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Silk Road Reporters
Dec 13 2014
Russian Gas in Europe after South Stream
Published by Joshua NoonanDecember 13, 2014
On 11 December 2014, Russian Energy Minister Alexander Novak phoned
European Commissioner Maros Sevcovic stating that the South Stream gas
pipeline project has been canceled. Who are the winners and losers in
this culmination of the what some have called the first pipeline war?
The statement to the EC confirmed President Putin's statement on 1
December in Ankara announcing the rerouting of Russian gas to Turkey.
In 2007, South Stream was created to rival the proposed Nabucco
Pipeline which would go from the Caspian to Europe via the Balkans. By
the time of conceding the cancellation of South Stream, Gazprom, the
Russian gas champion expended $9.4 billion on the failed project.
With Western sanctions taking their toll, Russia has been obliged to
retrench across Central Europe and the Balkans. This project also
signals the durability of the smaller yet important Azerbaijani-driven
TAP, TANAP, South Caucasus Pipeline combination to bring natural gas
to Turkey, Greece, the Balkans, with its terminus in Italy.
The European Union, having seen the post-WWII order shake with the
Russian dismemberment of Ukraine and the soon-to-be-frozen conflict in
the Donbas, have belatedly started to act against Russian market power
within the Union. Due to the constant manipulation of European energy
contracts, there is now talk of forming a new purchasing union. This
Polish-led European Union project would attempt to further reduce
Russian distortion of the markets. With Poland's former Prime Minister
Donald Tusk taking the reigns as the 2 1/2 year EU President, this
project may take priority as climate priorities are balanced with the
need for a cheap and reliable source of energy.
The Russians have stated that the cancellation of the pipeline will
spell higher energy prices for the Europeans. Moreover, with the shift
in focus to Turkey, they are able to exploit the growth in energy
usage of a large emerging economy. The move towards Turkey can be seen
as a tactical one, as Russia and Turkey continue to spar over issues
ranging from Syria to Cyprus and from Ukraine to the role of the
Russian Federation in the Armenian - Azerbaijani war in Karabakh.
Besides Russia, the other loser in this project is Bulgaria. Bulgaria
is losing the transit fees which would have accrued to it as well as
the diversification of energy sources. The former government of
Bulgaria fell earlier this year due to the cleavages opened by the
South Stream pipeline. The instability of Ukraine-transiting gas is a
systemic issue that may continue as a real threat to the energy
security of Central Europe. This will last as long as the
Russian-driven instability continue to plague the benighted country of
Ukraine. It is estimated that the investment losses to Bulgaria totals
3 billion Euro plus the transit fees totaling $400 million from the 18
billion cubic meters of natural gas transiting its territory according
to Gazprom's president Alexei Miller. The political nature of natural
gas will continue to play a role in European geopolitics as Russia is
bound to continue to supply a majority of European natural gas.
Nonetheless, with the cancellation of South Stream, the increased use
of LNG, and the rebalancing of Russia to Asia, expect a reduced role
of Russian pipeline investments on the Balkans and Central Europe.
http://www.silkroadreporters.com/2014/12/13/russian-gas-europe-south-stream/
Dec 13 2014
Russian Gas in Europe after South Stream
Published by Joshua NoonanDecember 13, 2014
On 11 December 2014, Russian Energy Minister Alexander Novak phoned
European Commissioner Maros Sevcovic stating that the South Stream gas
pipeline project has been canceled. Who are the winners and losers in
this culmination of the what some have called the first pipeline war?
The statement to the EC confirmed President Putin's statement on 1
December in Ankara announcing the rerouting of Russian gas to Turkey.
In 2007, South Stream was created to rival the proposed Nabucco
Pipeline which would go from the Caspian to Europe via the Balkans. By
the time of conceding the cancellation of South Stream, Gazprom, the
Russian gas champion expended $9.4 billion on the failed project.
With Western sanctions taking their toll, Russia has been obliged to
retrench across Central Europe and the Balkans. This project also
signals the durability of the smaller yet important Azerbaijani-driven
TAP, TANAP, South Caucasus Pipeline combination to bring natural gas
to Turkey, Greece, the Balkans, with its terminus in Italy.
The European Union, having seen the post-WWII order shake with the
Russian dismemberment of Ukraine and the soon-to-be-frozen conflict in
the Donbas, have belatedly started to act against Russian market power
within the Union. Due to the constant manipulation of European energy
contracts, there is now talk of forming a new purchasing union. This
Polish-led European Union project would attempt to further reduce
Russian distortion of the markets. With Poland's former Prime Minister
Donald Tusk taking the reigns as the 2 1/2 year EU President, this
project may take priority as climate priorities are balanced with the
need for a cheap and reliable source of energy.
The Russians have stated that the cancellation of the pipeline will
spell higher energy prices for the Europeans. Moreover, with the shift
in focus to Turkey, they are able to exploit the growth in energy
usage of a large emerging economy. The move towards Turkey can be seen
as a tactical one, as Russia and Turkey continue to spar over issues
ranging from Syria to Cyprus and from Ukraine to the role of the
Russian Federation in the Armenian - Azerbaijani war in Karabakh.
Besides Russia, the other loser in this project is Bulgaria. Bulgaria
is losing the transit fees which would have accrued to it as well as
the diversification of energy sources. The former government of
Bulgaria fell earlier this year due to the cleavages opened by the
South Stream pipeline. The instability of Ukraine-transiting gas is a
systemic issue that may continue as a real threat to the energy
security of Central Europe. This will last as long as the
Russian-driven instability continue to plague the benighted country of
Ukraine. It is estimated that the investment losses to Bulgaria totals
3 billion Euro plus the transit fees totaling $400 million from the 18
billion cubic meters of natural gas transiting its territory according
to Gazprom's president Alexei Miller. The political nature of natural
gas will continue to play a role in European geopolitics as Russia is
bound to continue to supply a majority of European natural gas.
Nonetheless, with the cancellation of South Stream, the increased use
of LNG, and the rebalancing of Russia to Asia, expect a reduced role
of Russian pipeline investments on the Balkans and Central Europe.
http://www.silkroadreporters.com/2014/12/13/russian-gas-europe-south-stream/