Russian gas pipeline could doom Europe’s Nabucco plan

Europe’s grand plan for the gas pipeline from the Caspian Sea was derailed with the 2008 Soviet invasion of Georgia. That was the true intention behind the war and not a handful of unruly politicians or military provocations from a nation not much bigger than Israel, with half the capability. Putin himself said the war was pre-planned (Additional source here). Create the crisis and provide the solution — energy dependancy on Russia in this case. That was (and still is) the aim.

  • Europe, U.S. support for Nabucco weakened
  • Azeri consortium expected to pick winner in June
  • Gas due to flow to European Union from 2019

VIENNA/BRUSSELS, May 28 (Reuters) – Europe’s grand plan for a gas pipeline from the Caspian Sea that would make its eastern states less reliant on Russia may have been fatally undermined by Russia’s even bigger project.

As Azerbaijan nears a decision on which pipeline to choose for its future exports, the Nabucco plan that was long the European Union favourite could lose out to the more modest Trans Adriatic Pipeline (TAP) across Greece to southern Italy.

In a complex equation based on politics as much as economics, TAP is in the ascendancy over the Nabucco pipeline to Austria in the face of Russia’s $39 billion South Stream plan.

“The question is: ‘Is Nabucco viable if South Stream is built?'” said Andrew Neff, Moscow-based principal energy analyst with research firm IHS.

The decision between TAP and Nabucco is expected in June from partners in the Shah Deniz consortium, led by gas field operator BP and Azeri state energy company Socar.

The European Union won’t have a direct say in the choice, but its recent switch to “project neutrality” from support for Nabucco could make a big difference. It now says it would be happy with either pipeline or even both.

EXPEDIENT

Choosing TAP, which does not cut through territory that Russia traditionally dominated, could be politically expedient for Azerbaijan, which is broadly aligned with the West but has no interest in conflict with its former Soviet overlord.

Russia began building South Stream in December and hopes to deliver gas to Europe well before 2019, when the Azeri gas is due to start flowing to the European Union..

The Gazprom-led 2,500 km (1,500 mile) South Stream will cross the Black Sea and then closely follow the line of Nabucco West. Plans for a southern route that could have competed with TAP were scrapped, another boost for Nabucco’s rival.

Southern European states see benefits for themselves too.

Italy, which relies for gas on politically unstable North Africa as well as Russia, is keen to diversify supply.

Bulgaria and Romania, the poorest European Countries, would appreciate the infrastructure investments if Nabucco were built.

But their economies do not face the immediate pain that Greece’s does – and a South Stream pipeline through Bulgaria, Serbia, Hungary and Slovenia would also bring economic benefits even though it would not break Russia’s dominance.

Washington is less concerned about the pipeline supply route to NATO allies than it was given the change in the global energy picture as a result of the U.S.-led shale gas boom and the increasing importance of liquefied natural gas, which can be shipped by sea.

In fact, the emergence of those alternative gas supplies has raised debate about whether long pipelines which tie end users into relatively expensive contracts can be justified by the economics alone.

Full article: Russian gas pipeline could doom Europe’s Nabucco plan (Reuters)

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