Wednesday

23rd Aug 2017

EU meeting turns into South Stream funeral

  • Construction of South Stream's offshore leg had begun when Putin said No (Photo: south-stream-offshore.com)

EU states who were to have hosted Russia’s South Stream gas pipeline have begun looking for other ways to improve energy security.

The eight countries’ energy ministers held talks in Brussels on Tuesday (9 December) with EU energy commissioner Maros Sefcovic.

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They tasked him to “clarify” whether Russian leader Vladimir Putin was serious when he announced in Ankara last week that South Stream is dead.

Putin said EU anti-monopoly laws made the project unappealing and that he'll build a massive pipeline to Turkey instead.

All eight states - Austria, Bulgaria, Croatia, Greece, Hungary, Italy, Romania, and Slovenia - say they are still awaiting Russia's official notification.

Some in the EU, including Germany's top Russia experts, think Putin is bluffing to make them put pressure on Sefcovic to relax the anti-monopoly regime.

The European Commission believes Putin did it because he cannot afford to build South Stream and because the war in Ukraine has already achieved the main objective of the project - to destabilise Ukraine (by bypassing its EU gas transit network).

Seven out of the group-of-eight said in a joint statement the Russian pipeline could be a good thing, if it was “in line with EU law”, because it would diversify supply “routes”.

The show of unity was marred by Hungary: Its minister did not co-sign the communique, claiming he had no mandate from Budapest to do so.

But the bulk of Tuesday’s meeting was devoted to building inter-connectors so that EU states can share gas if Russia cuts off south-east Europe.

The ministers also spoke about new liquid gas terminals and connectors to competing South Stream projects - “Tap” and “East-Med”.

They agreed Sefcovic will convene a “high-level working group” to see what the EU can contribute from two budget lines: the bloc’s new €315 billion investment fund and its €6 billion Connecting Europe Facility.

In a related development, Bulgaria, Greece, and Romania the same day said they will build a “vertical gas corridor” to share supplies.

For his part, Sefcovic was careful not to offend Moscow by sounding happy about the demise of the Russian initiative - the prevailing mood in Brussels.

But he told press on Tuesday that plans to build Tap - bringing Caspian Sea gas via Turkey to the EU from 2019, bypassing Russia - are proceeding “on schedule”.

He also said the East-Med proposal - an Israeli-Cypriot plan to pump Mediterranean Sea gas to Greece and Italy, further reducing Russia dependence - “could be useful” and that the commission might take part in a feasibility study.

Italy’s deputy economy minister, Claudio De Vincenti, referred to South Stream in the past tense.

“I believe it could have been possible to find a [legal] solution to South Stream”, he told media.

He added that diversification of sources is “more important” than diversification of routes and encouraged Sefcovic to take part in the East-Med study.

Winter supplies

The threat of EU gas cut-offs reared its head in July when Russia stopped supplies to Ukraine in a price dispute linked to its invasion.

Sefcovic noted on Tuesday that a temporary deal on winter supplies is holding up.

He said Ukraine on Monday pre-paid for 1 billion cubic metres of gas on the basis of interim discount prices.

But his remarks mask EU concern that Russian supplier Gazprom might turn off the tap in February once it gets over its current blip in cashflow.

His comments on Tanap and East-Med also mask concern in some ex-South Stream states that neither pipeline might be built.

“When it comes to pipeline proposals, we see at least three new ones every day: You could fill your attic with proposals”, a diplomat from one of the group-of-eight said.

Russia-Turkey axis?

If Putin does build a new pipeline to Turkey, it would deal a blow to Tanap, East-Med, and broader EU aspirations to reduce Russia dependence.

It would also mark a new alliance between two authoritarian leaders in the EU neighbourhood.

Some EU officials believe the Turkey option is not financially or technically viable, however.

One theory is that Putin announced it to save face, while Turkey’s Recep Tayyip Erdogan endorsed it to improve his negotiating position in EU accession talks.

Ankara thinks it would be “hypocrisy” for the EU to criticise the project because it revolves around EU states themselves buying the Russian gas on the Greek-Turkish border.

It is angling to open one or more of four new “negotiating chapters” in the EU entry talks - on energy, economic affairs, or rule of law. Opening new chapters make Erdogan look good and promotes pro-EU reforms, but few on either side believe the EU will ever let Turkey join.

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Bulgaria wants the EU to fund construction of a gas hub on its Black Sea coast to collect possible supplies from the area and sell them to clients in member states.

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