The Pipes are Calling

11 May 2011, 10:04

Uncertainty in the Middle East, as well as unclear  prospect of oil supplies, coupled with an upsurge of anti-nuclear sentiments after the Fukusima accident have once again forced many in Europe to look at energy supplies from the security perspective rather than purely from the viewpoint of economic-technical questions. The Russian Federation is using its influence on European elites and a systematic informational campaign to involve members of the EU in the construction of the South Stream gas pipeline bypassing both Ukraine and countries in Central Europe.

Who will take charge of the Southern Corridor?

Russiaexpects the South Stream to not only free its gas transit from the influence of certain countries all of whom have their own irritations with the Kremlin. It hurries to divert the threat to itself  of a “flank attack.” The states lying in the Caspian Region and Central Asia, most notably Azerbaijan and Turkmenistan, are in the throes of successful negotiationss with the EU about constructing the Nabucco pipeline that would ensure direct delivery of gas to Europe..

The European Commission places its stakes on the Southern Corridor which couldopen access to abundant Caspian gas deposits for Europe, thus decreasing the role of Russia as its energy supplier.

On 25 January  Günther Oettinger, the European Commissioner for Energy, announced in Brussels that the EU was hoping to receive blue fuel through Nabucco in the next two to three years. According to Mr. Oettinger, Caspian Region countries have supported the project and have provided specific plans for gas supplies. The deals were struck during the visits of EU representatives to Azerbaijan and Turkmenistan. Azerbaijan officials claimed a readiness  to pump into the pipeline system up to 20bn cu m of gas annually over the next five to eight years. Turkmenistan is willing to supply at least 10bn cu m annually.

On 16 March  after another round of inconclusive negotiations  with Turkey about the construction of a  Russian pipeline through its territory, Ihor Sechin, Russia’s Deputy Prime Minister for Energy, claimed that Russia could drop the idea of the South Stream pipeline opting instead for the construction of a liquid gas plant in the Black Sea.

Yet, it looks like the announcement was used as a guise for preparations for a diplomatic blitzkrieg of sorts. On 22  March  Russian Prime Minister Vladimir Putin met with the Slovenian leadership and agreed a deal toestablish a joint venture to build the Slovenian sectionof the South Stream pipeline. Plans were announced for Mr. Putin to visit Serbia to undertake analogous negotiations. On that same day, it was revealed that one of the subsidiaries of  the German BASF  planned to acquire a 15% stake in theSouth Stream pipeline, taking them over from the Italian ENI company, Gazprom’s 50:50 partner from the very beginning of the project. The next day, Turkey’s Minister for Energy and Natural Resources Taner Yildiz announced that Turkey would give permission to Russia to lay the South Stream pipeline through its territory if Russia “complies with all set terms and procedures.”

In reality, all of the above mentioned achievements are more in the realm of the  psychological. They do not solve the issue of the financing of the South Stream pipeline. Most European countries are rightly cynical about it: if Russia needs a new pipeline, it’s up to her to find the financing. In addition, Bulgaria and Romania have already declared that all gas pipelines on their territories would meet the criteria laid out in the EU’s 3rd Energy Package. Among other things, this means that Gazprom will not be in a position to possess or unilaterally control any section of pipeline  in these two countries. Russians are making efforts to  hold negotiations with  the EU with the intention of seeking to review the 3d Energy Package or agree onexceptions to it, but these attempts have proven futile thus far.

Therefore, following its tactical accomplishments, Russia is seeking a strategic breakthrough by convincing the EU to believe that Europe needs the South Stream pipeline and to thereby grant it priority status. The outcome will largely depend on how Ukraine behaves in of the field of energy security.

Kyiv in the gas race

Ukrainewill be one of the countries most affected by the outcome of the gas pipeline race. Firstly, gas supplied to the European market from a new region other than Russia could stabilise or even push the gas price down in the future. Obviously, this provides additional arguments in the blue fuel price negotiations, and the question of a new gas deal with Russia will arise very soon if it is postponed until the last moment in 2019 when the current contract expires.

