Russian gas exports to Europe via Ukraine may soon be re-routed via Turkey, if reports by President Vladimir Putin are to be believed. South Ossetia – a breakaway Georgia republic – will soon be absorbed into Russia and the Russian energy giant Gazprom will establish operations there to divert up to 25% of Russian gas exports to Europe. With the crisis in Ukraine bubbling over and Russian infiltration and meddling increasing, we are likely to see increasing tensions between Russia and Europe vis-a-vis natural gas supplies. With Russia integrating South Ossetia into its territory and plans afoot to divert natural gas from Ukraine through a new pipeline in Turkey, it is clear that Europe is concerned. During the course of 2013 Russia supplied approximately 30% of European gas demand, half of which came via Ukraine. Here at home, the European Commission’s Energy Union is looking to move to a low carbon economy as quickly as possible.
South Stream Pipeline Plans Scuttled after EU Says No to Russian Gas Supply
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The construction of the Turkish Stream gas pipeline from Russia to Turkey is a clear indication that Gazprom has given up on a natural gas pipeline to Europe via the Black Sea. When the Dutch company South Stream Transport was unable to successfully petition the Netherlands government to allow cooperation with Gazprom, the Russians went in a different direction. The situation was further inflamed when the CEO of Gazprom, Aleksei B. Miller held a press conference recently stating that European nations will have to set up their own gas transporting infrastructures
from Greece and Turkey. Various European countries including Serbia, Bulgaria and Hungary were excited about the prospect of the South Stream pipeline, but the EU was having none of it after Russian incursions into Ukraine. It appears that economics played a role in the cancellation of this project since a $40 billion pipeline was hardly worth the expense, especially at a time when energy prices are at historic lows.
Gas-Rich Middle Eastern Countries Enter the Picture
Many proposals are being considered between gas rich Middle Eastern countries and their European partners. Recently, news broke that Iran – which holds the world’s largest natural gas reserves – could export up to 30 billion cubic metres (bcm) of gas to 12 countries across Europe. The head of the National Iranian Gas Company, Azizollah Ramezani alluded to cooperation between Azerbaijan and Turkmenistan. Presently Iran accounts for 1.5% of worldwide gas trade, but this could increase to 10% within the next 10 years. However it should be pointed out that the natural gas reserves in the eastern Mediterranean are insufficient to compensate for Russian supplies to Europe. Geopolitics is certainly the thorn in everyone’s side right now.
Talks were recently underway between the US Vice President Joe Biden on the construction of a pipeline from Cyprus, Egypt and Israel via Greece and Turkey through to Europe. This bold initiative could have the effect of isolating gas supply from Egypt and other Arab markets and pairing it with Israeli exports. Israel has a potential edge over Jordan where there is a deficit and Egypt where gross mismanagement of energy resources and corruption have resulted in a periodic deficit. The idea of supplying Middle Eastern gas to Europe may also prove vital to reducing European dependence on gas supplies from Russia via Ukraine and other routes. However Turkey clearly has other designs as noted by a potential deal with Russia for its own gas pipeline.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]