By David O’Byrne
At 30km long but just 700m wide at its narrowest, Istanbul’s Bosphorus strait is one of world’s most crowded and potentially hazardous waterways, where even with state-of-the-art radar monitoring, transiting ships are still obliged to take on a pilot.
Fringed with forests and villages on its upper reaches, and the palaces and mosques of Istanbul at its lower end, it is also one of the most beautiful.
It is no surprise then that with oil tanker traffic through the straits having more than doubled since 1995 and expected to double again in the next decade on the back of fast-rising oil production in Russia and the Caspian basin, Turkey is keen to provide an alternative export route.
“Traffic through the strait already presents an unacceptable risk to the population of Istanbul, and any oil pipeline that can relieve the pressure will be welcome,” says Burak Ozugergin, spokesman for Turkey’s foreign ministry which has long warned of the dangers posed by too much tanker traffic.
Turkey’s own proposed solution is the Samsun-Ceyhan, or Trans Anatolian pipeline, planned to carry oil from Turkey’s Black Sea coast, 550km across the country to the Mediterranean coast, bypassing the crowded Bosphorus.
Sponsored by a consortium of Turkey’s Calik Enerji and Eni of Italy it is designed to carry up to 1.5m barrels per day.
It is also expected to help kickstart a new petroleum refining, petrochemicals and manufacturing sector at the Mediterranean port of Ceyhan, which Turkey has long harboured ambitions of turning into a major regional energy hub.
However despite presiding over a ground-breaking ceremony at Ceyhan in 2007, Calik and Eni have struggled to secure sufficient commitments of oil to ensure the line will be commercially viable.
Eni can supply oil from the giant Kashagan field in Kazakhstan which it is developing in partnership with Kazakh state oil company KazMunaiGaz, but the line also needs oil from Russian or Kazakh producers.
Support has been slow in coming, however, with Russia having long backed a rival project to build a pipeline through Bulgaria and Greece – a far shorter route, and Kazakhstan having long declined to commit to any of the competing schemes.
That situation has now changed with a recent agreement between Turkey, Italy and Russia committing the three countries to work together on this and other regional energy projects.
Russian prime minister Vladimir Putin also announced that he had secured Kazakh support for the project – a claim yet to be confirmed by Almaty.
“The agreement allows for Russian oil companies Rosneft and Tatneft to join the project either by committing oil or by becoming partners,” says Mustafa Aksoy, Calik Holding’s Director of Projects and Investments.
“With these two companies on board the project we expect to be able to make the final investment decision by the end of 2010,” he adds.
It is an important step, but there is still no definite commitment of oil to the Samsun-Ceyhan line. It also confirms that Moscow can make or break the project.
“Shipping oil by tanker through the strait is always going to be cheaper than any pipeline,” says John Roberts, Caspian analyst at Platts.
“Ultimately Russia controls the oil routes from the Caspian to the Black Sea, and only Russia can ensure the line has enough oil to make it viable.”
Such a move by Russia would come at a price, he cautions, pointing out that the recently signed agreements make only one definite commitment – for Turkey to allow Eni and Russia’s Gazprom to conduct a feasibility study for a by-pass line of their own.
They plan to construct that line, the South Stream gas pipeline, across the Black Sea to export Russian gas to Europe, by-passing Ukraine which has previously attempted to leverage its location on Russia’s gas export route to obtain cheap gas.
Russia is also hoping to co-operate with Turkey on other pipelines, including a second gas line across the Black Sea and an extension of an existing gas line south across Turkey to Ceyhan and on to Israel that would also allow for the development of gas-based industries at Ceyhan.
Copyright The Financial Times Limited 2009.
Showing posts with label Energy. Show all posts
Showing posts with label Energy. Show all posts
Thursday, December 10, 2009
Tuesday, November 24, 2009
Heritage deal’s end a blow to Genel Enerji
By Delphine Strauss
For Genel Enerji, it has been a brutal reversal of fortune. In June, the Turkish exploration group was celebrating the start of exports from northern Iraq’s Taq Taq field, after a breakthrough in talks between Baghdad and the Kurdish authorities.
The flow of oil, promising a revenue stream to fund development of other fields, was the key to the merger with Heritage Oil, under which Genel would gain a London listing and a 50 per cent share in assets valued at up to $6bn (£3.6bn).
In six months, the twists of Iraqi politics have obliterated those prospects. With Erbil and Baghdad deadlocked on how to pay contractors, Genel has halted exports and lost its main appeal to potential partners – its fortunes reflecting the rise and fall of investors’ interest in the Kurdistan region as a whole.
“It leaves them in a fairly difficult position,” said one analyst, noting that Genel had planned to use Heritage shares to settle a $1.1bn debt to the Kurdish authorities, while most other potential partners in the region were also under financial strain.
Mehmet Sepil, Genel’s chief executive and co-founder, declined to comment on Monday, only confirming that the merger had fallen through because there was no foreseeable prospect of receiving any payment for its Kurdish exports.
But the merger talks were complicated by a Financial Services Authority investigation that Heritage had said could prevent executives from Genel or its unlisted parent Cukurova joining the management of the new company.
Genel’s ties with the Kurdish administration also came under scrutiny this summer when Norwegian authorities began a probe into its dealings in shares of DNO, another Kurdistan-focused exploration group.
It is not clear how the end of talks will affect the partnership at the Miran oilfield in Iraqi Kurdistan, where Heritage has a controlling stake and Genel owns a 25 per cent share.
