Pipeline deal strengthens Russian grip on Europe’s gas supplies – Sunday Business Post


Russia notched up major success in its quest to establish a strategic stranglehold on gas supplies to western Europe last week.

Hungarian prime minister Ferenc Gyurcsany met outgoing Russian President Vladimir Putin at the Kremlin last Thursday, inking a deal to allow Russia’s Gazprom to extend a pipeline, already set to cross Bulgaria and Serbia, into western Europe.

The Serbian agreement was part of a package where Gazprom gets a controlling stake in Nis, the Serbian national oil company, in exchange for Russia backing Serbia’s opposition to Kosovar independence in the UN Security Council.

Alex Brideau of business risk analysts Eurasiagroup, told The Sunday Business Post that Russia’s policy was ‘‘guided primarily by the desire to maintain the country’s position in the natural gas business in Europe over the coming decades, given its importance to Gazprom and the overall economy’’, rather than based directly on Kosovo. The pipeline will be known as Southstream. Hungary will take transit fees, and the Hungarian section of the pipeline will be jointly-owned by Gazprom and Budapest.

Molly Pattenden, head of oil and gas at Business Monitor International, said it was in Russia’s interests to control surplus pipelines, ‘‘giving it greater flexibility to turn the taps on and off and reroute supplies for political reasons’’.

But Brideau believes it is not in Moscow’s interests to play politics with the pipelines: ‘‘If European states perceive that Russia is withholding gas for political reasons, for many of them their willingness to look at alternative sources would increase.”

The US and European countries have an alternative southern pipeline planned – called Nabucco – but last week it was announced it would be postponed to 2010. Southstream could end this western attempt to bypass Russia and reduce the current 25 per cent dependence on Russia for gas supplies.

Pattenden said there might not be enough gas to supply two pipelines. ‘‘Nabucco plans to draw from the BP-developed fields in Azerbaijan. The only way it may be viable is if gas-rich Iran is brought on board.”

The potential diplomatic minefield gives Tehran an additional bargaining chip with the west over its nuclear ambitions and strengthens Moscow’s support for the Iranian regime in weapons of mass destruction negotiations.

Meanwhile, Gazprom is holding firm on its threat to reduce gas supplies to Ukraine from tomorrow in a debt and supply dispute. A quarter of Europe’s gas supplies pass through Ukraine.

Gazprom threatens to reduce supplies to Ukraine by 25 per cent. Both Moscow and Kiev have promised supplies to Europe will be unaffected.

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