Scholars' Association News
Lectures Archive

‹ Back to lectures Archive
Franz-Lothar Altmann

Click to Enlarge
The Energy Triangle: EU - Southeast Europe - Russia. Pure Business and/or Geopolitics?

On March, 27 2008, the Onassis Foundation Scholars’ Association organized a lecture by Franz-Lothar Altmann Economist, Head of the Balkan Research Section (Research Unit EU External Relations) at the German Institute for International and Security Affairs (Stiftung Wissenschaft und Politik), Berlin. "The Energy Triangle: EU - Southeast Europe - Russia. Pure Business and/or Geopolitics?"

In its Green Book on Energy Policy of March 2006 the EU Commission emphasised that the world has entered a new energy age, in which Europe is challenged to develop a comprehensive common energy policy with strengthened diversification of forms of energy, countries of origin and transit routes. The June 2006 EU summit added that energy policy should be supported by all available instruments, including CFSP and ESDP. This, in particular, should also embrace strategic partnerships with the most important producer, transit and user countries.

Natural gas plays a special role in the EU Commission’s considerations of diversification. Gas will have an ever-growing importance within the EU’s energy mix in the years to come, since strong increases in the demand for gas in industry as well as in private households, especially for the production of electricity, are expected. Today, the EU imports roughly half the gas it needs, half of which also comes from Russia ― the remaining imports originate from Norway and Algeria. However, according to a prognosis of the Austrian OMV energy concern, the EU, for its demand of natural gas, will be dependent on imports by 80% in 2030! If this is true, where shall these additional deliveries come from? Only two alternatives are given: either increased deliveries from Russia, which would mean an increased share in EU’s imports and thus a rising dependency on Russia, or a quest for new sources of procurement.

Dependencies concerning energy deliveries between Russia and Europe are, however, not at all one-sided. Europe is a secure and reliable customer for Russia. Gazprom’s sales to Europe account for 65% of the enterprise’s profits; in physical terms they represent only 35% of the total deliveries, the rest going into domestic consumption and some minor exports elsewhere. The rapidly growing Russian economy will increase its demand for energy, which might have delimitating effects on Russia’s export possibilities, prompting it therefore to search for additional resources ― in competition to the EU!

Since 2002, the EU has sought access to the energy resources in the Caspian region, in Central Asia and in the Middle East. Southeast Europe was hereby identified as an important transit region and transit hub. It turned out that a far-reaching unity of interests exists with regard to future energy supply security between the EU and the SEE countries, and as far as the latter are concerned the prospect of EU’s financial engagement also plays an important role. Following years of long negotiations and consultations, within the framework of the "Athens Process", on October 25, 2005, the "Treaty Establishing the Energy Community" was signed (in Athens) ― the first multilateral treaty in new Southeast Europe after the bellicose turmoils and changes of the 1990s. The contract partners of the Treaty are, on the one hand, the EU (including Greece, of course), and, on the other hand, the nine Southeast European countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYROM, Montenegro, Romania, Serbia, and Kosovo under UNMIK 1244), while Turkey will negotiate later. There are two goals: first, to establish a common integrated electricity market, which means that the countries of the region shall take over the acquis communautaire of the EU in the area of energy, thus extending the integrated energy market of the EU to Southeast Europe: rules of environmental protection, competition, market opening, investment guaranties and regulation supervision. This will also help to harmonise the still very different rules and law frameworks in the region and will, therefore, promote and ease the necessary future co-operation in this field.

From the viewpoint of the EU, however, the second target of the Treaty is more important: namely, to prepare Southeast Europe for its foreseen role as transit region for the diversified energy supply for Central and Western Europe, but also for Southeast Europe itself, through the build-up of a transportation and distribution network for natural gas from the Caspian region and Central Asia.

Until recently, four projects had been identified: the Nabucco pipeline (Turkey-Bulgaria-Romania-Hungary-Austria), the Central Balkans Line (alternative to Nabucco: Turkey-Greece-FYROM-South Serbia-Bosnia and Herzegovina-Croatia), a liquid natural gas (LNG) terminal in Northern Dalmatia (Krk Island in Croatia ― but also Slovenia showed interest), and the so-called Italy pipeline (Turkey-Greece-Apulia).

At present, the Nabucco project dominates the (political) discussion because Gazprom/Moscow (51% of Gazprom is owned by the Russian State!) is not at all excited to notice that a realisation of the project will jeopardise its attempts to gain a quasi-monopoly position in the supply of the EU and also of Southeast Europe. Gazprom has evidenced distinct attempts not only to strengthen its position in the EU’s gas imports, but also to get a hold upon the domestic distribution networks in Europe, particularly in England, Germany, Italy, and Greece.

The first competitive project to Nabucco was launched by Gazprom in February 2006, proposing a pipeline which would extend the existing "Blue Stream Line" from South Russia to Northern Turkey (through the Black Sea), which at present is not fully used, from Ankara via Bulgaria and Romania or Serbia to Hungary. This "South European Gas Pipeline" (SEGP), also known as "extended Blue Stream", would at first transport exclusively Russian gas. Later, however, it could also take Caspian gas to carry it, instead of using the European Nabucco line!

In May 2007, the next attempt from Moscow to undermine the European Nabucco project followed. In Turkmenbashi, the Russian President Putin met his Turkmen and Kazakh counterparts in order to sign a declaration on the modernisation of the old gas pipeline existing since 1967, and the construction of a new one, parallel to the first one, also along the Eastern coast of the Caspian Sea ― both to be operated by Gazprom. Construction works are scheduled to start as early as mid-2008, and would, thus, clearly be finished earlier than Nabucco, which also intends to tap on gas from Central Asia!

The last counterattack of Gazprom came in spring 2008, offering the construction of a "South Stream" pipeline stretching from Beregovaya in Southern Russia through the Black Sea to the Bulgarian harbour city of Varna. From there, two extensions are foreseen, a southwestern one to Greece and then to Southern Italy, and a northwestern one through Serbia and Hungary to Northern Italy (probably through Croatia and Slovenia). However, the South Stream pipeline would again imply that exclusively Russian gas would be delivered!

Under these circumstances, scepticism has raised in the EU as to whether Nabucco still has a chance of being realised. Brussels has revitalised the endeavours to finalise the preparatory work and, in particular, to get the clear commitment of the Southeast European countries regarding the project. For Europe’s intended diversification of suppliers and import routes Southeast Europe remains the only new entry portal at hand. The Energy Community Treaty must be seen as the decisive step in these efforts. It provides Southeast Europe with technical support and financial assistance for the overdue modernisation of its energy grids, and also gives momentum to the urgently needed design of regional energy cooperation. Finally, it enables the linkage to and inclusion into the EU energy network. For the EU, the Treaty opens the door for future gas deliveries from three regions rich in energy resources: the Caspian Region, Central Asia, and the Middle East, including the Arabian Peninsula.

Franz-Lothar Altmann