Analysts say there are concerns Heritage could find the going tougher if its relations with Genel or with the regional authorities have soured.
Copyright The Financial Times Limited 2009.
For Genel Enerji, it has been a brutal reversal of fortune. In June, the Turkish exploration group was celebrating the start of exports from northern Iraq’s Taq Taq field, after a breakthrough in talks between Baghdad and the Kurdish authorities.
The flow of oil, promising a revenue stream to fund development of other fields, was the key to the merger with Heritage Oil, under which Genel would gain a London listing and a 50 per cent share in assets valued at up to $6bn (£3.6bn).
In six months, the twists of Iraqi politics have obliterated those prospects. With Erbil and Baghdad deadlocked on how to pay contractors, Genel has halted exports and lost its main appeal to potential partners – its fortunes reflecting the rise and fall of investors’ interest in the Kurdistan region as a whole.
“It leaves them in a fairly difficult position,” said one analyst, noting that Genel had planned to use Heritage shares to settle a $1.1bn debt to the Kurdish authorities, while most other potential partners in the region were also under financial strain.
Mehmet Sepil, Genel’s chief executive and co-founder, declined to comment on Monday, only confirming that the merger had fallen through because there was no foreseeable prospect of receiving any payment for its Kurdish exports.
But the merger talks were complicated by a Financial Services Authority investigation that Heritage had said could prevent executives from Genel or its unlisted parent Cukurova joining the management of the new company.
Genel’s ties with the Kurdish administration also came under scrutiny this summer when Norwegian authorities began a probe into its dealings in shares of DNO, another Kurdistan-focused exploration group.
It is not clear how the end of talks will affect the partnership at the Miran oilfield in Iraqi Kurdistan, where Heritage has a controlling stake and Genel owns a 25 per cent share.
Analysts say there are concerns Heritage could find the going tougher if its relations with Genel or with the regional authorities have soured.
Copyright The Financial Times Limited 2009.
Monday, November 16, 2009
Ukraine
Europe is on tenterhooks over whether Russia will shut off gas to Ukraine and leave it shivering in January. If that happens, however, blame will fall on Kiev, not Moscow.
Recession-ravaged Ukraine’s political squabbling and populism has hit fever pitch ahead of presidential elections on January 17. That has led the International Monetary Fund to suspend co-operation and delay a $3.8bn loan payment, due on Sunday. The government had already backed off from commitments to increase long-subsidised domestic gas prices. The final straw was President Viktor Yushchenko signing into law, against IMF objections, a parliamentary bill that will raise minimum wages and pensions by 20 per cent – costing 7 per cent of economic output in 2010.
Since Ukraine is reliant on IMF funding to make ends meet, it could struggle to pay its next two monthly gas bills – leading to another winter shut-off. It only just scraped together October’s payment. Yet, for all its bluster, Russia would rather keep the taps open. The Kremlin has belatedly realised the damage to its reputation from shut-offs, and last January’s interruption to European supplies cost state-run Gazprom dearly. Hence Prime Minister Vladimir Putin’s exhortation that Brussels extend a loan to Ukraine.
And why meddle in Ukraine’s electoral process this time? Moscow’s bogeyman, Mr Yushchenko, trails badly in the polls. Either frontrunner, Prime Minister Yulia Tymoshenko or Viktor Yanukovich, is more acceptable to Russia.
Ukraine still has $28bn in foreign currency reserves; the central bank will probably allow some to be used to pay for gas. A bigger question is whether it will plug the budgetary gap by printing money. If so, inflation will result; if not, wage arrears beckon. Either option may put pressure on Ukraine’s currency and asset prices. Europe’s gas consumers must hope they do not become collateral damage.
Copyright The Financial Times Limited 2009.
Recession-ravaged Ukraine’s political squabbling and populism has hit fever pitch ahead of presidential elections on January 17. That has led the International Monetary Fund to suspend co-operation and delay a $3.8bn loan payment, due on Sunday. The government had already backed off from commitments to increase long-subsidised domestic gas prices. The final straw was President Viktor Yushchenko signing into law, against IMF objections, a parliamentary bill that will raise minimum wages and pensions by 20 per cent – costing 7 per cent of economic output in 2010.
Since Ukraine is reliant on IMF funding to make ends meet, it could struggle to pay its next two monthly gas bills – leading to another winter shut-off. It only just scraped together October’s payment. Yet, for all its bluster, Russia would rather keep the taps open. The Kremlin has belatedly realised the damage to its reputation from shut-offs, and last January’s interruption to European supplies cost state-run Gazprom dearly. Hence Prime Minister Vladimir Putin’s exhortation that Brussels extend a loan to Ukraine.
And why meddle in Ukraine’s electoral process this time? Moscow’s bogeyman, Mr Yushchenko, trails badly in the polls. Either frontrunner, Prime Minister Yulia Tymoshenko or Viktor Yanukovich, is more acceptable to Russia.
Ukraine still has $28bn in foreign currency reserves; the central bank will probably allow some to be used to pay for gas. A bigger question is whether it will plug the budgetary gap by printing money. If so, inflation will result; if not, wage arrears beckon. Either option may put pressure on Ukraine’s currency and asset prices. Europe’s gas consumers must hope they do not become collateral damage.
Copyright The Financial Times Limited 2009.
Saturday, October 31, 2009
Putin in new Ukraine gas warning
Russian Prime Minister Vladimir Putin has said Ukraine might be having problems paying for gas, raising new concerns over European supplies.
