US Senator: Break Russia's Energy Monopoly On Europe

[Exarch]

Russia's gas grip worries US senator
By Margarita Assenova

United States Senator Richard Lugar has urged the Obama administration to break Russia's energy monopoly in Europe and called on congress to lift limitations on deliveries of liquefied natural gas (LNG) deliveries to North Atlantic Treaty Organization (NATO) allies in Europe.

His critical report, "Energy and Security from the Caspian to Europe", and the proposed LNG for NATO Act came days after Russian President Vladimir Putin launched the construction of the South Stream natural gas pipeline in the Russian Black Sea town of Anapa.

Senator Lugar urged the US administration to do more for European energy security by supporting the Southern Corridor from Central Asia and the Caucasus to Europe. He advised the State Department to restore the high-level position of US Envoy for Eurasian Energy Security and asked congress to place NATO allies on an equal footing with free-trade partners under US law when providing for automatic licenses for US LNG exports.

Most Central and Eastern European countries are currently dependent on Russian gas supplies from 60% to100% of their needs. The report sends a strong message to US officials regarding South Stream that energy security in Europe is vital for America's national security interests.

The South Stream launching ceremony in Anapa, attended by Putin, marked the end of the negotiations and the beginning of actual construction work. There is no doubt now that Putin's political project will be built, but serious questions remain regarding the quantities of Russian gas that would be available for transfer to Europe, Gazprom's natural gas pricing policies, and South Stream's impact on EU energy regulations.

A day before the ceremony in Anapa, Maria van der Hoeven, executive director of the International Energy Agency, also raised questions about the cost-effectiveness of the project. She told reporters that making a multi-billion dollar investment into the pipeline "could be seen as a brave choice", given Europe's sliding gas consumption. European gas demand has declined by 11% in 2011 and is expected to decrease further this year.

In the fall of 2012, Gazprom engaged in intensive rounds of negotiations in Southeastern Europe to put in place the pipeline agreements with all participating states. Gazprom hurried to pre-empt possible investment decisions on the Nabucco gas pipeline that would have made South Stream's future uncertain.

The EU- and US-backed Nabucco pipeline would pump gas from Central Asia and the Caucasus to Europe via Turkey and southern Europe, reducing Europe's reliance on Russian gas. The original idea has undergone modifications since Azerbaijan and Turkey agreed on June 2012 to build the Trans-Anatolian Pipeline (TANAP) from the Caucasus through Turkey to the Greek border.

The pipeline will then connect with Nabucco-West (a shorter version of the original project) through Bulgaria, Romania, and Hungary to Austria. Senator Lugar's report is focused on this version of Nabucco, which would effectively diversify gas sources in Europe. The South Stream project does not diversify sources - they remain entirely Russian - it only changes routes by bypassing Ukraine and as a result enables the Kremlin to place greater political pressure on Kiev.

The South Stream pipeline was marketed in Eastern Europe as a profitable venture because the expected transfer fees for the planned 63 billion cubic meters (bcm) of gas per year will be significant. However, Gazprom may not have such quantities of gas available since Russia's Eastern Siberia fields are not yet developed and the Western Siberian ones are becoming depleted.

Gazprom currently delivers 55 bcm of gas per year to Germany and Finland via the Nord Stream pipeline under the Baltic Sea. The South Stream pipeline may end up with much smaller quantities of gas, given that Southeastern Europe has much smaller demand. If the pipeline carries only 15 bcm of gas per year, probably diverted from Ukraine's transit network, the countries participating in the project will find it difficult to pay the loans they plan to obtain for the construction of the pipeline.

Gazprom has no new contracts for South Stream, and only Serbia has expressed desire to increase supplies to 5 bcm per year from the current 1.39 bcm.

However, Gazprom's biggest problem will be complying with EU energy regulations. One of them requires South Stream to provide full access to third-party gas in all distribution and transmission infrastructure in a competitive manner. Another, even more problematic regulation that will affect South Stream is the EU requirement for separation between transmission and production activities, or the "unbundling" of supply and trade. Based on this regulation, in 2011, the EU overturned Gazprom's acquisition of a 50% stake in the Central European Gas Hub in Baumgarten, Austria.

