Fear and suspicion over gas supplies

The EU seeks alternative fuel routes to Europe bypassing Russian-controlled gas pipelines. Toby Vogel reports.

Almost one-third of the EU’s imports of natural gas and crude oil come from Russia, through pipelines controlled by state-owned monopolists (Gazprom and Transneft, respectively). Commerce and politics are closely intertwined in this business: Gazprom’s taxes amount to around 10% of Russia’s public revenue and the company’s chairman, Dmitry Medvedev, is the anointed successor to Vladimir Putin, Russia’s current president.

Vladimir Chizhov, Russia’s ambassador to the EU, says that Europe has no reason to fear its energy dependency on Russia. "We don’t mix energy and economic problems with political ones," he told reporters in Brussels on 6 February. "Others do that."

But the EU is not taking any chances and wants to diversify both the source of its energy and its access to it. The most developed result of that ambition so far is the planned Nabucco pipeline, designed to bring Caspian gas to Europe through Turkey.

The Central Asian republics whose reserves the EU hopes to tap directly through the pipeline are hardly bedrocks of stability, which worries many observers.

More immediately, the €4.6 billion project has run into all sorts of trouble, even before construction of its 3,300-kilometre pipeline has actually begun. And many of the problems originate with EU member states rather than non-EU transit countries.

Austria’s OMV, part-owned by the state and the leader of the Nabucco consortium, on 25 January entered a joint venture with Gazprom for Nabucco’s Austrian terminal and storage centre at Baumgarten. Baumgarten, one of the largest such facilities on the continent, already handles one-third of Russia’s gas exports to western Europe but was wholly-owned by OMV. The deal will give Gazprom a say in what happens there.

Austria also supports ideas to stream Russian gas through Nabucco or even to "integrate" Nabucco and South Stream, a Gazprom project, Economics Minister Martin Bartenstein told the media at the time that the Baumgarten deal was announced.

South Stream, a partnership between Gazprom and Italy’s ENI, is a project to carry Russian gas to Europe through a new pipeline under the Black Sea starting in the Russian port of Novorossiisk and re-emerging, after 900 kilometres under the sea, in Bulgaria. Construction is expected to cost some €10bn.

South Stream received a major boost when Russia signed framework agreements with Bulgaria and Serbia in January. This will open the way for South Stream to cross the Balkans and link up with central and western European markets.

But Bulgaria is also a key participant in Nabucco and the new deal with Russia could undermine its commitment to the EU project.

South Stream is one element in Russia’s own attempt to diversify export routes to dampen the risk from unreliable transit countries. The other is Nord Stream, a €5bn, 1,200-kilometre gas pipeline that will run below the Baltic sea, directly linking Russia and Germany, one of its most important national markets.

Nord Stream will allow Russia to export gas to Germany without having to go through Ukraine, Belarus or the Baltic republics.

Russia’s main export route for crude oil is the Transneft-managed Druzhba (friendship) pipeline, which runs from Samara in south-east Russia - a collection point where pipelines from Siberia, the Urals and the Caspian meet - to the northern Adriatic port of Omišalj in Croatia. Along the way, Druzhba branches off into Germany and Poland in the north and Slovakia, Hungary and the Czech Republic in the south.

Druzhba also supplied oil to Lithuania until deliveries were stopped in 2006 because of a leak. Russia says that the ongoing suspension is for technical reasons, while Lithuania sees political motives and says that Russia has rejected technical assistance in fixing it.

The EU seeks alternative fuel routes to Europe bypassing Russian-controlled gas pipelines. Toby Vogel reports.