Mr Putin said the European Union had not yet given Ukraine the money it had promised to help provide stable supplies of Russian gas to Europe.
He also blamed Ukrainian President Viktor Yushchenko for blocking payment.
In January, many countries were left short of gas because of a payment dispute between Moscow and Kiev.
'Blocking funds'
"It appears we are again having problems with payments for our energy supplies, which is extremely regrettable. The EU has still not provided Ukraine with the money it has promised for that purpose," Mr Putin said.
"European leaders are referring us to the European Commission, while the European Commission leadership are evading discussing the issue with us."
But Mr Putin said that despite the lack of funding from the EU, Ukraine still had plenty of cash to pay its gas bills.
Referring to the country's large gold and foreign currency reserves, he said: "According to the Ukrainian Prime Minister [Yulia Tymoshenko], Yushchenko is obstructing normal co-operation between the central bank and the Ukrainian government and is blocking the transfer of relevant funds."
In August, the EU and international lending institutions agreed a $1.7bn (£1bn at the time) loan deal to help secure European gas supplies.
This was specifically designed to ensure that the disruptions to supplies that occurred earlier in the year were not repeated.
Mr Putin's comments have raised concerns that disruptions may happen again.
Russia provides about a quarter of the gas consumed in the EU and 80% of that is piped through Ukraine.
Mr Putin said the European Union had not yet given Ukraine the money it had promised to help provide stable supplies of Russian gas to Europe.
He also blamed Ukrainian President Viktor Yushchenko for blocking payment.
In January, many countries were left short of gas because of a payment dispute between Moscow and Kiev.
'Blocking funds'
"It appears we are again having problems with payments for our energy supplies, which is extremely regrettable. The EU has still not provided Ukraine with the money it has promised for that purpose," Mr Putin said.
"European leaders are referring us to the European Commission, while the European Commission leadership are evading discussing the issue with us."
But Mr Putin said that despite the lack of funding from the EU, Ukraine still had plenty of cash to pay its gas bills.
Referring to the country's large gold and foreign currency reserves, he said: "According to the Ukrainian Prime Minister [Yulia Tymoshenko], Yushchenko is obstructing normal co-operation between the central bank and the Ukrainian government and is blocking the transfer of relevant funds."
In August, the EU and international lending institutions agreed a $1.7bn (£1bn at the time) loan deal to help secure European gas supplies.
This was specifically designed to ensure that the disruptions to supplies that occurred earlier in the year were not repeated.
Mr Putin's comments have raised concerns that disruptions may happen again.
Russia provides about a quarter of the gas consumed in the EU and 80% of that is piped through Ukraine.
Tuesday, July 14, 2009
Iraq offers half gas needed for Nabucco
By Delphine Strauss and Ed Crooks
Iraq has offered to supply enough gas to fill half the capacity of the proposed Nabucco pipeline, the prime minister said, giving the project a boost even as heads of government met to sign a historic agreement approving the plan.
The offer from the Iraqi government to supply 15bn cubic metres a year of gas by 2015 helps address the greatest obstacle to the 3,300km pipeline from eastern Turkey to Austria: the prospect of there not being enough gas to fill it.
José Manuel Barroso, pre sident of the European Commission, said the signing of the Nabucco agreement in Ankara by the leaders of five countries on the pipeline’s route – Austria, Bulgaria, Hungary, Roman ia and Turkey – could “open the door to a new era in the relationship between the European Union and Tur key, and indeed beyond”.
Dick Lugar, the most senior Republican in the US senate, said the agreement was “a signal to the rest of the world that partner governments will not acquiesce to manipulation of energy supplies for political ends”.
Nabucco is intended to provide an alternative to Russian supplies, which have caused growing concern following the disruption caused by disputes be tween Russia and Ukraine.
The hope is that the inter-governmental agreement will convince gas-producing countries that the project – scheduled to start in 2014 – is closer to becoming reality than rival European or Russian-sponsored schemes, and persuade them to commit the volumes needed for commercial viability.
The only supplier that will definitely be ready for the first phase of the project is Azerbaijan, but it is juggling Nabucco’s de mands against those of Russia.
Richard Morningstar, US energy envoy, described Azeri gas as a “necessary condition” but not sufficient for the €8bn ($11bn, £7bn) Nabucco project.
If Iraq is able to achieve its ambition of supplying an annual 15bn cu m a year, it will fill almost half the pipeline’s 31bn cu m capacity.
International oil companies are interested in investing in the country to develop its resources, including gas.
The Kurdistan region in the north of Iraq has also attracted a planned investment by a consortium of companies including OMV of Austria and Mol of Hungary, which are both members of the Nabucco group.
Nabucco executives say significant quantities of gas could be available from those Kurdish fields as soon as next year.
Recep Tayyip Erdogan, the Turkish prime minister, also reiterated his desire for Iran to be a supplier “when conditions allow”, despite US opposition.
Andris Piebalgs, EU energy commissioner, said the EU’s focus now would be on encouraging Turkmenistan to participate. Stefan Judisch of Germany’s RWE, the energy group that is a member of the Nabucco consortium, said Turkmenistan would be able to supply an annual 10bn cu m in the pipeline’s first phase, but would first have to find a way through disputes over the Caspian Sea.
Gurbanguly Berdymukhammedov, president of Turkmenistan, said last week that participation in the project would help his country – which is locked in a dispute with Russia over gas supplies – to diversify its export routes.
Mr Piebalgs was optimistic about the consortium’s prospects of finding financing, saying: “If they have the gas, money will follow.”