Russia wants to create a precedent with South Stream that will be used for its Nord Stream pipeline as well. Gazprom will try to avoid implementing the Third Energy Package by bending the regulations or interpreting them in a flexible manner.

In December 2011, Russia's Ambassador to the EU Vladimir Chizhov told reporters: "South Stream does not fall under the Third Energy Package because its owner will not be Gazprom but an international consortium. That is, it will be under an independent operator. The same applies to Nord Stream, because its operator - Nord Stream AG - is a consortium registered in the Canton of Zug in Switzerland." South Stream's core shareholders include Gazprom with 50%, Italy's Eni with 20%, and Germany's Wintershall Holding and France's EDF with 15% each.

In September 2012, the Russian press reported that Gazprom would reform its European assets to meet EU requirements and avoid anti-trust claims by the European Commission. The planned change implies the creation of two subsidiaries of Gazprom to sell gas to European customers instead of the existing single entity - Gazprom Storages & Transport and Trading GMT Holding.

The first of the holdings will reportedly embrace Gazprom Germania, gas storage and transport networks, and the second will sell gas. The plan will probably not work, because Gazprom will remain the owner of all assets and this will not satisfy the requirements of the EU's third energy package.

The risks and uncertainties of South Stream are much higher than the benefits, but the Eastern European countries seem to be determined to invest in the project nonetheless. This will leave them without funds for Nabucco. The EU, however, still has a chance to press its energy and environmental regulations and give a boost to Nabucco. US leadership in this task is critical, which makes the initiative of Senator Lugar even more important.

Margarita Assenova is a professional journalist and political analyst with over 25 years of experience in print and broadcast media, including Radio Free Europe/ Radio Liberty. In 1997 she was awarded the John Knight Professional Journalism Fellowship at Stanford University for her reporting on nationalism in the Balkans. She currently serves as the Course Chair (Contractor) for Southeast Central Europe Advanced Area Studies at the Foreign Service Institute of the US Department of State.

Source: http://www.atimes.com/atimes/Central_Asia/NL20Ag02.html

well, well, well, all this in light of the slowing pace of nuclear disarmament between Russia and the US given the NATO ABM batteries being installed in eastern europe, and need i mention the move a few months ago for the US to label a select few Russian officials as human rights violators?

Question is, what is the EU going to do about this?

[mrmouth]

About Dick Lugar saying something?

[Thorn777]

If a senator says something there is people in the background paying him them to do so.

I wonder who's paying.

[motiv-8]

As a bit of background: Senator Lugar is the chair of the Senate Foreign Relations Committee, focuses primarily on nuclear non-proliferation, has worked to reduce the amount of nuclear weapons in the former Soviet Union since 1991, and was detained in Russia very briefly in 2005 while on an inspection tour of nuclear sites with then-Senator Obama.

I suppose the first question that should be asked is, does Russia actually have an energy monopoly in Europe?

[Col. Tartleton]

I'm reading the trend that Europe is going to be moving towards more and more nuclear, but we should be exporting gas to anyone who will buy it.

Russia's monopoly I'm sure is a figure of speech.

Looking at his stances on Wikipedia is random. He's all over the place. Oh well, I respect that. He does his job.

For example he's got an F from the NRA and a 53% approval from Brady Campaign. I assume that means he doesn't give a about guns one way or the other.

Boyscout, ΒΘΠ, Navy, Rhodes Scholar, Farmer.

Paint him red, white, and blue, he's an American.

[Exarch]

If a senator says something there is people in the background paying him them to do so.

I wonder who's paying.

it's fairly obvious, i imagine the shareholders of Nabucco for one (given the failure of a non Russian gas transit for Europe), not to mention anachronistic Cold Warriors who've been dreaming up Nabucco for decades.

As a bit of background: Senator Lugar is the chair of the Senate Foreign Relations Committee, focuses primarily on nuclear non-proliferation, has worked to reduce the amount of nuclear weapons in the former Soviet Union since 1991, and was detained in Russia very briefly in 2005 while on an inspection tour of nuclear sites with then-Senator Obama.

