- On November 7 the first of two pipelines for Nord Stream,
the huge Russian-German gas pipeline project, began delivery of gas. The
event was no minor affair. German Chancellor Merkel and Russian President
Medvedev along with the prime ministers of France and the Netherlands and
the EU Energy Commissioner formally opened the first of two 1224-kilometre
pipelines at Lubmin in northern Germany, beginning delivery of the first
gas direct from Russia's Yuzhno-Russkoye gas field in Siberia to Germany.
-
-
- Nord Stream was not cheap. It cost a total of more than
$12 billion for the complex 760 mile long undersea pipeline through the
Baltic Sea from Vyborg near Russia's St Petersburg to north eastern Germany.
It was laid in remarkable time and with extraordinary environmental precautions
to insure protection of sea life, a precondition set by several EU Baltic
countries. When the second pipeline is finished in late 2012, Nord Stream
will be able to deliver 55 billion cubic meters of Russian gas a year,
almost ten percent the entire EU annual gas consumption, or roughly one
third the entire current gas consumption of China.
-
-
- Nord Stream estimates it will provide enough energy to
fuel 56 million West European households. With current EU political decisions
over reducing CO2 "carbon footprint" emissions, the Russian gas
giant argues its natural gas gives 50% less CO2 than rival coal plants
at as much as 50% greater energy efficiency.
-
-
- Even if Moscow is being more than somewhat opportunist
and is not convinced about the shoddy science of global warming, Gazprom
does not hesitate to use this as a shrewd political selling point. The
EU is going for natural gas energy big time and Moscow intends to be a
major, if not the major beneficiary of that push. In addition to delivering
Siberian gas to Germany, Nord Stream will deliver to the United Kingdom,
Denmark, the Netherlands, Belgium, France and the Czech Republic.
-
-
- Moscow appears to hold a winning hand in the one important
non-military lever it has to tip the global geopolitical balance of power
in its direction and away from Washington's overwhelming dominance. Oil
and natural gas are at the heart of the strategy. For some months Russian
production of crude oil has surpassed Saudi Arabia's to be the world's
largest oil producer with over 10.3 million barrels daily, nearly one million
barrels more.<#_edn1>[1] And in terms of known reserves of natural
gas Russia is far away the world leader according to industry data.
-
-
- Russian natural gas has increasingly been the foundation
for a brilliant series of Russian energy geopolitical initiatives for several
years. Gazprom, a closely-held state company, is the centerpiece of this
energy strategy.
-
-
- To counter the eastward march of NATO into countries
of the former Warsaw Pact such as Poland, the Czech Republic or Romania
and the various US attempts to lure Ukraine and Georgia into NATO, Russia's
Vladimir Putin, both as President and more recently as Prime Minister,
has used the economic lever of Gazprom. With its enormous gas resources
Russia seeks to win stronger economic ties in western Europe, thereby hopefully
neutralizing somewhat the potential military strategic threat from the
NATO encirclement. No country has been more the focus of this Russian pipeline
diplomacy than former wartime foe Germany where Nord Stream lands.
-
-
- The undersea route across the Baltic to Germany was chosen
by a German-Russian consortium including Gazprom with 51% and the German
chemicals group BASF Wintershall and E.ON Ruhrgas of Germany each today
with 15.5% share, giving the German-Russian partners a dominating 82% control.
Further adding to the political support from key EU countries, later they
were joined by N.V. Nederlandse Gasunie and France's GDF Suez which each
own a 9% share.
-
-
- The Baltic undersea route was chosen deliberately to
avoid potential geopolitical disruptions such as occurred several years
ago when a pro-NATO Ukrainian government blocked Russian gas deliveries
to Western Europe to undercut Russian attempts to come closer to western
Europe. Behind Ukraine was the long arm of Washington. <#_edn2>[2]
-
-
- Had Ukraine joined NATO as Washington urgently sought
after Kiev's 2004 "Orange Revolution" brought Washington's man
Viktor Yushchenko in as President, then Ukraine would have been in a strategic
position to economically strangle Russia on command. Prior to opening of
Nord Stream in November some 80% of all Russian gas exports to EU countries-mainly
to Germany, Italy and France-were flowing across Ukrainian territory. Political
instability and ongoing NATO meddling in Ukraine dictated the decision
to build the new Nord Stream undersea route to Germany and other EU markets
bypassing entirely Ukraine and Poland. Today some 40% of all state revenue
in Russia comes from Russia's oil and gas exports.<#_edn3>[3]
-
-
- South Stream vs Nabucco
-
-
- While few outside the energy industry and special political
interest groups have paid much attention to it, at the same time Nord Stream
was coming into play a ferocious geopolitical battle has also been raging
over a second planned major Gazprom Russian gas pipeline project to EU
countries called South Stream. South Stream gas pipeline will be laid on
the Black Sea floor, pass through Bulgaria, Serbia, Hungary and Slovakia
and on to west European markets from the southern part of the EU.
