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bne June 2017 Central Europe I 43
“Gas supplies are extremely dependent on costly infrastructure, delivered
. via expensive pipelines,” noted
the European Bank for Reconstruc- tion and Development (EBRD) in late April. “Only working across borders can ensure that a country avoids being dependent on a single supplier of gas. Having access to a regional gas market means access to various suppliers who are competing to provide the best price. It also means better security of supply.”
Russia hopes that boosting its supply of relatively cheap gas to the EU will help kill off the development of alter- native sources such as LNG. However, it also weds Gazprom to its EU cus- tomers, offering them greater lever- age on price if they stick together.
While Russia supplies the bulk of gas in CEE, its role in overall EU supply – although the largest – is a far less dominant 30% or so. Meanwhile, a
full 75% of Gazprom’s exports head to the European bloc. Moscow’s revenues from oil and gas accounted for over 43%
of federal budget revenue in 2015.
The Commission has pushed through rules that allow the EU to be party to the contract talks of member states. However, driven by their stance demanding greater national sovereignty, and likely some less idealistic issues also, some CEE countries have resisted efforts from the EU to involve itself in such negotiations.
Yet that clearly weakens their hand in talks with Russia. Moscow is pouring huge resources into the construction of permanent links to the European market. The EU's challenge is to turn the tables by unifying that market and exploiting Russia's huge economic dependence on it.
Plugging Russia’s gas export busi- ness even deeper into the EU via yet another expensive pipeline is no one way street then, despite claims from opponents of Nord Stream 2 that it will simply increase dependence.
Many CEE states howled with fury when the EU surprised them with
its compromise deal with Gazprom over the competition probe. However, the official green light for cross- border trading is a huge step towards reducing Russian leverage. It would allow virtual gas trading, meaning member states from the Baltic to
the Adriatic can now sell spare Rus- sian gas anywhere in Europe.
Find more Central Europe content at www.bne.eu/central-europe
Selected headlines from past month:
· EU opens probe over Slovak aid for JLR car plant
· MEPs call for Article 7 to be triggered against Hungary · The only way is nukes
www.bne.eu