This agreement, known as the known as the Energy Charter Transit Protocol, would have developed an enhanced set of rules - governed under international law - that would have monitored energy transit flows across national borders.

These negotiations had begun as early as 2000 and the aim was to build upon the already ratified Energy Charter Treaty. However, despite the fact that most of the text within the protocol had been already agreed upon last year, total acceptance of the agreement could not be reached due to a few outstanding issues that were not finalised.

At the core of the matter are differences of views between the European Union and Russia. In fact, bilateral talks between the two parties had been on going throughout the year to find a common ground but to no avail.

According to Christophersen, "I deeply regret that we were not able to achieve a unanimous decision by the Charter." He urged "all Contracting Parties and Signatories to the Energy Charter Treaty" should be guided by the principles of the draft Transit Protocol "when regulating the transit of energy through their territories, pending the Protocol's formal adoption and signature."

"[The] Conference today [was] in favour of adopting the Transit Protocol. It remains my view that the text on the table reflects a fair balance of interests, and offers solutions that all parties, including the EU and Russia, should be able to accept. It is even more regrettable that, in my judgment, this outcome was largely determined by factors unrelated to the substance of the proposed text of the Protocol itself."

"Under these circumstances, I consider, as Chairman, that there is no purpose to be served by continuing the negotiation process at this time. Nonetheless, we have not closed the door on the negotiations forever, and I have tasked the Energy Charter Secretariat with reporting back to the next meeting of the Charter Conference in June 2004 regarding the prospects for completing our work on the draft Protocol."

"It cannot be denied that this outcome represented a serious setback for the Energy Charter process. But the fundamental issue at stake has not altered - namely, that problems affecting energy flows in transit, via pipelines and grids, represent a major potential risk for the collective energy security of the countries of Eurasia.

"It therefore remains the case that governments need to create a multilateral framework of rules on transit issues, which will help to mitigate this risk as far as possible.

"Despite today's decision, there is no more appropriate forum within which to conduct this work than the Energy Charter process, in view of its geographical coverage and the legal foundation on which it is based. Several of our member-governments - including, I should underline, the Russian government - made it clear at today's meeting that they share this opinion.

"But, as the Transit Protocol has demonstrated, the Charter's potential can only be fulfilled if there is a true political commitment on the part of all our member-states to draw up such rules and subscribe to them," said Christophersen.