The EU and Gazprom. Divided and panicky

Date: 06/05/06

Europe's quandary over Russian gas

THE European Union is meant to develop a collective response to the common problems of its 25 member nations. Instead the panicky realisation that, collectively, the EU is increasingly dependent on Russian gas is leading to infighting and recriminations among the union's members.

The Germans, normally the first to urge a common EU policy on almost anything, have responded to their vulnerability on energy by trying to develop a "special relationship" with Russia. Soon after he lost office, Gerhard Schroder, the former German chancellor, took a job with the consortium developing a euro4 billion ($4.8 billion) pipeline under the Baltic sea aimed at transporting gas from Russia direct to Germany. Angela Merkel, now chancellor, was in Siberia late last month to meet Vladimir Putin and witness the signing of a deal that will allow BASF, a German company, to make a large investment in a Russian gas field.

Many Poles and Balts find this Russo-German connection alarming--hence the evocation last week by the Polish defence minister of the "the Molotov-Ribbentrop tradition". The Poles want the EU to develop an energy pact, similar to NATO, in which all EU countries pledge to come to each other's aid in times of energy crisis.

Other EU countries have their own concerns. The British, who like to lecture other countries about the need to be open to global capital, have been fretting about the possibility that Gazprom may make a bid to take over Centrica, which controls much of Britain's gas infrastructure. Any such bid would certainly test the British commitment to open markets. The Italians are uneasily aware of their dependence on Russian energy, but have been too distracted by internal political turmoil to do much about it. The French, because of the strength of their nuclear industry, feel less vulnerable.

As for the EU authorities in Brussels, they are working on an energy-policy document for the June 2006 summit of EU heads of state. On May 2nd the commission sent a letter to Victor Khristenko, the Russian energy minister, promising that the rules applied to Gazprom would be no different from those that apply to other companies in the EU energy market. Yet the letter also restated the importance of ratifying the Energy Charter Treaty, a political initiative which stipulates the right for foreigners to use pipelines. So far, the Russians do not seem remotely tempted to sign--a stance which only heightens fears within the EU that one day Russian gas may become a political weapon.

EU countries could respond by importing more liquefied natural gas (LNG). And they can build new routes like the Nabucco pipeline, which would bring gas from Turkey via Bulgaria, Romania and Hungary. Yet LNG terminals and new pipelines take years to build. They are expensive too: the estimated cost of the Nabucco project is $5 billion.

Article discusses Europe's quandary over Russian gas