Europe Has No Substitute for Russian Energy Resources
Pyotr ISKENDEROV | 12.07.2014 | OPINION

Europe Has No Substitute for Russian Energy Resources

In many ways, Serbian Prime Minister Aleksander Vucic’s two-day visit to Moscow this week was a breakthrough. To begin with, both sides finally managed to come to an agreement on all issues concerning Serbia’s involvement in the South Stream pipeline project. Serbia’s Prime Minister also emphasised an interest in developing a partnership with Russia, which he sees as a priority of his country’s foreign policy…

The international context in which the high-level talks between Russia and Serbia took place, and in which Serbia’s Prime Minister was received not just by his Russian counterpart Dmitry Medvedev, but also Russian President Vladimir Putin, were hardly auspicious. In recent weeks, the West has noticeably increased pressure on Belgrade to side with the general chorus of anti-Russian voices on the issue of sanctions. And in Serbia itself, the voices of those calling for Belgrade’s historic partnership with Moscow to be lead to the altar of EU integration can be heard. In a recent interview with the AFP news agency, local political analyst Jelena Milic even accused Russia of exerting «growing pressure» on Serbs «to block Serbia’s EU integration» [1]. During a recent visit to Germany, meanwhile, Prime Minister Vucic himself spoke so strongly in favour of a partnership with Berlin that many spoke of the country’s irreversible geopolitical u-turn towards the West. In particular, the Serbian Prime Minister remarked that Serbia is too small to be Berlin’s partner, but that it «would like to be Germany’s ally» and for that, «Serbia must change». 

Recently, however, Serbia has shown a willingness to bridge relations between Moscow and Brussels and, in this regard, the fact that Vucic has said he is «very pleased» with his visit to Russia does not seem to be an exaggeration. 

Undoubtedly, the most concrete result of Vucic’s talks in Moscow was the reconciliation of all issues regarding Serbia’s involvement in the construction of the South Stream pipeline project. As a result, the companies South Stream Serbia AG and Russia’s Tsentrgaz had already signed a contract in Belgrade by the evening of 8 July for the construction of the main section of the pipeline in Serbia. The value of the contract is nearly 2.1 billion euro. Tsentrgaz, which is a member of the Gazprom group, had previously won the corresponding tender. As Aleksander Vucic explained in Moscow, 50 percent of the construction work and 40 percent of the other work involved in realising the South Stream project in Serbia will be carried out by Serbian companies, allowing them to earn nearly 350 million euro. Gazprom confirmed that, «The provisions of the contract stipulate that certain types of work will be subcontracted out to Serbian companies». So in relations between Russia and Serbia, political and economic interests are closely intertwined.

It is no secret that of late, the European Commission has literally been twisting the arms of those involved in the South Stream pipeline project to force them to abandon it. Various official reasons are being given, from the project’s discrepancy with the requirements of the EU’s Third Energy Package, which prohibits the extraction and transportation of gas being controlled by a single company, to the allegedly non-transparent conditions of the tenders. However, this position is not only weak from a legal point of view (intergovernmental agreements on the South Stream project were signed before the Third Energy Package came into effect), but is also untenable economically.

Europe simply has no substitute for Russian energy resources. In an interview with Reuters, Christophe de Margerie, the CEO of the oil and gas company Total, said that any reduction in gas supplies from Russia would result in the fuel deficit being covered by the purchase of fuel from other suppliers at a much higher price, which end consumers would not like. According to Margerie, this is precisely why EU member countries should focus on making Russian gas supplies safer, including options to bypass Ukraine. «Can we live without Russian gas in Europe? The answer is no. Are there any reasons to live without it? I think – and I’m not defending the interests of Total in Russia – it is a no. We will have a problem this winter if there is a cut in supplies and if it is cold – that is obvious», stressed the head of Total. 

There is good reason why a number of EU countries are calling for Brussels to find a compromise solution to the Russian pipeline issue. In particular, the Italian ambassador to Russia, Cesare Maria Ragaglini, confirmed in an interview with the Interfax news agency that his country «broadly supports» the South Stream project «both because of the project’s importance in diversifying gas supply routes, and because of Italy’s industrial and technological involvement in the project. One needs to remember that gas is extremely important not just for economic development, but also for building a stable and environmentally-friendly economy. In this regard, the European Union and Italy are trying to fulfil their obligations. We would like the dialogue with Russia to continue on the part of the European Commission and those countries that are directly interested in the construction of the gas pipeline». Italy became the current chair of the European Union on 1 July, and this gives particular weight to the country’s position. According to Ambassador Ragaglini, «the normalisation of relations with Moscow is a priority of Italy’s EU presidency». 

It should also be noted that Russian-Serbian cooperation does not just have a European dimension in the energy sphere. The Russian Minister of Emergency Situations, Vladimir Puchkov, has called for the European Union to set up a global emergency-response system based on Russian experience, as well as a broader use of the potential of the Russian-Serbian humanitarian centre in the Serbian city of Nis.

Naturally, those involved in the talks between Serbia and Russia could not avoid the issue of Kosovo, which is painful for Belgrade. Indeed, many in Serbia doubt the consistency of Russia’s position following the reunification of Crimea with Russia. Russia’s attitude regarding the non-recognition of Kosovo’s self-proclaimed independence remains unchanged, however. «I am very grateful for the assistance we are receiving from you on the issue of Kosovo and Metohija, and I am also very pleased that you wish to continue developing economic ties with us», stressed Vucic during a conversation with President Putin [8]. And these words may serve as the most accurate summation of the Serbian Prime Minister’s visit.

[1] AFP 200717 GMT JUN 14

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