euro|topics - Gas Pipelines: The Battle against Energy Dependence

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Gas Pipelines: The Battle against Energy Dependence

by Michael Kaczmarek

The race for energy reserves is entering a crucial phase. Contracts are being signed and pipelines planned that will determine who controls the world's most important energy resources over the coming decades. Meanwhile, the countries of the EU are unsuccessfully trying to reduce their dependence on Russia.

At present Europe can cover only around 40 percent of its natural gas requirements with its own resources. The rest has to be imported. The main supplier is Russia. According to recent estimates, over the next 20 years Europe's dependence on natural gas imports will rise from around 60 percent to 80 percent.

Gas pipes in the Ukraine
Photo: AP

The gas disputes with Ukraine and Belarus

During the Russian-Ukrainian gas dispute Europeans were made painfully aware of the consequences this dependence on imports could have. Towards the end of 2005 Russia raised the price of natural gas for Ukraine, which until then had been heavily subsidised. But Ukraine refused to pay the new price. In the Austrian Standard of 27 December 2005, Josef Kirchengast wrote that Russia's threats to cut off gas exports to Ukraine were just a bluff: "Naturally, Moscow is aware that a sharp rise in gas prices would be extremely unpopular with the Ukrainian people. It also knows that 80 percent of Russia's gas supplies to Europe flows through Ukraine's pipeline network. That's why the Russians can't simply cut off Ukraine's gas supplies." But he was wrong: on 1 January 2006 the Russian state-owned energy giant Gazprom turned off its gas supplies to Ukraine.

In the Swedish daily Dagens Nyheter Jan Blomgren analysed the strategic import of the dispute: "Moscow wants to gain control of the gas pipelines that provide almost 50 percent of Europe's energy supplies. Gazprom has said it will lower the price of its gas supplies to Ukraine if that country is willing to form a consortium with Russia for this purpose."

Now Gazprom, which already owns the world's largest natural gas reserves, also wants to gain control of the infrastructure, i.e., the pipelines that bring the supplies to its clients. Russia had previously used this strategy with Belarus in 2004: "The Russian supplier temporarily shut off gas supplies and Lukashchenko agreed to sell the Beltrangas pipeline to Gazprom. Whoever controls not only the coveted gas and oil resources, but also the pipelines, wields great economic – and potentially political – influence over importing countries," Reinhard Meier wrote in the Neue Zürcher Zeitung on 3 January 2006. Russia's first attempt to take over Beltrangas failed, but at the turn of the year 2006/2007 Moscow provoked a new dispute which ended with Belarus agreeing to allow Gazprom to gradually acquire up to 50 percent of Beltransgas shares by 2010. Gazprom was also able to push through a considerable increase in the price per cubic metre of gas.

At the same time as Russia tries to regain control of the pipelines to Europe built during the Soviet era, it is also consolidating its position through investments in new pipeline projects. There's the "Blue Stream" pipeline, which runs under the Black Sea, and the Northern European gas pipeline running under the Baltic. Both will compete with Europe's Nabucco pipeline project, which it is hoped will connect the EU with Caspian and Iranian gas reserves by 2012.

Russia's involvement in new pipeline projects

Inaugurated in November 2005, the Blue Stream pipeline transports Russian gas from Novorossiisk through the Black Sea to the Turkish port of Samsun, thus bypassing the former Soviet republics. Its capacity is to be increased to 16 billion cubic metres of gas per year by 2010.

But the most controversial pipeline project in Europe is no doubt the Northern European gas pipeline, better known as the Baltic pipeline. In 2005 Gerhard Schröder, who was German Chancellor at the time, and Russian President Vladimir Putin signed a deal for the construction of the line. With a 51 percent stake, Russia's Gazprom is the majority shareholder in Nord Stream AG, the consortium which owns the pipeline. Two German companies also each have a 24.5 percent interest in the consortium, which from 2010 is expected to transport 55 billion cubic metres of gas per year from Vyborg in Russia to the German port of Greifswald. This will give Russia direct access to the European market for the first time and enable it to circumvent transit countries - a fact that has triggered scathing criticism of the deal, particularly from the Baltic countries and Poland, which feel they have been left out.

