Russia-E.U. negotiations on changes in the E.U. Third Energy Package are at an impasse, Russian Energy Minister Sergei Shmatko said at the International Energy Week in Moscow on October 24.

There is a clash of ideologies instead of negotiations, Shmatko said.

There is a conflict of interest between consumers and suppliers of energy resources, he said. “I think that the ideological foundation of this confrontation is taking shape,” he noted.

Producers of energy resources, among them Russia, prioritize the development of infrastructure, such as gas pipelines and LNG facilities, he said. They also want long-term gas contracts to “guarantee stability of the deliveries and payments,” he said.

“All that is sacred to us, and will be hard to abandon,” he said.

Russia had hoped that the European Commission would keep in mind its interests of a leading supplier of energy resources to Europe in the drafting of the Third Energy Package. However, the European Commission did not do that.

Despite Russia’s dissatisfaction with the negotiations on the Third Energy Package, it will stick to the earlier commitments, Shmatko said. “Any commitment assumed by Russia will be fulfilled without any doubt,” he said.

At the same time, Russia has to diversify vectors of energy supplies in order to protect its interests. “We have formulated the need to develop the eastern vector, to build transport infrastructure there, to develop that market and to search for partners,” Shmatko said.

Earlier, Russia believed that the E.U. was the primary and traditional consumer of its energy resources. “We could have found a long-term advantageous way of the joint provision of energy security. Alas, we are facing a confrontation of energy security ideological concepts. I am confident that the negotiations with the European Union will go on, but from the position of defense of our interests and positions,” he said.

The E.U. Third Energy Package entered into force in March 2011 with a two-year transitional period and ensured the access of third persons to gas pipelines. The same document compelled E.U. countries to divide gas selling and transporting businesses. Russia thinks that the E.U. Third Energy Package must be upgraded further because it is possible to keep the ownership of gas pipelines in the creation of an independent operator.

Meanwhile, Russian Foreign Minister Sergei Lavrov said that Moscow is alarmed by Europe’s application of the Third Energy Package to Russian companies and could go to court to settle this issue but would prefer to come to terms without doing so.

“What is going on on the European gas market now is certainly seriously alarming to us,” Lavrov said in an interview broadcast on the radio stations Echo Moskvy, the Voice of Russia, and Radio Rossii on October 21.

“The unilateral steps, which the European Commission is taking, and that, by the way, are not always agreed-upon with and supported by the E.U. member-states are alarming us. The Third Energy Package that the European Union has adopted at the European Commission’s suggestion contains clauses that directly go against European Union member-states’ and the European Commission’s obligations,” Lavrov said in reply to a question from Interfax.

The European Commission’s steps violate the bilateral agreements between Russia and E.U. countries on mutual protection of investments, Lavrov said.

“Each of these agreements stipulates the principle of non-deterioration of business conditions on each other’s territory. The Third Energy Package in fact results in the deterioration of such conditions,” he said. The existing Russian-E.U. Partnership and Cooperation Agreement also stipulates that the parties will not take steps worsening conditions of business activities, he said.

“This is the legal aspect of the matter. And I think we always have this option – these documents can be presented in court,” Lavrov said.

The negotiations between the Russian Energy Ministry and the E.U. commissioner for energy should produce the desired results, Lavrov said. “The negotiations are aimed at preventing the retroactive application of the Third Energy Package to the projects that have already been finished or are in the process of execution,” he said.

“I believe, courts will also remain a tool in our hands. But we’d better come to terms out of court, because court is always long, while the energy situation in Europe, especially following the decisions that have been made in relation to the nuclear power sector, is perhaps not very easy,” Lavrov said.

The Third Energy Package is a plan for the liberalization of the electric power and gas market in the E.U. It was endorsed in the E.U. in 2009, and the national parliaments are in the process of its ratification.

The document, in particular, stipulates that all E.U. countries must enforce the separation of gas selling and gas transporting businesses. The European Commission so hopes to increase competition in the sector, provide opportunities for new players to enter the market, and reduce energy prices.

In Russia’s view, the E.U. proposals on the Third Energy Package mean that the companies owning and operating pipelines should not be entitled to pump energy resources, including natural gas, through these pipelines.

Russia believes that this could lead to alienation of gas transportation systems in the E.U., in which Gazprom holds stakes. It is also of the opinion that the Third Energy Package could prompt the parties to refuse extending long-term gas supply contracts.

The European Commission has meanwhile rejected the idea of signing an intergovernmental agreement with Russia establishing the legal framework for trans-border energy projects, including the South Stream gas pipeline project, a source in the Energy Ministry reported.

“We held a South Stream presentation in Brussels and sent our proposals to the European Commission, but the idea of signing it was not supported,” he said.

The Energy Ministry said that Russia and the European Union were unable to reach an agreement on issues concerning the creation of a special legal regime for the South Stream gas pipeline. “For the purposes of settling issues of energy security, such as the implementation of major international infrastructural projects for gas transport, Russia’s Energy Ministry made a proposal to the European Commission for developing a special legal regime for such projects. This also concerns the South Stream gas pipeline. However, Russia’s proposals did not find acceptance with the European Commission. Russia’s proposal still has not received a positive response,” a Ministry official said.

Another source told Interfax that one reason this document was not signed was that the EC continues to insist on a so-called Southern Corridor, the basis of which would be the Trans-Caspian gas pipeline and Nabucco. Russia’s proposals gave priority to the South Stream pipeline.

Russia will not reject the South Stream project, despite the EC’s reluctance to sign an intergovernmental document on it, the source said. However, the priority for Russia might be to develop gas and infrastructure projects in Eastern Russia.

It was reported earlier that Russia had proposed the idea of assigning the South Stream project the status of a Trans-European Network (TEN) or to develop a legal regime for cross-border projects. This would mean the future pipeline would not come under the competence of European and national regulators and the Third Energy Package. In addition, Russia has asked for South Stream to be awarded the same benefits as the competing Nabucco gas pipeline project. Gazprom and the Energy Ministry in May made a presentation on South Stream in Brussels. During the presentation, the Ministry put forward the proposals to sign an intergovernmental agreement.

The European Commission will support the construction of the South Stream gas pipeline from Russia to Europe and will not impose unreasonable administrative requirements on it, European Commissioner for Energy Gunther Oettinger said during the presentation on May 25.

The EC does not consider the project a priority for Europe but rather an alternative route enabling the diversification of supplies, he said.

Later the European Union decided to start talks with Turkmenistan and Azerbaijan about a Trans-Caspian Pipeline – a project to transport gas from Central Asia to Europe via a pipeline on the Caspian seabed. Russia and Iran announced they were against such a project.

Russia-E.U. negotiations on changes in the E.U. Third Energy Package are at an impasse, Russian Energy Minister Sergei Shmatko said at the International Energy Week in Moscow on October 24.

Russia continues to insist on maintaining long-term contracts for consumers and on the need for energy resource suppliers to participate in infrastructure projects, he said. This does not conform to the provisions contained in the Third Energy Package.

Later the Energy Ministry said that relations between Russia and the E.U. on the Third Energy Package “revealed a difference in ideological approaches.” Russia’s proposals about the legal regime for cross-border projects “did not find understanding in the European Commission. Legal protection for the interests of Russian companies is currently being worked on, including through international agreements between Russian and the E.U., Russia, and the E.U. members,” the Energy Ministry’s press service said.