I suppose the first question that should be asked is, does Russia actually have an energy monopoly in Europe?

energy monopoly in he purest definition, no, but a large proportion of Europe's energy does come from Russian gas.

I'm reading the trend that Europe is going to be moving towards more and more nuclear, but we should be exporting gas to anyone who will buy it.

Russia's monopoly I'm sure is a figure of speech.
.

Europe may actually be opting for gas over nuclear especially given Merkel's statements after Fukushima, all the more so considering gas has a lower carbon footprint than coal and oil.

Going by Washington's strategy of becoming a major gas producer via shale oil, it could dilute Moscow's bargaining positon vis-a-vis Europe.

anyway the gist of this senator's message is once again the old 'let's revive the cold war again' schtick considering NATO members would get preferential treatment, wonder what Ukraine is going to say about that.

[Kanaric]

energy monopoly in he purest definition, no, but a large proportion of Europe's energy does come from Russian gas.

So in otherwords hes fairly correct?

When people say monopoly they dont mean a total monopoly but near complete control.

[removeduser_4536284751384]

So in otherwords hes fairly correct?

When people say monopoly they dont mean a total monopoly but near complete control.

Only 23.9% of European energy demand is met by gas. Of that, 34% is imported from Russia (source). In other words, 8.126% of the European energy supply is purchased from Russia. About the same as the total renewable energy generated in Europe, with some countries at 40+% renewables, and a number that will start to increase as the Eastern countries get into renewables. How is that anything near complete control?

Obviously Russia holds significant sway and does a lot of arm twisting when to comes to prices.

Different from any other seller how? There seems to an American meme that the Cold War is still ongoing. Russia is a developing country that needs all the business it can get. Western trade is far more important to its development than eastern gas is to European energy supply.

[King Gambrinus]

Only 23.9% of European energy demand is met by gas. Of that, 34% is imported from Russia (source). In other words, 8.126% of the European energy supply is purchased from Russia. About the same as the total renewable energy generated in Europe, with some countries at 40+% renewables, and a number that will start to increase as the Eastern countries get into renewables. How is that anything near complete control?

That's still a lot of money that could be saved if we were self-reliant on energy.

[mrmouth]

Different from any other seller how?

The all too common periods where people are left without heat in the winter, for one.

[mrmouth]

The main area of diversification for Russia after 2008 was to establish secure holds on their energy assets going into Western Europe. They have done a lot of that.

Monopoly? I don't know.

If Lugar is arguing that the US can help and make the often painful negotiations between Russia and a lot of the rest of Europe, less so, then so be it. Obviously Russia holds significant sway and does a lot of arm twisting when to comes to prices.

[Bonestaak]

Europe may actually be opting for gas over nuclear especially given Merkel's statements after Fukushima, all the more so considering gas has a lower carbon footprint than coal and oil.

Well what I've heard in the news is that Germany has ambitious plans to increase it's solar- and wind energy output dramatically.

However on the long term the EU is opting for independence of fossil energy, considering the fact they're the largest contributor and host of an even more ambitious science project called ITER (basically substitutes fossil for fusion). Ironically both Russia and America contribute to the project .

[Odenat]

Well, US first put embargo to Iran and now says break the Russian monopoly. We must turn to them and ask how? Maybe they are planning an invasion of Russia as the main fields are there.

Turkey supported Nabucco at the start but everyone knows that there's not enough gas to make the project viable. Even the russian built South Stream have the same problem.

[Exarch]

Well, US first put embargo to Iran and now says break the Russian monopoly. We must turn to them and ask how? .

incidentally, Iran has among the world's largest sources of natural gas; they're like the Saudi Arabia of natural gas.

[Odenat]

incidentally, Iran has among the world's largest sources of natural gas; they're like the Saudi Arabia of natural gas.

