European Union and Russia. The border marked by a pipeline

This is how Vladimir Putin “punished” Europe: stopping the construction of the South Stream pipeline. A project defined by Gazprom as “a real step in pursuing the Gazprom strategy to diversify the Russian natural gas supply routes”. The project idea started in 2006, when the two big companies, Gazprom and Eni, entered into the Strategic Partnership Agreement entitling Gazprom to supply Russian gas directly to the Italian European gas companies: Saipem, a subsidiary of Eni’s first partner, Gazprom for Italy, the German Wintershell and the French EDF. Totally, the shareholding structure is as follows: Gazprom 50%, Eni 20%, Wintershall Holding and EDF 15% each. Here is a map of the route of the pipeline.

It has not been only the Ukraine crisis to divide Europe from Russia, it has not been only the toughest sanctions against Russian economy, imports and goods. Now there is another big obstacle between Putin and the European Union and it seems insurmountable: it is the energy crisis. On the one hand, Europe’s member states needs Russian gas supplies; on the other hand, gas supplies turned out to be the best weapon for the Kremlin to blackmail Europe. Now, after a long debacle between Russia and Brussels, the game is over, no more the South Stream project for European countries.

The pipeline that should have been realized, would have passed on the bottom of the Black Sea and connected the Russian Crimea to Bulgaria, in order to carry the gas in central and southern Europe. Russia had problems also with the Bulgarian government, which did not agree to a pipeline passing through the national territory: this is one of the reasons why Putin quit the project, tired of the carelessness of Bulgaria. It is not a secret that Russia has read the delay of Bulgaria as a “no”. For this reason, it has withdrawn its support for the project. According to Putin, the European Union is definitely responsible of the lack of confidence shown by the Bulgaria’s government. “Bulgarians should ask the EU to cover the economic damages, about 400 million euros. Europe will not receive these supplies” Russian President said. The European Union, on its part, gave this official explanation: the project would have gone against the rules of the so-called “third energy package”, in particular with the provision that prohibits the same company (Gazprom) to be both seller and distributor of gas.

Once Russia has understood the European Union attitude, things changed a lot and got worse. The new Russian energy policy, especially the giant Gazprom and its CEO Alexey Miller, started looking at other countries, especially Turkey and Greece. On December 6th, Miller declared: “The company has no intention of reopening the dossier and stopping the South Stream project is the final decision. South Stream is permanently closed. The decision to stop the project is due to the fact that a project is impossible if there are delays and blocks. The decision was taken by the European Union. The European Parliament adopted a resolution calling for the prohibition of the South Stream on April 17th”. As a hard response to the lack of interest of the European Union in the South Stream project, Moscow suggests the construction of a gas pipeline on the Greek and Turkish borders. The aim is to create a stronger cooperation and partnership between those two countries and Russia. And then, in front of this unexpected scenario, what are the consequences for Europe and Italy?

Firstly, the energy security of our country, of course, is in danger. Among the major suppliers of gas, 1/3 of the supplies are offered by Gazprom. Alexey Miller, deputy chairman of the company, has supported Putin, confirming the resounding “no” of the Kremlin to the South Stream project. Secondly, from a business perspective, Eni and the other European companies would be heavily damaged. Not only because of Putin’s changes about the South Stream but also because Europe needs investments for its economy. Moreover, as Miller has underlined, Europe will be forced to buy the gas and to pay also for its transportation. The increase of the prices would lead every European citizen to pay more and more for this energy source. A consequence that sounds like another tax, during these “hard times” in Europe. Over the past few days, the South Stream consortium has officially collapsed. Russians are ready to repurchase the partners after the stop to the project. Italians should collect 300 million and 10% interest (the value of the investment of Eni was about 300 million).

Secondly, there will be negative consequences for Italy, as well. The energy provisions for the country are not optimistic: according to the NEB, the national energy balance (source Ministry of Economic Development), in 2020 Italy will always be in great need of gas, rising to 98.2%. From 2015 onwards, gas becomes the main energy source, covering by 2020 over 40% of the heat demand, followed by oil (37.1%) and sources. With this background, Italy will obviously increase the energetic dependence for natural gas from about 84% to 91% by 2020. But the point is this: behind the significant growth in consumption, increasing the import routes is a need, especially through the construction of regasification terminals, which make supply more flexible and less tied to the offer of individual countries. Therefore, it seems important to transform Italy from a mere importer of gas into a European distribution hub, obviously equipped with necessary infrastructure. This is why the South Stream project was so important to realize.

Another important issue, in the long period, is the key role of Turkey and its relationship with the European Union. All the investments that Gazprom has decided to make in Turkey will contribute to strengthen its role and economy. As Alexey Miller said, once Europe has decided to give up the South Stream, Turkey will become the “opening valve” for gas resources aimed at Europe. As a result of this new role of Ankara, what will be the consequence for the entire European Union? According to Miller, Ankara will be using this power as a fundamental element in its future dialogue with the European Union. We will see if Germany, one of the most influent import-partner of Gazprom, together with the other Member States, will change its ideas about the membership question.


Master’s degree in International Relations (LUISS “Guido Carli”)

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