Will Ukraine crisis derail Russia's southern gas pipeline?
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Since: Nov 13
#1 Apr 10, 2014
Russia's plans to build a natural gas pipeline that bypasses Ukraine to the south is in doubt as the standoff between Russia and Ukraine continues to escalate.
When completed, the South Stream pipeline will run from Russia, underneath the Black Sea to Bulgaria, and on to Western Europe. It will carry Russian natural gas to Europe while bypassing Russias neighbor Ukraine. Russia clearly finds this pipeline to be strategically important the Kremlin would be able to operate with greater freedom when using natural gas to bully Ukraine, and it wouldnt have to worry about angering its large customer base in Western Europe. However, the project is very much in doubt as the standoff between Russia and Ukraine has escalated once again.
The EU held talks in Brussels to discuss the potential disruption of Russian gas moving through Ukraine. While Russia cutting off gas flows would do a lot of damage to Russia itself, that prospect can no longer be considered an unlikelihood. Gazprom has already jacked up prices on Ukraine by 81%, which the government in Kiev has said it will not tolerate. Ukraines interim Prime Minister Arseniy Yatsenyuk said on April 5 that Ukraine needs to begin to prepare for natural gas supply disruptions.Russia was unable to seize Ukraine by means of military aggression. Now they are implementing plans to seize Ukraine through economic aggression, he said. To make matters worse, Gazproms chief justified the $11.4 billion debt owed by Ukraine by arguing that Russia no longer needs to pay Ukraine to use the Sevastopol port for its Navy because it is now on Russian territory. Never mind the fact that Russia doesnt feel it needs to reimburse Ukraine for expropriating its territory and assets.
All this is to say that the row over natural gas specifically seems to be growing. Should the conflict escalate further if, say, Russia decides to send in the thousands of troops it has amassed along the border with Ukraine, or it does in fact cut off gas to Ukraine Russias relationship with Europe would hit a fresh low. That could put the entire $45 billion South Stream pipeline into doubt.
The pipeline is in the early phases of construction as Gazprom is laying down pipe in Russia, Bulgaria, and Serbia, but the EU Energy Commissioner has already frozen talks in retaliation for the annexation of Crimea. Its future is now up in the air. According to the Wall Street Journal, the chief executive of Eni, which holds a 20% stake in South Stream, told an Italian parliamentary committee in March that the fate of South Stream was somewhat murky.
Europe is looking for alternative supplies of energy to the pipelines that run through Ukraine. They have lately been lobbying heavily in Washington for swifter approval of LNG export terminals, but it may be several years before LNG begins moving from U.S. ports in substantial volumes. The EU is also hoping to complete the Trans-Adriatic pipeline, which could be seen as a competitor pipeline to South Stream, but it will not come online for another five years. Gazprom executives believe they can bring South Stream online by the end of 2015. By freezing talks on South Stream, the EU is trying to pressure Russia to back down on Ukraine, but it is unclear how far it is willing to go. In the short and medium-term, the EU will still be highly dependent on Russia for energy. Yet, if Russia invades Ukraines eastern territories, the EU may make a bolder effort to kill the South Stream project. What happens next is anyones guess.
Since: May 14
#2 May 5, 2014
Greetings from Spain! Being a part of joint European family here we raise our hands up for russian gas and further cooperation between the EU and Russia but expelling Ukraine shortly. Hope a day is to come and our gas pipelines will be connected to German ones which receive Russian gas, as we want to receive gas also from Russia what is for sure more reliable and cheaper than the one we receive now from Algeria..., a nation under continuous civil war between francophones and moslems (unfortunately Ukraine is stepping evidently the same rotten path). The initiative to bypass Kiev here cannot but sounds promising enough. It is a golden rule in any sphere of making business: the less agents there are between a consumer and his supplier the clearer, more confident and far going partnership they both do have.
The other day dying soviet old gas-transport systems... plus the ongoing deep political and economical crisis... plus the civil war from day to day being followed with those openly terroristic promises to blow up gas pipelines...- sorry, but this Ukraine, I mean in its current shape, is not a reliable partner at all!
Kiev should be bypassed.
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