The modest installment payments that Ukraine is making on its $2.440 billion debt to Gazprom are not enough to restore the reputation of that country as a reliable transit partner. Since Russian gas is being persistently redirected south and east, Kiev’s role as an intermediary for Europe’s gas might slowly wane between now and 2019.
The “Turkish Stream” - the alternative route that the Western business press has described as “just another attempt to blackmail the EU” - is beginning to take tangible shape. The longer of two potential routes of the new pipeline has been selected. It will follow South Stream’s proposed undersea corridor, but veering off at the end in order to land on the Turkish coast, instead of emerging in Bulgaria next door.
Gazprom and the Turkish company Botas Petroleum Pipeline Corporation have confirmed their intention to pump the initial shipment of natural gas into Turkey through the new pipeline in December 2016. The bilateral agreement will be signed before the end of the second quarter of 2015. These latest negotiations to get “Turkish Stream” up and running is a clear signal to the European Union that Gazprom’s southern detour is being developed in with an eye toward the future. And there is no Ukraine in that future. Related: When Conspiracy Theory Becomes Fact
Ultimately, a civil war in a transit country should be seen as an example of force majeure, and one in which Germany, France and Poland themselves had a hand in creating back in February 2014. Yet EU Energy Commissioner Maroš Šef?ovi? still believes that gas transit through Ukraine is a “better option”. However, first the EU will have to explain to its member states why on earth the Southern European consumers would need Kyiv as a mediator. Today Ukraine is on the brink of sovereign default and is known for siphoning off natural gas for its own needs.
EU Energy Commissioner Maroš Šef?ovi?
The current contract between Gazprom and Naftogaz Ukraine will expire in 2019, reducing to zero these risks of natural gas transit via Ukraine. In addition, the construction of a gas hub on the Turkish-Greek border will force the delivery map for the continent’s energy supplies to be redrawn, and it could diminish the role of Austria’s Baumgarten hub, which is currently the region’s primary gas-distribution center. Four years is very little time in which to create new projects.
If the European Commission wants to get gas from Turkey by 2020, then it is high time it starts building infrastructure - in full accordance with the “Third Energy Package” or any other legal restrictions that the Europeans deem necessary. Otherwise, Brussels will be left with a dubious asset on its balance sheet, in the form of a Western fragment of Ukraine (the European equivalent of what Somalia was in 2009), which will have to be subsidized using various ploys for semi legal “reverse flows” of Russian gas purchased through Turkey.
The flexible structure for obtaining gas supplies via the “Turkish Stream” allows a number of potential options for the interim 2016-2019 period, but the final configuration of the gas network will depend on how far the EU’s energy leaders are willing to pursue their suicidal policy of rejecting Russian resources. While Brussels is complaining about Russia’s efforts to make Ukraine pay its natural gas bills, other countries, such as Hungary, Greece, and Serbia, seem more open to the opportunities of the “Turkish Stream”. Related: Gazprom Confident In European Future Despite ‘New Cold War’
Hungarian Prime Minister Viktor Orbán, for example, is sure that the EU’s economic sanctions are “in conflict with Hungary’s interests” and he intends, in his words, “to come to terms with Russia on a gas agreement” during a meeting with Russian President Vladimir Putin in Budapest on Feb.17. No one is likely to accuse this conservative politician of being enamored of Russian gas, after he declared that Hungary must avoid becoming the “happiest barrack of Gazprom”, as the Los Angeles Times reminds us. Nevertheless, the pragmatic approach has prevailed in Hungary.
An increasing numbers of South European countries view themselves as potential replacements for Ukraine in Russia’s new gas-delivery route. Bulgaria, with her modest energy resources, might be one exception - she threw in her lot with the losers when she bowed to unprecedented political pressure in regard to gas issues.
The states that were at least somewhat able to defend their right to energy sovereignty are now among the winners. And those who followed the advice of European bureaucrats, sacrificing their gas trade in order to join in the general chorus “demonizing” Russia for the events in Ukraine, will take a big hit.
By Igor Alexeev for Oilprice.com
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