Europe’s Nabucco Delusion


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 for political reasons, and Iraq is unstable.
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.
–Ben Katcher


15 comments on “Europe’s Nabucco Delusion

  1. Cee says:

    I have no idea how the above got here.


  2. Cee says:

    Why care what loud, wrong and discredited Goldfarb says?
    He probably just jealous for feeling like a skunk at a garden party…if he’s even invited.
    Michael Goldfarb is an editor at the Bill Kristol-founded Weekly Standard and served as a research associate for the largely defunct Project for the New American Century, a neoconservative letterhead group that spearheaded efforts to push for the invasion of Iraq after the 9/11 terrorist attacks.
    A communications director, spokesman, and frequent blogger for the 2008 presidential campaign of Sen. John McCain (R-AZ), Goldfarb was a vehement critic of then-Sen. Barack Obama, calling into question Obama’s personal connections and patriotism. During an October 2008 appearance on CNN, Goldfarb said, “The point is that Barack Obama has a long track record of being around anti-Semitic, anti-Israel, and anti-American rhetoric.”1 Asked to be specific, Goldfarb hurled the “antisemitic” label at Rashid Khalidi, a Columbia University professor who once held a fundraiser for Obama, but then refused to cite anyone else. Outcry quickly erupted over Goldfarb’s allegations.2 Blogger Andrew Sullivan wrote, “Asked to name one other anti-Semite other than his allegation about Rashid Khalidi, he can’t. He won’t. But he leaves it hanging, refusing to disown or retract the charge. This is pure McCarthyism. And it is the rotten core of McCain.”3


  3. Nick says:

    I love your blog.
    There is certainly a lot of inside info we don’t get elsewhere, but
    you have always been a bit of a star F^%$er.
    You have a little of the 12-year old Britney fan in you so just
    embrace it.
    We will still read and support you when you are not getting all hot
    and bothered over some has-been like Dowd.
    Yeah, and count the times you said you would return to Dowd’s in
    a second in your original post.
    Where you on X on something?


  4. jon says:

    The Turkish pipeline may or may not happen. There are lots of
    prospective oil and gas pipelines that have been discussed,
    planned and promoted for decades, and relatively few get built,
    due to the large investments needed, diplomatic and royalty
    negotiation difficulties, and uncertainties of supply.
    What is clear is that Europe, especially northern and eastern
    Europe is extraordinarily dependent on Russian gas and has very
    few options currently available. Russia is also willing to use gas
    supply to further state ambitions and to make points about its
    resurgent power. Russia has made a habit recently of
    interrupting the gas flow to the Ukraine every winter. This point
    is not lost on those at the other end of the pipeline.
    It behooves Europe to diversify its energy supply and to become
    less dependent on any single supplier or route of supply.
    Europe is already twice as energy efficient as the US, and energy
    conservation is a large issue there. Europe is also a leader in
    developing renewable energy supplies. But clearly, there
    continues to be large demand for petrochemicals.
    I disagree that Iran and Iraq will not be attractive suppliers to
    Europe. Europe has generally cordial relations with Iran, and
    trade and diplomatic restrictions have been driven by the US
    inability to move beyond Khomeni and the hostage crisis. If Iran
    behaves moderately about its nuclear power program and
    provides sufficient inspections and assurances about its putative
    nuclear weapons work, that will provide the opening necessary
    for the US to dial back on its efforts to isolate Iran – and
    increase the desire for access to Iran’s oil and gas.
    Iraq may well become stable enough for its oil and gas reserves
    to play a larger role in the world markets. The main difficulty
    about access to Europe via a Turkish pipeline is that northern
    Iraq’s oil and gas fields tend to be in Kurdish areas. Kurds don’t
    trust the Turks, and the Turks are wary of benefitting Kurds, as
    it might exacerbate movement for Kurdish autonomy in Turkey,
    or efforts to establish an independent Kurdistan. Within Iraq,
    Kurds and Shia are skirmishing and positioning to dominate and
    gain permanent possession of the oil fields. New laws allocate a
    great portion of production royalties to the provincial
    governments, so political control has become a much more
    valuable prize.


  5. ... says:

    i agree with JohnH line of reasoning and questioning…. yukos oil is an interesting back story to this as well, when one is considering theft of a countries resources from an individual/corporation.. one wonders about the constant bullshit expressed towards iran and how much of it has to do with the oil…. some of us will continue to express cynicism towards the usa’s role in all of this..


