other international financial institutions in the Western Balkans with a view to taking appropriate measures aiming at a finance facility for the Western Balkans. ANNEX II [ ] Declaration on Western Balkans The European Council reaffirmed its full support for the agenda set out at the Thessaloniki Summit in 2003 and for the Stabilisation and Association Process. A peaceful and prosperous Serbia fully integrated into the family of European nations is very important for the stability in the region. The European Council, therefore, recalls that the European Union is willing to resume negotiations with Serbia on a Stabilization and Association Agreement as soon as full cooperation of Serbia with the ICTY is achieved. 3

4 The Union maintains its support to the ongoing talks about the future status of Kosovo led by UN Envoy Martti Ahtisaari and stresses the crucial importance of moving forward on the implementation of standards in Kosovo. In close consultation with key international actors, the European Union stands ready to enhance its role in Kosovo following a status determination, in particular in the areas of police, rule of law and the economy. The European Union and its Member States have already agreed to develop their relations with Montenegro as a sovereign, independent State. The European Council calls on both Serbia and Montenegro to pursue a direct and constructive dialogue on their future relations. The European Union will continue to assist Bosnia and Herzegovina in ensuring stability and progress on key reforms. It urges the Bosnian authorities to ensure real and tangible progress in the implementation of police reform in order to maintain momentum in the Stabilisation and Association Process. The European Council underlines the importance of proceeding with constitutional reform. The European Council calls on all parties in the former Yugoslav Republic of Macedonia to ensure that the parliamentary elections on 5 July are conducted in line with international standards. with Albania and calls on Albania to push ahead with its reform agenda. The European Council strongly encourages regional cooperation including through the South East European Cooperation Process (SEECP). It welcomes the initiative for a regional free-trade area launched in Bucharest on 6 April, as well as the signing of the agreement on a European Common Aviation Area with the countries of the region on 9 June, and progress made in the ratification process of the Energy Community Treaty for South-East Europe. The European Union will continue to back its policies for the Western Balkans with commensurate financial assistance, particularly through the Instrument for Pre-Accession Assistance to be introduced next year. The European Council is conscious that the question of visa facilitation is particularly important for the people of the countries of the region. The European Union therefore hopes to adopt negotiation mandates for visa facilitation and readmission agreements in the course of this year, in line with the common approach to the development of the EU policy on visa facilitation agreed in December 2005, so that negotiations can be concluded as soon as possible, ideally in 2007 or earlier where possible. The European Council welcomes the signature of the Stabilisation and Association Agreement EU External Relations Council Conclusions on Montenegro, Luxembourg, 12 June Link The Council has taken note that, on 3 June 2006, based on Article 60 of the Constitutional Charter of the State Union of Serbia and Montenegro and following the Montenegrin referendum of 21 May 2006, the Parliament of Montenegro has passed a Declaration on the Independence of the Republic of Montenegro which states that the Republic of Montenegro is an independent State with full legal personality under international law. Furthermore, the Council has taken note that, on 5 June 2006 following the above-mentioned Declaration, the Parliament of Serbia has passed a Decision that defines the Republic of Serbia as the continuing State of the State Union of Serbia and Montenegro. The Council recognizes that these Parliamentary Acts were taken in conformity with the arrangements and procedures foreseen in the Belgrade Agreement of 14 March 2002 as well as in compliance with Article 60 of the Constitutional Charter of the State Union of Serbia and Montenegro. The European Union and its Member States have therefore decided that they will develop further their relations with the Republic of Montenegro as a sovereign, 4

