Pipelines: Avoiding a Loss of Face?

Thoughts from The Voice of Russia

Blocking South Stream is not in the interests of the EU. Instead, the primary goal is to combine this gas project with the European legislation.

Such was the sentiment expressed by European Energy Commissioner Gunther Oettinger at the Brussels conference timed for the 10th Anniversary of the Russia-EU Energy Dialogue.

Just a year or two ago, such a nod to Gazprom’s baby would surely mean that the Commissioner would lose his post. Yet today, such a statement does not appear to be any particular act of defiance. Russia has already entered into inter-governmental agreements for the implementation of this project with Bulgaria, Hungary, Serbia, Greece, Slovenia, Austria and Croatia.

The EU is forced to de facto admit to a breakthrough in Russian energy diplomacy, in the opinion of Deputy Chair of Gazprom Alexander Medvedev.

There is every reason to consider South Stream a pan-European project. Its path alone lends itself to such a view. Around ten countries and a number of major companies are interested in taking part in it. And it appears that these numbers will grow. The new pipeline is expected to not only satisfy growing demand for the fuel, but also ensure the reliability and flexibility of supplies – Medvedev explained.

The EU can’t not factor this in, even if the catchphrase of the Brussels conference was “diversification of energy supplies”, or in other words – a reduction in reliance on Russia. Yet at the same time, the Europeans can’t ignore the fact that Russia’s share in gas imports will grow. European officials will have to cast off political blinders, emphasized Russian Energy Minister Sergei Shmatko.

We supply almost a third of the EU’s energy resources on a long-term basis. Europe is perfectly well aware of the mutually dependent nature of our relationship. They understand that there won’t be any alternative to Russian oil and gas in the next 30 years. EU strategy up to the year 2050 envisages considerable energy resource supplies from Russia, the minister said.

This is already a step towards South Stream receiving a de jure priority transportation network status in Europe. This will first of all remove hurdles in signing sale-purchase agreements for gas deliveries. Most likely, this will be the number one argument for Russian gas importers in their bid to make this a pan-European project, as its launch is scheduled for 2015. The planned capacity of the two branches of the gas pipeline – for Central Europe through Bulgaria, Hungary and Serbia and for southern Italy through Greece – is 65 billion cubic meters.

The EU has rushed into awarding priority status to the Nabucco project, which envisages the transportation of Caspian gas to Europe, bypassing Russia. For the time being, owing to a lack of specific resource base, this pipeline looks pretty virtual. If it does get built, it may become a monument to the political ambitions of the EU.

In that case, the EU will have to take belated steps towards South Stream. Meanwhile, a “loss of face” will be unavoidable. Wouldn’t it be better to make a start on diversifying thinking and de jure recognize South Stream today?

Source: Voice of Russia