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EU pushes for energy union to curb dependence on Russia: draft

[BRUSSELS] European Union ministers will next month debate urgent ways to improve cross-border energy links to make the 28-nation bloc less dependent on imported fuel, especially from Russia, a draft document shows.

The document, drawn up by the envoys of EU member states and seen by Reuters, also says gas prices should not be linked to oil prices, a practice followed by Russia's Gazprom, and instead allow for market-based gas pricing.

The fragmentation of Europe's energy market has long been a source of frustration to many EU nations.

Britain, Ireland and Italy, as well as Spain and Portugal, are virtual energy islands, with connection capacities of just 3 to 5 per cent, according to European Commission figures.

However, the conflict between Ukraine and Russia, the bloc's main energy supplier, has focused attention on improving security of supply by more effectively pooling resources via upgraded power and also gas links.

In this context, Portugal led a successful push at an October summit for agreement on better power connections to allow the Iberian peninsula to export surpluses of renewable energy, produced by firms such as Acciona and Iberdrola.

France, which has plenty of nuclear generation and was clearly unhappy at the idea of opening its borders to cheap renewable energy, had argued that better connections were too costly. But, as part of a wider deal on climate and energy goals for 2030, it finally agreed to the Portuguese demands.

This deal gave impetus to those seeking an energy union and EU energy ministers at a December meeting will debate measures to implement a goal for cross-border links equalling 10 per cent of a nation's power generation by 2020.

The document, dated Nov 26, invited the European Commission to report regularly on progress towards a 15 per cent interconnection target by 2030 and also calls on it to investigate "all possible sources of financing".

For decades, the single EU energy market has been a dream rather than a reality as nations insist on choosing their own fuel sources, but the new Commission, in office since Nov 1, has made energy union a priority.

As part of its energy strategy, the Commission says it is exploring the idea of the EU buying gas as a group, rather than as separate countries to try to break Russia's ability to demand high prices.

The draft document does not mention that, but encourages the adoption of gas pricing linked to gas trading hubs, rather than indexing it to oil, and "stresses the importance of ensuring the removal of contractual clauses contrary to EU law".

EU regulators have been investigating Gazprom since Sept 2012 for suspected anti-competitive behaviour, including over-charging customers because of the way prices are calculated.

The case has been on hold since the crisis over Ukraine erupted after Moscow annexed Crimea earlier this year.