Who is compromising “South Stream” in Europe?

23. May 2013. / SEE Energy News

Contributed by: Igor Alexeev

The third and fourth sections of Russia’s “South Stream” will be completed by 2018. However, supranational structures in Brussels and their representatives in Berlin still cannot set forth a predictable and unified position on this project of undisputed geopolitical importance.  Bureaucratic hurdles like “Third Energy Package” or even more mysterious “Southern Gas Corridor” create non-competitive and non-transparent advantage to the EU initiatives on the energy market. “We will not impose any unreasonable or unjustified level of administrative or regulatory requirements. We will act as fair partners”, promised EU Energy Commissioner Guenther Oettinger in May, 2011. Two years after this speech one can clearly see quite an opposite situation.

“Third Energy Package” is a direct attempt to implement retroactive legislation thus driving down natural gas prices. It is absolutely inconsistent with the principles on which the whole European legal framework is based. Another notorious example of arbitrary behavior on the part of the European Commission is its indirect support to the alleged “virtual” reverse gas supplies from Poland to the Ukraine. There is every reason to believe that this natural gas is Russian. One can hardly call it fair play (any partner would consider such actions fraudulent), but after the Cyprus affair it is very hard to predict how far the EU can go in denying market realities.

On a long-term horizon this strategy may harm German national interests as a major natural gas importer and create unnecessary credibility gap between Russia and the European Union. Germany needs to get over its love/hate relationship with “South Stream” and return to thinking in terms of realpolitik. After all, it’s just a pipeline, not some ad vitam Doctor Faust’s contract as some analysts with Atlantic orientation often assume. European double-game seems especially illogical if we consider the scope of economic problems which Merkel and Oettinger have to solve in their own backyard. Global natural gas demand growth should be treated as an opportunity, not a “threat”.

The European leaders are very well aware of “Nabucco West” and “TAP” project limitations (lack of solid resource base and insufficient infrastructure to name a few). These pipelines may contribute to the diversification of supplies although even if completed they cannot be a game-changer. Recent talks of Azerbaijan’s President Ilham Aliev in Austria have shown that “OMV” and other key European shareholders prioritize “Nabucco-West” over other pipeline blueprints. Unfortunately “South Stream” remains on the periphery of European energy policy, despite the fact that it is a very advanced project. In comparison, “Nabucco West” is yet to meet environmental goals and objectives in Romania. Nabucco Gas Pipeline International, the consortium to develop, build and operate the “Nabucco West” pipeline, has spent less than 5% of the total value of the investment on the development of the project.

There are clear differences of opinion among the EU regulators. EU Energy Directorate’s wavering position on “South Stream” sends contradictory signals to the non-EU transit states. Serbia, for instance, has officially announced it is ready to start building its section of the South Stream pipeline. “All problems are solved”, announced “Srbijagas” Director-General Dusan Bajatovic. At the same time “Nabucco” and “Southern Gas Corridor” lobbyist Zorana Mihajlović (Serbian Minister of Energy and Washington-backed ISAC Fund zealot) has recently been very active in her meaningless crusade against Russia’s “South Stream”. Many experts also remember her “brave” attempt to change the final draft of agreement between Gazprom and Srbijagas not that long ago. Although an old Serbian proverb says: you can’t have both goatling and money. Politically motivated red tape will not undermine Serbia’s energy self-sufficiency on the Balkans.

In April, 2013 Prime Minister of Slovenia Alenka Bratusek confirmed that Russia’s gas pipeline remains a priority for her country, which pursues economic development and foreign investments. Slovenia’s investments in the project will total some 1.1 billion euros ($1.4 billion). Bulgaria has also expressed its deep interest in Russia’s pipeline. A look on the map of the Southern Europe reveals that political contradictions in Belgrad will cause nothing but a short delay in “South Stream” realization. Hardly the same could be said about “Nabucco”.

Igor Alexeev is a Russian journalist and blogger for Strategic Culture Foundation, Asia Times and Route Magazine. He writes on the oil and gas sector, Eurasian energy security and shipping industries in the Arctic.

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