5 independent State, taking full account of the referendum result and the afore-mentioned Parliamentary Acts. Member States will take the subsequent measures implementing this decision nationally in accordance with international law and practice. their future relations. The European Union stands ready to support this dialogue. The Council reaffirms the European perspective of the Western Balkans on the basis of the Stabilisation and Association Process. The Council calls on Serbia and Montenegro to pursue a direct and constructive dialogue on Signature of a Stabilisation and Association Agreement between the EU and the Republic of Albania, Luxembourg, 12 June Link. Link to the Agreement At a ceremony held in Luxembourg on 12 June 2006 the Stabilisation and Association Agreement between the European Community and its Member States, of the one part, and the Republic of Albania, of the other part, was signed for the European Union by: Ms Ursula PLASSNIK, Minister for Foreign Affairs of Austria, President of the Council, Mr Olli REHN, Member of the European Commission, and, on behalf of the Member States, the Foreign Ministers or their representatives, for the Republic of Albania by: Mr Sali BERISHA, Prime Minister. On the same occasion, an Interim Agreement on trade and trade-related matters was also signed. *** The Stabilisation and Association Agreement establishes a comprehensive contractual framework between the EU and Albania. As such, it represents an important step on Albania's path towards the EU. Albania s relations with the EU have so far been covered by the Trade, Commercial and Economic Co-operation Agreement which was signed in May 1992 and entered into force on 4 December The Stabilisation and Association Agreement with Albania is the third to be signed with a country in the Western Balkans region. Similar have been signed and have entered into force with the former Yugoslav Republic of Macedonia (signed on 9 April 2001 and in force 1 April 2004) and with Croatia (signed on 29 October 2001 and in force 1 February 2005). Pending the ratification of the Stabilisation and Association Agreement, the Interim Agreement will allow the trade and trade-related provisions of the Agreement to enter into force as soon as possible. The Stabilisation and Association Agreement with Albania was modelled on the agreements with the former Yugoslav Republic of Macedonia and Croatia, apart from a number of provisions designed to reflect the specific situation in Albania. The agreement focuses primarily on the following points: provision for political dialogue with Albania; provisions on enhanced regional cooperation, including the perspective of establishing free trade areas between the countries of the region; the perspective of the establishment of a free-trade area between the EU and Albania within ten years of the entry into force of the Agreement; provisions on the movement of workers, freedom of establishment, supply of services, current payments and movement of capital; 5

6 the commitment by Albania to approximate its legislation to that of the EU, notably in key areas of the internal market; provisions on co-operation with Albania in a wide range of fields, including justice, freedom and security. provision for the establishment of a Stabilisation and Association Council which supervises the implementation of the Agreement, of a Stabilisation and Association Committee and a Stabilisation and Association Parliamentary Committee. The Interim Agreement and, subsequently, the Stabilisation and Association Agreement will replace the Trade, Commercial and Economic Co-operation Agreement between the European Community and Albania. The more favourable trade concessions granted by Council Regulation (EC) No 2007/2000 of September 2000 introducing exceptional trade measures for countries and territories participating in or linked to the European Union's Stabilisation and Association process will continue to apply, in parallel to the Interim Agreement and, subsequently, to the Stabilisation and Association Agreement. Issue of Kosovo concerns future of Serbia and all its citizens, Serbian Government, Press Release, Belgrade, 27 June Link Serbian Prime Minister Vojislav Kostunica delivered a lecture today at the Royal United Services Institute for Defence Studies in London, themed "Serbia on the Road to EU Integration" and said that Serbia would definitely refuse any imposed solution on the issue of Kosovo-Metohija. He said that in line with the Serbian parliament resolution, such a solution would be declared legally null and void, a decision that would find full support in a huge majority of citizens. Explaining how Serbia sees the problem of Kosovo-Metohija, Kostunica said that this issue is undoubtedly the greatest regional and one of the gravest European issues of today, mostly because the threat of violence permeates its very foundations. "Kosovo Albanians are demanding nothing but full independence and international recognition, and all of that at once, and, as the UN and EU know very well, they are prepared and capable of resorting to organised violence if their demands are not met", warned the prime Minister. "Serbia does not agree to indulge the one who threatens it and give up a portion of its territory contrary to international law as well as moral and legal considerations which the international community should be aware of", said Kostunica. "More or less discreet messages that have been arriving in Belgrade of late, heralding "some kind" of independence as Kosovo's possible future status, are discouraging and tend to neglect direct and indirect consequences of such an imposed solution", said Kostunica. He demanded that the international community shows more understanding and gives clearer criteria that would help remove distrust towards the authorities in Serbia and their efforts to eliminate the