Much of the debate concerning the Nord Stream II
pipeline centres on whether the project should be seen as a commercial
undertaking, or as an effort to lock in Gazprom’s dominance in Europe and deal
a blow to Ukraine.
The semantics of
this discussion are interesting insofar as they touch at the heart of the
Kremlin’s “divide and rule” strategy towards the EU.
Over the years, Gazprom has
perfected a strategy whereby it whets the appetite of Europe’s political and
business elite with potentially lucrative pipeline deals, even though the
prospects of realising these projects are often unclear.
How does Gazprom do it? By
tempting different countries with promises of turning each of them into a “gas
hub”, which creates confusion and division between those who expect billions in
transit fees and those who see contradictions between the pipeline project and
the policies agreed at EU level.
Crucially, such a strategy impedes
the development of a common #European_energy_policy since every country will
throw its weight behind this or the other pipeline. The fact that the majority
of these projects will never be built becomes a moot point.
How South
Stream went south
The best known example of this
strategy was South Stream, a pipeline that would ship Russian gas via the Black
Sea to Bulgaria and through Serbia, Hungary and Slovenia to Austria.
At the time of its inception the
project was seen as a rival to the EU-backed Nabucco pipeline that aimed to
bring gas from the Caspian Sea to Europe.
Although Nabucco ultimately failed
due to a lack of available gas supplies in the region, the fact that Russia
managed to sign up several EU states to South Stream surely did not help in
gathering the necessary political backing for Nabucco.
South Stream was controversial
given that it would cement Gazprom’s dominance in south-eastern Europe even
though EU leaders had agreed to try to reduce dependence on Russian gas.
However, this did not deter
several European countries and companies from backing the project. Austria, for
example, was keen to see another pipeline flow to its gas hub at Baumgarten.
Bulgaria had its eyes fixed on possible transit revenues and Italy saw a
potentially lucrative project for its energy firm ENI.
A crucial problem however was that
the bilateral agreements struck between Russia and the countries along the
pipeline’s route were all in breach of EU competition and energy legislation.
Given that it was public knowledge
that Gazprom never had the slightest intention of allowing different producers
to operate on South Stream, the countries involved had to have been fully aware
that the pipeline was never legal in its proposed form, yet still they
persisted.
Unsurprisingly,
Russian president Vladimir Putin cancelled South Stream in December 2014 leaving many EU countries and
companies chasing a pipe dream.
From Russia
with gas
Soon
afterwards, Putin launched an alternative project called Turkish Stream. The pipeline would transport
Russian gas across the Black Sea to Turkey, and from there to a hub at the
Turkish-Greek border, thus circumventing the EU’s competition legislation.
In June 2015, at the height of the
Greek debt crisis, Greek prime minister Alexis Tsipras travelled to St
Petersburg to meet Vladimir Putin.
Desperate for cash and leverage,
Tsipras signed a memorandum of understanding with Gazprom on the construction
of an extension to Turkish Stream that would carry Russian gas further into
Europe.
Under the agreement, Russia would
commit to pay hundreds of millions of dollars in transit fees. However, Tsipras
should have known that Gazprom would never build a pipeline into Europe where
it would be forced to share capacity in accordance with EU law.
Moreover, Greece was in no
position to provide funding for the project itself and the case for private
financing was weak. Essentially, Putin knew he could use Tsipras to drive a
wedge between Brussels and Greece at a time that the Union was buckling under
the weight of the Greek crisis.
Tsipras happily obliged. And the
pipeline? That was never built. With Turkey driving a hard bargain,
negotiations were protracted from the outset and the downing of a Russian
fighter jet by Turkey in November 2015 proved to be the nail in Turkish
Stream’s coffin.
Memorandum of
not understanding
On 24 February this year, Gazprom
signed a memorandum of understanding with Italian energy company Edison and
Greek public gas corporation DEPA for the delivery of Russian gas via the Black
Sea, and unnamed third countries, to Italy and Greece.
The agreement revived the old
Italy-Turkey-Greece Interconnector (ITGI), a small gas pipeline that was
scrapped in 2012 after it failed to win a bid for Azeri gas.
Why revive this project? At this
point it should be mentioned that Italian energy company ENI was a major shareholder
in South Stream. Matteo Renzi, Italy’s prime minister, has criticised German
support for Nord Stream II explaining that he views it as a double standard
having to support sanctions against Russia at a time when Berlin has few qualms
about backing a pipeline deal involving Gazprom.
Renzi of course has a point when
he claims that EU law should apply equally to all pipeline projects. The
revived version of ITGI, although much smaller and easier to build than Nord
Stream II, should therefore be seen as compensation to neutralise Italian
criticism.
But again it is unclear how the
pipeline will actually bring Russian gas to this part of Europe. Interesting
also is the claim by Italian government officials that they were not consulted
about the memorandum. By not informing Rome, Gazprom deliberately created the
impression that the Italian government was behind the plans.
Lastly, by not specifying which
countries serve as transit countries, this opens up competition between Turkey
and Bulgaria – two other nations that saw earlier pipeline projects fail – to
vie for the final shape of the pipeline route; precisely the kind of
competition that keeps European elites busy and away from a concerted effort at
forging an actual Energy Union.
The Kremlin knows that the best
strategy to undermine EU attempts to rein in Gazprom’s dominance is to let
member states do Russia’s bidding.
As long as Europe’s political and
business elites continue to believe Gazprom’s empty promises, thwarting the
Energy Union will be all too easy for Vladimir Putin.
The Crude World monthly column on Eurasian
(energy) security and power politics in Europe’s eastern neighbourhood is
written by Sijbren de Jong, a strategic analyst with The Hague Centre for Strategic
Studies (HCSS), specialised in Eurasian (energy)
security and the EU’s relations with Russia and the former Soviet Union.
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