TAP Wins on Nabucco: A Total Defeat for the EU
Matteo Cazzulani, EastBook, 5.07.2013
The choice of Trans Adriatic Pipeline as the unique pipeline to pump Azerbaijani gas to Europe is economically convenient to reach Northern European energy markets. However, the exclusion of Nabucco is a total defeat of the EU projects to diversify gas supplies from Russia.
MILAN – A political defeat for the EU and an almost lost opportunity to diversify European gas supplies from Russia’s monopoly in the Central Eastern Europe (CEE) states of the Old Continent. On Thursday, June 28, the consortium that controls Shakh Deniz gas field in Azerbaijan –shared by Azerbaijani concern SOCAR, British concern British Petroleum, Norwegian concern Statoil, and French company Total – chose Trans Adriatic Pipeline (TAP) as the unique infrastructure to carry natural gas from Azerbaijan to Europe.
TAP will carry 10 bcm of Azerbaijani natural gas per year to Italy from the border between Turkey and Greece through Albania. The shareholders of Trans Adriatic Pipeline, which is politically supported by the Governments of Italy, Switzerland, Croatia, Greece, Albania, Montenegro and Bosnia Herzegovina, are Norwegian concern Statoil, Swiss company Axpo, and German company E.On. TAP’s concurrent project that was also conceived to obtain the right to carry Azerbaijani gas to Europe was Nabucco pipeline. Nabucco was planned to pump 25 bcm of natural gas per year to Austria from Western Turkey through Bulgaria, Rumania and Hungary.
Shareholders of Nabucco, which was politically supported by the governments of Austria, Poland, Slovakia, Turkey, Rumania, Czech Republic, Bulgaria and Hungary, are Austrian company OMV, Turkish Botas, French Suez Gas de France, Rumanian Transgaz, Bulgarian BEH and Hungarian FGSZ1. The concurrence between TAP and Nabucco was quite equilibrated, with the European Commission and the US Presidential Administration maintaining neutrality after an early support to Nabucco. However, the final decision in favor of TAP was probably due to the presence among TAP shareholders of Norwegian concern Statoil, which is also a Shakh Deniz gas field shareholder.
TAP’s win on Nabucco pipeline was also favored by the role of other Shakh Deniz gas field shareholders as Azerbaijani energy concern SOCAR. After the acquisition of the majority of DESFA energy company, which controls Greek Gas Transportation System, SOCAR was likely to prefer to carry Azerbaijani gas via Greece.
British Petroleum, another Shakh Deniz shareholder, was likely to consider the possibility to export to Northern European energy markets -as Switzerland, Germany, Belgium and France- the Azerbaijani gas carried by TAP to Italy. BP project will be possible thanks to an agreement of partnership that TAP consortium signed with Belgian Fluxys company, which controls the Transit Pipeline that links Switzerland with Germany and the entire Belgium-Britain and Belgium-Netherlands interconnector pipelines.
The choice of TAP will ensure Europe to diversify natural gas supplies by carrying 10 bcm of natural gas from Azerbaijan. In addition to Northern European energy markets, TAP will ensure Azerbaijani gas supplies also to the Balkans, thanks to the realization of the Ionian Adriatic Pipeline -IAP, a pipeline conceived to pump 5 bcm of Azerbaijani gas to Croatia from Albania through Montenegro and Bosnia Herzegovina- and the Greece Bulgarian Interconnector -IGB.
Russia’s monopoly in Central Europe is not in danger
From the economic point of view, TAP is a far more economic project than Nabucco. However, the exclusion of Nabucco is a geopolitical mistake that endangers EU energy security. Shakh Deniz choice of TAP is also represents a spectacular political defeat for the European Commission. Although European Commission President Jose Manuel Barroso and EU Energy Commissioner Gunther Oettinger welcomed Shakh Deniz consortium decision in favor of TAP, the European Commission, despite not always openly, always supported Nabucco.
In fact, Nabucco was planned to help gas supplies diversification in an area that is strongly dependent on Russian gas supplies, as CEE. Austria depends on Russian gas supplies for almost the 52% of the national energy need, Poland, Czech Republic and Rumania for almost the 82%, and the remaining countries that supports Nabucco -Slovakia, Bulgaria and Hungary- for the 99%. If selected as the unique pipeline to carry Azerbaijani gas to Europe instead of TAP, Nabucco could allow dropping Russian influence on CEE energy market. In CEE, Russia acts as a new imperialist power, that uses gas and pipelines to reach geopolitical goals.
On the other hand, TAP does not conceive Azerbaijani gas as a geopolitical matter, but just as a pure economic opportunity. Azerbaijani gas is pumped by TAP in a EU area -Greece, Albania, Italy, Switzerland, Germany, France, Belgium, UK and the Netherlands- which is already fully supplied not only by Russian gas, but also by Algerian supplies and some LNG shipping from Egypt, Norway and Qatar.