last "Hague obstacle". They could also show a more concrete sign of support, for instance when it comes to the visa regime, he added. Kostunica stressed that Serbia is getting tired of all the pressure and conditions, though it is beyond doubt still determined and ready to conclude cooperation with the Hague Tribunal. As for the extradition of Ratko Mladic, not only is there political willingness to locate him, but also absolutely all capacities that a democratic state can have at its disposal have been employed with this aim in mind, he said. He also said that throughout European and even world history, it would be difficult to find "a precedent for such an enormous need to isolate and eliminate one single man", which nevertheless does not change the position which Serbia and Serbian people are in at the moment. 6

7 "I believe that in such a position, Serbia has the right to know in what way it can prove that it is doing everything in its power to fulfil its obligations", concluded the Prime Minister. BLACK SEA Joint Declaration of the Black Sea Forum for Dialogue and Partnership, Bucharest, 5 June Link We, Heads of State or Their Representatives from the Black Sea region: Republic of Armenia, Republic of Azerbaijan, Republic of Bulgaria, Georgia, Hellenic Republic, Republic of Moldova, Romania, Turkey and Ukraine; Considering the far-reaching democratic transformation process currently under way in the Black Sea Region, and its growing relevance in a globalised world, where increasing interdependence requires a new impetus to be given to regional cooperation, in line with the UN principles; Recalling the experience acquired from regional cooperation in South Eastern and Central Europe, the Baltic Sea and Northern Europe, which generated enhanced confidence among participating countries; Acknowledging that existing regional initiatives, processes and structures have so far fostered closer cooperation in the region and encouraged the participating countries to seek regional answers to their common challenges; Affirming the conviction that the States in the Black Sea Region should continue to uphold their responsibility for maintaining peace, stability, prosperity and good neighbourly relations in the Black Sea area, by utilizing effectively and efficiently all available organisations (BSEC), initiatives and processes in the area, contributing to democratic transformation and sustainable development; Emphasising that the evolving common security challenges in the region, such as those pertaining to energy, terrorism and WMD proliferation, environmental degradation, natural disasters, illegal trafficking, organised crime require correlated and cooperative responses of the countries in the region; Stressing that unresolved conflicts in some Black Sea states represent a challenge to security and stability in the region; Recognising that a reinforced strategy of an action-oriented nature, which will build upon the existing regional cooperation initiatives and make use of all other relevant mechanisms and programmes, as well as the contribution of interested parties in a complementary fashion, is needed to effectively deal with these common challenges; I. Hereby announce the launching of the Black Sea Forum for Dialogue and Partnership, a process that will serve as a regional platform designed primarily to define a common vision of democratic and sustainable development. The Forum will thus help consolidate regional commonalities, through providing new ideas and proposals for an intensified dialogue and cooperation within the Black Sea region, based on good neighbourly relations and effective partnerships, while taking full account of the existing regional and international endeavours that can be of assistance in the pursuit of this fundamental objective. The Forum will therefore provide an inclusive, flexible and open framework for generating new ideas, channelling and mobilising governmental and nongovernmental, regional and international efforts and resources in the pursuit of these goals. II. Agree that, in order to achieve the objectives of the Forum, the following areas of cooperation will be given priority: a) Fostering greater synergy among international and regional organisations to create political preconditions for the success of regional cooperation projects; shaping a common vision and setting a common agenda; b) Promoting good governance, strengthening of tolerance and non-discrimination, civil society capacity-building, empowerment of the youth through provision of better education and research opportunities, with a view to creating a 7

