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Monday, 14 May 2012

Bye bye Nabucco? You cannot win without Russian gas

If Giuseppe Verdi had known that one of his operas would become the name for a gas pipeline network, he would have not expected such a political and financial blunder as it occurs right now. Europe wanted to become more independent from Russian gas supplies, now it seems that they will stick to Russian gas for a little longer.

The German energy company RWE announced to seriously review its commitment to the European gas pipeline project, and keeping its right to drop out from the entire project. The reason for this is rather simple: the estimated costs for Nabucco have doubled over the years, up to 15 billion Euros. For Europe’s efforts to rely on an own and more independent gas supply free of any potential Russian energy policy intervention or unreliable gas transit countries, RWE’s decision to quit would mean the end of all efforts of the past years.

In fact, Europe’s ambitions have been undermined since the entire project has been kicked-off in 2009. As a reaction to vulnerable gas transit countries like the Ukraine and Belarus, which turned out to be highly crucial for gas supply from Russia into the EU, three parallel gas pipelines have been under construction or planning over the past few years:
North Stream, which provides Russian gas from Vyborg by Gazprom through the North Sea to Greifswald, Germany (operational since November 2011).
South Stream, providing Russian gas through Southern Europe (construction start: December 2012).
Nabucco, providing non-Russian gas from the Caspian region through Southern Europe (planned, construction start: pending).

Certainly, looking at the geographic implementation, one of the two southern pipeline networks will become redundant. Looking at the progress of South Stream’s planning and Nabucco’s financial and administrative quarrel, it is more likely for South Stream to prevail this contest – also because South Stream is far more advanced in planning than Nabucco.

Nabucco was an ambitious effort from the very beginning, a cooperation of major European energy companies, such as German RWE and Austrian OMV (which is in fact the head company of Nabucco), political will and determination were enormous, so where the costs. The pipeline system is not even under construction yet, planning not completed yet, nor the exact routes of the pipeline network or from which countries Nabucco’s gas will be fed with, but the costs keep climbing.

Now it appears that Europe is facing a massive defeat in the run for non-Russian gas, and the EU will continue to depend on Russian gas provided by Gazprom. Former German Chancellor Gerhard Schröder ( a close friend of Russian President Vladimir Putin) is in fact a member of Gazprom’s board of directors and therefore closely related to North Stream, which was actually initiated and kicked-off while he was in office until 2005. As a result of this smart move, Germany is directly receiving Russian gas supplies through the North Sea, deviating unstable transit countries like Belarus and the Ukraine (whose payment deficits have in fact repeatedly caused gas shortages in many Central and Eastern European Countries during the Russian-Ukrainian gas disputes between 2005 and 2009).
By the way: it is also a battle between two old friends during the former Red-Green coalition under Chancellor Schröder, with Schröder backing North Stream, and former Foreign Minister Joschka Fischer to support Nabucco.

Let’s face it: if you want gas, you cannot do it without Russia. Europe highly depends on Russian gas supplies and it needs stable transit routes. Nabucco was an ambitious, but rubbish attempt to make Europe more independent from Russian gas supplies, but with the wrong strategy: Russia was never a problem in gas supplies, but its transit countries.  One third of all gas imports to Europe originate from Russia, and Nabucco’s contribution to downsize this amount – assuming it will be completed one day. Also, Nabucco’s failed planning organization led to a massive increase of the costs; there are still no clear routes, and now with RWE’s statement to consider a withdrawal from the project Nabucco is losing one of its major political and economic backbones.

In the end, Nabucco will die before it is even born. Verdi would rotate in his grave by now.

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