Thursday, August 25, 2005

Intelligence Brief: French Energy Policy

Drafted By: Federico Bordonaro

French Prime Minister Dominique de Villepin held an important speech on August 16, 2005. Apart from addressing his projects to tackle unemployment, he explained to citizens why the present oil crisis is destined to last and, more importantly, he briefly illustrated the new French energy policy. The importance of this speech is two-fold.

First, de Villepin is launching a strategy aimed at energy independence (involving the state's intervention in the national economy), which appears to be in line with his Gaullist legacy. Second, he never mentioned in his speech launching a common European energy policy.

These facts signal that the effects of France's rejection of the E.U. Constitutional Treaty are having a deep impact on the country's politics, and that sovereignist discourse is being incorporated by the neo-Gaullist majority. Therefore, we now see a shift in Paris' industrial policy -- although along well-known Gaullist lines -- which makes the formation of an authentic European political union even more difficult. [See: "The Rise of French Pro-Sovereignty Movements and their Geopolitical Consequences"]

De Villepin's Speech and France's Energy Policy

Speaking at Matignon, de Villepin announced that his government is preparing a series of new measures for this fall aimed at spurring economic growth. He recalled with confidence some recent positive economic data as evidence that the economy is back on a more favorable growth trend. The French prime minister did not provide details of the program, but said it would include targeted spending of revenues generated from the government's privatization projects.

In order to fight unemployment, which is around ten percent and considered unacceptable by most of the public, de Villepin introduced in June 2005 a tough measure: employers will be allowed to fire new staff without justification at any time during an initial two-year period of their hiring. This decision sharply contrasts with traditional French labor guarantees, and it means that the neo-liberal agenda pushed by Interior Minister Nicolas Sarkozy is growing in influence and popular reception.

Summarizing the head of government's speech, the daily newspaper Le Monde said the challenge for de Villepin is creating a vast, industrial and commercial re-specialization of French products, while cutting taxes for small and medium enterprises.

However, the core of de Villepin's speech was, undoubtedly, on energy security.

He explicitly warned citizens that the oil crisis -- and the subsequent high oil prices -- will last for a long time. Oil reserves appear fragile in front of growing demands from old and new great powers such as China and India, and the political tensions in the Middle East will continue for the foreseeable future.

He continued, arguing that France's energy security is a vital stake for present and future generations. Recalling the political strategy of former President Charles de Gaulle, de Villepin stressed the fact that French national energy production covers now 50 percent of France's needs -- compared with only 20 percent in 1973. Such a figure, he said, is encouraging but not enough, and needs to be expanded.

Other important issues, de Villepin continued, are sustainable development and the fight against global warming, which are in the heart of the July 13, 2005 energy policy law that fixes the energy policy's orientations.

National energy independence and technological innovation -- aimed at diversifying energy sources -- are at the core of de Villepin's strategy. This echoes a long run French struggle to ensure its energy security and to open new scenarios for tomorrow's energy acquisition. De Villepin announced three pillars upon which the project will be carried on. The first of these pillars is massive investment in energy policy, beginning with the oil sector.

In line with this, the prime minister called for French oil company Total, and other companies, to invest in more refining capacity. Total, he said, must contribute in an equitable way to the preparation of the future. Such an explicit call from a government for a big corporation to increase its role in national policy also signals the revival of "economic patriotism," advocated by increasingly influential politicians such as the U.M.P. exponent Bernard Carayon.

Concerning nuclear power, de Villepin mentioned the present day's situation where nuclear power plants function as a strong pillar in France's energy production, and called for starting a nuclear strategy of the future -- with new generations of nuclear power plants to be implemented. Given Paris' importance in the European energy market, we can expect nuclear power to be re-launched on a continental scale -- also on the basis of growing energy needs from Central and Eastern European countries.

The second pillar, continued de Villepin, will be that of renewable energy, a field in which Paris ranks among the most advanced countries. Hydroelectricity and bio-fuels in particular were evoked as the right assets to develop together with nuclear power so that France will not become totally dependent on atomic energy to satisfy its electricity needs.

The third pillar will be energy savings. Again, the government will actively take part in this game with taxation, reinforcing tax credits that already exist and promoting renewable energy assets, low-consumption cars, solar energy heaters, etc.

The Bottom Line

Politically, the Matignon speech is obviously very important, as France's industrial orientations for the future are clearly defined. However, such a project could have decisive geopolitical consequences. Contrary to many previous government communications, this one makes no mention of Europeanist rhetoric or of Franco-German centrality. It is, instead, plainly French.

On a geoeconomic level, we can expect important consequences if such a program is achieved successfully. Total's competitors will be very interested in the company's involvement in France's energy security strategy since this could strengthen Total's leverage in global economic markets. Moreover, oil producers and investors will carefully observe Paris' implementation of alternative energy sources.

De Villepin will nonetheless have to effectively and rapidly tackle unemployment concerns and to revitalize the G.D.P. at home. Otherwise, he will hardly obtain the needed support to implement his broader policy. In 2007, general elections are scheduled in France, and the neo-Gaullist candidate (who may run in the presidential elections) will face strong competitors, such as the neo-liberal Nicolas Sarkozy and (to a lesser extent) the sovereignist hard-liner Philippe de Villiers and the socialists Fran├žois Hollande and Laurent Fabius.

However, if de Villepin succeeds, it could portend the beginning of a more independent French foreign policy, less attached to the Franco-German axis, possibly opening the way to a "variable geometry Europe" similar to that advocated by pro-sovereignty intellectuals and politicians like de Villiers, although without this latter's sovereignist and anti-E.U. rhetoric.


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