8 regional environment conducive to the promotion of democracy and fundamental rights and freedoms; c) Identifying regional means and capabilities that can be mobilised to ensure sustainable development through a more effective regional cooperation, and highlighting the role and active involvement of the business community to this end; d) Encouraging regional cooperation by pooling relevant national experiences and best practices, in crisis management, civil emergency planning, post-conflict reconstruction and environmental protection, putting regional priorities in conjunction with European and Euro-Atlantic developments in these areas; III. Agree that, in the future, we may decide on the inclusion of further priority areas for consideration within the context of the Black Sea Forum; IV. Welcome the increasing interest of the EU in the Black Sea region and take note with appreciation of the recent initiatives undertaken by EU member states, resulting in the undergoing efforts within the EU to elaborate a comprehensive regional approach for the Black Sea, which should significantly contribute towards achieving the goals we all share. In this context, we encourage the EU member states and the European Commission to make full use of their policy and financial instruments available for the region from 2007 onwards, including the European Neighbourhood Policy, the European Neighbourhood Policy Instrument (ENPI) and the Instrument for Pre-Accession (IPA). We also welcome the involvement of development, financial and cultural partners in the Black Sea region. V. Decide on the following principles and guidelines of the Forum: a) The Forum will have no permanent structures or bodies and it will not duplicate the activities of the existing mechanisms of cooperation in the region. The operational framework will be flexible and minimal, based notably on networks and partnerships. The envisaged cooperation among the participating countries will stem from intergovernmental interaction, public private partnerships, cross-national projects and interdisciplinary academic expertise. b) Consultations will continue, as and when required, in an effort to explore ways and means of further enhancing the contribution of the Forum to the regional cooperation including through the existing mechanisms. c) The Forum is open to the participation of every state in the region, as well as other interested partner organisations and states. Particular attention shall be given to engaging the representatives of regional and sub regional organisations and initiatives. The Forum will facilitate increased communication and interaction among regional stakeholders, state and non-governmental actors alike. d) Cooperation with the EU institutions for the implementation of proposals discussed within the Forum would be sought and based on the added value of these proposed projects to existing and future EU instruments, bearing in mind wider regional needs and considerations. e) The responsibility for the implementation of agreed projects (coordination, format of meetings, identification of donors and facilitators, etc) that are not funded by the EU in the framework of the Forum lies mainly with the initiating country/countries. A Synergy for Black Sea Regional Cooperation: Guidelines for an EU Initiative, by Fabrizio Tassinari, CEPS Policy Brief 105/June Link to the full paper [Abstract] This study advocates that the EU support a comprehensive, multi-stakeholder initiative to achieve synergy from regional cooperation in the wider Black Sea area. The background for this initiative is first provided through an overview of the challenges, recent developments and EU interests in this region. Different models of regionalism have been promoted by the EU in the European periphery, and these are schematised with a focus on their respective advantages and disadvantages. Finally guidelines for an EU initiative are set out under: 1) objectives and sector-specific actions, 2) its scope in terms of variable geographic 8

9 geometries of desirable cooperation in the region and 3) a Framework of institutional and financial arrangements to support the process. An overarching mechanism is required to give political cohesion, ownership, visibility and strategic purpose to the process, and this could well be based on an annual, high-level meeting, drawing on the model of the Black Sea Forum Summit in Bucharest on 5 June ENERGY & RUSSIA Pre-summit Statement by G8 Finance Ministers, 9-10 June 2006, St. Petersburg. Link We met and discussed today a number of global economic issues in preparation for the annual Summit of G8 Heads of State and Government in St. Petersburg. We also had productive discussions with colleagues from Australia, Brazil, the People's Republic of China, India, the Republic of Korea and Nigeria. 1. Global growth remains strong and is gradually becoming more broadly based. However, downside risks from high and volatile energy prices and widening global imbalances remain. We underline that global economic adjustment is a shared responsibility and re-iterate our commitment to address global imbalances. We are committed to fighting protectionism and to promoting liberalization of trade in agriculture, industrial goods and services, as well as of investment. We agreed on the importance for global growth of an ambitious outcome from the Doha Development Round and recognize that urgent progress is needed for its achievement. Many developing countries also need substantial aid for trade to help them take advantage of general trade liberalization. 