The howls of outrage emanating from European capitals following the Russia-Ukraine gas row have led some to conclude that Europe will move quickly to diversify its natural gas supply at Russia’s expense. In fact, it is more likely that Russia’s aggressive move will reinforce Europe’s internal divisions and yield strategic dividends over the long-term.
The Europeans have known for years that they are dangerously dependent on Russian gas. Nevertheless, Europe continues to import one quarter of its gas from Gazprom.
The centerpiece of Europe’s energy security strategy is the Nabucco project, a proposal to bring Central Asian gas directly to Europe through a pipeline from Turkey to Austria via Bulgaria, Romania, and Hungary. Ministers from these countries met in Budapest this week to discuss the 2,112-mile, $10.7 billion project. While the conference’s concluding document supposedly sets the project on the path toward completion in 2019, many obstacles remain.
The biggest unresolved question is, who will supply the gas? Uzbekistan has pledged its allegiance to Russia, Turkmenistan has huge reserves, but remains under Russia’s grip at least for now, and Azerbaijan – thought to be the most reliable potential supplier – is supporting Russia’s competing pipeline as well. Iran has been excluded
Furthermore, key disagreements among the transit and consuming countries persist. Last week, Turkish Prime Minister Erdogan threatened to halt cooperation on the project unless Brussels opened the energy chapter in its accession negotiations. Even Hungary, which would clearly benefit from having an alternative supplier, is hedging its bets – agreeing to cooperate with Russia on its competing South Stream pipeline.
Finally, even if these and other numerous obstacles were overcome, Nabucco’s capacity would only be 31 billion cubic meters (bcm) per year, a fraction of Europe’s annual appetite of 500bcm. Therefore, even under the best-case scenario, Russia will continue to supply a large portion of Europe’s gas.
This vulnerability provides Moscow with a crucial geopolitical weapon, but at this point the weapon is a blunt one because 80% of Russia’s exports to Europe go through Ukraine. That means that Russia cannot shut off Ukraine’s gas without assuming the political and economic costs of leaving other European countries cold as well. For that reason, Russia is pursuing a divide and conquer strategy to maximize its leverage and flexibility.
Russia plans to build several more pipelines aimed at specific markets. The Nord Stream will go under the Baltic Sea directly to Germany, and the South Stream will run under the Black Sea to Italy via Bulgaria. In addition, a third pipeline called the Blue Stream already runs directly from Russia to Turkey, and plans are underway to extend it to points further southeast.
While each of these projects has its own difficulties, Prime Minister Putin is wiling to devote immense resources to win this new “great game.” Putin has held talks with Iran and Qatar about forming an OPEC-like cartel for gas, and last summer’s war with Georgia left little doubt as to Russia’s willingness to use force.
The bottom line is that whether or not the Nabucco pipeline is built, Europe will remain uncomfortably dependent on Russian gas for the foreseeable future.