INOGATE PROGRAM

1. INOGATE Umbrella Agreement (UA), developed through the institutional framework of INOGATE program, took effect in February 2001. It is an interstate agreement which makes more rational and promotes the development of an interstate system of oil and gas transport, and attempts to attract necessary investments.

The management of imported energy dependence is one of the key issues in ensuring external sources of energy supply for the EU. The manner of energy transport is of fundamental importance for the security of supply, taking into account the fact that the EU relies on imports for 50 per cent of its energy, with a tendency of growing dependence on imported energy likely to reach 70 per cent by 2030, if the present trend continues. Reconstruction of the existing and the construction of new oil and gas pipelines will facilitate oil and gas import from the Caspian region and from the Southern Mediterranean. This will improve a great deal the pattern of energy imports (for instance, the gas pipeline between Greece and Turkey within a larger project of a gas pipeline linking the Caspian basin with the Mediterranean region and Europe).

The objective of INOGATE is to continue to provide assistance in attracting investments and financial resources, both private and public, in order to create a network of international oil pipelines from East to West, within the appropriate institutional framework. The program is in accordance with the EU policy of secure supplies and is harmonized with diverse regional programs and projects in Europe, Central Asia and the Mediterranean, on the basis of the EU Council decision of 27 April 1998 and the EU/USA common position on the Caspian basin energy issues of 18 May 1998.

The main goals of acceding to the Umbrella Agreement are:

• Commercial exploitation of oil and gas in the Caspian region through efficient transport to markets in Europe and the West;
• Elimination of inefficient national systems of oil and gas transport;
• Synchronization and technical assistance in establishing an interstate system of oil and gas transport;
• Providing guarantees to investors;
• Avoidance of global risks: political, legal, commercial, ecological.

The above set goals are to be achieved through:

• Adequate technical assistance for intensification, adoption and development of both the existing energy supply network and the construction of new strategic routes;
• Reducing to minimum financial risks of investment through the implementation of the INOGATE Umbrella Agreement;
• Assistance in making projects known to potential investors in multilateral financial organizations, other international financial institutions, banks and private financial subjects.

Member countries have the possibility of benefiting from technical assistance in the implementation of projects under the INOGATE program through the CARDS program, based on the promotion of INOGATE objectives.

2. One of the major projects within the INOGATE program is the Constance - Pančevo -Omišalj oil pipeline project for the supply with Caspian oil of the respective countries and corresponding Central and Southern European countries, relying on the existing infrastructure in Romania, the Republic of Serbia and Croatia. Diversification of oil supply, the strategy and priorities of the Republic of Serbia in joining Euro-Atlantic integrations, and the economic and infrastructural factors, were decisive for the accession of the Republic of Serbia to the program and the agreement. Immediately after acceding to the Agreement the Republic of Serbia initiated negotiations with Romania and Croatia, which resulted in initialling the Protocol Establishing the Interstate System for Oil Transport Constance - Pančevo - Omišalj, in Belgrade on 29 June 2001. A mechanism of mutual cooperation between the three countries, through professional and technical institutions, has also been established with a view to the further work on implementing the project of the oil pipeline through the three countries.

The Protocol to the INOGATE Framework Agreement for the establishment of an interstate system for oil transport from Constance (Romania) to Omišalj (Croatia), together with Annex 1 for the settlement of disputes, was signed in Bucharest on 10 September 2002, by the respective ministers of the three countries. The Protocol is in fact an Annex to the INOGATE Framework Agreement on the Establishment of the Interstate System for Oil and Gas Transport, signed in Kiev on 22 July 1999. The signing of the Protocol means that international-legal conditions have been created for the actual implementation of the Constance - Pančevo - Omišalj oil pipeline project.

In the meantime, prior to the signing of the Protocol, cooperation had also been established with the USA which decided to finance, through its Agency for Trade and Development, the feasibility study for the pipeline project, amounting to US $ 300,000. In this context, an agreement was signed between the USA and Croatia, with the presence of representatives of Romania and the Republic of Serbia. The operationalization of this agreement is under way through the American company Parson's,Texas (USA), specialising in this kind of job.

3. The Constance - Pančevo - Omišalj oil pipeline project offers important advantages, both to countries through which it passes (Romania, Yugoslavia, Croatia) and to the wider region. Transport of crude oil through the Bosphorus (use of the port of Constance) is avoided, the oil pipeline passes through politically stable countries and ensures an alternative supply of oil to refineries in Eastern Europe (supply was exclusively from Russia so far), as well as a vital infrastructural link with the Western European energy corridor within the INOGATE program.

This pipeline is completely compatible with European interests because it will link the oil resources in Asia with the Panalpina pipeline (Trieste), Central and Western Europe. Highly important for the project itself is the fact that, out of the total length of the pipeline - 1200km - 800km already exist, which is one more argument to attract financiers and strategic investors (Chevron, Exon, Lucoil, Eni, Total, Elf, etc.).

4. The implementation of the Constance - Pančevo - Omišalj pipeline project will be of particular importance for the development and stability of the region as well as for a stable oil supply from the Caspian region to Europe, including primarily the countries through which it passes.

The signing of the Protocol to the Framework Agreement between Romania, the Republic of Serbia and Croatia, the joining of the project by the USA, and the continued EU commitment, signifies that a new space has been created for cooperation among countries of the region, and for galvanizing the process of Euro-Atlantic integrations. Indeed, by turning the project into reality the area where it will be located will cease to be a zone of risk, but rather a zone of stability and economic prosperity. The implementing of this project is of strategic import to the Republic of Serbia, and is in the direct function of its strategic political and economic interests.

¹ There are at present 21 countries which have acceded to this agreement with the EU (Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Georgia, Greece, Kazakhstan, Kyrgisztan, Latvia, Macedonia, Moldova, Romania, Slovakia, Tajikistan, Turkey, Turkmenistan, Uzbekistan, Ukraine and the Republic of Serbia).Thus, all of them have agreed to cooperate towards the establishment of one or several systems of oil and gas pipelines which pass through their territories, while observing the jointly accepted rules embodied in the agreement.