Secondly, as Nabucco will transport not Russian gas, the Russian Federation will need facilities for the export of its own fuel meaning that it will inevitably utilize the Ukrainian gas transportation system. Even ifthe amount of gas transported were to decline as Russia will lose some of its European gas market and will likely switch some of its exports to the North Stream pipeline; nevertheless, this will not decline to nothing as  the Russian side is threatening to undertake in the event of  the South Stream pipeline.

Thirdly, European partners admit that the EU could cooperate with Ukraine on the Nabucco project on a broad range of issues. These include the possible construction of additional branches through the gas transportation systems of Bulgaria and Romania  which would elevate Ukraine as yet another market for Asian gas, to the purchase of Ukrainian pipes, and cooperation in their laying.

Ukrainian government deserves credit. Sensing a threat to its economic interests from the South Stream pipeline and seeing the benefits of Nabucco, Ukrainian politicians are making visible diplomatic efforts to convince everybody that the Russian project has no prospects. In addition, the idea of a joint venture between and Naftogaz is not moving forward. It is the case that Russian interlocutors have some elaborate methods to discredit Ukrainian declarations.

Music to Order

Analysts have estimated that Gazprom alone spends over US $140mn every year on its foreign advertising and media (in reality propaganda) campaign. This estimate does not include the work of the Foreign Affairs Ministry, the use of political and economic leverage to influence key EU members; factors that do not include banal bribery of officials in EU member states.

This financial outlay is spent not only to write articles, but to launch information campaigns involving various mass media outlets Not only does this include payment of fees  to Western experts it includes the buying up or establishment of institutes which carry out, publish and promote  “research” focused on the inevitable use of Russian energy supplies and the doomed failure of any attempts to disrupt this.

Despite their obviously biased nature, such publications and speeches are effective as they are always present in the information sphere, give simple answers to difficult questions, for instance “Ukraine blocking gas intended for Europe or stealing Russian gas from Europe” are based on traditional stereotypes and keep feeding them, for example, “everybody knows that Ukraine is sinking in stagnation and corruption and therefore its   gas transportation system cannot be in a normal state.” Especially because there is no one to refute such claims: Ukraine is not offering any adequate alternative explanations, let alone offering counter positions in the media.

Russian propaganda also influences Ukraine.  And this is not only in a direct way by the fact it is spread through the Russian media which transmits these viewpoints but also indirectly upon Ukrainian opinion leaders. One small detail which should be borne in mind – the Russian media, especially on the internet, actively translate Western publications. They are selected carefully to back up the general Kremlin line; they are often the same publications inserted into the Western media by  Russian media campaigns. Materials that do not agree with this line remain ignored. Ukrainian journalists and analysts often use these translations as the easiest way to access Western publications instead of working with the originals. This is how myths launched in Russia are disseminated through Ukrainian media publications even if  journalists, editors or owners genuinely support Ukraine’s independence and the protection of its economic interests.

 Ukrainian Arguments

Creating positive views in European societies permits Russia to use conventional means of foreign policy, such as shuttle diplomacy, more effectively. These efforts towards pre-preparing an audience lead to them swallowing such information. At the same time, replies to diplomatic maneuvers and the creation of “parallel realities” by the media have always been a direct consequence of such actions. In this context, Ukraine could influence the outcome of the pipeline race.

In March 2009, Ukraine, the EU and leading international financial institutions signed the Brussels Declaration. If Ukraine implements a series of energy reforms, the EU would assist it upgrade its gas transit system with assistance provided by international financial organisations. It is true, that after Russia’s visceral protests Angela Merkel called on the parties to take into account Russia’s interests which made the project look less attractive to some EU member states. Moreover, neither the Tymoshenko nor the Azarov Governments have managed to take any specific steps to reform the energy sector so far.

But, not all possibilities are lost. The EU is interested in stable gas supplies. Its participation in the modernization of the Ukrainian gas transportation system coupled with more transparency in Ukraine’s energy sector is a weighty argument in favour of the continued transit of Russian gas through Ukraine as well as opening up options for importing energy supplies from other regions. In addition to these obvious strategic benefits, Kyiv will gain from the receipt of billions of euro’s from the EU and international financial institutions that could go to Ukraine, rather than to the South Stream pipeline.

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