Agallamh: A comhrá leis an Ambasadóir Uirbeach Rusnak, Ard-Rúnaí na Cairte Rúnaíochta Fuinnimh

The Energy Charter has the potential to become one of the leading organisations of international energy governance - Cairt fuinnimh Rúnaí Ginearálta Ambassador Urban Rusnák (sa phictiúr) cainteanna leis Tuairisceoir AE.

As far as international energy organisations go, the Energy Charter seems to be one of the more 'sleepier' actors in the global energy governance landscape. You are not as widely known as the IEA or OPEC, for example, and even the so-called Russian-driven gas OPEC tends to get more publicity within international media circles. Do you feel this is a fair assessment?

International organisations in general and international energy organisations in particular are only as sleepy as the media wants to make them. More so, they tend to be brought out of their 'hibernation' by the tempo of international events, particularly those which they have been designed to address. The UN Security Council, for example, is brought to prominence by the international media when there is a global security crisis of one form or another, the UN Refugee Agency when a security crisis turns into a humanitarian crisis, OPEC when there is an oil price shock such as that which took place in the second half of 2008, and so on.

The Energy Charter is an international energy organisation which has evolved on the basis of the Energy Charter Treaty (ECT) of 1994, which has 54 contracting parties and signatories. It also has more than 20 observers, comprised of both countries and international organisations. The main task of the Treaty, as well as the overall Charter Process, is to promote energy security of all of its members in an equal and unbiased manner. This includes looking after the interests of producers (of energy), consumers, as well as countries involved in the transit of energy.

In practical terms this means that we work to protect, as well as to securitise investments in our member states, promote the trade of energy goods and services, serve to facilitate unhindered flow of energy transit across the borders of our member states, advocate strategies of energy efficiency, and underscore the recognition of a state’s right to exercise sovereignty over its natural resources.  The ECT provides its constituency with concrete dispute settlement mechanisms: conciliation and arbitration procedures for investor-state and state-to-state disputes that inevitably arise now and again.

Such activities are, in essence, our 'bread and butter': they constitute the day-to-day activities of the Energy Charter Process and are managed by our Brussels-based Secretariat. If this makes us appear 'sleepy' to the international media, then so be it.

So it would appear that my assessment is not entirely justified?

Aiseolas

Look, as an organisation whose primary concern is international energy security, the media tends to fixate upon us when energy security, as a topic, is in the limelight.  This might be during a high-level summit when Russia and the European Union, for example, aim to arrive at an agreement on energy: both parties might refer to some of the core principles of the Energy Charter as a means upon which to base their cooperation. Global Forums such as the G8 also tend to refer to the Charter and its founding principles when promulgating political declarations.

The flip side is that the media also tends to pick up on the Energy Charter when an energy security crisis of one form or another emerges. One example is the Russia-Ukraine gas crisis which took place in January 2009. While the parties preferred to resolve this case on their own, ECT provisions were available to them in the event that they would have chosen to revert to these as a means of dispute settlement.

The Energy Charter was conceived at the end of the Cold War and the ECT has been in existence since 1994. You became Secretary General of the Energy Charter Secretariat on January 1, 2012 and will serve in the post for 5 years. What were your core objectives for the Charter when you came into office and what do you hope to achieve during your tenure as Secretary General?

When the (so-called) European Energy Charter was conceived and nurtured by its founding fathers in the early 1990s, the project certainly did not suffer from lack of political ambition. The main political architect of the project, Prime Minister of the Netherlands at that that time, Ruud Lubbers, foresaw a “big ticket” opportunity to create a legal framework for Eurasia with the intention of stimulating investor confidence. American and European oil and gas companies were at the time eyeing new business opportunities ‘to the east’, while capital-deprived Soviet markets desperately needed investment, thus inspiring win-win oriented energy cooperation. The Energy Charter emerged as a highly ambitious project of mutually beneficial international energy cooperation.