The choice of TAP, and Nabucco exclusion, de facto denies the original reason that moved the European Commission to sign agreements to import natural gas from Azerbaijan: to help those EU countries, as CEE, that are strongly dependent on Russia’s gas to diversify their national gas supplies. By carrying Azerbaijani gas to Italy, and further to Germany, Belgium and the UK, TAP does not permit to drop CEE countries’ energy dependence on Russia.
Is TAP a new Nordstream?
The effect provoked by the choice of TAP is the same obtained by Russia with the open of Nordstream. This pipeline was realized by Russia in 2012, with the political support of Germany, France, Belgium and the Netherlands, to carry 55 bcm of Russian gas from Russia to Germany through the Baltic Sea seabed, in order to bypass Central European EU member states as Poland, Lithuania, Estonia, Latvia, Rumania, and Hungary.
Nordstream political impact was quite well described in 2008 by therefore Polish Minister of National Defense Radoslaw Sikorski -actually Poland’s Minister of Foreign Affairs- who described Nordstream as a new Molotov-Ribbentrop Pact that Russia signed with Western Europe in order to disadvantage CEE. Of course, TAP helpfully is not a Russian project, rather, it is planed to oppose Russian energy policy.
However, Nabucco exclusion will lead to the energy isolation of some EU member states that are yet strongly dependent on Russia, and represents an opportunity for Moscow to continue holding sway in Poland, Czech Republic, Slovakia, Rumania, Austria, Hungary and Bulgaria.
Also Mediterranean Europe could be penalized by TAP?
TAP’s win on Nabucco could be not only written as a question filed with Western European states and Russia vs. CEE, but also as a competition between Northern and Southern Europe.
The presence of important energy concerns and companies such as Statoil, Axpo, E.On, and the entry of Fluxys, British Petroleum and Total in TAP consortium, could move TAP shareholders to consider the Northern European markets as the unique final destination of Azerbaijani gas, while Italy and Greece would just been considered as simple transit states.
This suspicion is supported by the emphasis that TAP Managing Director Kjetl Tungland posed on the importance to supply Northern European energy markets with Azerbaijani gas. Moreover, TAP consortium did not already sign any swap operation in Italy, which is supposed to be the main market of the Azerbaijani gas carried to Europe by TAP.
The consideration of Italy as a simple transit state, and not as the Azerbaijani gas’ final destination in Europe, would be a political defeat also for the Italian Government. If TAP shareholders will consider only Northern European markets as the main goal of TAP realization, Italy, that politically openly supported TAP, could loose the opportunity to use Azerbaijani gas to diversify Italian national gas supplies, and drop the dependence on Russia and Algeria’s gas supplies.
The same scenario could be painted for Greece, whose political support to TAP was a crucial matter that influenced Shakh Deniz consortium final decision to resign from Nabucco. Greece has already a quite diversified gas market, but Azerbaijani gas could help Athens to drop gas prices for industries and private users, avoiding the deepening of the economic and social crisis that the Greek government is facing on rite now.
With the energy isolation of CEE and Mediterranean EU, the project of gas supplies diversification in the weakest EU countries from the energy point of view, that was originally planed by the European Commission, is totally defeated.
The EU demonstrated a lack of power in the matter, and the impossibility to provide a common energy policy without the full support of big energy companies.
In Obama’s shale we trust
However, gas supplies diversification for CEE and Mediterranean EU states could be reached thanks to the realization of a massive quantity of LNG terminals, in order to import liquefied gas from Qatar, Norway and Egypt. LNG terminals are also necessary to take advantage of US shale gas export that the USA is proceeding to ship to Europe, as US President Barack Obama’s Administration recently confirmed.
Thanks to the exploitation of domestic shale gas fields, the USA will become the first world gas exporter, according to new EIA data. The USA already proceeded to ship shale liquefied gas to India and the UK, whereas South Korea, Singapore and Taiwan signed pre-agreements to receive US shale as soon as the Department of State will give green lite to the export. Interest in US shale shipping was also declared by several EU member states as Poland, Germany, Spain, Italy and Lithuania.
For those EU member states that, except Spain, are strongly dependent on Russian gas, US shale import is now the unique opportunity to diversify their national gas supplies. As well as in other moments of the history, the USA could now help European states to solve a difficult geopolitical situation, as the strong EU dependence on Russia’s energy is.
Once again, the European states were not able to find a common position and provide a common policy, showing how weak the EU is from the geopolitical point of view. The resignation from Nabucco could be also the opportunity to think about how Europe needs a serious common energy policy, and how important an alliance between the EU and the USA is for the Western civilization to fight in important geopolitical struggles that the EU is not able to win alone.