-
-
- To politically counter the growing Russian energy ties
to the EU, with strong Washington backing, the EU Commission proposed an
alternative in 2002 called the Nabucco pipeline, curiously named after
the Verdi opera. To date Turkey, Romania, Bulgaria, Hungary and Austria
have agreed "in principle" to build the 3,900 km Nabucco pipeline
that theoretically would pump up to 31 billion cubic meters of gas annually
from the Caspian and the Middle East across Turkey into western Europe.
Nabucco partners to date include energy companies RWE of Germany; OMV of
Austria; MOL of Hungary; Botas of Turkey; Bulgaria Energy Holding of Bulgaria;
and Transgaz of Romania.
-
-
- The problem is that the Nabucco partners have yet to
secure gas anywhere to fill the pipeline. Moscow has deftly locked up the
gas from the obvious supplier Azerbaijan, and surplus gas from former Soviet
Republic Turkmenistan is also secured in deals with Gazprom, leaving only
Iran as an option, something politically Washington is not ready to consider,
to put it mildly.
-
-
- Both Nord Stream and South Stream came into being when
Ukraine's previous Yushchenko regime, with reported strong US behind-the-scenes
backing, twice disrupted transit gas flows to European markets beginning
2006. To assure stability of supplies, Moscow created both new pipeline
projects to bypass Ukraine.<#_edn4>[4]
-
-
- The geopolitical problem for Washington and its allies
in Brussels is the fact that its Nabucco project appears dead in the water
before it even gets started. Not only has Gazprom locked up the major gas
supply sources including Azerbaijan. Nabucco is also far more costly than
its Russian rival.
-
-
- Latest estimates put Nabucco's ultimate construction
cost at almost double that of South Stream. Tamás Fellegi, Hungarian
National Development Minister, recently stated that the cost of Nabucco
gas pipeline will exceed original plans by four times. "No one can
predict the final cost of Nabucco, but according to optimistic estimates,
its cost may reach 24-26 billion euro," Fellegi said.<#_edn5>[5]
-
-
- In late October Gazprom made a major move to secure partners
for its South Stream in a Moscow meeting with its largest consortium partner,
Italy's ENI. <#_edn6>[6] Some days before in September, Gazprom secured
the significant participation into South Stream of its major Nord Stream
German partner, BASF Wintershall, a major blow to Nabucco hopes. They joined
the major French energy company EDF to give the South Stream project major
clout versus the floundering Nabucco.
-
-
- Last April, Turkey, also at least on paper a key player
in Nabucco, gave permission to Gazprom to begin offshore prospecting for
the potential undersea route of South Stream, a first step to gain Turkish
approval to begin construction in Turkish territorial waters on the Black
Sea. Turkey is trying to play a new role as an energy crossroads between
the EU and its neighbors. By giving Gazprom the green light to begin prospecting,
Turkey's Erdogan government clearly has decided not to put all its energy
eggs into the NATO Nabucco basket.<#_edn7>[7]
-
-
-
-
-
- Possible routes for Gazprom's South Stream Pipeline
-
-
- Already Gazprom is the largest natural gas supplier to
the EU. Gazprom with Nord Stream and other lines plans to increase its
gas supply to Europe this year by 12% to 155 billion cubic meters. It now
controls 25% of the total European gas market and aims to reach 30% with
completion of South Stream and other projects.
-
-
- Rainer Seele, chairman of Wintershall, suggested the
geopolitical thinking behind the decision to join South Stream: "In
the global race against Asian countries for raw materials, South Stream,
like Nord Stream, will ensure access to energy resources which are vital
to our economy." <#_edn8>[8]
-
-
- But rather than Asia, the real focus of South Stream
lies to the West. The ongoing battle between Russia's South Stream and
the Washington-backed Nabucco is intensely geopolitical. The winner will
hold a major advantage in the future political terrain of Europe.