Conditions have changed significantly since the inception of the Energy Charter project more than two decades ago. The global energy environment of today faces a host of new challenges that were hardly known in the early 1990s. Energy producing counties have “risen to the forefront”, while consumer countries all too frequently cite security of the energy supply as a core priority. That said, energy security can no longer be predicated on the assumption that it is merely about security of supply. Security of demand is a major factor to take into account in the overall global energy security discussion. Furthermore, the climate debate and energy efficiency topics have risen to levels of prominence unseen previously

Upon taking up the post of Secretary General, I assigned to myself the core task of ensuring that the Energy Charter was able to rise up to effectively meet the global energy challenges that prevail at present. I see my core job as ensuring that the Energy Charter Process, not only remains relevant given the changing global energy context, but is able to thrive in the altered setting. The Charter needs to become part of the solution to the global energy challenges of today and tomorrow, rather than those of yesterday. It has all the potential to become a ‘governance power’ in the investment field and I want to do all that I can to see this happen.

In practical terms this means that the Charter Process needs to be “modernised”, or reformed, in order to meet the interest of its highly diverse constituency of member states. As you may realise, these range from countries as disparate as Portugal and Mongolia, or Switzerland and our newest member, Afghanistan, which joined the ECT in summer 2013.

Modernization (of the Charter Process) ? What does this entail in practice and how do you modernise an international energy organisation with such a diverse constituency of member countries?

Modernisation is not a term which I myself can claim to have invented. The process of modernisation of the Energy Charter had already begun before I became Secretary General and a roadmap was offered by the Energy Charter Conference, our central decision making body, as to how the modernisation process should proceed.

The members of the Energy Charter Treaty embarked on the process of widening the Energy Charter’s geographic scope, of searching for optimal instruments for implementation of its core principles in a new, rapidly changing international energy environment. Our existing members want to see more countries join the ECT since they believe that the provisions of the Treaty, as well as the core principles upon which it is founded, are relevant to a much wider field (of countries). This is not surprising – the Energy Charter is about applying the rule of law in the countries where the Treaty is legally binding. Who can blame our members for wanting to see the rule of law applied more widely within the context of international energy cooperation?

Further, we also need to strengthen the relationships between our existing members in order to inspire greater confidence in the Charter Process.  This is all part of our recently laid out “consolidation strategy”, which serves to complement expansion of the Charter’s geographic scope. The strategy of consolidating upon our existing membership is, I feel, starting to pay dividends. We very much hope to make progress in close cooperation with Russia within the framework of the Energy Charter Process. Russia’s proposals on strengthening international energy security are very similar to the Energy Charter provisions and we are working on finding stronger common ground.

How realistic are some of these objectives and are they achievable in your five year term as secretary general?

I think that it is important for your readers to understand that everything that I have briefly set out above has been endorsed by our contracting parties through the binding decision of the Energy Charter Conference. Modernisation of the Energy Charter was initially mandated by our members at the Charter Conference in Rome in 2009 and we have been looking to build on this since I became Secretary General.

This is important. Without such a mandate, it would be impossible for me to do my job.  On the basis of our mandate, we have set out our strategy of modernisation, taking into account our desire to consolidate and enlarge the Charter Process. In many ways, we are re-inventing our identity as an institution of global energy governance on the basis of modernisation, which, importantly, is exactly what our constituency has endorsed. As mentioned above, there is an increasing desire to expand the rule of law in global energy, which is what we aspire to deliver.

Is reform of the Energy Charter made easier by the fact that you have a mandate from your member states?

Reform of either national or international bodies is never quite ‘a walk in the park’. However, your readers should also understand that our constituency supports the Energy Charter and wants to see it expanded both in geographic scope and relevance.  This is a key part of the modernisation process. The Energy Charter is about building and promoting energy cooperation in every sense of the word. We seek to provide ‘minimal standards’ in terms of common rules (the binding ECT) and provide a platform to exchange views on these rules, to iron out differences, review energy policies, etc.

This is a fully fledged service which the Charter Process provides, and is managed by the Energy Charter Secretariat. All of the above assists with predictability, transparency and eases the nature of operations in the international energy trade, which is in the interests of all stakeholders. This is why our constituency wants to see the Energy Charter Process reformed in order to become more ‘modern’, in today’s sense of the word and expand in scope of geographic coverage.