However, there are fears that some companies in the consortium could struggle to finance their share of the pipeline – forcing them to accept a smaller share of its capacity.
Iraq has offered to supply enough gas to fill half the capacity of the proposed Nabucco pipeline, the prime minister said, giving the project a boost even as heads of government met to sign a historic agreement approving the plan.
The offer from the Iraqi government to supply 15bn cubic metres a year of gas by 2015 helps address the greatest obstacle to the 3,300km pipeline from eastern Turkey to Austria: the prospect of there not being enough gas to fill it.
José Manuel Barroso, pre sident of the European Commission, said the signing of the Nabucco agreement in Ankara by the leaders of five countries on the pipeline’s route – Austria, Bulgaria, Hungary, Roman ia and Turkey – could “open the door to a new era in the relationship between the European Union and Tur key, and indeed beyond”.
Dick Lugar, the most senior Republican in the US senate, said the agreement was “a signal to the rest of the world that partner governments will not acquiesce to manipulation of energy supplies for political ends”.
Nabucco is intended to provide an alternative to Russian supplies, which have caused growing concern following the disruption caused by disputes be tween Russia and Ukraine.
The hope is that the inter-governmental agreement will convince gas-producing countries that the project – scheduled to start in 2014 – is closer to becoming reality than rival European or Russian-sponsored schemes, and persuade them to commit the volumes needed for commercial viability.
The only supplier that will definitely be ready for the first phase of the project is Azerbaijan, but it is juggling Nabucco’s de mands against those of Russia.
Richard Morningstar, US energy envoy, described Azeri gas as a “necessary condition” but not sufficient for the €8bn ($11bn, £7bn) Nabucco project.
If Iraq is able to achieve its ambition of supplying an annual 15bn cu m a year, it will fill almost half the pipeline’s 31bn cu m capacity.
International oil companies are interested in investing in the country to develop its resources, including gas.
The Kurdistan region in the north of Iraq has also attracted a planned investment by a consortium of companies including OMV of Austria and Mol of Hungary, which are both members of the Nabucco group.
Nabucco executives say significant quantities of gas could be available from those Kurdish fields as soon as next year.
Recep Tayyip Erdogan, the Turkish prime minister, also reiterated his desire for Iran to be a supplier “when conditions allow”, despite US opposition.
Andris Piebalgs, EU energy commissioner, said the EU’s focus now would be on encouraging Turkmenistan to participate. Stefan Judisch of Germany’s RWE, the energy group that is a member of the Nabucco consortium, said Turkmenistan would be able to supply an annual 10bn cu m in the pipeline’s first phase, but would first have to find a way through disputes over the Caspian Sea.
Gurbanguly Berdymukhammedov, president of Turkmenistan, said last week that participation in the project would help his country – which is locked in a dispute with Russia over gas supplies – to diversify its export routes.
Mr Piebalgs was optimistic about the consortium’s prospects of finding financing, saying: “If they have the gas, money will follow.”
However, there are fears that some companies in the consortium could struggle to finance their share of the pipeline – forcing them to accept a smaller share of its capacity.
Gas Pipeline in Turkey Gains European Backing
By SABRINA TAVERNISE and SEBNEM ARSU
A project for a gas pipeline that would reduce Europe’s dependence on Russian gas cleared a hurdle on Monday when four European governments signed an agreement with Turkey. But the project’s completion remained a distant goal, with no suppliers formally committed.
Government representatives of Austria, Bulgaria, Hungary, and Romania joined Turkish officials in Ankara, Turkey’s capital, to sign the pact, a transit agreement on the so-called Nabucco pipeline, which would stretch 2,000 miles from the Caspian Sea to Austria through Turkey.
The project has long been delayed, bogged down in disagreements between Turkey and Europe over terms and by maneuvers from Russia, which is pressing for a competing pipeline, South Stream. Most significantly, the pipeline has no committed suppliers, the most important element in getting the project moving.
The agreement signed Monday, which Turkey’s prime minister, Recep Tayyip Erdogan, was present for, was just one small step, experts said.
“It does very little to remove obstacles from the pipeline,” said Ana Jelenkovic, an analyst at Eurasia Group in London. “We have no map. There are no committed supplies, and no committed financing.”
The project was proposed in 2002 by executives of European energy companies wanting to reduce their reliance on Russian gas, which dominates Europe’s energy market. It took on new urgency in 2006 and again last winter, when pricing disputes between Ukraine and Russia shut down supplies to Europe.
Azerbaijan, an oil-rich American ally on the Caspian Sea, was seen as a potential principal supplier, though countries like Egypt and Iraq — as well as Iran, despite American objections — had also been discussed.
But geopolitics intervened last year, when Russia fought a short war with Georgia, giving other former Soviet satellites like Azerbaijan pause. In an indication of that concern, Azerbaijan last week signed an agreement to supply small amounts of natural gas to Russia, a promise that Ms. Jelenkovic said would not threaten the Nabucco pipeline.
Azerbaijan has also hit a rough spot in relations with Turkey, which is trying to reconcile with Armenia, its neighbor. Azerbaijan and Armenia fought a bitter war in the 1990s.
And Moscow has continued to seek support for its project. Just last week, Russia’s deputy prime minister, Igor Sechin, was quoted by the Interfax news agency as saying that Russia had “offered Turkey cooperation with the South Stream.”
Monday’s agreement does not address the sticking point between Turkey and Europe, Ms. Jelenkovic said. Turkey wants to keep 15 percent of the pipeline’s potential supply for its own markets or for resale, and European countries have balked at that.
