Deferring Nabucco Is Win-Lose for Gazprom

As reported in The Moscow Times, the foreign ministers of 27 European Union countries could not agree on the 3.5 billion euro budget for energy projects during a recent meeting. This means, among other things, that the fate of the Nabucco project, which was supposed to be allocated 250 million euros, has been essentially put on hold.  As the article notes:

“….Cutting the priority for the Nabucco gas pipeline, which if built will bypass both Russia and Ukraine, can be seen as either a victory for Gazprom or as a relief for the EU members, whose budgets have been heavily taxed by the financial crisis.

Although France and Italy also supported the downgrading of Nabucco, Germany, which stands to be on the receiving end of the Nord Stream pipeline, is Nabucco’s largest opponent. Nord Stream’s shareholders include Gazprom with 51 percent, German enterprises E.On and BASF with 20 percent each and Dutch Gasunie with 9 percent.

Most of the skepticism surrounding Nabucco centers on the lack of gas to fill it. Iran, with the world’s second-largest natural gas reserves, could easily fill the pipeline, but it is impossible to imagine Tehran as a reliable partner in Nabucco considering how many sharp points of contention there are between Iran and the United States (and many EU members as well) — mainly over Tehran’s nuclear program. Turkmenistan, which has the world’s fifth-largest reserves of natural gas, could play a prominent role in Nabucco, but this would require building a new Trans-Caspian pipeline. Moreover, there are security issues regarding transit routes through Georgia and Turkey.

Gazprom’s other proposed project, South Stream, which would transport gas from Russia to Bulgaria and onward to other European countries via the Black Sea, would be Nabucco’s competitor.

Now Gazprom can see itself as the victor. While Europe is shelving Nabucco until more prosperous times, Gazprom continues to see the ambitious South Stream and Nord Stream projects as their key strategic priorities.

On the other hand, Gazprom’s gas exports to Europe have shrunk since the beginning of the year by 40 percent in comparison with the same period a year ago. Moreover, long-term forecasts point to European demand for gas dropping much more than previously believed, which makes the Nabucco deferral logical.

Gazprom may believe that the Nabucco downgrade strengthens its status as a near-monopoly supplier of gas for Europe. But the price of having this privilege may prove to be very expensive.”

This entry was posted on Thursday, March 19th, 2009 at 6:43 am and is filed under Gazprom, Russia.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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