And what are the prospects like for expansion of your geographic scope?

Indeed, the Charter is becoming increasingly attractive to countries beyond our traditional constituency. Afghanistan has just completed the accession process to the ECT as mentioned above, while ratification of the ECT in Jordan and Pakistan is progressing. We hope that Montenegro will complete its preparations for accession before the end of the year. We are also working closely with Indonesia, Morocco and Serbia, while our relationship with China has received some new momentum.

Much of this is still work in progress. As the energy business takes on a higher profile internationally, however, I am confident that we will become more attractive to yet a wider array of countries and widen the geographic scope of our membership in accordance with the wishes of our existing constituency.

And what about your relations with the energy industry? You seem to be very much focused on your inter-governmental process which industry critics would claim is not that transparent and does not fully take into account the “catalogue of concerns” of the corporate sector. Industry is, after all, a key stakeholder in the international energy game?

You hit the nail on the head by identifying industry as a key stakeholder within international energy relations and commensurate investment processes. The Energy Charter by no means ignores this. In principle the entire Charter concept was built around the interests of the private sector since its founding fathers were not naive to the fact that it was industry that would actually have to do the investing, particularly in the upstream energy sectors of energy-rich countries.

This is why the ECT was based around a bevy of investor protection instruments, which were binding on the member states of the Treaty. That said, investment protection under the ECT is just as much about protecting investors from energy producing countries that would invest inside EU member states or other countries that are contracting parties to the Treaty (ie, Japan, Turkey, etc).

The ECT is about balancing out the interests of security of supply with security of demand, since our constituency represents the full diversity of the energy value chain. It is our job to care about all of our members in a non-discriminatory manner and it is the companies from these countries that the Treaty seeks to protect the most, since they are the ones that have to do the actual investing.

Whether the investor is an international oil company, a state-owned ‘national champion’, or another type of market actor, we don’t really take a view on that. We simply offer to protect them from arbitrary regulation and spur investor confidence by levelling the playing field for investors.

Interesting to note is the fact that we are hearing of an increasing number of investor-state dispute proceedings involving the ECT inside the EU, which are generated by companies from inside the Union, rather than ECT arbitration cases in the classic “upstream” energy countries.  The EU internal energy market is evolving and new legislation is becoming the name of the game, which provides new scope for the ECT to be cited in dispute resolution proceedings. Times have changed significantly since the Energy Charter was first conceived.

Does the Charter have any practical instruments that connect it to industry? You seem to be promoting the interests of the industry by offering to protect investments, but how do you actually communicate with the energy industry given that you are an inter-governmental process, strictly speaking?

This is a good and important question. While you are perhaps right in your perception of the Energy Charter being a somewhat government-heavy mechanism, about 10 years ago we initiated the Industry Advisory Panel (IAP) under the Energy Charter as our window to the international energy industry.

Today, the IAP is comprised of some 38 international energy companies from across our constituency and holds meetings at regular intervals to discuss a whole catalogue of issues as you mention above. These are mostly to do with government relations topics, ranging from regulation, new legislation, energy efficiency, as well as a host of other industry-relevant issues which are impacted upon by the actions of governments.  The IAP also follows market developments quite closely, since the Charter has the capacity to provide information about all the latest trends.

The IAP is chaired by Mr Howard Chase, a high-level, career long energy industry professional and its work is managed in coordination with our Secretariat in Brussels. Membership to the IAP for companies comes at no charge, but gives them a powerful voice in international government affairs. It likewise helps companies with transparency by making international government more accessible and acts as a confidence building measure within the context of investor-state relations.

It is one of the more useful toolboxes available to the industry. Ultimately, it further reinforces and securitises energy investments by providing companies with access to more reliable information about the latest energy developments within our constituency. This is what the Energy Charter is all about. The IAP, as a window, is wide open to new entrants. I think that it is good value.

Secretary general, it has been a pleasure speaking with you, thank you.

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