2. We discussed the current situation in the energy markets and the risks that high oil prices pose for the global economy going forward. We call for comprehensive action by both energyproducing and energy-consuming countries to facilitate investment in the energy sector, improve energy efficiency, including through national initiatives, and promote greater transparency and reliability in energy market data, including through development of a global common standard for reporting oil reserves. We recognize the importance of the principles of the Energy Charter, of diversification of energy markets and supply sources, and of strengthened emergency response cooperation in ensuring energy security. We encourage the IMF and the World Bank to work with both energyproducing and energy-consuming countries to develop guidelines on appropriate policies to mitigate the adverse impact of high and volatile energy prices. 3. We discussed the importance of delivering the commitments made in 2005 to help developing countries achieve the Millennium Development Goals. In this regard,we reaffirm the importance of energy for development and are issuing a separate statement on this issue. We noted the particular importance of making further progress to achieve the goals of Education for All. We reiterate the Gleneagles commitment to help FTIendorsed countries to develop sustainable capacity and identify the resources necessary to pursue their sustainable education strategies. We look forward to a progress report on the FTI by the World Bank at the Annual Meetings. 4. We welcome the increasing role of new donor countries in financing development in lowincome countries. We call for enhanced coordination among all members of the growing donor community, and alignment of aid programs with partner countries' development priorities. We deem it essential to prevent the build up of unsustainable debt in low-income countries, particularly in those that receive debt relief under the HIPC Initiative and the MDRI. We urge all donors to take account of debt sustainability issues in all their lending practices and share fully information on their lending to low-income countries. We congratulate the Paris Club on the occasion of its 50-year anniversary and underscore its key role in promoting coordination for resolving international debt problems. 5. We re-iterate that the risk of an avian flu pandemic requires preparation through 9

10 facilitating cooperation across countries in drafting contingency plans, including for the financial sector. We appreciate the work undertaken by the IMF in promoting the common elements of business continuity planning and encourage further efforts in helping countries elaborate their own plans. We take note of the progress on innovative financing mechanisms. We thank the World Bank and GAVI for their technical work on Advance Market Commitments for vaccines and look forward to a successful launch of the AMC pilot project by the end of this year. We also call for mobilization of additional support to close the financing gap for polio eradication activities. 6. We acknowledge the importance of better financial education and literacy for improving the ability of people to use financial services and to make effective decisions with respect to their present and future welfare. We welcome the ongoing work in the OECD on the Financial Education Project and call for further development of financial literacy guidelines based on best practices. We support the proposal by Russia and the OECD to organizean international conference in Moscow on financial literacy in coordination with other relevant international bodies. We emphasize that improved access to financial services is a powerful tool of economic development. We call on the IFIs and other donors to support best practices in financial access programs and to improve coverage, accuracy and comparability of data on financial access and financial sector performance. We encourage efforts at the country level to remove obstacles preventing access to financial services, including lowering the costs of remittances. 7. Following on earlier G8 Summit declarations in support of the OECD's high standards of transparency and effective exchange of information in all tax matters, we welcome the report by the OECD's Global Forum on Taxation on progress made world-wide towards meeting these standards. We urge their full implementation everywhere they do not fully apply and look forward to the conclusion of tax information exchange agreements between OECD countries and financial centers. 8. We confirm our resolve to fight money laundering and terrorism financing and are committed to strengthening our systems for freezing assets and sharing information, and development of multilateral financial tools to disrupt criminal and illicit activities. We call for continued actions by all countries to strengthen their adherence to the FATF Recommendations. We support the regular comprehensive assessments of countries' compliance through the mutual evaluation process of FATF and the FATF-style regional bodies and the financial sector assessment program of the IMF and the World Bank. We call for closer cooperation among these institutions in order to deliver consistent and high quality assessment reports, share experience on assessment programs, provide additional training resources and analyze new trends and techniques. We also encourage all countries to publish their full evaluations. 