EU’s Answer to Gas Crisis “Not Credible”

OK – hands up. I admit it. Yesterday I may have been too hasty to blame the European row on Russian and Putin, when there is increasing evidence that the Ukrainians are to partly to blame too.

You could argue that the other countries in Europe are also to blame. Despite these annual spats between Ukraine and Russia, which someone yesterday pointed out have been going on since the early nineties, they have failed to diversify away from Russian gas and the Ukrainian route.

There is increasiny evidence that the EU’s proposed solution to the crisis is flawed too. The main pipeline that is due to be built to avoid Gazprom’s grip is way behind schedule, with some even questioning whether the economics stack up.

The pipeline is named after a Verdi opera. Called the Nabucco, the 2,400 mile pipeline will link the gasfields of Azerbaijan to Western Europe without passing through either Russia or Ukraine.

The first stage from Austria to Turkey is meant to be completed in 2013, but construction has yet to start (it was meant to start two years ago). There are also questions whether the pipeline will ever be economically viable – its cost stands at 8 billion Euros – and whether there will ever be enough gas to fill it. Some say not enough gas will be found to fill it completely until 2020.

In a completely ironic twist, some analysts are saying the only way it will be viable is by transporting Russian gas, which kind of defeats the object of the original pipeline.

An article in today’s Guardian newspaper quotes an industry source that says: “This is an attempt at reverse engineering in pipeline development. Usually you find the resource and then you build a pipeline. With Nabucco it’s the other way round.”

Pierre Noël, an energy analyst at the European Council on Foreign Relations, tells the paper: “This is a project that does not exist except in the minds of Brussels bureaucrats. They think you can build a pipeline and then the gas will flow. It’s simply not credible.”

Adding to the woes of the Brussels beaurocrats who dream of a non-Russian and non-Ukrainian pipeline is Turkey. The Turks are apparently insisting on 15% of the gas at discounted prices, a demand that would wreck Nabucco financially. Some reports say they also just want to use it for themselves and not let it transit their country at all.

And even if the political, economic and environmental problems are sorted out, it will still be providing less than 10 per cent of Europe’s needs. Does it make sense to you?