One of the main issues on the agenda during Russian Foreign Affairs Minister Sergey Lavrov’s visit to Greece on 2-3 November is to discuss the prospects for energy cooperation between Moscow and Athens within the broader issue of Europe’s energy security.
Greece is a key consumer of Russian gas, and gas supplies to the country are increasing. Between January and October 2016 alone, Gazprom’s exports to Greece increased by 47.3 percent in annual terms. According to this indicator, the Greek energy market has become one of the fastest growing for Russia in the European Union, along with those of Britain, the Netherlands, Austria and Denmark. More generally, Gazprom’s Russian gas supplies to non-CIS countries during the same period increased by 10 percent in annual terms, which further highlights the trend.
In today’s environment, however, bilateral energy cooperation can only be successful if it is based on the needs and interests of the entire surrounding region, including the Balkans and the whole of Southeast Europe. And Greece could play an important role here in ensuring reliable and large-scale deliveries of Russian gas to the countries of the region. There are now solid grounds for discussing the possibility of creating a ‘gas alliance’ involving Russia, Turkey, Greece and Italy, and which could well include Serbia and other Balkan states in the future.
There are several key factors in favour of creating such an alliance.
Firstly, there is the growing volume of Russian gas being delivered to Europe amid declining domestic production in the European Union. During October, Russian gas supplies to non-CIS countries increased by 16 percent to 16.9 billion cubic metres. This is almost at the level of Gazprom’s output in December 2007, when the company set a new record for monthly exports (16.98 billion cubic metres). According to Alexander Medvedev, Deputy Chairman of Gazprom’s Management Committee, the company is planning «to supply a record amount of natural gas to Europe» in 2016. Medvedev believes that «the only question is whether exports will exceed 170 billion cubic metres».
These processes are in keeping with the trend of declining domestic production in EU member countries, a trend that is particularly noticeable in the Netherlands, where gas production fell by almost 3 billion cubic metres in the first half of 2016 alone.
Secondly, the Russian company’s pricing policy benefits European consumers. At present, the average price of gas under Gazprom’s long-term contracts is $170 per thousand cubic metres, while experts have calculated that the average price for 2016 may fall to $165. The price of gas on spot exchanges, meanwhile, is no less than $200 per thousand cubic metres.
Thirdly, there are clear changes in the structure of Europe’s energy consumption. We are currently witnessing a gradual return of hydrocarbons, especially gas, as a leading source of energy production compared with coal. In April 2016, for example, the share of gas in power generated by fossil fuels in the UK exceeded 80 percent, setting a record high.
And fourthly, there is a demand for Russian gas in the Balkan states due to the possibility of creating a supply chain that will benefit the region by integrating the Turkish Stream and ITGI-Poseidon systems. It will allow for the creation of a single infrastructure in the Balkan-Mediterranean region as close to the Balkan countries as possible and with the possibility of joining the key Central European gas hub in Baumgarten, Austria.
According to Alexander Medvedev, «the Turkish authorities have confirmed their readiness to contribute, if necessary, to the construction of the transit string in the Turkish territory. The Greek side has expressed full support for the project, saying it is practicable and Russian gas supplies are needed there».
Medvedev continues: «With TurkStream progressing further, we are going to be even more proactive in our cooperation with our Greek partners, including the project for transit across Greece to Italy. This is why, in line with the memorandum signed by Gazprom, DEPA, and Edison, we have a permanent working group that discusses concrete steps in our future joint efforts».
What’s more, unlike the competing Trans Adriatic Pipeline (TAP) project being supported by the European Union (which will not be put into operation until at least 2020), the Russian gas system is fully loaded with raw materials sufficient to meet the needs of European consumers. As Vasileios Karakasis, an analyst at the University of Leiden in the Netherlands, acknowledged in an interview with The Washington Times: «The estimated amount of gas transferred to Europe from Azerbaijan is not even comparable to the respective amount coming from Russia».
Brussels is far from happy at the prospect and one can assume that it will try to make the creation of such a system as difficult as possible. Even references to the Syrian crisis could prove useful here (should Brussels exhaust its references to Ukraine). Already, there are people in Europe calling for work on the Nord Stream 2 gas pipeline project to be suspended in response to Russia’s actions in Syria.
As a consequence, Russia has already made it clear through its foreign affairs minister, Sergey Lavrov, that it will only consider extending Turkish Stream into the EU «if we have explicit official guarantees in writing to allow this project to be built» from the European Union.
So Greece, Serbia and other Balkan countries know exactly to whom they should address their claims regarding their energy security – those political forces in the European Commission who are more or less acting against the interests of Europeans.