Friday, December 12, 2014

South Stream Pipeline Goes Down the Drain; Now What?

With Vladimir Putin deciding to scrap the South Stream pipeline venture over a week ago, leaders from former eastern European nations are scrambling to come up with a strategy to diversify energy supplies. The heads of Hungary, the Czech Republic, Slovakia, and Poland met on Tuesday to discuss plans for more comprehensive energy security. Without a new strategy, these nations will continue to be almost exclusively reliant upon receiving gas to heat homes through the current pipeline that runs through Ukraine, which understandably raised concerns that instability in the region will cause gas deliveries to be stopped or slowed down.

 Furthermore, with Russia owning and operating the pipeline, some in Brussels claimed it would be violating European competition laws, as well as sowing corruption throughout development. The latter was evidenced by Bulgaria’s projected cost being risen from 1.2 billion euros initially to 4 billion, simply to benefit companies involved in the project.

Nevertheless, this comes as good news to battered Ukraine, as South Stream would have given Russian a different pathway into Europe, decreasing its leverage against its giant neighbor. Now, for the foreseeable future Ukraine will be the main avenue for Russian gas into Europe. Additionally, it is an important win for nations within the EU who have supported the Ukrainian plight and spoke out harshly against the installation of a pipeline, saying that it would only further solidify Russia as the dominating supplier of gas to the EU.

In addition, not everyone within the EU was unhappy about the news of South Stream’s demise. Eastern European nations viewed the pipeline as a way to increase energy security, as well as a way to fill government coffers with pipeline transit fees. Additionally, Italy and Austria, who both had companies with significant stakes in the project, expressed support for the project and attempted to help Gazprom overcome EU obstacles. This division led to delays in responding to the Ukraine crisis, as it was difficult for nations to decide on the level and type of sanctions to impose on Russia.

In any case, it seems that for now, the EU will be pursuing a different strategy in its attempt to meet the goals of the proposed Energy Union. Russia will definitely continue to play an important role in the EU’s overall energy future, and although unlikely, it is possible the South Stream project could be revived down the road. Nevertheless, it seems for now that the EU will be looking increasingly to other nations to diversify its energy supply, such as Azerbaijan and the US, as well as further expanding the pipeline system that exists at the moment. Russia, on the other hand, will be scrambling to find ways to stymie it tumbling and heavily energy-dependent economy. 

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