BRICS agenda to expand on account of energy

Jul 14, 2014

The agenda for the sixth BRICS summit – already saturated with joint projects – may be expanded on account of Moscow’s new initiative. At the meeting between the heads of governments that will take place on July 15-16 in the Brazilian city of Fortaleza, Russia plans to propose the creation of a BRICS energy association with fuel reserve and joint institute for energy policy. This was announced by presidential aide, Yuri Ushakov.

“Russia is going to propose some specific issues for consideration, namely: the establishment of a BRICS energy association, the activities of which will be directed at ensuring the energy security of the participating countries,” Ushakov told reporters at a briefing. Moscow is also proposing that comprehensive research and analysis be carried out on the global market tendencies of hydrocarbons. “We mean to create a reserve fuel bank and BRICS energy policy institute within the framework of this association,” explained the presidential aide.

Ushakov did not give any specifics. It may be assumed that the proposition will only be announced at the summit and if the partners lend their agreement in principle, then the long process of coordinating the project will begin – like what is happening now with the Joint Development Strategy. The final version is scheduled for approval at the 2015 summit, which will be held in the Russian city of Ufa. Ushakov only explained that the idea of creating such a collaborative association is the result of a joint initiative between Russian government and business that underwent preliminary discussion at the state level.

The intent is not to create an alternative to OPEC or a gas union. The association, if the idea is approved at the summit, will conduct comprehensive research and analysis of world markets trends. To some extent, it would be a rival to the International Energy Agency – an influential organization that prepares its materials about the energy market but represents the interests of importing countries more than those of exporters.

Maxim Pleshkov, a senior analyst at the Russian agency Rus-Rating thinks that the association will be in demand. “BRICS is a union of rapidly developing states. Coordinating energy policy will ensure the stability of development and the actual economic security of the participating countries. In addition, when carrying out global policy – and by virtue of the geography and scale of its members, BRICS is already claiming a global approach – it is necessary to take into consideration various aspects, energy hardly being the last among them,” he pointed out.

In his estimation, the task of the energy association will be working out a common energy policy for the bloc. Among BRICS members, only Russia can be classified as a major gas and oil producer. Brazil also has large deposits, but if it can meet its needs in terms of oil, its gas is insufficient. The remaining bloc participants are purely hydrocarbon importers. Thus, the energy policy of the bloc, by definition, cannot be orientated exclusively towards the interests of suppliers but must be balanced, the expert believes.

“Ensuring the energy security of participating countries will involve mutually beneficial contracts for supply as well as coordinated actions in internal markets,” Alexander Grishanov, a financial analyst at Lionstone Investment Services.   

Andrey Solokovnikov, a consultant at the company Nexia Pacioli Consulting, expects that the decision itself will be made within the framework of the upcoming summit but thinks it is possible that, in the end, the creation of the fuel reserve will not be one of the association’s core areas of activity since the territorial isolation of the BRICS participants would hinder the idea’s implementation. “The association’s focus on energy security suggests that the potential areas for cooperation can become a wide spectrum of issues in the energy sphere,” he said. “In particular, they can be questions related to the research and analysis of the world market trends of hydrocarbons and other energy sources, the development of a coordinated energy policy, the enhancement of energy security by addressing energy export/import issues, diversification of energy supply and transit, improving the investment climate, attracting private investors to the energy sector, and so on,” Solokovnikov added.

The expert recalled that there is a regional cooperation program (INOGATE) in the energy sector within the framework of the EU. “The creation of an energy association will allow the BRICS members to unite and coordinate their efforts in the energy sphere and work out joint solutions and concerted approaches, which will make it possible to solve energy security and energy export/import problems not only between the individual BRICS members, but also with other countries,” he pointed out.

However, there were sceptics among the interviewed Russian experts. RusEnergy partner Mikhail Krutikhin reminded us that Russia has already proposed establishing an association within the framework of the Shanghai Cooperation Organization, but in fact nothing happened other than a declaration of intent. “As far as the fuel bank, I doubt strongly that anything will work out,” he told RIR.

Source: Russia & India Report