Borit Grgoc, an expert on Caspian energy issues who has worked as a consultant to the Azeri government, said that European nations were unlikely to have an interest in allowing Turkey to “sell gas back to them.”
However, reports in the Turkish news media said that Turkey had agreed to lower its demand after partners in the consortium, along with RWE of Germany, offered a 50 to 60 percent share in tax revenues from the project, which could be worth up to $650 million.
A project for a gas pipeline that would reduce Europe’s dependence on Russian gas cleared a hurdle on Monday when four European governments signed an agreement with Turkey. But the project’s completion remained a distant goal, with no suppliers formally committed.
Government representatives of Austria, Bulgaria, Hungary, and Romania joined Turkish officials in Ankara, Turkey’s capital, to sign the pact, a transit agreement on the so-called Nabucco pipeline, which would stretch 2,000 miles from the Caspian Sea to Austria through Turkey.
The project has long been delayed, bogged down in disagreements between Turkey and Europe over terms and by maneuvers from Russia, which is pressing for a competing pipeline, South Stream. Most significantly, the pipeline has no committed suppliers, the most important element in getting the project moving.
The agreement signed Monday, which Turkey’s prime minister, Recep Tayyip Erdogan, was present for, was just one small step, experts said.
“It does very little to remove obstacles from the pipeline,” said Ana Jelenkovic, an analyst at Eurasia Group in London. “We have no map. There are no committed supplies, and no committed financing.”
The project was proposed in 2002 by executives of European energy companies wanting to reduce their reliance on Russian gas, which dominates Europe’s energy market. It took on new urgency in 2006 and again last winter, when pricing disputes between Ukraine and Russia shut down supplies to Europe.
Azerbaijan, an oil-rich American ally on the Caspian Sea, was seen as a potential principal supplier, though countries like Egypt and Iraq — as well as Iran, despite American objections — had also been discussed.
But geopolitics intervened last year, when Russia fought a short war with Georgia, giving other former Soviet satellites like Azerbaijan pause. In an indication of that concern, Azerbaijan last week signed an agreement to supply small amounts of natural gas to Russia, a promise that Ms. Jelenkovic said would not threaten the Nabucco pipeline.
Azerbaijan has also hit a rough spot in relations with Turkey, which is trying to reconcile with Armenia, its neighbor. Azerbaijan and Armenia fought a bitter war in the 1990s.
And Moscow has continued to seek support for its project. Just last week, Russia’s deputy prime minister, Igor Sechin, was quoted by the Interfax news agency as saying that Russia had “offered Turkey cooperation with the South Stream.”
Monday’s agreement does not address the sticking point between Turkey and Europe, Ms. Jelenkovic said. Turkey wants to keep 15 percent of the pipeline’s potential supply for its own markets or for resale, and European countries have balked at that.
Borit Grgoc, an expert on Caspian energy issues who has worked as a consultant to the Azeri government, said that European nations were unlikely to have an interest in allowing Turkey to “sell gas back to them.”
However, reports in the Turkish news media said that Turkey had agreed to lower its demand after partners in the consortium, along with RWE of Germany, offered a 50 to 60 percent share in tax revenues from the project, which could be worth up to $650 million.
Monday, July 13, 2009
Europe gas line deal to be signed
By David O'Byrne
Four European countries are meeting in Turkey to sign a five-nation agreement for the long-planned 3,300km Nabucco natural gas pipeline.
Once completed, the line will bring up to 31 billion cubic metres of gas a year from the Caspian and the Middle East across Turkey and into Europe.
It will give an important alternative energy supply to Russia, which already meets 30% of Europe's gas needs.
But much still remains to be agreed on, not least where the gas will come from.
Long-running project
The five countries - Turkey, Romania, Bulgaria, Hungary and Austria - have been working on the Nabucco project with the European Commission for seven years now.
But still the decision to sign the heads of government agreement on 13 July has come as a surprise.
To begin with there is still no clear idea as to what has been agreed.
Turkey and the European Commission are still at loggerheads over how much gas Turkey will be able to take from the line, with Ankara claiming that it might be another six months before a final agreement is reached.
Supply issues
More worrying still, Nabucco still has no guaranteed supply of gas.
Iran, Iraq, Kazakhstan, Turkmenistan and Egypt are all considered potential suppliers in the long term.
Currently though, only Azerbaijan is in a position to supply the 15 billion cubic metres a year the line needs if it is to be constructed as planned by 2014.
But two weeks ago, Baku agreed to sell some of that gas to Russia, a move many understood as a warning to the Nabucco partners to sort out their differences or look elsewhere.
In the same way, Monday's signing ceremony is being seen as largely an attempt to persuade Baku that the Nabucco partners can reach an agreement, on some issues at least.
At the same time, Russia is planning its own new gas pipeline to Europe, the Nord Stream, which will run direct from Russia to Germany under the Baltic Sea.
Four European countries are meeting in Turkey to sign a five-nation agreement for the long-planned 3,300km Nabucco natural gas pipeline.
Once completed, the line will bring up to 31 billion cubic metres of gas a year from the Caspian and the Middle East across Turkey and into Europe.
It will give an important alternative energy supply to Russia, which already meets 30% of Europe's gas needs.
But much still remains to be agreed on, not least where the gas will come from.
Long-running project
The five countries - Turkey, Romania, Bulgaria, Hungary and Austria - have been working on the Nabucco project with the European Commission for seven years now.
