European Energy Integration Comes At A Price: Bulgaria, Ukraine Ask for Support
The indented stretch of coast from Greece to Ukraine is increasingly drawing attention both on a geopolitical and financial level. The last weeks turned the spotlight on these five countries with good reason. The region is indeed a strategic battleground that could turn the tide of Europe.
On Monday, European Union foreign ministers delayed for a week the implementation of sanctions against a new group of individuals in Russia and Eastern Ukraine, waiting for the coming meeting in Minsk on Wednesday. While Russia (as Greece) is playing a key moment of its ‘battle’, Ukraine and Bulgaria are raising their voice, putting their own requests on the European tables.
Over the last hours, Ukraine asked for a direct interconnection agreement with Slovak TSOs for all pipelines, while Bulgaria for a central role in the gas industry, as a compensation for the failed South Stream project.
ENERGY UNION AND UKRAINE
As stated by European Council President Donald Tusk on Friday, “the situation in Ukraine is getting worse every day.” And he is right. NATO continues to ramp up its military presence in Eastern Ukraine, and Moscow reportedly tested its new anti-submarine system during military exercises in the Baltic Sea.
The odds of a large-scale military confrontation are on the up, and Kiev wants to be sure of Europe’s resolve. On a gas level, the military escalation would indeed translate into further uncertainty.
Naftogaz, the national oil and gas company, stressed the importance of reverse flows from Slovakia, which would give Ukraine a higher bargaining power vis-à-vis Russia.
Quoting Slovakia’s President Andrej Kiskaf, the company sent a sounding message: the authorities now ruling the country ask for an integration in the European energy markets, and the reverse flow is part of it.
‘One obstacle in particular still needs to be tackled: the obstruction by Gazprom of the virtual and physical reverse flow between Slovakia and Ukraine. Removing this bottleneck would ensure that Ukraine can import all the gas it needs from Europe, at a more competitive price than currently being offered by Russia’ the company wrote in a press release.
According to the company, the project would also have positive implications for countries in Southeast Europe currently exposed to potential supply shocks.
“A direct and unobstructed relationship between the neighbouring TSOs would immediately provide Bulgaria, Romania, Hungary, Serbia and other SEE countries with the ability to source as much gas on the Western European market as they need via Ukraine’s gas transmission system”, Andriy Kobolyev, CEO of Naftogaz, said.
Logically, Kobolyev played his card to get the support of Southeastern countries and restate Ukraine’s centrality in the European energy markets.
CENTRAL EAST SOUTH EUROPE GAS CONNECTIVITY, AND BULGARIA
Also on Monday, European authorities and representatives of nine countries held the first meeting of the Central East South Europe Gas Connectivity (CESEC) High Level Group in Sofia.
‘The discussions covered both external and internal aspects of the supply situation in the region, with a specific focus on interconnections and on the optimal use of existing infrastructure’ reads the note released by the European Commission.
Austria, Bulgaria, Croatia, Greece, Hungary, Italy, Romania, Slovenia and Slovakia will work to find alternatives to the failed South Stream project. The High Level Group will meet again by early summer to adopt the Action Plan.
The representatives of the nine European countries will then discuss the expert level analysis, which will be carried out in subgroups over the coming months. Doing so, representatives of national governments will come up with the list of the new projects.
In the summer meeting, many national governments will try to bring back home some form of political trophy, some proofs of the fact that they can make the interest of their citizens, not only bowing to Mittel-European intentions.
The Bulgarian government, which already voiced discontent over the last months, has been taking the lead - the event is indeed held in Sofia at the initiative of Bulgaria.
“Our government is actively working for the realization of key projects, which will allow the country to have access to secure gas supplies at competitive prices,” Prime Minister Boyko Borissov said at the opening of the meeting, reminding how it had been the most impacted country in the winter of 2008, when Russia halted gas supplies to Europe.
As said, the High-Level Group agreed that an Action Plan - with concrete deliverables - will be adopted by early summer. This is good news for security of supply in Southeast Europe, as countries have to accelerate the construction of interconnectors to avoid possible blackouts over the next winter.
“A priority of the Bulgarian government is the construction of interconnectors with neighbouring Greece, Romania, Turkey and Serbia, as well the development of its own gas deposits in the Black Sea shelf,” Borissov argued, well aware that his own political career will pretty much depend on his ability to avoid further energy crisis in his country.
In this context, Borissov confirmed the interest of Sofia to increase its regional clout in the energy markets, also elaborating on the concept of “gas hub.
“We have a well-developed national gas distribution network, gas storage facility, oil and gas deposits, which are currently being developed. These are just some of the advantages and opportunities that the country has to offer,” he stated, basically saying that the country wants to become a gas distribution centre for the region.
In this sense, Ukraine and Bulgaria are a clear sign of the fact that integration can happen, but it never comes for free. Kiev and Sofia would have a hard time in case of serious energy crisis. This is the right moment for them to get sure they could be supported by Brussels also in case of a bloody Grexit, and also in case of a even more violent standoff between Russia and the West.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci