Europe keeps Nabucco on life-support

The European Council, in a meeting principally devoted to determining the European Union’s policy towards its eastern members and preparing an EU position for next week’s Group of 20 summit in London, also took an important decision last week on energy with a compromise to keep plans for the Nabucco gas pipeline on life-support.

Out of nearly 4 billion euros (US$5.4 billion) allocated for the

energy sector over the next two years, less than 7% has been set aside for Nabucco, which seeks to pipe natural gas from the Caspian Sea basin through Turkey to the Balkans and Italy for eventual distribution throughout Europe as greater quantities come on line. The amount agreed is more than German Chancellor Angela Merkel would have preferred.
Germany strongly favors the North Stream pipeline agreed with Russia by Merkel’s predecessor, Gerhard Schroeder, to pass undersea directly between the two countries – also making Germany the monopsonistic distributor of Russian gas in the region. Merkel had sought to have Nabucco downgraded in the EU’s priority list of energy projects and earlier in the month succeeded in having the European Commission, meeting earlier this month, take a preliminary decision to withhold all public funds from the project.

Nabucco was entirely eliminated from the register of projects to be supported from out of the EU’s 5 billion euro stimulus plan to counteract the current financial crisis, but a compromise at the European Council meeting in Brussels restored just over a quarter-billion euros after East European members of the EU raised strong protests.

Besides Turkey’s attitude (Ankara insists on the right to buy at below-market prices 15% of the Azerbaijani gas that would fill Nabucco), the question of Georgian transit has in some eyes become a complicating factor. While the Russian invasion of Georgia has altered Azerbaijan’s politico-strategic perceptions and view of the North Atlantic Treaty Organization, pipeline volumes through Georgia are coming back up to pre-invasion levels. Volumes that had transited by rail, however, seem not to have recovered as well. Kazakhstan has decided not to build a refinery at the port of Batumi, ostensibly for commercial reasons.

Asia Times