-
-
- According to Andrei Polischuk, an energy analyst at the
BKS Finance Group, Nabucco is in far the weaker position at present. "This
project is facing several problems. One of them is how to fill it with
gas and how to find a resource basis. The second is its growing cost. Earlier,
the project was estimated at 8 billion US dollars, but at present, it has
grown up to 12 to 15 billion US dollars." says Polischuk. "All
these projects have first and foremost a hidden political motive. By implementing
them, Europe tries to lower its dependence on Russian gas." <#_edn9>[9]
-
-
- Reinhard Mitschek, director of Nabucco Gas Pipeline International,
recently admitted that Nabucco now has been pushed back until 2017, three
years later than originally planned. The construction work won't begin
until at least 2013. He feebly admitted in a recent press conference when
pressed on a date for gas deliveries, that gas would flow, "as soon
as there are firm indications that gas supply commitments are in place."
<#_edn10>[10]
-
-
- EU Nacht und Nebel Raid on Gazprom
-
-
- As if on cue, just days before the planned opening ceremony
for Gazprom's Nord Stream pipeline the EU launched an unprecedented "nacht
und nebel" style raid on the offices of Gazprom and its EU partners
covering ten countries.
-
-
- In response to a complaint by the Washington-friendly
government of Lithuania, on September 28 EU officials raided Gazprom and
associated offices in central and eastern European states to investigate
firms involved in the supply, transmission and storage of natural gas.
The Commission claimed the raids were linked to "suspicions"
about anti-competitive practices.
-
-
- The raids were an unprecedented use of new EU "antitrust"
weapons including the threat of fines up to 10% of a company's global turnover.
Following a Thatcherite "free market" model, the EU Commission
has in recent years forced E.ON, RWE and ENI to open up or sell their energy
pipelines to rivals. E.ON and GDF were also forced to dismantle their market-sharing
deals.
-
-
- The EU is working a so-called Third Energy Package, which
imposes limits on ownership of EU pipeline infrastructure by gas suppliers
and calls for the "unbundling" of over-concentrated ownership.
Under the rules, Russia could be forced to sell off parts of its pipeline
network in the EU, something Moscow is understandably not about to do.
It could open a Pandora's box of geopolitical interference with potential
for anti-Russian companies to in effect sabotage the vital and growing
Russian gas trade with the EU, a mainstay today of Russian state finances.
-
-
- The Gazprom raids were explicitly political. The EU even
admits it has little evidence: "We're at the beginning of the investigation;
we have our suspicions and we have to see whether these are confirmed on
the basis of the evidence we find and our analysis," Commission spokeswoman
Amelia Torres told press in Brussels.<#_edn11>[11]
-
-
- According to Reuters, "A Commission official, who
declined to be named, told Reuters the raids were part of the EU's efforts
to wean itself off reliance on Russian gas and concerns about Gazprom's
power as a state-controlled entity." Gazprom itself clearly links
the raids to their recent progress on South Stream: "My guess is that
it comes as Russia is speeding up its projects, including the South Stream
underwater link," a Gazprom source said. <#_edn12>[12]
-
-
- Vladimir Feigin, a member of the Russian delegation discussing
the issue with EU officials, charges the European Commission with taking
a "dangerous path" with the raids. "It's not a simple demonstration
of muscles ... There are lots of issues, which are highly politicized,
including Gazprom's long-term contracts," he insisted. <#_edn13>[13]
-
-
- While free market game rules may sound attractive to
market outsiders, for the future planning of Gazprom long-term fixed contracts
are essential. As oil markets reveal in recent years, while prices sometimes
fall, most often they are subject to manipulation by major Wall Street
banks like JP MorganChase, Citigroup or Goldman Sachs, the gang that pushed
oil prices above $147 a barrel in June 2008 at a time supply on the world
market was in glut, making a literal killing in the process.<#_edn14>[14]
-
-
- In anticipation of the larger export market for its gas
to Europe, Gazprom has been making huge infrastructure investments across
Europe which could be wiped out by an adverse EU decision. It is in the
process of doubling its underground storage capacities for gas. It already
operates gas storage facilities in Austria and leases facilities in Britain,
France and Germany to handle the planned new flow from Nord Stream and
South Stream. As well, Gazprom has built a joint venture storage facility
with Serbia to serve gas exports to Serbia, Bosnia-Herzegovina and Hungary.
