Deutsche Welle , Germany
Aug 9 2009

Russia plays better hand in pipeline poker

Großansicht des Bildes mit der Bildunterschrift: Russia and Turkey
have agreed on the construction of a gas pipeline under the Black Sea
soon after the EU signed a deal with Ankara on the Nabucco
pipeline. The Russian project is ahead at the moment.

Russia and Europe are heading for a grim race in the construction of a
gas pipeline under the Black Sea. Or so it would appear after the
signing of a contract between Russian Prime Minister Vladimir Putin
and Turkish Prime Minister Recep Tayyip Erdogan.

There’s a need for both the Russian South Stream as well as the
European Nabucco pipeline, because gas consumption in Europe will
increase in the next decade.

However, the Russian project is ahead at the moment, if you consider
it from a political and business point of view.

The Russians will be the first to begin construction and they can
probably more easily afford the estimated 20 billion euro ($28
billion) costs with their state-run Gazprom. A private consortium is
to build the EU pipeline for around 10 billion euro ($14 billion).

The Nabucco project has to be run as a business whereas Gazprom can
afford massive losses.

EU members disagree

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:
Russia and Turkey signed the South Stream Pipeline deal on August 6
European states such as Greece, Italy, Bulgaria and Austria as well as
Turkey are partners in both pipeline projects.

This indicates two things: it’s everyone for himself when it comes to
energy security. A uniform European approach is not expected and is
also not desired, for energy provision falls in the jurisdiction of
the member states. A consistent energy policy in the European Union is
worlds away compared to the largest producer, Russia, because the 27
member states cannot agree on what they really want.

After their experiences as part of the former East Bloc, the Baltic
States and Poland, the Czech Republic and Slovakia want to avoid any
dependence on Russia.

The largest group in the EU, including Germany and France, are
compliant customers who know that they will be dependent on the
Russian gas stopcock for a long time to come.

In principle, it is only right that the North Stream in the Baltic and
South Stream and Nabucco in the south should provide alternatives to
the present supply lines through Ukraine and Belarus. Above all, the
loser will at first be Ukraine which will be deprived of its status as
an important transit country to Turkey.

The Caucasus question

The Caucasus plays a key role in the great gas debate. Important Gas
and oil pipelines, built with the help of the US, run through Georgia
which is in a long-term dispute with Russia.

Neither South Stream nor Nabucco can operate properly without a stable
Georgia, Azerbaijan and Armenia.

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:
Nabucco has to be run as a business whereas Gazprom can afford massive
losses
And even more important than the question of the pipeline routes is
the question of the gas supplier. Who should supply the gas for the
pipelines? Russia and the EU are endeavoring to persuade the central
Asian states, especially Turkmenistan, Iraq and Iran to be the
suppliers. That’s where the actual competition is.

Russia does not produce enough from its own oil fields to be able to
fulfill the contracts and thus needs new sources. The EU is also
endeavoring to strengthen deliveries from the Mediterranean area and
Norway but here too new methods of conveyance are needed.

In order to guarantee the supply of energy, the EU has to do some
homework on its own territory. Europe desperately needs North-South
and East-West pipelines in order to be able to smooth out production
shortfalls among its member states.

France advocates that the Russians should not only be viewed as
competitors that one simply has to keep out of the European
market. Rather, the EU, Russia and Turkey should run all the pipelines
together.

The happy winner at the moment, thanks to its geographical position,
is Turkey. It will become the most important land of transit and is
connected via the third pipeline, Blue Stream, directly with Russia.

Turkey could not do anything else than sign the contracts with Putin,
after all, Russia supplies two thirds of the gas for the Turkish
market and thus possesses a virtual supply monopoly.

Author: Bernd Riegert (td)
Editor: Andreas Illmer

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