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EU "flagship" near collapse

Posted by Richard Monday, February 06, 2012


This, I suspect, is going to get short shrift from the British MSM, despite the fact that we are referring to something of considerable importance – the Nabucco pipeline, a project to ship more than 30 billion cubic meters of gas per year from the Caspian and beyond to Europe. According to the news agency AFP, the project is near collapse, with a newly confident Turkey playing a key role.

The project itself stems from the repeated disputes between Russia and Ukraine over transit tariffs that led to supply cuts and pushed the EU in 2009 to launch its "Southern Gas Corridor initiative", of which Nabucco is the biggest component, aimed at reducing dependence on Russian gas supplies.

But in December, Turkey gave Russia the green light for its South Stream project to run through its Black Sea waters, with construction of the 63 billion cubic metres (bcm) per year pipeline to start by the end of this year, thereby completely bypassing the Ukraine, and providing a more reliable supply option.

The project was brought forward late last year, but Necdet Pamir, a former deputy director of Turkey's TPAO oil company, says the "Nabucco project was in a coma long before the South Stream agreement".

Nabucco was to run some 2,400 miles across Turkey then up through Bulgaria, Romania and Hungary to reach Austria where it would link up with a major distribution network, taking advantage of the lucrative European market.

But Turkey also signed in December a deal with Azerbaijan to build the Trans-Anatolia Pipeline (TANAP) to carry 10 bcm per year of Azeri gas to European markets, plus 6 bcm for itself, casting further doubt on Nabucco which is having difficulty getting commitments from gas suppliers, sufficient to take up its capacity.

Publicly, officials say Turkey, one of six partners in Nabucco, still supports the pipeline. "We continue our efforts for this project to come true," Energy Minister Taner Yildiz said recently. However, analysts believe Ankara is not committed to the project.

This is further demonstrated by an agreement for other competing pipelines, two "more modest projects" to ship gas from Turkey across Greece to Italy - the Interconnector Turkey-Greece-Italy (ITGI) and the Trans-Adriatic Pipeline (TAP) - and both have said they are willing to co-operate with TANAP which would be able to provide them with sufficient supplies.

On top of that, there is the Southeast Europe Pipeline (SEEP), a private sector initiaitve promoted by British energy giant BP, yet another project competing with Nabucco, leaving very great doubts as to where that project will obtain supplies to ship to market. The chances are, therefore, that the scheme will be impossible to complete. Some analysis say it is already dead.

All that, of course, is also without factoring in Polish shale gas, but the real irony is that the writing was on the wall as early as 2008, when my erstwhile co-editor flagged up the problems, and in 2009 when we last wrote about the project. Even then, we said, the EU was losing its grip.

But that did not stop the "colleagues". The Commission co-financed Nabucco in the feasibility stage (through the trans-European energy networks budget) and committed a grant of €200 million to the project under the European Energy Programme for Recovery (EEPR) for the first phase of its construction.

Then, in 2010, they agreeing to finance the project to the tune of €2 billion - with the European Bank for Reconstruction and development contributing €1.2 billion – out of a potential finance package of €4 billion.

One can only smile at the hubris of the moment when in 13 July 2009, José Manuel Barroso signed on behalf of the EU the Nabucco intergovernmental agreement with Turkey. Gas pipes may be made of steel, but Nabucco can cement the links between our people, he said, then declaring: "What we are witnessing today is a powerful illustration of the strategic bonds between Turkey and the European Union".

That "powerful illustration" seems now to have rather faded. With luck we will only lose the initial down payment of €200 million, another part of the price we have to pay to demonstrate the inadequacy of the wonderful European Union, which messes up virtually everything it touches.

With the project sharing its name with the Verdi opera, one analyst thus remarks that what promised to be a grand opera is proving to be more of a soap opera … and without a happy ending. That rather sounds like the EU itself.

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