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Source: http://www.nord-stream.com/en/the-pipeline/pipeline-route/route-details.html
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Source: http://news.bbc.co.uk/1/hi/world/europe/8039587.stm
Leonhardt van Efferink is a PhD student at Royal Holloway, University of London. For more information about his PhD, please check:
Leonhardt van Efferink: Geopolitical scripts and the (de)legitimisation of ISAF
He holds Master’s degrees in Geopolitics, Territory and Security (King’s College London) and Financial Economics (Erasmus University Rotterdam).
Russia is the largest supplier of gas to the European Union (EU). Its decision to cut off gas deliveries to Ukraine temporarily reduced Russian gas inflows in several EU countries in 2006 and 2009. The inflows had become smaller because Ukraine tapped Russian gas that was supposed to be re-exported to EU countries. The Russian-Ukrainian gas dispute added fresh impetus to the debate on the dependence of the EU on Russia’s gas.
The article attempts to shed light on Russia’s position on the EU gas market. This third part focuses on the two pipeline projects Nord Stream and South Stream. The first part gives a brief overview of gas demand in the EU, followed by a discussion of Russia’s gas production. The next part continues with Russia's gas strategy and the role of Gazprom in that respect. The last part summarises the first three parts and wraps up the article.
This map of the U.S. Energy Information Administration shows the gas (and oil) pipelines of Russia:
Russian Oil and Natural Gas at a Glance
The Nord Stream project (see left column for map) fits neatly within Russia’s strategy to consolidate its position in the EU. In 2005, Gazprom signed an ‘in-principle’ agreement to develop the Nord Stream pipeline. The other signatories were the two German companies Wintershall and EON Ruhrgas, later joined by the Dutch gas company Gasunie.
The Nord Stream pipeline will be built on the seabed between Vyborg (Russia) and Greifswald (Germany), enabling the transport of Russian gas directly to its largest EU market. Accordingly, the Nord Stream pipeline will end the transit monopoly of Ukraine and Belarus on Russian gas flows to the EU. The realisation of Nord Stream pipeline has become very likely, as nearly all required conditions have been fulfilled. The pipeline is expected to become operational in 2011 . The costs of building the Nord Stream pipeline are considerable. Initially estimated at USD 5bn by the project management, analysts currently expect an amount of around USD 12bn.
Claims of EU officials that Nord Stream will improve EU energy security by precluding the possibility of interruptions in transit countries miss this point. Nord Stream would after all not make a difference for the EU in terms of supplier diversification.
A completely different claim was made by the Polish minister of Foreign Affairs Radek Sikorski in 2009. He argued that the Nord Stream pipeline deal was comparable to the 1939 Molotov-Ribbentrop Pact. With this agreement, Germany and Russia intended among other things to create two spheres of influence in Central Europe and Eastern Europe.
At first sight, this comparison seems far-fetched. Nowadays, most countries are members of the European Union and NATO, while countries in this region lacked strong institutional ties with Western Europe or the US in the 1930s. However, bearing in mind that Eastern European countries form relatively small markets for Gazprom compared to countries such as Germany and France, the economic costs for Russia of a gas delivery cut-off to these countries is relatively small. Moreover, the de-linking of gas deliveries to Western and Eastern Europe also reduces the political costs of such a move. Combined with the relatively heavy dependence of the Eastern European countries on Russian gas, the Nord Stream gas pipeline would make gas flows a more effective tool for Russia to influence the political process in EU countries in Eastern Europe. Particularly since the perceived threat of interrupting gas deliveries already provides Russia with political leverage in the countries concerned, even before Gazprom would actually stop the gas flows.
The South Stream pipeline (see left column for map) is another result of Russia’s gas strategy towards the EU. In 2008, Gazprom signed an agreement with Italian energy company ENI for the development of second new pipeline to EU, coined South Stream. This pipeline would transport gas from Russia through the seabed of the Black Sea to Bulgaria. From there, the gas would continue in two directions: to Austria, crossing Serbia and Hungary, and to Italy, crossing Greece and the seabed of the Adriatic Sea. In May 2009, Russia signed an agreement to conduct South Stream feasibility studies with the governments of four involved countries, Italy, Bulgaria, Greece and Serbia. The pipeline is expected to cost USD 25bn and to be completed by 2015.
A brief analysis of both pipeline projects makes clear that Russia likely has political and strategic reasons for building the new pipelines. To start, Russia effectively controls the Nord Stream and South Stream projects thanks to Gazprom’s 51% share. This position is in stark contrast with the pipelines that cross Ukraine, which Russia has sought to acquire to no avail for years. Gazprom has stated that it would welcome the expected participation of the French utility company EDF in the South Stream project, but insists on keeping its decisive vote and majority ownership. Another telling observation is that the estimated transportation costs for gas of the new pipelines will substantially exceed the transit fees that Russia currently pays to Ukraine and Belarus. Furthermore, Russia never expressed any doubt about the projects after the global economic crisis began (2008) and the gas prices declined sharply (2009) . Finally, recent gas market forecasts imply that existing pipelines between Russia and the EU have sufficient capacity to facilitate Russia’s gas exports to the EU until 2030.
Many analysts, including Paszyk (2010), claim that South Stream is a deliberate attempt of Russia to prevent the building of the Nabucco pipeline. This pipeline would run from Turkey across Bulgaria, Romania and Hungary to Austria. Its estimated development costs are less than half of those of the South Stream pipeline and the planned completion year is 2013. The project has been troubled by financial problems and a lack of consensus among the involved countries. The Nabucco project is part of EU efforts to find opportunities to import gas without Russian interference.
The South Stream project seems poised to have a negative impact on the Nabucco project as it aggravates the latter’s most serious problem: the supply of sufficient gas to transport through the pipeline. Suggested options to secure gas flows include connections between pipelines in eastern Turkey and those in either Azerbaijan or Iraq. While the second option is not possible for the time being due to political problems in Iraq, the first one is attractive as Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan have earlier expressed interest in delivering gas to the EU without interference of Russia. So far, the countries concerned have however only guaranteed 20% of the required gas flows, making it highly unlikely that eventually sufficient gas will be available for the Nabucco pipeline. The ability of Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan to deliver gas to the EU through the Nabucco pipeline is compromised by committed gas sales to Russia, export opportunities to China and strong domestic demand.
The long-term prospects of the Nabucco project, and thus of the EU’s ambition to become less dependent on Russia for its gas imports, were further clouded by Gazprom’s acquisition in 2008 of a 50% share in the large gas transmission centre at Baumgarten in Austria. With this transaction, Gazprom created an influential position towards the Nabucco pipeline, as the EU had designated the centre as the final destination of the Nabucco pipeline. Officials of the Austrian government and the Nabucco project have recently suggested using the Nabucco pipeline to transport Russian gas as well or to merge its European (non-Turkish) route with that of the South Stream pipeline . These suggestions make clear that the initial rationale behind the Nabucco pipeline, excluding Russia from part of the gas flows to the EU, seems nothing but a ‘pipe dream’.
If you want to continue reading, please use this link to go to the next part. For the references, the same link applies (please scroll down):
Russian gas 4: national interests undermine EU energy security (conclusion)