Yes that's the problem; if you don't want Russia to have monopoly, then you must get along with Iran. Either that, or an invasion to secure the gas fields

[conon394]

and the US given the NATO ABM batteries being installed in eastern europe,

Not any more. Maybe the Radars are still going up but I belive all the ABM stuff will now be ship based

Anyway bad reporting

"Senator Lugar urged the US administration to do more for European energy security by supporting the Southern Corridor from Central Asia and the Caucasus to Europe. He advised the State Department to restore the high-level position of US Envoy for Eurasian Energy Security"

That was back when Biden was still in the Senate although maybe he reiterated the point

In any case the problem here is that US LGN exports as a natinal policy have more than a couple road blocks

First - Obviously the expanded production that would that reasonable is going to make hard Green/Lefty Dems unhappy and their are road blocks at the state and local level as well.

Second - there are lot of Republicans and Democrats who don't really understand Economics. When they see reports about projections from fracking and deep water projects to massively boost US energy production they tent to confusion energy independence with cheap energy. Now I not saying independence is a bad thing - it lower the US trade deficit and makes us less dependent on giving a crap about the Saudis and the like. But given the growth of demand from China and the hit Nuke Power took from Japan etc even if the US can supply itself unless it nationalizes all production and than subsidizes local sales - energy is likely to stay at the same price or get higher [Also of course as long as the tension with Iran and a potential war there remains].

For example see this piece - many US pols have no interest in export:

http://www.downstreamtoday.com/News/...ookieSupport=1

Or just go back and review the Keystone Pipeline, or say the controversy about new coal

Natural gas because it either has to be piped to turned into LGN is a bit more broken up than Petroleum, but it seems like the US has sufficient untapped reserves that export is feasible and low domestic prices are retarding production...

http://www.bizjournals.com/houston/p....html?page=all

... But that is the problem if the US does open exports and build LNG export points and more pipelines, production will rise with the ability to access exports but domestic prices are likely to jump sice sells would have no reason to not use the global pricing.

However I think the key thing is Natural gas is seen as more clean than oil or coal and so it relatively easy for current Government or any State Governemnt to apporve the expansion of production and export. With the apparent existance of unused reserves the the proponents can likely fend off worries over price. After all new terminals, exports and production means jobs and taxes so 'm thinking that trumps strategy or environmental concerns - in a way that is not working so good for coal export to China .

http://www.nytimes.com/2012/05/30/us...nals.html?_r=0

In passing the WSJ says Britain and Spain are already signed up for imports from the US as soon as the Sabine River facility is ready. The problem is unless the US is going to do kick start financing placing like Poland or Romania don't have the LNG offload capacity

http://blogs.wsj.com/washwire/2012/1...n-u-s-arsenal/

[Thorn777]

Remember kids: Russia is evil, and dont forget to hide under your desks.

[priam11]

Remember kids: Russia is evil, and dont forget to hide under your desks.

Naw, just the orphans need to worry. Everyone else is a.o.k

[conon394]

How is that anything near complete control?

Depends I would say you need to look a things with a bit more granularity.

I mean if you have big investment in natural gas an it is used for cooking, dryers and heaters that not something you can just change easily. I live in Washington state now and most housed are run all electric, but back in Michigan in every house I lived in form 1970-2000 I had natural gas for central forced heat, stove and dryer. that a fair amount of fixed infrastructure investment for the average family/landlord even if that use is small portion of overall energy use

------------------------------

Saved in the sense the money would go to someone else within the EU rather than outside of it. That sort of chauvinism doesn't mean much to me. Energy security is important, but I think developing countries need our custom as well simply out of humanitarian concern.

No its not chauvinism - its self interest. Look Mines, Power plants and such in Europe likely by more European equipment and likely hire Europeans or if you will locals.

but I think developing countries need our custom as well simply out of humanitarian concern

Considering the corrupiont, and envirmential degradation of most third world primary resource extraction operations I not sure you are being all that nice - just ask those South African miners... because I'm pretty sure European police don't typically shoot dozens of striking workers.

[Thorn777]

I feel allot more treathened by the US putting its fat ugly old sweet-talking dick on everything thats none of their business.

And concerning concerns: Lybia and Iran. Next Russia? Maybe they want to rearrange their export-deficits by exporting their shale rampage to us.