A more integrated energy policy among key European Union member states Germany, France and the U.K. could act as a counterbalance to the influence of Russia, but a radically different approach is needed, said a report from London-based think tank Chatham House published Thursday.
If the E.U. is able to strengthen crossborder energy transmission infrastructure, particularly gas networks, and create a single energy market, "the greater the potential for the U.K. and other E.U. member states to agree on coordinating their external representation on important energy questions," such as supply negotiations with Russian gas monopoly OAO Gazprom (GAZP.RS), said the report. Gazprom supplies just over 25% of the E.U.'s gas.
However, to achieve this the U.K., France and Germany need to change their approach to energy policy.
The U.K. government needs to "set aside its singular emphasis on promoting greater short-term competition between key energy players in Europe through ownership unbundling, in favor of a policy that emphasizes the building of crossborder European energy infrastructure," the report said. Unbundling is the process of separating ownership of energy supply assets and distribution networks.
In turn, France and particularly Germany need to adopt less selfish energy policies, the report said.
"German political and business leaders have assiduously cultivated a special relationship in the energy field with Russia...so long as Germany is seen to be prioritizing its own energy security interests over all other considerations, then other E.U. member states which have the option to do so are likely to follow suit," the report said.
Germany has the potential to become the gas hub for a more integrated European market, but "Russia can be expected to do all it can to block the emergence of a more coordinated external voice on energy policy," the report warned.
It said there is a strong case for the creation of single European energy agency to ensure these changes are implemented.