The German-Russian gas deal

Radoslaw Sikorski, who was Polish Defence Minister at the time, sparked a wave of international protest when in early May 2006 he compared the Russian-German Baltic pipeline with the Hitler-Stalin Pact of 1939. Former Chancellor Gerhard Schroeder also became the target of serious accusations for having concluded the deal during his term in office and then benefited from it directly following his election defeat, when he became head of the supervisory board of the Nord Stream consortium. The Estonian daily Postimees still hadn't forgiven him 18 months later for the "German-Russian gas deal," describing him on 17 April 2007 as a "corrupt politician."

Writing for the Czech newspaper Hospodarske Noviny on 5 April 2006, the Czech Jan Machacek stressed the "geopolitical dimension" of the Baltic pipeline. "The contract for the gas pipeline means that Central Europe is defenceless against Russia's blackmailing gas price tactics."

His fellow countryman Teodor Marjanovic, on the other hand, criticises the Eastern Europeans' complaints about being dependent on Russian energy supplies. On 9 January 2007 he wrote in the Czech paper Mlada fronta dnes: "The Americans could also moan about their dependency on foreign raw materials. They, too, would prefer to be independent of the Arabs or of populists like the Venezuelan Hugo Chavez. It is the irony of the modern age that the west has no oil - unlike what we consider to be the non-democratic part of the world."

The brief Nabucco euphoria

To prevent Europe from becoming completely dependent on Russian gas imports, the Nabucco pipeline project was initiated in 2004. As of 2012, this pipeline is expected to bring up to 30 billion cubic metres of gas per year from the Turkish-Iranian-Azerbaijani border area to Austria under an agreement concluded by Austria, Hungary, Romania, Bulgaria and Turkey at the end of June 2006. "Europe's gas supply is to be given a wider basis that reduces its one-sided dependence on Russian gas," Günther Strobl wrote enthusiastically about the Nabucco project in the Austrian Standard of 27 June 2006. And Hungarian journalist Peter Dunai also argued in the 14 July 2006 edition of Népszabadság that the Nabucco project could help Europe reduce its dependence on Russia: "Just as British and American oil companies once fought for the oil and gas of the Middle East, Moscow is now fighting against the construction of the Nabucco pipeline, which would circumvent Russia and transport gas from Turkmenistan and Azerbaijan directly to Western Europe."

However, in mid-March 2007 Hungary's President Ferenc Gyurcsany surprised Europeans by announcing he would support the extension of the Gazprom Blue Stream pipeline from Turkey to Hungary. "The Nabucco has been a long cherished dream," Gyurcsany argued in the International Herald Tribune on 12 March. "But we don't need dreams. We need projects." And on 30 May 2007 Mihnea Maruta commented disappointedly in the Romanian newspaper Cotidianul that all the Nabucco countries with the exception of Romania had now approved plans for natural gas imports from Russia. This isn't the end of the Nabucco pipeline, but the fact that the participating countries have sought to back up their supplies through contracts with Russia means the project will fail to achieve its original goal of securing energy independence from Russia.

The calls for a joint European energy policy

So for now Europe remains in a tricky situation. Borut Grgic, director of the Institute for Strategic Studies in the Slovenian capital of Ljubljana, summed it up as follows in the Slovakian newspaper Sme on 2 February 2006: "There are not enough sources of energy to replace Russia as a supplier. It's also questionable whether other European producers would prove more reliable."

It's therefore all the more important that the states of Europe focus on reaching an agreement on a joint European energy policy. This raises questions such as "Should Europe use renewable energies and technological advances to cover its energy demands, or should it rely on nuclear energy or traditional European energy sources like coal?" and "What is the ideal energy mix?" One of the problems that has emerged in the course of the debate is that each EU country regards its own energy policy as the point of reference for a joint European energy policy. For instance, on 16 November 2006 the Swedish daily Dagens Nyheter insisted: "It's high time that Sweden and all the other EU states started focusing more on nuclear power. There's no reason to make ourselves more dependent on Russia than absolutely necessary."

In its most recent publications the European Commission has also placed an increased emphasis on energy efficiency and nuclear energy. But can such an approach really reduce Europe's dependence? As Vera Gaserow pointed out on 20 January 2007 in Germany's Frankfurter Rundschau: "No national policy of self-reliance can stop potential blackmailers. After all, the necessary uranium is not a home-grown product."