Russia’s new energy strategy

Russia has tightened its grip on the European energy market, winning Bulgaria’s support for a major new pipeline to export natural gas to Europe.

President Vladimir Putin struck a deal to build the South Stream pipeline during a visit to Bulgaria last week. South Stream, a joint venture between Russia’s Gazprom and Italy’s Eni set up last year, calls for the construction of a 900-km pipeline under the Black Sea that will carry 30 billion cubic metres of gas a year from Russia to Bulgaria, from where it would split to Greece and southern Italy and to Romania, Hungary, and Austria before reaching its final destination in northern Italy.

In another major deal, Russia and Bulgaria agreed to set up a company to build and operate a new oil pipeline from the Black Sea port of Burgas in Bulgaria to Greece’s Alexandroupolis on the Aegean. This will allow Russia to increase its oil exports across the Black Sea, which have been constrained by the congested Bosphorus Straits.

The Bulgarian deals fill the last missing link in Mr. Putin’s ambitious plan to consolidate Russia’s control of energy flows to Europe. In less than a year, Moscow has struck deals with half a dozen nations to open a new energy transportation route from Central Asia to Europe.

Last May, Mr. Putin signed agreements with the leaders of Turkmenistan, Kazakhstan, and Uzbekistan to build a new pipeline and expand an existing one that would increase Central Asian gas exports to Russia from 60 billion to 80-90 billion cubic metres a year by 2010.

The bulk of these additional gas volumes will be pumped through the South Stream pipeline scheduled to be completed in 2013. Last May, Mr. Putin reached an agreement with Kazakhstan to expand a pipeline carrying its oil to the Russian Black Sea port of Novorossiisk, from where it will be fed by tankers into the Bugras-Alexandroupolis pipeline.

South Stream stands out as a particularly landmark achievement for Russia. It deals a fatal blow to the U.S.-pushed Nabucco pipeline project to deliver Central Asian and Caspian gas to Europe bypassing Russia.

"Ten years of efforts to set up Nabucco have fallen through," said Dr. Leonid Grigoriev of the Institute of Energy and Finances. "There is just not enough gas around to fill the Nabucco pipe."

U.S. efforts fail

The United States, which plans to set up three military bases in Bulgaria, had pressed Sofia to say no to South Stream.

After U.S. Deputy Assistant Secretary of State Matthew Bryza publicly urged Bulgaria to choose Nabucco over South Stream last month, Bulgaria promised to heed the American advice and said it needed more time to study the Russian proposal.

However, following dramatic late night talks with Mr. Putin’s delegation, the Bulgarian government inked the deal on Friday.

South Stream will allow Russia to expand its strategic foothold in the Balkans that was critically weakened after the break-up of Yugoslavia. Serbian Prime Minister Vojislav Kostunica on Friday publicly backed a Russian offer of an energy pact that could see Serbia included in the South Stream pipeline in return for Gazprom getting a stake in Serbia’s oil monopoly NIS. Earlier, Greece expressed willingness to join South Stream.

The European Union already imports almost half of its natural gas and 30 per cent of its oil from Russia.

South Stream and North Stream, another major gas pipeline Russia is planning to build jointly with Germany under the Baltic Sea, will further consolidate Moscow’s dominant position in the European energy market.

The new pipelines will also weaken Russia’s dependence on export gas pipelines running through Ukraine and Belarus.

American strategists say the Russian onslaught is undermining U.S. positions in Europe.

"Moscow is pursuing a comprehensive strategy that could increase Europe’s political and economic dependence on Russian energy," Dr. Ariel Cohen of Heritage Foundation wrote in a November backgrounder.

"Such dependence could negatively affect transatlantic relations, common values, goals, strategic objectives, and security policies. Without a policy dialogue and coordination between Washington and European capitals, Europe’s strategic drift away from the United States will continue unabated."

[Source: By Vladimir Radyuhin, The Hindu, January 21, 2008]

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