Europe: Energy Security and Grudges

Europe: Energy Security and Grudges

In many respects 2015 has gone down in history as a watershed year. The domination of the United States and its allies in world affairs was ceding place to the new system of multipolar world with Russia being an independent center of power. Russian Federation has re-established its presence in the strategically important areas and turned into a pole of attraction for other countries opposing West’s hegemony.

Energy sector reflects well the ongoing global changes. That’s where one can clearly see how deeply have exacerbated the contradictions between the policies conducted by pro-US and pro-EU political elites and the interests of common people in Europe. The irresponsible policy of Turkey, which has actually stymied the plans to build the Turkish Strait gas pipeline, makes the countries of Central and South-Eastern Europe consider the possibility of taking an independent stand on the issue. They begin to eye the Nord Stream pipeline, a very promising project. The plans to build the second line are already underway.

Central Europe was evidently jealous as Gazprom, BASF, E.ON, ENGIE, OMV and Shell signed the Shareholders Agreement on Nord Stream 2 project last september.

In the letters sent to the European Council and its President Donald Tusk, they accused Russia and Germany of treachery and colluding behind the backs of Poland, the Czech Republic and Slovakia. Unlike the German government, the leaders of Central European states fail to see the main thing.

For instance, Sigmar Gabriel, the Minister for Economic Affairs and Energy and Vice-Chancellor of Germany, pointed out that the Nord Stream is the project of great significance for securing reliable gas supplies to European consumers at the time European gas production is going down. Even those who openly demonstrated their opposition to the idea of energy cooperation with Moscow have started to gradually realize the importance of the project for national and all-European energy security.

Gazprom and Lithuanian company Amber Grid have recently signed a new long-term Agreement on Russian gas transit via Lithuania to the Kaliningrad Region. According to the ten-year term deal, up to 2.5 billion cubic meters of gas will be supplied through the territory of the country annually. The Agreement will become effective on January 1, 2016. Amber Grid has been supplying natural gas to Lithuania. In June 2014, Gazprom sold stakes in the Lithuanian company Amber Grid and Lietuvos Dujos, an importer of Russian gas and the largest gas distribution company in Lithuania, for 121 million euros. Prior to that, in June 2013, the shareholders of Lietuvos Dujos, including those of the Gazprom, decided to establish a separate legal entity to deal with gas supplies.

Obvious economic reasons define the Lithuanian policy. The Klaipeda LNG Terminal has failed to become a gateway and a hub for the Baltic gas market.

Latvia’s state gas company Latvijas Gaze is not interested in liquefied natural gas from neighboring Lithuania’s LNG terminal in the seaport of Klaipeda. «Our demand for gas in Latvia is completely satisfied by the long-term contract with Russian Gazprom. The market because of the current (gas) surplus so far is not ready to have an extra quantity of gas added to it», said Mario Nullmeier, deputy chairman of Latvijas Gaze's board.

The Lithuanian LNG terminal has an annual capacity of 4 billion cubic. It is much more than Lithuania needs. Gasprom is the only source of gas to satisfy the Lithuania’s own consumer demand and the only supplier to make its transition plans come true.

Another symbolic event took place in November 2015 – a ceremony dedicated to the 40th anniversary of signing the first contract for Russian gas supply to France. On this occasion, Gérard Mestrallet, Chairman and Chief Executive Officer of ENGIE said«We are happy to celebrate with Gazprom the anniversary of the long-term solid partnership uniting our companies. It has considerably contributed to developing the European gas industry. ENGIE's participation in the Nord Stream 2 project bespeaks our faith in continuing this cooperation».

Alexey Miller, Chairman of the Gazprom Management Committee, remembered another date, «Today we also celebrate another jubilee – five years ago ENGIE became a partner in Nord Stream. Today the success of the project is known to everyone, so in September we and our European partners, including of course ENGIE, made a decision to construct Nord Stream 2. The project will bring to the European market additional 55 billion cubic meters of Russian gas», he said.

During the ceremony Alexey Miller and Gerard Mestrallet signed an Addendum to the Sales and Purchase Agreement for shares of the Nord Stream 2 joint project company (JPC), which executes the Nord Stream 2 project. The document provides for increasing ENGIE’s stake to 10 per cent. Thus, once the deals for the purchase of JPC shares by foreign shareholders are closed, the shareholding structure will be as follows: Gazprom – 50 per cent, BASF, E.ON, ENGIE, OMV, Shell – 10 per cent each.

These are the real energy interests of important European actors. At the time when the politicians of Central and South-Eastern Europe hold grudges and submit complaints to the European Commission, more far-sighted businessmen and politicians make choices to meet their far-reaching ends.