Energy Wars and European Interests (II)

Energy Wars and European Interests (II)

See Part I

The worsening situation on the fronts of the energy wars is forcing those directly involved and all other interested parties to revise their previous approaches. Signs that Bulgaria intends to resume construction of the South Stream gas pipeline project are a good example. In a New Year interview, Bulgarian Prime Minister Boyko Borissov admitted that the South Stream gas pipeline project was in the interests of his country, but had been halted as a result of interference by the US and the European Union, even though both the US and Europe knew that the project would be beneficial to Bulgaria, according to Borissov.

A few days later, sources close to the Bulgarian prime minister indicated that Russia and Bulgaria were planning to resume work on the South Stream project within the next few weeks. As reported by the Standart newspaper, the gas pipeline construction project will probably be one of the items on the agenda at the upcoming meeting of the Intergovernmental Commission on Trade-Economic and Scientific-Technical Cooperation to take place in Sofia at the end of January, the first such meeting in five years.

«There are two main reasons why Moscow will resume the project put on hold by the Oresharski cabinet in the summer of 2014 (Plamen Oresharski, the former prime minister of Bulgaria who announced that the project was to be halted in 2014 following a meeting with a group of US senators – P.I.). One of these is the sharp deterioration in relations between Russia and Turkey. The second reason is the recession in the Chinese economy, which has stalled the Power of Siberia gas pipeline intended to deliver natural gas to China», writes the Standart. According to the newspaper, «the revival of the South Stream project will meet the requirements of Brussels and fit in with the idea of building a Balkan gas distribution centre supported by the EU, which cannot be implemented without Russian gas».

Moscow is not in a hurry to commit to any promises in this regard, however, which is perfectly understandable given the role played by the Bulgarian authorities in disrupting the project. The fact that the whole business regarding the suspension of construction work on the South Stream project showed Sofia to be incapable of making responsible economic decisions autonomously and independently and therefore incapable of being a reliable partner is still fresh in everyone’s minds. There is no convincing evidence that anything has changed since then.

Dmitry Peskov, the Russian president’s press spokesman, has denied information that talks have resumed with Sofia on the South Stream project, stating that: «At present, such a project does not exist. It has been terminated. Consequently, there is no subject for negotiations». Information regarding plans to resume the project has also been denied by the Russian Energy Ministry, which emphasised that the status of the South Stream project remains unchanged and the project has been suspended. A spokesperson for the Bulgarian Council of Ministers was then forced to admit that the government had no information regarding the resumption of talks on the South Stream project.

Yet the signals being given by Sofia are very telling and are linked to the general crisis developing in the world’s energy markets, as well as the deteriorating economic situation in countries previously regarded as possible alternative energy suppliers to replace Russia. First and foremost, I am referring to the US.

Nearly a third of US oil companies could be facing bankruptcy by mid-2017 if oil prices remain low, while a few companies will be able to survive if the price of oil rebounds to at least $50 per barrel. According to experts, in 2016 a number of US oil and gas companies can expect the biggest budget cuts since the 1980s.

According to the Nigerian Oil Minister and the current President of the OPEC Conference, Emmanuel Ibe Kachikwu, OPEC may hold an emergency meeting in early March. Kachikwu says that several OPEC member countries have called on the leaders of the oil cartel to hold such a meeting. One of the subjects under discussion may be a change in the organisation’s strategy in response to the sharp fall in world oil prices. And most importantly, during informal talks as part of the upcoming emergency meeting, OPEC members are planning to discuss the situation on the market with other oil-producing countries that are not members of the oil cartel (including Russia) in order to reach an agreement on reducing oil production, which will stop prices falling further. 

The situation is complicated. Experts have different views regarding which way and by how much oil prices will bounce in the near future, with estimates ranging from $10 to $100 and even $250 per barrel. This uncertainty in the predictions alone suggests that a jump in oil prices will not be determined by the market or by the dynamics of supply and demand, but by non-economic factors. Professor Katasonov refers to the first of these factors as price manipulation, which is carried out by major US banks along with some others. 

«We must be prepared for any developments on the commodity and stock markets», Russian President Vladimir Putin said during a meeting with government members on 13 November. «We must keep a very close eye on them and have development scenarios for the Russian economy to cover every eventuality».