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Russia hints its gas export strategy may get harsher

April 14, 2015, 17:39 UTC+3 Alexandrova Lyudmila
© Valery Sharifulin/TASS

MOSCOW, April 14. /TASS/. Russia has for the first time described in detail what its likely response to the European Union’s new energy concept may look like, and it did so in very clear terms. After 2019 the flow of Russian gas to Europe through Ukraine will run dry. By that time Europe must have its own new pipeline infrastructure up and running: otherwise it will be unable to receive gas from the Turkish Stream pipeline, Russian experts say. This is the gist of what the chief executive officer of Russia’s gas monopoly Gazprom, Alexey Miller, and Energy Minister Alexander Novak said at a meeting of the discussion club Valdai in Berlin on Monday. From now on Gazprom is determined to adhere to a combined Eurasian export strategy, in contrast to the previous Europe-oriented one, they said.

Infographics Russia's gas pipelines to Europe by 2018 Russia's gas pipelines to Europe by 2018

Russia's gas giant Gazprom intends to completely abandon gas supplies to Europe through Ukraine after 2018 with the help of a new pipeline to Turkey. Infographics by TASS

Russia’s gas export strategy began to find new bearings immediately after the conclusion of contracts with China, analysts recall.

Miller said that Gazprom had already begun to lay the Power of Siberia pipeline from East Siberia to China. And another gas carrier, Altai, connecting West Siberia, which is a provider of gas for the European Union, with China would bring into being a common mega market with a single reserve base. Its emergence will reduce to nothing the value of debates over pricing in Europe, because the Asian market would become the determining factor. And the European idea of a common price does not mean that it will be the lowest price of all — it will be the highest cutoff price.

In fact, Gazprom has for the first time ever mentioned the possibility of suspending gas export to Europe officially and unequivocally. If no infrastructures for the further transportation of Russian gas to Europe emerge by the moment the Turkish Stream pipeline terminating on the Turkish-Greek border goes operational, Gazprom "will take a pause."

"I would like to draw you attention to our competitive edge. We can afford to take a pause and we will take that pause, if we are forced to," Miller said. "We have warned in advance — if the transport infrastructures are not created on time, it will be no fault of ours."

In general, the Russian gas export strategy began to be re-oriented after the conclusion of the contract with China and the construction of an LNG plant in Yamal, the leading research fellow at the Russian Institute of Strategic Studies, Vladimir Blinkov, told TASS. "As for the Altai project, the reserve base is the same for Europe and for Asia, while the prices of gas in Asia are higher than in Europe. This approach looks fairly reasonable."

"That the South Stream project was disrupted is entirely Europe’s fault," Blinkov believes. "We had been prepared not only to lay a pipeline under the Black Sea, but also to build infrastructures in Europe on credit. Now we will lay the pipeline to Turkey only, and the first line of the gas carrier will be servicing Turkey alone. Whether Europe will build its own infrastructures or not is entirely its own business. There are some countries that would like to do this, such as Greece, Serbia and Bulgaria, but they lack the funds."

This situation is not very pleasant for Europe, but it is not hopeless either. "Alternative options, such as Azerbaijan’s gas in Italy or Greece or greater import of LNG, which is far more expensive, will not resolve the problem. As far as Iran as a potential source is concerned, the beginning of commercial supplies of gas may follow no earlier than several years after the sanctions have been lifted. "But even in that case Iranian gas will have to be transited through Turkey. That country would then turn into a gas super-giant. To Europe this possibility looks far from inspiring.

At the same time, Blinkov said, Russia is capable of meeting Europe’s demand for gas without Ukraine and without Turkish Stream by and large. For that it would be enough to use Nord Stream to capacity and also to step up traffic through Belarus and Poland.

Blinkov pointed to the fact that Miller and Novak made the harsh statements at an informal gathering, although some officials were present there, too.

"Whatever the case, those were unofficial negotiations and unofficial solutions." He believes that Moscow has been trying to establish a dialogue with Europe in response to its attempts at dictating.

Moscow’s new export strategy formulated in Berlin was declared in retaliation for unprecedented pressures on Russia as the exporter of gas to the European market, which has been observed for the past few years, research fellow at the World Energy Markets Studies Centre of the Energy Institute, Svetlana Melnikova, told TASS. "We are witnesses to massive, systematic pressures on Russia as the provider of gas. The thought of dependence on it makes Europeans feel panic fears. All discussion formats have been curtailed. No meaningful dialogue is on the agenda at the moment."

Russia’s transition from the European gas strategy to a combined Eurasian one looks quite reasonable, the analyst said. It became possible with the conclusion of gas contracts with China. "We have now gained opportunities for diversification and room for maneuver. We enjoy far greater freedom than a year ago, when we were tightly pegged to the European market," Melnikova said, adding that there has been no clear response from the Europeans to the latest changes to Russia’s stance yet.

 

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