The Revival of South Stream on the Horizon. Commentary for New Eastern Europe

Rosyjska propozycja projektu Turkish Stream.
Rosyjska propozycja projektu Turkish Stream.

Russia encourages its allies in the EU to participate in the Turkish Stream project which is aimed at delivering Russian gas to Central Europe. This initiative may be a threat to Ukraine’s position as well as a threat to the Southern Gas Corridor, a key European diversification initiative. Implementation of new Russian plans would be in fact a revival of the abandoned (?) South Stream project. Some European countries are ready to help Russia in the implementation of its business plans, although they might not serve the EU’s interest well.

Hungary, indirectly, by its statements on energy policy, supported the Slavkov Triangle’s (Austria, Czech Republic and Slovakia) stand in the matter of energy cooperation with Russia. These countries see no obstacles in strengthening economic ties with the Kremlin in spite of the Ukrainian war. Viktor Orban recently paid a tribute to Vladimir Putin who visited Budapest on February 17th. Orban has been selling the Hungarian energy sector to Russia step by step. In exchange for lower gas bills and more flexible conditions of the gas deal, he accepted a Russian loan, nuclear deal on building new reactors in the city of Paks by Rosatom and agreed to not export purchased Russian gas to Ukraine. The latter is the most important thing.

Russians now dictate to Orban to whom he can or cannot sell gas which is against the EU law. According to the EU regulations, each state has a full right to sell gas to any other country. Gazprom does not want this to happen because the situation in which its customers trade Russian gas between each other is highly uneconomic for the company which has been recently losing its firm position on the European market. Under current conditions, this solution is more beneficial for gas buyers than to buy gas directly from Gazprom. For example, Ukraine has been purchasing gas from Germany as Germany’s deal with Gazprom had much better conditions than Ukraine’s one. Thus, the Russian gas giant wants to keep a re-export ban clause in all its agreements with European partners even if it is not in accordance with the EU law. Budapest has accepted this clause unilaterally and, by doing so, Orban showed Putin that the Kremlin may influence not only the Hungarian energy sector but also Hungarian politics as a whole. It is also an attack on EU energy law execution in member states. Even the invitation of Vladimir Putin to Budapest itself was a bad signal – it may encourage some EU member states to bypass European institutions and try to build good bilateral relations with Russia in spite of the Kremlin’s aggressive foreign policy. Cyprus and other EU member states have already followed this direction, legitimising Moscow’s foreign policy and investment plans in spite of constant fighting in Donbas and the occupation of Crimea.

The Slavkov Triangle’s countries expressed strong interest in the Turkish Stream project which would allow them to purchase gas from Russia and bypass Ukraine by creating a gas link to Turkey and then to the Balkans. Russia may use existing South Stream infrastructure to connect these countries with Russian gas via Turkey. If the Slavkov Triangle is a more formalised structure, it may overshadow the Visegrad Group however this is a long way off; it is crucial to signal the issue though.

From Russia’s point of view one thing in gas relations is particularly important in this matter – to deprive Ukraine of the status of a transit country. If that happens, the Kremlin could easily cut off Ukraine from Russian gas and, thus, influence its politics. The Turkish Stream is an essential project to achieve this geopolitical goal.

Slovak gas pipeline operator Eustream has offered its customers in Ukraine, Bulgaria, Romania and ex-Yugoslav states to deliver western European gas to them within the frames of the Eastring project. It is a project aimed at modernisation of gas infrastructure in Romania, Moldova and Balkan countries (primarily Bulgaria) and building new gas pipelines to connect the region with Western gas markets. According to Slovak Eustream, it could be implemented within three years. The project was already supported by Bulgaria and Romania. Slovakia wants to discuss this project with the EU, more specifically, Austria and France in order to specify the source of supplies.

Although Slovakia presents Eastring as a chance to provide gas from well developed, western European markets such as Germany to Central Europe, it could also serve as a replacement of the European part of the South Stream and a way to deliver Russian gas to Europe, via Turkish Stream. Slovakia and Hungary are ready to follow Russian interests in this case. Mirek Topolanek (not to be confused with the former Czech PM), Eustream’s external relations special representative has already admitted that Eastring is not going to compete with the Turkish Stream. Moreover, according to Topolanek, they may even be complementary as Eastring could also provide Russian gas to Western Europe.

Topolanek’s statements are contradictory to the primary Eustream’s goal which was to transport gas from Western Europe to Central and Southern Europe. Thus, it appears that states interested in Eastring which are, at the same time, supporters of Russian interests which will allow Russia to connect Eastring with the Turkish Stream.

It would mean, in fact, an implementation of the South Stream project in a complicated form, without waiting for the permission from Brussels. This would push the EU to face the policy of fait accompli. Russia adopted a similar strategy against Poland few years ago. When the European Commission gave the green light to the Nord Stream pipeline, Russia offered Poland a chance to take part in it. Poland, however, was not interested so it can now buy Russian gas from the German market which makes more sense as it is cheaper than gas transported through Belarus and Ukraine. However, the aim of Nord Stream has been to bypass Poland and other transit countries and send Russian gas to Western Europe directly; of course, if the European Comission allows it to develop with exemptions from EU law.

The connection of Eastring with the Turkish Stream would provide the Balkans with a significant quantity of gas so it would not need to seek Caspian gas sent through the Southern Gas Corridor. This situation would not only mean a de facto revival of the South Stream but it would lead Russia to make its other geopolitical goal come true – cutting off Europe from the gas resources of the Caspian Sea, a key diversification alternative. It would happen by reserving the demand by Turkish Stream volumes. A blockade of the Southern Gas Corridor by Greece’s Syriza would be in this case the icing on the cake. Greece wants to maximise its profits from the Trans Adriatic Pipeline, a project which will bring natural gas from Turkish TANAP to southern Italy (both are parts of the Southern Gas Corridor project) but Azerbaijan does not want to make any concessions. The new Greek populist government may react nervously.

The EU policy, supported by states from outside the pro-Russian bloc, needs to be active. This is why the European Commission needs to speed up its anti-trust investigation into Gazprom and save Southern Europe from inappropriate Russian actions. It also needs to speed up work on the implementation of the Southern Gas Corridor project. In the time of economic crisis in Russia and sanctions, Gazprom does not have enough money for the most expensive, offshore part of the Turkish Stream and the West should take advantage of this opportunity.

The current activity of Moscow’s policy in the field of energy is possible because the Nabucco project failed, as a result of poor co-operation between the EU member states. If the EU does not create an attractive alternative to the Russian gas projects, all searches for alternative sources of gas will fail. It will result in even more Russian gas on European markets and, at the same time, more Russian political influence inside the EU.

The Energy Union, a concept presented on February 25th in Brussels is a chance to react properly to Russia’s attempts to monopolise the energy markets in Central and Southern Europe. During the presentation of the Energy Union, the European Commission has also declared that its antitrust case against Gazprom will be concluded “within a few weeks”. But will it really happen?

Source: New Eastern Europe

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