Sunday, April 13, 2003
Hungary votes yes - 13th April 2003, 22.22

On a lower than anticipated turnout of 45.56%, the Hungarian electorate voted by approximately 84% to join the European Union. These figures indicate that any opposition to the vote stayed away and accepted, by default, the outcome as inevitable. The low turnout is not an endorsement of the European Union, although, as a proportion of the total electorate, the vote is more than any British party wins at a general election. This withdrawal has been blamed upon the opposition party, Fidesz, which announced that it would look at the terms in order to ensure that they were in the national interests of Hungary. The European Business website commented that this made voters "insecure" although you could just as easily use the term "aware".

Membership of the European Union will be a mixed blessing, at best. Through accession to the acquis communautaire, Hungary will find that its economy is burdened by regulatory costs that will prove difficult to meet, whilst the country loses the flexibility required to maintain or increase its trend rate of economic growth. One of the other arguments for accession is increased security. However, the actions of the European Union towards the accession countries does not suggest that the European Union will act to increase the security of Central or Eastern Europe.

The third trend consists of an accelerating effort by Russian energy companies -- in this case, mainly the state-connected Gazprom and Lukoil -- to buy up strategic energy enterprises of Central and East European countries, offering them long-term supply contracts for Russian oil and gas. Those Russian companies seem to have embarked on a race against the clock for dominance in these countries' energy sectors. Indeed, they appear to follow a strategy of preemption, so as to confront the European Union with faits accomplis in the accession countries and in the EU's new eastern neighborhood.

The European Union does not seem to be responding to this grab. Yet if Russian takeovers and EU passivity continue, the consequences can be serious indeed. The enlarged EU may find itself divided into two zones with very unequal levels of energy security. In the West, Russia will be one among a number of energy suppliers to the EU's old member countries. There, the principles of diversified sources of energy supply will remain in force, even if Russia will be one of major suppliers. In Central-Eastern Europe, however, the EU's new member countries will find themselves overwhelmingly dependent on Russian energy supplies.

While Russian energy giants function mainly as commercial suppliers in the West, they take over a wide and growing range of roles in the Central and Eastern Europe. There they also own and operate refineries and other processing plants, distribution systems, transit pipelines and storages, port terminals, and other key assets. Such a situation would be deemed unacceptable in Western Europe. If allowed to develop in Central-Eastern Europe, this situation can generate long-term internal and external risks to the newly free countries, and to the EU as a whole.

The European Union must devise measures to halt this potentially dangerous trend on an urgent basis. Some suggestions: Together with the accession countries, the EU should work out targeted investment programs in these countries' energy sectors. It should at last activate the long-dormant proposals to bring North Sea oil and gas to the accession countries, and should link their pipeline and electricity networks with those of the EU's old member countries. The new countries lack the investment funds for these tasks. The EU must step in now, and assist its new members to observe the EU's own norms in terms of energy supply diversification.

These countries are vulnerable especially in terms of 'energy security'. They purchase most of their oil or gas from Russia and one of the reasons for joining the European Union is to reduce the potential pressure that their giant neighbour can bring to bear. However, the facts in the pipeline show that the EU, specifically France and Germany, is unwilling to reduce their potential dependence upon Russia. Russia is a more important suitor than the accession countries, a potential member, and an arc of influence for the bear within the EU is considered an acceptable price to pay for future access to supplies of oil and gas from the Caspian or Siberia.


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