President Putin’s announcement in Turkey last week that Russia was cancelling the $45bn South Stream gas pipeline project has caused havoc in southeastern Europe. Political leaders in the countries most adversely affected by this decision, Serbia and Hungary, have tried to keep a brave face, expressing hope that it may be revived some time in the future. This seems unlikely. The European Commission – under U.S. pressure – has successfully forced Bulgaria, the weakest link in the chain of small participating nations, to block this major new energy corridor.
The formal reason advanced from Brussels is the project’s alleged incompatibility with the European Union’s anti-monopoly laws, as Russia’s Gazprom would have been both co-owner of the pipeline and supplier of its fuel. Similar objections did not stop Russia and Germany from completing the Nord Stream pipeline in 2012, however. Putin described the European Commission’s position toward South Stream as being “unconstructive”, and conceded that if the EU did not want to see the project go ahead then it would not happen.
The real reason was stated, with her usual diplomatic tact, by Assistant Secretary of State for European Affairs Victoria Nuland on October 2, when she lashed out at those who “cut dirty deals that increase their countries’ dependence on one source of energy despite their stated policy of diversification.” In view of the EU’s recent readiness to follow Washingtonian foreign policy ukase, once the U.S. government declared that South Stream was a “dirty deal” it was as good as dead. Washington’s main goal is to
The result is a minus-sum game for all key European actors. Russia’s gas deliveries to Central Europe will remain largely dependent on Ukraine’s antiquated pipeline network. More seriously, they will continue to be vulnerable to Kiev’s political games (as witnessed in the winters of 2006 and 2009). Having a massive new pipeline, which could bring 63 billion cubic meters of Russian gas per annum across the Black Sea to Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy, would have resolved the problem; but the apparat in Brussels was unable to resist Washington’s veto.
Russia’s inability to break the European Commission’s barriers indicates the limits of her geopolitical clout. The clear immediate winner is Turkey, which will be Russia’s strategic partner in building a new pipeline across the Black Sea to Thrace and developing a gigantic gas storage facility on its border with Greece. Gazprom and Turkey’s BOTAS signed a memorandum on the construction of this new pipeline which is projected to transport 63 billion cubic meters per year – precisely the capacity of the now defunct South Stream. The prospects for that project are also uncertain, however. Current sluggish demand for gas and weak prices are less of an impediment than the European Commission’s ability to exert pressure on Greece, a vulnerable EU member, similar to that applied against Bulgaria since its October 4 general election.
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