But still the decision to sign the heads of government agreement on 13 July has come as a surprise.
To begin with there is still no clear idea as to what has been agreed.
Turkey and the European Commission are still at loggerheads over how much gas Turkey will be able to take from the line, with Ankara claiming that it might be another six months before a final agreement is reached.
Supply issues
More worrying still, Nabucco still has no guaranteed supply of gas.
Iran, Iraq, Kazakhstan, Turkmenistan and Egypt are all considered potential suppliers in the long term.
Currently though, only Azerbaijan is in a position to supply the 15 billion cubic metres a year the line needs if it is to be constructed as planned by 2014.
But two weeks ago, Baku agreed to sell some of that gas to Russia, a move many understood as a warning to the Nabucco partners to sort out their differences or look elsewhere.
In the same way, Monday's signing ceremony is being seen as largely an attempt to persuade Baku that the Nabucco partners can reach an agreement, on some issues at least.
At the same time, Russia is planning its own new gas pipeline to Europe, the Nord Stream, which will run direct from Russia to Germany under the Baltic Sea.
Friday, July 10, 2009
Transit states release tension on Nabucco
By Ed Crooks and Delphine Strauss
Nabucco, the ambitious pipeline proposal to bring natural gas to the European Union from the Caspian region, will pass its first significant milestone on Monday when an inter governmental agreement between the project’s backers is signed.
Turkey, where the pipeline is intended to start, had been obstructing a deal but a solution has been found to meet the country’s demands for security of supply without making a legal commitment to provide it with a fixed amount of gas.
A crisis in January caused by a gas dispute between Russia and Ukraine gave momentum to the slow-moving Nabucco project, reinforcing European consumers’ view of the need for alternative supply routes and sources of gas.
Many European industry executives and officials now believe the pipeline is likely to go ahead at last.
However, the commercial prospects for Nabucco still look highly uncertain because of a shortage of readily available gas supplies and competition from cheaper and quicker projects. If it is to be built, it is likely to require further support from member states and the EU.
The intergovernmental agreement is set to be signed in Ankara on Monday by the five transit countries – Turkey, Austria, Hungary, Romania and Bulgaria. Energy companies from those five countries make up the Nabucco consortium, along with RWE of Germany.
Turkey has been demanding it should be able to buy 15 per cent of Nabucco’s gas for its domestic use or for re-export. For now, that demand appears to have been shelved.
Instead, Ankara has been promised other guarantees of security of gas supply, such as a commitment that the pipeline will be built so that gas can flow in both directions. In emergencies such as the Russia-Ukraine dispute, it would be able to call on stockpiles of gas held in the EU.
But while the politicians may now be in agreement, the business case to support the €8bn ($11bn, £7bn) investment to build a 3,300km pipeline is more tenuous.
The demand is certainly there. A year ago, companies interested in using Nabucco made non-binding bids for 100 per cent of its capacity from its earliest planned start date of 2013.
The problem is the lack of gas to fill it. The only country that can definitely supply Nabucco from the start is Azerbaijan, which will begin production from the large Shah Deniz 2 project in the next decade.
However, that gas is also sought by two other planned pipelines running from Greece to Italy: the Interconnector Turkey Greece Italy (ITGI) and the trans-Adriatic pipeline (TAP). Umberto Quadrino, the chief executive of Edison, the Italian energy company that backs ITGI, says: “This pipeline can be realised much more easily. There is just a small infrastructure investment. Nabucco is much more complex and more gas is needed.”
ITGI would have about 8bn cubic metres per year going to Italy, compared with Nabucco’s planned maximum capacity of 31bn cubic metres per year.
For Nabucco, Iraq is a promising source of gas, following the plan announced in May for Mol of Hungary and OMV of Austria, partners in the pipeline, to invest $8bn in developing gas production in the Kurdistan region of northern Iraq.
Gas-rich Turkmenistan, locked in a gas dispute with Russia and likely to look favourably on alternative export routes, would be another source if the problem of crossing the Caspian could be solved. If ITGI goes ahead, however, it will take away the cheapest and quickest source of supply for Nabucco.
If the latter pipeline is built, it will encourage investment in gas production and so, eventually, it is likely the supply will come. That would mean the pipeline being used at less than full capacity for many years. But Jonathan Stern of the Oxford Institute for Energy Studies believes the political will may now be there to do that.
“European governments will just have to encourage their utilities to back Nabucco,” he says. “They will say ‘this is a test of EU energy policy and a test of European solidarity, and you have got to do it’.”
Next steps
Securing an intergovernmental agreement is only the first step on the road to taking a final decision to proceed with Nabucco. The next steps will be:
● Completing the engineering design work, which will be the basis for the environmental impact assessment.
● Signing agreements with natural gas trading companies to book capacity on the pipeline. The gas traders will be trying to agree deals with the supply countries, likely to be Azerbaijan, Iraq and Egypt for the first phase, and then possibly Turkmenistan for the second phase.
● Securing financing. The European Commission has promised €200m ($280m, £170m) of stimulus funding, but that is only a fraction of the project’s estimated cost of about €8bn.
The European Investment Bank has said it is prepared to finance up to 25 per cent of the pipeline’s cost, implying a further commitment of €2bn.
Commercial funding should be relatively easy to secure once the capacity is booked, because the gas transit fees are reliable revenues.
The problem will be in securing the gas to be transported.
Once those elements are in place, the Nabucco consortium says that it will be able to take the final investment decision, which is scheduled for the first quarter of next year.
