IN MATTERS of energy and much else, Europe’s political leaders resemble Starkadder of Cold Comfort Farm.

Like the rusticated rural folk in Stella Gibbons’s satirical novel, Europe’s politicians are in love with the Continent’s backwardness. Its lack of modernisation is lovable, pretty as an alpine cowshed and just as draughty.

For a long time Europeans thought energy just happened at the turn of a switch. When they looked a bit closer, they found “something nasty in the woodshed”, an Opec or a Russian oligarch, causing them to shut the door in fright, hoping it would go away.

Sadly, it has not gone away and yesterday’s €50 billion (£34 billion) bid by E.ON for Endesa is another nasty power-grab to frighten Europeans already alarmed by the unexpected irregularity of Russian gas supplies.

E.ON’s bid is a snub to Neelie Kroes, Europe’s feisty head of competition policy, who took the initiative last week, waving a yellow card at Europe’s energy monopolists, Gaz de France, EdF, E.ON and ENI. If Ms Kroes had her way, they would be broken up, their pipes and power grids stripped from them and their energy stockpiles sold to the highest bidder.

Not to be outdone, Tony Blair and Angela Merkel, the German Chancellor, have been chattering about a European Energy Policy, urging the European Union to develop an energy strategy and create something called a European “energy grid”. Ever in tune with the political Zeitgeist, Blair’s comments follow protests from British industry about rising gas prices, the loss of Russian gas pressure in the Siberian cold snap in January and last week’s 22 per cent increase in British Gas’s consumer tariff.

Politicians like nothing better than to respond to a crisis with a policy, but it is very unclear what meaningful action can be taken to ensure that Europe is lit, heated and fuelled inexpensively in the future.

As E.ON has demonstrated, the energy chess game is well under way and the important pieces have already been placed in strategic positions on the board. Gazprom, too, has been hard at it, securing export routes and carving up markets. It has Germany joined at the hip with shareholding links to E.ON’s child, Ruhrgas, and Wingas, together Germany’s duopoly importers. Gazprom has a former German chancellor on its payroll, chairing the board of a pipeline company that would take Gazprom further west, through the Baltic and even to Britain.

The new year showdown in the Ukraine, widely portrayed as an attempt to unseat the pro-West President Yushchenko, was little more than a ham- fisted attempt to get control of the Ukraine transit pipelines.

A Green Paper to be published early next month will set out the European Commission’s policy options on security of supply, competition and sustainability. Stopping E.ON and breaking up Gaz de France won’t help because their main supplier is cocking a snook at the EU’s demand for open access to Siberian gas.

The Commission was able to bully nice little Norway into compliance with its strictures, but Gazprom is a different story.

Will Europe be able to strike better energy bargains with Russia if the EU’s own bullying utility monopolists are reduced to a dozen squabbling and competing gas importers? For an energy market to function effectively, it needs a multiplicity of producers. Yet in gas there is at present an even greater concentration than in oil, because the biggest producer, Gazprom, controls the pipes that deliver the fuel to Europe.

Europe’s real energy problem lies beyond its borders. Were it not for the curious obsession of the US State Department over energy supplies, the situation would probably be worse than it is today. Europe has been complacent, for years pooh-poohing America’s concern about dependence on Russian oil and gas. It was that obsession during the 1990s that led to the construction of the Baku-Ceyhan pipeline, a link between the oilfields of the Caspian region and the Mediterranean via Georgia and Turkey.

It was a bonkers American idea, a pipe that would leap over the Caucasus and bypass Russia.

Now near completion by BP, the pipeline will soon deliver one million barrels per day of high-quality crude into the oil markets of Europe and the Atlantic basin.

Alternative with no easy answers

WHERE is Europe to find alternative supplies of gas? Our leaders have even broached the subject with Iran, another energy titan but one even less enthused than Russia by Europe’s obsession with transparency and free markets.

A more co-operative attitude from Tehran on the thorny question of nuclear inspections might elicit support for a gas export route to southeastern Europe, via Turkey.

Unfortunately, Iran is a difficult energy partner, a fact made evident by the painfully slow development of its giant gasfield, South Pars.

A project to build an export pipeline to India has been through many permutations and progress is now in reverse, due to India’s unhelpful (in Iranian eyes) stance, supporting Western demands that Iran comply with the International Atomic Energy Agency’s writ.

Qatar, meanwhile, is building a business exporting liquefied natural gas. It will happen, but it will be expensive fuel. For the time being, Gazprom is the only game in town.

carl.mortished@thetimes.co.uk

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