Forbes: Gazprom Tightens Control Over European Supply

Well, it’s finally coming; Russia is starting construction of the €16bn South Stream pipeline on 7th December to make sure it retains a strong grip over South East European and Central & Eastern European gas supplies. But whether this is in Gazprom’s longer term interests remains to be seen. What’s good for ‘regional control’ is bad for Gazprom’s ‘global posture’.

Russia always had first mover advantage in the Southern Corridor purely by virtue of being able to redirect initial supplies from Ukraine towards South Stream markets. Having bought its way through corrupt SEE and CEE states, that’s exactly what it’s going to do. With final investment decisions in place, Gazprom can start offshore construction across the Black Sea – cutting through Turkish waters – before resurfacing in Bulgaria. Onshore pipes then run through Serbia, Hungary, Slovenia and into the Trans Austrian Gas Pipeline towards Northern Italy. An initial 15.75bcm will flow by 2015, ramping up to 63bcm by 2019, but let’s not beat around the bush: The moment pipeline construction starts next week, the market assumption will be that no other pipelines can compete. The EU inspired Nabucco project designed to bring Caspian and Levantine gas to European markets is ‘officially’ dead. Never to be resurrected. What’s more, Russia has just signed a 30 year supply agreement with Turkey. Gazprom isn’t just knocking out competing sources of upstream supply; it’s keeping transit states firmly under its thumb as well. ‘Russian gas, Russian prices, Russian monopoly of supply and rent’. Full stop.  MORE