It can then begin to sign contracts with contractors, steel providers and other suppliers. Construction could begin next year.
Nabucco, the ambitious pipeline proposal to bring natural gas to the European Union from the Caspian region, will pass its first significant milestone on Monday when an inter governmental agreement between the project’s backers is signed.
Turkey, where the pipeline is intended to start, had been obstructing a deal but a solution has been found to meet the country’s demands for security of supply without making a legal commitment to provide it with a fixed amount of gas.
A crisis in January caused by a gas dispute between Russia and Ukraine gave momentum to the slow-moving Nabucco project, reinforcing European consumers’ view of the need for alternative supply routes and sources of gas.
Many European industry executives and officials now believe the pipeline is likely to go ahead at last.
However, the commercial prospects for Nabucco still look highly uncertain because of a shortage of readily available gas supplies and competition from cheaper and quicker projects. If it is to be built, it is likely to require further support from member states and the EU.
The intergovernmental agreement is set to be signed in Ankara on Monday by the five transit countries – Turkey, Austria, Hungary, Romania and Bulgaria. Energy companies from those five countries make up the Nabucco consortium, along with RWE of Germany.
Turkey has been demanding it should be able to buy 15 per cent of Nabucco’s gas for its domestic use or for re-export. For now, that demand appears to have been shelved.
Instead, Ankara has been promised other guarantees of security of gas supply, such as a commitment that the pipeline will be built so that gas can flow in both directions. In emergencies such as the Russia-Ukraine dispute, it would be able to call on stockpiles of gas held in the EU.
But while the politicians may now be in agreement, the business case to support the €8bn ($11bn, £7bn) investment to build a 3,300km pipeline is more tenuous.
The demand is certainly there. A year ago, companies interested in using Nabucco made non-binding bids for 100 per cent of its capacity from its earliest planned start date of 2013.
The problem is the lack of gas to fill it. The only country that can definitely supply Nabucco from the start is Azerbaijan, which will begin production from the large Shah Deniz 2 project in the next decade.
However, that gas is also sought by two other planned pipelines running from Greece to Italy: the Interconnector Turkey Greece Italy (ITGI) and the trans-Adriatic pipeline (TAP). Umberto Quadrino, the chief executive of Edison, the Italian energy company that backs ITGI, says: “This pipeline can be realised much more easily. There is just a small infrastructure investment. Nabucco is much more complex and more gas is needed.”
ITGI would have about 8bn cubic metres per year going to Italy, compared with Nabucco’s planned maximum capacity of 31bn cubic metres per year.
For Nabucco, Iraq is a promising source of gas, following the plan announced in May for Mol of Hungary and OMV of Austria, partners in the pipeline, to invest $8bn in developing gas production in the Kurdistan region of northern Iraq.
Gas-rich Turkmenistan, locked in a gas dispute with Russia and likely to look favourably on alternative export routes, would be another source if the problem of crossing the Caspian could be solved. If ITGI goes ahead, however, it will take away the cheapest and quickest source of supply for Nabucco.
If the latter pipeline is built, it will encourage investment in gas production and so, eventually, it is likely the supply will come. That would mean the pipeline being used at less than full capacity for many years. But Jonathan Stern of the Oxford Institute for Energy Studies believes the political will may now be there to do that.
“European governments will just have to encourage their utilities to back Nabucco,” he says. “They will say ‘this is a test of EU energy policy and a test of European solidarity, and you have got to do it’.”
Next steps
Securing an intergovernmental agreement is only the first step on the road to taking a final decision to proceed with Nabucco. The next steps will be:
● Completing the engineering design work, which will be the basis for the environmental impact assessment.
● Signing agreements with natural gas trading companies to book capacity on the pipeline. The gas traders will be trying to agree deals with the supply countries, likely to be Azerbaijan, Iraq and Egypt for the first phase, and then possibly Turkmenistan for the second phase.
● Securing financing. The European Commission has promised €200m ($280m, £170m) of stimulus funding, but that is only a fraction of the project’s estimated cost of about €8bn.
The European Investment Bank has said it is prepared to finance up to 25 per cent of the pipeline’s cost, implying a further commitment of €2bn.
Commercial funding should be relatively easy to secure once the capacity is booked, because the gas transit fees are reliable revenues.
The problem will be in securing the gas to be transported.
Once those elements are in place, the Nabucco consortium says that it will be able to take the final investment decision, which is scheduled for the first quarter of next year.
It can then begin to sign contracts with contractors, steel providers and other suppliers. Construction could begin next year.
Monday, June 1, 2009
Iraq: Baghdad may yet fulfill its potential
Carola Hoyos
After almost 40 years of exile, international oil companies are about to return to Iraq.
For companies such as BP, Shell, Total and ExxonMobil, Iraq represents the biggest opportunity in decades.
Not since the fall of the Soviet Union led to the revival of Russia’s industry and significant discoveries in central Asia, has such a promising oil frontier emerged.
The companies are among those expected to bid next month for oil service contracts. They hope their work in helping revive Iraq’s tired old fields will lead to being allowed to tap its vast undeveloped reserves.
Iraq has reserves of 115bn barrels, but war, sanctions and underinvestment have meant the country is able to produce only about 2.4m barrels a day, a fraction of its potential.
But the fall in oil prices – to about $60 a barrel, from $147 last July – has left a gaping hole in Iraq’s budget. As a result, politicians in Baghdad have finally become serious about writing contracts that oil companies are willing to accept, even without a hydrocarbons law.