  6. Dan Kervick says:

    I thought Hillary solved the European natural gas dilemma yesterday.


  7. JohnH says:

    Wigwag–I’m really glad that Israel discovered gas off of Haifa. Now maybe they won’t have to steal Palestinian gas, like they stole Palestinian land and continue to drain Palestinians’ acquifers. Unless of course the Haifa ‘discovery’ is really horizontal drilling to drain the Gaza reserves. (I’m shocked, simply shocked that Palestinians get angry when their resources are looted!)
    As for Europe using less natural gas, try telling that the European consumers. And while you’re at it, try telling that to American motorists, who exhibit no qualms about guzzling gas from the Middle East. As a matter of fact, try telling that to anyone in Washington. They can’t even manage to publicly connect the US obsession with the Persian Gulf and Caspian basin with oil and natural gas. (It’s about terr-rrorr-rrism, as the Israelis like to say.)
    I tend to agree with Dan Kervick. The Europeans would like to move natural gas into the realm of commercial discussions with Russia. Strange how they can’t manage to do that with Iran. Is it because there is a superpower somewhere goading them not to? Could it be the same superpower that is goading them to antagonize Russia?


  8. DonS says:

    think they’ll have a debate about offshore drilling ; )


  9. WigWag says:

    “Wigwag–who would you propose that Europe depend on, when 3 countries–Russia, Iran and Qatar–hold the majority of proven natural gas reserves?”
    FYI, John H. While everyone in the United States was talking about Israel’s attack on Gaza, everyone in Israel was talking about the discovery of huge natural gas reserves off the coast of Haifa. To wit,
    Jan 18, 2009 10:54 | Updated Jan 19, 2009 10:16
    Huge gas reserves discovered off Haifa
    By SHARON WROBEL, special to JPost
    A historic natural gas reservoir found offshore from Haifa is poised to meet Israel’s natural gas demand for about 15 years and reduce or eliminate the country’s dependence on gas imports from Egypt…
    The discovery of the natural gas field 90 km. offshore from Haifa, known as Tamar, was made by a US-Israel consortium including the Delek Group, through its subsidiaries Delek Drilling and Avner Oil Exploration, Isramco Negev 2, Dor Gas Exploration and US oil operator Noble Energy Inc.
    Preliminary estimates indicate that the Tamar field might contain over 88 billion cubic meters of gas making it one of the largest gas finds of the last decade.
    If the Tamar site opposite the Haifa coast succeeds in producing the significant quantities of natural gas predicted, we are talking about a revolution which will have an impact on the Israeli economy for the coming generations,” said Dan Halman, CEO of Halman-Aldubi Group. “The vast reservoir is poised to bring down electricity prices, reduce the country’s dependence on gas from foreign countries, in particular from Egypt, and thereby turn Israel from a gas importer into a significant gas exporter.”
    Besides diversifying their sources of gas, the Europeans have another option; they can use less gas.


  10. Don Bacon says:

    Unlike oil, with lots of shiploads floating around the world headed for the highest bidders, gas often goes through a pipeline in which the flow can be easily controlled or even shut off, like Russia recently did to Ukraine and other European countries.


  11. Dan Kervick says:

    I’ve read this post a couple of times, but the central point eludes me. Europe wants gas; Russia has gas. It’s business. Yet apparently some Europeans worry that buying a lot of gas from Russia is dangerous. But what precisely are they worried about? I’m not saying there is nothing to be worried about, but I’d like it to be spelled out a bit more for me. Ben suggests it’s that Russia might use this blunt political tool to make Europeans do something they don’t want to do. Like what? Eat more borscht?


  12. JohnH says:

    Wigwag–who would you propose that Europe depend on, when 3 countries–Russia, Iran and Qatar–hold the majority of proven natural gas reserves?
    A better question is why should the Europeans depend on the US to pry loose those supplies? Can’t the Europeans negotiate just as good a deal? Or is there something that US military intimidation adds to their bargaining position? Personally, I don’t see it.