9. We agree that responsible and effective management of public finances is of fundamental importance for achieving macroeconomic stability and sustainable growth, and provides the essential foundation for good governance. To this end, we support national and international initiatives to promote fiscal transparency, stable and sustainable public finances, integrated approaches to budget formulation and execution, performance-based budgeting at each level of government, mediumterm financial planning, and effective financial control, accounting and monitoring. We call on relevant international and regional institutions to strengthen the coordination of their initiatives fostering the application of existing international standards and best practices in the fiscal area, and agree to continue dialogue on further measures required to strengthen good governance in public finance. 10

11 European Council Presidency Conclusions on Energy, Brussels, June Link Energy [Extract] In its conclusions of March 2006 the European Council called for an Energy Policy for Europe and invited the Commission and the Council to prepare a set of actions with a clear timetable enabling it to adopt a prioritised Action Plan at its meeting in Spring The external aspects of energy security will constitute an important part of such an overall policy and will need to be included within the Action Plan. The European Council therefore welcomes the joint paper by the Commission and High Representative, which is a sound basis for an external policy conducted in a spirit of solidarity and intended to ensure reliable, affordable and sustainable energy flows into the Union. It invites the Commission to take it into due account when it draws up the Strategic Review. It underlines the importance of using all the available policies and instruments to support external action in this area. Meanwhile, since there is a continuing need for the EU to respond to the worldwide competition for access to increasingly scarce sources of energy, the European Council invites the Presidency, the Commission and the High Representative to take forward work on the development and implementation of an external energy policy in a coherent and coordinated manner, making use of all available instruments including CFSP and ESDP. This should include the development of strategic partnerships with the main producer, transit and consumer countries and concentrate initially on the following priorities: conclude negotiations of the Energy Charter Transit protocol and secure the ratification of the Energy Charter Treaty by all signatories to the Charter; invite the Commission to set out elements for an agreement with Russia on energy within the framework of the successor to the Partnership and Cooperation Agreement; extend the EU's internal market in energy to its neighbours (including the expansion of the Energy Community Treaty); make better use of the European Neighbourhood Policy (ENP) mechanism to further the EU's energy policy objectives; enhanced dialogue with Algeria will be particularly relevant; give full support to infrastructure projects compatible with environmental considerations and aimed at opening up new supply routes with a view to diversifying energy imports which would benefit all Member States; integrate the EU's energy objectives fully into its trade policy and pursue these through the WTO, as appropriate; pay particular importance to energy in the context of the Union's relations generally with major third country partners. The European Council underlines the need to further diversify sources of energy supply, promote development of renewable energies and make more efficient use of energy. It recalls in this context that it is for each Member State to choose its own energy mix. An External Policy to serve Europe s Energy Interests, Paper from the Commission and the EU Secretary-General/High Representative for the European Council, Brussels June Link Facing External Energy Risks The EU and the world need reliable, affordable and sustainable flows of energy. This is a key element for economic development and the achievement of the Lisbon goals. There is an obvious link between energy security, sustainability and competitiveness. Increasing dependence on imports from unstable regions and suppliers presents a serious risk. Some major producers and consumers have been 11

