A View of South Stream from Turkey

This article by columnist Amanda Paul is reprinted from SundayZaman

Is South Stream losing steam?

For the last few years there has been something of an ongoing pipeline battle underway between Russia’s South Stream natural gas pipeline and the Western-backed Nabucco pipeline. The Brussels bureaucracy has favored the Nabucco project, a transit route that would bring gas from the Caspian and the Middle East (bypassing both Russia and Ukraine) to the energy-guzzling EU. However, at the same time a number of EU member states, EU energy giants and gas producers have supported Russia’s South Stream, which would bring natural gas across the Black Sea (also bypassing Ukraine) to the EU directly from Russia.

When the Russian leadership goes to bed at night they continue to dream of gas domination. Moscow wants to maintain a strong grip over the EU gas market and is ready to take to almost any measure to achieve this, even if it means building exorbitantly expensive pipelines that fail to get the proper funding, gas or support. With progress continuing to be made on Nabucco, Russia has felt the need to keep pushing South Stream and, therefore, Moscow continues to tout the project as the only reliable route, describing it as key to strengthening European energy security.

The Russians continue to demonstrate extreme confidence in the project, saying it will deliver quickly -- being rapidly completed thanks to the outstanding skills of the Russian workforce and their experience in laying pipelines on the seabed. Moscow also claims that Russia has enough gas resources available to supply the required 63 billion cubic meters every year from 2015 onward for up to 60 years. To push the project they also continue to discredit Ukraine, regularly stating that with Ukraine’s very unreliable record as a transit state it would be more sensible and efficient for Ukraine to be avoided.

However, it is clear that South Stream is still far from being a reality and that the Russians are grossly exaggerating, maybe even deluding themselves on some issues. While Russia may claim to have all the necessary gas, it is clear they do not. When asked specifically about this, Gazprom always fails to identify specific gas sources. They are also unable to give hard evidence of where the funding will come from for the estimated $30 billion cost of this project.

Furthermore, while Russia continues to claim that South Stream has plenty of EU support, this is not the truth. For example, Germany, one of Russia’s closest friends in the EU, has not given any support either financially or politically for South Stream, which has come as something of a blow for the men in the Kremlin. Indeed, Germany has expressed concerns about the project at times, including when Russia moved to get the German energy giant RWE on board. And, on the other hand, while Germany has not been the most ardent supporter of Nabucco, German Chancellor Angela Merkel did travel to Kazakhstan recently and raised the issue of gas supply for Nabucco with President Nursultan Nazarbayev, as well as for other planned southern energy corridor projects. Unfortunately for the EU, Kazakhstan is rather short of gas these days and would be unable to sell anything to the EU for some time to come, at least until new fields are explored. Nevertheless, Merkel’s visit was symbolic.

The EU is also not sold on the “Ukraine is unreliable” argument used over and over again by Moscow since the Russia-Ukraine gas crisis of January 2009. While Ukraine is hardly the ideal partner, it is the deep fear in Kiev that South Stream is becoming a reality that is currently spurring the Ukrainian government on to improve its gas transit system, including carrying out reforms demanded by the EU. The European Commission now regularly states that it does not view South Stream as cost effective and a few days ago this precise message was voiced by European Commissioner for Energy Guenther Oettinger during a visit to Kiev. He actually said there is no route more profitable and reliable than transit through Ukraine -- hardly music to Moscow’s ears.

And last but not least, ENI, Gazprom’s main partner, seems to looking for an exit from South Stream. The Italian giant is now said to have serious doubts over Moscow’s ability to shore up gas and financing. Indeed ENI have now suggested that South Steam should be down-scaled, giving it a capacity of 15 billion cubic meters per year.

So all is not well in the South Stream camp. Clearly Russia will not give up and they will doubtless continue to pursue all routes to continue to drive South Stream forward as long as Nabucco is still alive. Therefore, while the Russians are currently in this slump the EU would be well advised to use the opportunity to give Nabucco a big push and get some much-needed fresh momentum into the project, as it will almost certainly be just a matter of time before Moscow’s pulls another surprise from its sleeve.

Sunday's Zaman is the weekend edition of Today's Zaman, Turkey's most-circulating English-language newspaper.