Putin turns the screw on Austria

Russian gas monopoly Gazprom’s statement recently that it expects Austria to sign onto the South Stream pipeline should not come as a surprise. “Ever since the idea of the South Stream project was conceived, Gazprom has viewed Austria as one of its high priority potential partners,” Tatiana Mitrova, head of Moscow’s Centre for International Energy Markets Studies, told New Europe on 20 January, reminding that Austria and Russia have a long history of relations in the gas sphere. Also, the Baumgarten hub and underground gas storage facilities are located there. Baumgarten was the originally designated terminal of the Nabucco pipeline project.

Austrian officials visited Moscow to begin negotiations in November, when Prime Minister Vladimir Putin pressured Vienna to join South Stream. Russia operates from a position of strength. Since Russia has now secured agreements on the route of the South Stream pipeline with all other countries, it is entirely possible to enter the Italian market bypassing Austria, Mitrova said. However, the situation will be different if the second branch of the South Stream pipeline to Austria is constructed. Even so, there are options – it could become a full-scale trunk line, or a small scale offshoot for Austria, she added.

A source at the Austrian Economy Ministry confirmed to New Europe that negotiations between the Russian and Austrian governments regarding an intergovernmental agreement on South Stream are ongoing. “We are very much in favor, of course, of Nabucco but we want to also conclude the contract with the Russians because it is another source of supply,” the source said on 21 January, adding that there is no preference between the two projects.

However, Michaela Huber a spokeswoman for Austria’s OMV, a shareholder in the Nabucco project, told New Europe on 20 January that “Nabucco is clear Number One with top priority.” But she pointed out that Europe needs more gas, therefore South Stream is not a competitor. “We are in good business relations with Gazprom and in this context we’re of course talking also about South Stream, but it’s clear: Nabucco has top priority,” she said.

Mitrova said that constant delays and a lack of clarity in respect of the Nabucco pipeline have not added weight to Austria’s negotiation position. “The Nabucco project appears to be more risky, due to uncertainty in respect of its resource base, long known to be an issue,” she said.

Both Nabucco and South Stream are political projects.

But Konstantin Simonov, director of the independent National Energy Security Fund in Moscow, told New Europe on 20 January that it is a European and Russian mistake to perceive South Stream and Nabucco as competitive projects. “Europe is trying to struggle with South Stream but, of course, Russia is also trying to struggle with Nabucco and we see the policy of Putin, the policy of Gazprom, they really want to stop this project,” Simonov said, adding that Gazprom wants to buy all Azeri and Turkmen gas even at high prices to stop Nabucco.

According to Simonov, the best solution would be the integration of South Stream and Nabucco into one project. “Russia can build the pipe to Turkey and we can integrate it to Nabucco,” he said. “Maybe it’s a crazy idea but the problem of Europe is not the diversification of gas supply; the problem of Europe is where to find the gas.” And Russia has gas – plenty of it.

By Kostis Geropoulos

Source: New Europe, 24 January 2010