The Reciprocity Clause

Tomorrow the FT will be running an article about a confidential working paper making its way around the European Commission which could attach a "reciprocity clause" for foreign investors, meaning that they will not be allowed to purchase energy assets unless they are equally open to investors in their country. The document is seen as a direct shot at Russia and Gazprom, aiming to limit their political exploitation of Europe via the mass acquisition of energy distribution infrastructure (emphasis mine):

A separate internal Commission document about the implications of unbundling, seen by FT Deutschland, the Financial Times’ sister paper, says the EU could be “vulnerable to a strategy of third countries to dominate the EU markets not only in terms of supply but also by acquiring the networks”.

The document explicitly warns about situations “where investment is driven by other motives than economic ones”.

It has been suggested Russia or other resource-rich countries could gain control of European energy supply by means of state-controlled companies such as Gazprom or state-owned investment funds.

In the working paper, the Commission suggests several options to prevent uncontrolled access.

The weakest proposal would give the commission the right closely to examine any potential buyer.

The toughest measure would declare the European energy sector a “strategic industry”, thereby excluding most countries from outside the EU from investing in it.

The requirement for reciprocity would be a particular blow to Gazprom, Russia’s state-controlled gas company, which has intense ambitions to expand in Europe and already owns a range of assets and equity stakes in the EU.

Attempts by the EU to restrict acquisitions by non-European companies are likely to be ­vexatious. The European Commission has set itself firmly against attempts by member states such as Spain and France to declare their energy industries strategic sectors that can be ­protected from foreign bidders. However, it seems likely that some form of protection for the energy sector will be ­implemented.