Deflating the gas bubble

By E.L.

AS regular readers will know, we carry quite a few articles saying that "Eastern Europe" is an out-of-date term. But a new publication in Warsaw is boldly adopting the label. Called New Eastern Europe, it is paid for (in part) by the Polish Ministry of Foreign Affairs (meaning taxpayers). It has had two issues so far, snazzily designed in red and black. Oddly, they are not available online (even for subscribers).

But it also has interesting blog posts, (it also reposts material from the European Council on Foreign Relations)

The most recent offering on the site is about the European Union and Gazprom, by Jonas Grätz of the Center for Security Studies in Zurich, pegged to the lastest wobbles in supply during the February cold snap.

"The premise of stable supplies from Russia is crumbling fast" he argues, as it showed the problems of both bad long-term investment decisions (for example the failure to build proper storage) the fall-out from the quarrels with Turkmenistan and the political decision to favour Turkey over the EU (presumably as a reward for Turkey's flip-flop on South Stream and Nabucco). The EU should reject Gazprom's demands for exemptions from the rules mandating third-party access to pipeline infrastructure and instead demand that Gazprom sorts out its own storage facilities.

He concludes:

Gazprom is not the “reliable supplier” that the Soviets may once have been (in the eyes of Western Europe). Gazprom's market share in the EU turns out to be already too high for the sort of power play Moscow wants to pull off with the EU. By exploiting irregularities and crises to display and test the EU's vulnerabilities, Russia strives to derail the EU's market liberalisation agenda, putting its “pipeline-isation” agenda ahead of the EU's marketisation.

Meanwhile, many EU member states and institutions have so far rather rewarded Russia's unreliable behaviour: The 2006 and 2009 gas supply cuts contributed greatly to the acceptance of the Nord Stream pipeline as a bypass. The 2009 crisis was also instrumental in the German decision to grant Nord Stream's connecting pipeline, the OPAL, exemptions from third-party access. Following Nord Stream, South Stream is set to be Russia's next Trojan horse for the EU agenda. So instead of rewarding Russia, the EU and its gas industry have to focus on diversifying suppliers which is an essential element of completing an internal gas market. Otherwise, the outlook for gas as the “fuel of choice” for the transition to a renewable power generation looks rather bleak