  13. WigWag says:

    In 1982 Ronald Reagan warned the Europeans that it would be foolish to rely on the Russians (at that time the Soviets) for a large portion of their natural gas supply. The Europeans were infuriated at Reagan for meddling and came up with numerous reasons why Reagan was wrong. From whatever circle of hell he happens to be residing
    in, Reagan is probably getting a good laugh at all of this; after all, he was right, Europe was wrong.
    This is from the July 12, 1982 issue of Time Magazine:
    Trouble in the Pipeline
    By Frederick Painton;Lawrence Malkin/Paris;Gisela Bolte/Washington Monday, Jul. 12, 1982
    The U.S. and its allies are at odds over how to deal with Soviets
    It is more than a debate, deeper than a commercial dispute over narrow national interests. The public row that pits the U.S. against its major allies over the projected Euro-Soviet pipeline has exposed a gaping fissure in an issue central to the Atlantic Alliance’s very existence: how to deal with the Soviet Union. Meeting in Brussels last week, the leaders of the ten-nation European Community sternly warned President Reagan of the “adverse consequences” of his move to block or at least delay the planned $10 billion pipeline that is supposed to deliver natural gas 3,500 miles from Siberia to the heart of Western Europe starting in 1984.
    Reverting to his old hard-line approach, Reagan had extended the existing ban on sales of American products for the pipeline to include equipment manufactured both by U.S. subsidiaries abroad and by foreign firms operating under U.S. licensing agreements. So angered were some European leaders that the first draft of the Brussels summit’s communique, later toned down, was described by a senior British diplomat as a “virtual European declaration of economic war against the U.S…”
    The seemingly quixotic campaign by the Reagan Administration against the pipeline is based on the view that the Soviet Union’s economic vulnerability should be exploited. At Versailles, Reagan had reportedly told his partners: “If we push the Soviets, they will collapse. When will we get another opportunity like this in our lifetime?” Even observers who don’t for a minute believe the Soviet Union would actually collapse think that its behavior could be influenced: that economic pressure can force a reduction in Soviet military spending, diminish aid to Cuba and Viet Nam and even, perhaps, bring about a measure of internal reform in the Communist system. Reagan’s principal aim in attacking the pipeline agreement is to prevent Moscow from benefiting from a flow of hard currency (an estimated $8 billion annually by the late 1980s) that could be used for vital imports of Western technology. U.S. officials, however, have been toning down their strong concern that Western Europe could become over dependent on Soviet energy supplies.


  14. JohnH says:

    Interesting that one origin point of Nabucco is in Iran. This is tacit recognition that Europe will someday need Iranian natural gas, lots of it. Since Russia and Iran together control about 40% of proven world reserves, European energy futures can hardly avoid either Iran or Russia.
    More interesting is Europe’s continued embrace of US antagonism towards Iran, particularly given its significant energy needs combined with the objective weakness of US allegations against the Iranian regime. Why would Europe shoot itself it the foot by supporting manufactured US hysteria about nukes, support for terrorism, and support for Iraqi insurgents? When will they finally come to realize that the US is trying to make Europe dependent on the US in matters that could be easily resolved without US involvement? In fact, the US’ major goal seems to be the manufacture of ways to insert inself in issues where it has no business, all as a way of maintaining its importance.
    US anatagonism towards Iran will ultimately push Iran closer to China and Russia, the former because it needs natural gas, the latter because working together they can help assure their mutual energy security needs (reliable markets and prices).
    At some point in the near distant future, you have to believe that Europe will make a definitive break from the US and start to work directly with Iran, as it does with Russia. Once again the US’ pointless antagonims towards Iran with have proven counter-productive. And US influence will markedly drop.


  15. Mr.Murder says:

    Steve, apologies for my missing so many great items at TWN. Power is out here, I’m blogging from an undisclosed location(actually, my relative is being host to others, playing 401k football while being laid off).
    The bailout money should have qualifiers. We spend a ton of USAID money to try and shape our interests and objectives. Every truck on gov’t payroll abroad that I’ve seen in footage, of civil capacity, is a Toyota.
    Couple USAID money with bailout money. Buy Fords and GM, etc.
    True, the foreign makers have actually moved a lot of truck manufacture plants here. Respect purchases from that along the same lines. Other than that, move the USAID and bailout funds to matching totals in a way that we buy into the product.
    Yes, it is a form of nationalization. It is what it is. Take care of your own and have them do the same in return.
    The NASDAQ and DOW could sure use the additional capital.
    That’s all I’ve got time to say for now, friend. That is where our conversations must aim at this time. Reorder the system to reinforce itself. Yes, some of it us just moving money on paper, shady as a buyback offer. See beyond the short term and try to determine what strategic benefit we can gain.
    Put ours back to work for our purpose and needs.
    Good luck in all things, Steve.


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