12 using energy as a political lever. Other risks include the effects on the EU internal energy market of external actors not playing by the same market rules nor being subject to the same competitive pressures domestically. A secure energy supply requires a combination of internal and external policies. More action is needed at EU level - this is why on the basis of the Commission Green Paper 1 the European Council called for an Energy Policy for Europe and a prioritised Action Plan to be adopted at its 2007 spring meeting, following the Strategic Review to be presented by the Commission by the end of It also invited the European Commission and the Secretary-General/ High Representative in the meantime to provide input for an EU strategy on external energy relations. The legitimate right of individual Member States to pursue their own external relations for ensuring security of energy supplies and to choose their internal energy mix is not in question. Nonetheless, the development of a coherent and focussed external EU energy policy, drawing on the full range of EU internal and external policies, would enhance the collective external energy security of the Union. It would also help the EU face more effectively possible strategies by major external energy suppliers to adversely influence market fundamentals. This paper considers how EU external relations, including CFSP, can be used more effectively to pursue our common objective of securing reliable flows of affordable and environmentally sustainable energy. It is necessarily preliminary and intended to open up debate. But it also highlights concrete actions that could be put into motion straightaway. External energy relations cannot be separated artificially from the wider question of what sort of energy policy the EU and its Member States want. The response to that question will be part of the Action Plan to be put forward next spring. A more fully developed internal policy is a pre-condition for delivering the EU s external energy interests, and for better 1 A European Strategy for Sustainable, Competitive and Secure Energy, March 2006, cf. doc. 7070/06 + ADD 1 (COM(2006) 105 final). judging what leverage the EU is able to bring to bear in its external relations for furthering these interests. Guiding Principles In order to enhance the external security of energy supplies of the EU, it is important that a coherent approach be adopted that pursues the following objectives: 1. Promoting transparency and improved governance in the energy sector through energy partnerships with third countries, the objective being to create mutually beneficial, open, transparent, non discriminatory and stable legal conditions for energy investment and trade. 2. Improving production and export capacities in producer countries and developing and upgrading energy transportation infrastructure in producer and transit countries. 3. Improving the climate for European companies investments in third countries and opening up the production and export of energy resources to EU industry. 4. Improving conditions for trade in energy through non-discriminatory transit and third party access to export pipeline infrastructure. 5. Enhancing physical and environmental security as well as the energy infrastructure safety. 6. Encouraging energy efficiency, use of renewable energies including bio fuels, low emission technology and rational use of energy worldwide. 7. Implementing the relevant Kyoto Protocol mechanisms. 8. Diversifying energy imports by product and country. 9. Creating an international regime for the supply of enriched uranium to countries that have chosen the nuclear option, in line with nonproliferation commitments and taking into account the EURATOM treaty provisions. 10. Promoting strategic reserve stocks and encouraging joint stock holding with partner countries. At this stage, it would be useful to consider two building blocks of energy security: functioning markets and diversification. FUNCTIONING MARKETS 12

13 Well-functioning world markets are the best way of ensuring safe and affordable energy supplies. They create a resilient and responsive world energy supply, facilitate investment decisions, cushion shocks and provide security for both customers and producers. But markets do not operate in a vacuum; they need physical and legal infrastructure, as well as information and transparency, and the active participation of major players. This could be achieved by the EU extending its own energy market to include its neighbours within a common regulatory area with shared trade, transit and environmental rules. More widely, the EU should advocate reciprocity in market opening and respect for market rules: non discrimination, competition, transparency and enforcement. We need to convince non EU consumer countries that world energy markets can work for them. If they were to conclude that the only route to security lay in bilateral deals, the risk of disruption of the energy system would grow. DIVERSIFICATION EU energy security can be enhanced by diversifying energy sources and geographical origin as well as transit routes. The EU should facilitate the maintenance and upgrade of existing energy infrastructure in neighbouring countries of key importance to the EU as well as the development of new infrastructure. There are a number of new gas projects which have either been decided or are in an advanced stage of planning (North Africa, Middle East, Caspian region, Russia and Norway). If completed, they could create new energy corridors and new import capacity amounting to a significant share of the EU's current gas consumption. In addition, LNG terminals offer a particular contribution to security of supply. The development of major international pipelines to deliver oil from the Caspian region and Central Asia to the EU is also vital. All instruments, ranging from political dialogues and Community policies such as trade, development, competition, research and