New Russian gas pipeline deal cuts through EU unity

On 23 June, Italian gas giant Eni and Russia’s Gazprom agreed to cooperate on a new pipeline that will increase Russian natural gas flows to EU markets. The deal is widely seen as increasing the EU’s dependance on Russian gas, and appears to run counter to European efforts to “speak with one voice” in external energy relations. 

  • South Stream

If approved by regulators on both sides, the new pipeline, known as “South Stream”, will pass through the Black Sea and into Bulgaria, bringing 30 million cubic meters of gas annually to EU markets. 

  • Good for Europe?

Italy’s Minister of Industry Pierluigi Bersani considers South Stream “a deal between Russia and Europe” that will increase Europe’s energy security.

But others are concerned that Russia may ultimately abuse the EU’s dependance on its natural gas for political purposes, particularly after Russia cut supplies to the Ukraine in January 2006 (EURACTIV 11/01/06). 

  • Nabucco project and the Black Sea Strategy

In an effort to diversify its supply, the EU has been backing several new pipelines, such as the Caspian Nabucco project (EURACTIV 27/06/07). The EU has also launched a “Black Sea Synergy” strategy designed in part to increase energy cooperation countries in the region (EURACTIV 11/04/07).

But the South Stream deal may conflict with both of these efforts, as Gazprom investments for Nabucco are now highly unlikely and South Stream, which runs through the Black Sea, was agreed outside the framework the EU’s strategy.

  • Eni beats the competition

While the advantages for Europe as a whole remain uncertain, the deal is certainly a victory for the Italian gas giant.

Eni is Gazprom’s largest customer and Europe’s largest gas company in terms of sales. Unlike BP and Shell, which have been forced to sell key Russian assets to Gazprom, as part of the South Stream deal Eni will likely allowed to keep a number of assets recently acquired in Russia.

Eni has also offered Gazprom guaranteed supply contracts to 2035, as well as extensive access to the Italian market.

The European Commission reacted with pragmatism to the announcement, with one spokesperson in Brussels saying that, due to rapidly increasing demand for gas in Europe, "every new infrastructure that can help meet this rising demand is a positive thing".

Russia currently provides over 40% of the EU's natural gas needs, but political relations between the EU and Russia have been plagued by difficulties (see EURACTIV 15/05/07 and 22/05/07) and the increasingly monopolistic control of state-controlled Gazprom over Russian natural gas resources is a source of concern for Europe.

The EU has attempted to present a united front to Russia as part of the EU-Russia Energy Dialogue, launched in 2000, but bilateral deals between Russia and EU member states continue to prevail over a specific EU approach (see our LinksDossier).

  • Beginning 2008: Projected start of construction of South Stream.
  • 2011: Projected completion of South Stream. 

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