Feasibility studies are being done for similar joint storage projects in
the Czech Republic, France,
-
-
- Romania, Belgium, Britain, Slovakia, Turkey and Greece.
This, in addition to the major investment in the pipelines, makes it clear
the EU raids are aimed at Moscow's energy jugular.<#_edn15>[15]
-
-
- Were Moscow to succeed in completing South Stream and
retain its integral control over the delivery pipeline infrastructure,
it would represent nothing less than a major geopolitical defeat for Washington.
Since the collapse of the Soviet Union in the early 1990's, Washington
energy geopolitics in the Caspian region and across Eurasia into Russia
have attempted to weaken if not permanently cripple the one major remaining
geopolitical lever Moscow holds to counter Washington's NATO encirclement
strategy. Not letting itself be totally dependent on EU gas or oil revenues,
Moscow has recently indicated it is greatly increasing its focus on building
long-term energy partnerships with its eastern neighbors of Eurasia, most
notably with China. The geopolitical implications for Washington of that
shift will be examined in a subsequent article.
-
-
-
- F. William Engdahl is author of A Century of War: Anglo-American
Oil Politics in the New World Order. He may be contacted through his website
at www.engdahl.oilgeopolitics.net
-
-
-
-
-
- Endnotes:
-
-
- <#_ednref1>[1] News Wires, Russian Output Hits
Post-Soviet Highs, 2 November 2011, accessed in http://www.upstreamonline.com/live/article286798.ece.
-
-
-
- <#_ednref2>[2] F. William Engdahl, Ukraine Geopolitics
and the US-NATO Military Agenda: Tectonic Shift in Heartland Power--Part
I, accessed in http://www.globalresearch.ca/index.php?context=va&aid=18128.
-
-
-
- <#_ednref3>[3] Friedbert Pflüger, Russia and
Europe: Time to bury the hatchet-and embrace the market, 20 October, 2011,
European Energy Review.
-
-
-
- <#_ednref4>[4] RIA Novosti, Ukraine lost reputation
of reliable gas transit country Yanukovych, 19 October, 2011, accessed
in http://en.ria.ru/world/20111019/167874442.html
-
-
-
- <#_ednref5>[5] ABC.AZ, Nabucco project cost to
exceed value of South Stream and make it world's most expensive gas pipeline,
24 October 2011, http://abc.az/eng/news/main/58939.html
-
-
-
- <#_ednref6>[6] ENI, Gazprom CEOs discuss South
Stream Development, October 17, 2011, accessed in
- www.offshoreenergy.com
-
-
-
- <#_ednref7>[7] Newswires, Turkey gives offshore
permit to Gazprom for South Stream project, 11 April, 2011.
-
-
-
- <#_ednref8>[8] UPI, Wintershall joins South Stream
consortium, September 16, 2011, accessed in
- http://www.upi.com/Business_News/Energy-Resources/2011/09/16/Wi
ntershall-joins-South-Stream-consortium/UPI-92591316173513/#ixzz1dUq77i89.
-
-
-
- <#_ednref9>[9] Moscow Times, Europe still wants
to go around South Stream, September 30, 2011, accessed in http://english.ruvr.ru/2011/09/30/57380344.html.
-
-
-
- <#_ednref10>[10] M K Bhadrakumar, Russia redrawing
Europe energy map, Asia Times Online, May 12, 2011, accessed in http://www.atimes.com/atimes/Central_Asia/ME12Ag02.html.
-
-
-
- <#_ednref11>[11] Reuters, EU raids Gazprom offices
in anti-trust probe, 29 September 2011, accessed in http://www.euractiv.com/energy/eu-raids-gazprom-offices-anti-trust-probe-news-508007.
-
-
-
- <#_ednref12>[12] Ibid.
-
-
-
- <#_ednref13>[13] Ibid.
-
-
-
- <#_ednref14>[14] F. William Engdahl, More on the
real reason behind high oil prices: Part II, Global Research, May 21, 2008,
accessed in http://www.globalresearch.ca/index.php?context=va&aid=9042.
-
-
-
- <#_ednref15>[15] M K Bhadrakumar, op. cit.
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