environment through to financial grants and loans, including those of the EIB, EBRD and other IFIs, should be used in a coherent manner to speed up the completion of these infrastructure projects. Getting Results This analysis demonstrates the importance of having an EU external relations policy on energy. It must be coherent (backed up by all Union policies, the Member States and industry), strategic (fully recognising the geopolitical dimensions of energy-related security issues) and focused (geared towards initiatives where Union-level action can have a clear impact in furthering its interests). It must also be consistent with the EU's broader foreign policy objectives such as conflict prevention and resolution, non-proliferation and promoting human rights. An external energy policy has to be based on a clear prior identification of EU interests, and reliable risk assessments. This means ensuring that the EU has the necessary monitoring capabilities to provide early warning and enhance its capacity to respond. The EU should envisage a network of energy security correspondents, including representatives from the Member States, the Commission and the Council General Secretariat to monitor energy security, and develop analysis and action plans. The European Energy Supply Observatory could also make a valuable contribution. An effective external policy on energy depends on being able to harness our considerable collective resources and put them at the service of shared interests. That means engaging with producer, transit and consumer countries to produce results. And it means acknowledging that political challenges require dialogue at political level (including Heads of State and Government) on a bilateral, regional and multilateral basis. Possible initiatives that could be developed include: At bilateral level Considering that the EU and Russia are and will remain interdependent in the energy sector, work towards a comprehensive agreement with Russia covering all energy products. The aim should be integration of the EU and Russian energy markets in a mutually beneficial, 13

14 reciprocal, transparent and non discriminatory manner. Such an agreement should ideally be negotiated in the context of the post PCA contractual framework. Continue to pursue the strategic energy partnership with Norway (including supporting its wish to join the Energy Community Treaty) and pursue a similar approach with Algeria. Help Turkey to make full use of its potential to become a major energy transit hub and in particular promote its rapid integration into the Energy Community Treaty. Implement the EU-Ukraine MoU on energy cooperation, the inclusion of a comprehensive energy chapter in the future bilateral agreement and envisage Ukraine's integration into the Energy Community Treaty. Place particular emphasis on the implementation of the energy-related provisions of the ENP Action Plans. Develop bilateral energy cooperation with important producer and transit partners in North and continental Africa, the Caucasus, the Caspian Basin and Central Asia, the Middle East and the Gulf, as well as Latin America. Enhance bilateral dialogue and cooperation with key consumer countries, particularly the US (where a more political dialogue on energy is needed) as well as Japan, China and India in a bid to seek a common approach to global energy issues. The objective would be to improve the transparency and operation of world energy markets, and to develop sustainable energy resources and energy efficiency. At regional level Extend the EU s internal market, through expansion of the Energy Community Treaty to include relevant EEA and ENP countries. Develop regulatory convergence through the ENP in order to improve to investment climate and provide a level playing field in terms of market opening, fair competition, and environmental protection and safety. At multilateral level Integrate the EU's energy objectives fully into its multilateral trade policy and pursue these through the WTO, as appropriate. Conclude the negotiations of the Energy Charter Transit Protocol and secure the ratification of the Energy Charter Treaty by all signatories to the Charter. Encourage Member States which are members of the G8 and the Commission to use this forum to promote the EU's energy interests, including in the G8+5 format which brings together key producers and consumers. Consider how to strengthen cooperation with the International Energy Agency and extend its membership. Promote an international agreement on energy efficiency, boost development of renewable energies and deployment of energy efficient technologies. The European Council is invited to consider whether these proposals should constitute input into the wider reflection process leading to an Energy Policy for Europe and an overall Action Plan to be agreed in Spring 2007, and to what extent they should be implemented already in advance of the outcome of this wider process. Annex: EU gas and oil consumption in 2004 by source GAS OIL Import from Russia 24% 27% Import from Norway 13% 16% Import from the Middle East 19% Import from Algeria 10% Import from North Africa 12% Indigenous production 46% 21% Other Regions 7% 5% 14