The European Energy Charter is expected to go into effect in about a year.
It aims to create a legal framework to facilitate western energy investments in former Communist countries.
Clive Jones, secretary general of the Energy Charter Conference, said 44 nations have signed the treaty, and four others are due to sign soon (OGJ, Dec. 26, 1994, p. 33).
Signatories will then include all the countries of eastern and western Europe, except for some regions of the former Yugoslavia, and all countries of the former Soviet Union, as well as Japan, Australia, Canada, and three Mediterranean countries.
The U.S. did not sign. It said the charter would grant most favored nation trading status to some countries that do not now have it and require Washington to ensure that U.S. states comply with the pact.
However, U.S. oil companies might be able to benefit from the treaty through their foreign subsidiaries.
BROAD SCOPE
Jones said, "This is the first multilateral treaty of such wide scope for one particular economic sector and the first substantial multilateral treaty between East and West since the Cold War ended."
The key to the charter's success will be the oil industry's willingness to invest and operate in the East.
The pact requires member nations to treat foreign energy investments at least as well as the investments made by their national companies.
"This should be a very powerful incentive for companies wondering whether to commit their resources to an overseas venture in the energy field," Jones said.
Signatory nations could not agree on impartial national treatment in the exploration phase. One problem was that many western companies wanted exceptions to that rule for their "national preference" laws.
The countries chose to postpone that issue and negotiate a second pact before 1998 granting such treatment.
TRADE ISSUES
On trade matters, Jones said, "The treaty will have the effect of treating those signatories which are not members of the General Agreement on Tariffs and Trade as if they were GATT members only for energy trade."
The countries agreed to begin negotiations this year on a "tariff standstill," which would bar signatory countries from increasing import or export duties on energy products.
Talks also will start this year to extend the treaty to cover energy equipment.
Most of the signatory countries agreed to follow terms of the treaty until it is ratified, subject to limitations in constitutions or laws.
Jones stressed, "The significance of the charter initiative goes far beyond the energy field.
"Certainly, by encouraging investments and energy trade, the treaty will improve energy supply and security in world markets. But it will also yield major environmental benefits by promoting the transfer of technologies and know-how in the energy efficiency and environmental fields."
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