APPENDIX: GAS TRANSIT IN EURASIA: TRANSIT ISSUES BETWEEN RUSSIA AND THE EUROPEAN UNION AND THE ROLE OF THE ENERGY CHARTER
The Annex examines transit issues between Russia and the EU and the role of the Energy Charter instruments in minimizing such transit risks. It starts with an analysis of historical development of Soviet/Russian gas supplies to Europe – evolution of its contractual structure based on Groningen (Dutch) model of LTGEC and the role of transit, which has increasingly evolved after dissolution of the COMECON and the USSR. It identifies three major components of transit risk in the cross-border gas value chain: legal/regulatory, technical and political, while the first two have an objective character non-dependent of the name of transit state. It distinguishes two zones of new transit risks – within and outside the EU – in gas value chain of Russian gas supplies to Europe; arguing that new transit risks outside the EU is the result of the move from political to market-based pricing and to ‘European formulas’ within the CIS, while new transit risks within the EU resulted from liberalization trends within and enlargement of the EU energy market. The Annex considers which international law instruments are best available for regulating transit of energy: GATT/WTO or ECT and compares GATT Art V ;Freedom of Transit’ and ECT Art 7 ‘Transit’ (transit through fixed infrastructure), including its intended strengthening through the draft Energy Charter Protocol on Transit. The Annex examines in detail key debated transit issues and draft solutions within Energy Charter framework, including: definition of available capacity; domestic, import/export and transit tariffs; conciliatory procedure; congestion management; contractual mismatch; and draft Transit Protocol implementation inside the EU. Finally, the Annex examines which transit risks ECT does not address and why.
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