Thamir Ghadhban, chairman of the advisory board to Iraq’s prime minister and a former oil minister, says the coming bidding round will be heavily subscribed and companies will be obliged to begin work within three months of any awards being approved by Baghdad.
Executives warn the process could be delayed, given the country’s past struggles to make decisions about its most precious resource and in view of the fragility of the security situation. However, they say they are as close to returning to the country as they have ever been.
Alex Munton, analyst at Wood Mackenzie, the industry consultant, says the lack of a hydrocarbon law, bogged down by disagreement about how to share the oil revenue, is no longer an obstacle because many of the companies’ concerns have been addressed.
Nevertheless, the companies are taking a leap of faith, especially because the contracts demand a total of $2.6bn in loans upfront, making them riskier than before.
“Having an institution [such as the hydrocarbons law] in place gives greater comfort that things are not going to change in three to five years, when the companies are making investments for 20 years,” Mr Munton says. But, he adds, Iraq was too good an opportunity to forgo.
Indeed, international groups have been short of opportunities to tap easy oil as oil-rich countries have closed their borders to them and relied on their own national companies and on service contractors such as Schlumberger.
“International oil companies are short of reserves and opportunities, and countries control almost 88 per cent of oil reserves. The only real opportunity is Iraq,” Mr Ghadhban said.
But while Baghdad was negotiating with some of the world’s biggest oil companies, many smaller ones decided to bet on Kurdistan, the more stable semi-autonomous region in the north of the country.
Their decisions were risky, because Baghdad retaliated by prohibiting those companies from bidding for work in the southern areas it controls.
But their audacity may also be about to pay off. The Kurdistan Regional Government this month announced it had asked Addax, a small Swiss oil company, and DNO, a Norwegian company, to export 100,000 barrels a day of its oil through the Iraq-Turkey pipeline.
Baghdad agreed, ending a stalemate that had for months hindered companies trying to recoup some of the hundreds of millions of dollars they invested in developing fields in Kurdistan.
Though the deal is still fraught with uncertainty, especially as money from the sale of oil will be controlled by Baghdad, it may work.
Addax and DNO, siding with Ashti Hawrami, the KRG’s determined oil minister, are willing to give it a shot. Jean Claude Gandur, president and chief executive of Addax, says he trusts Mr Hawrami to come up with the money, believing he may already have cut a deal with the finance ministry in Baghdad.
“He fears nothing, he is a man of determination,” Mr Gandur told the FT.
Meanwhile, Mr Hawrami recently may have won himself a big ally. Europe now has a vested interest in seeing exports from Kurdistan, after OMV of Austria and Mol of Hungary agreed to develop two big Kurdish gas fields eventually to feed the Nabucco pipeline.
Nabucco is the centrepiece of Europe’s energy policy and its drive to reduce the region’s dependence on Russia. But construction of the pipeline, which would bring gas from central Asia, has yet to begin, because it lacks suppliers.
The deal now makes Kurdistan’s gas a decisive factor in the success or failure of Nabucco.
That, and Iraq’s desperate need for revenue to fill the gap left by the drop in oil prices, may just speed up exports from Kurdistan, despite the bitter politics.
Together with the vast oil fields in the south, they may help the country fulfil its potential.
The consequences of this reach far beyond the country’s borders. Not only does Europe need Iraq’s gas, but analysts believe the world could again suffer an oil shortage if Iraq fails to develop its huge fields in time to fuel the recovery of the world’s economy.
After almost 40 years of exile, international oil companies are about to return to Iraq.
For companies such as BP, Shell, Total and ExxonMobil, Iraq represents the biggest opportunity in decades.
Not since the fall of the Soviet Union led to the revival of Russia’s industry and significant discoveries in central Asia, has such a promising oil frontier emerged.
The companies are among those expected to bid next month for oil service contracts. They hope their work in helping revive Iraq’s tired old fields will lead to being allowed to tap its vast undeveloped reserves.
Iraq has reserves of 115bn barrels, but war, sanctions and underinvestment have meant the country is able to produce only about 2.4m barrels a day, a fraction of its potential.
But the fall in oil prices – to about $60 a barrel, from $147 last July – has left a gaping hole in Iraq’s budget. As a result, politicians in Baghdad have finally become serious about writing contracts that oil companies are willing to accept, even without a hydrocarbons law.
Thamir Ghadhban, chairman of the advisory board to Iraq’s prime minister and a former oil minister, says the coming bidding round will be heavily subscribed and companies will be obliged to begin work within three months of any awards being approved by Baghdad.
Executives warn the process could be delayed, given the country’s past struggles to make decisions about its most precious resource and in view of the fragility of the security situation. However, they say they are as close to returning to the country as they have ever been.
Alex Munton, analyst at Wood Mackenzie, the industry consultant, says the lack of a hydrocarbon law, bogged down by disagreement about how to share the oil revenue, is no longer an obstacle because many of the companies’ concerns have been addressed.
Nevertheless, the companies are taking a leap of faith, especially because the contracts demand a total of $2.6bn in loans upfront, making them riskier than before.
“Having an institution [such as the hydrocarbons law] in place gives greater comfort that things are not going to change in three to five years, when the companies are making investments for 20 years,” Mr Munton says. But, he adds, Iraq was too good an opportunity to forgo.
Indeed, international groups have been short of opportunities to tap easy oil as oil-rich countries have closed their borders to them and relied on their own national companies and on service contractors such as Schlumberger.
“International oil companies are short of reserves and opportunities, and countries control almost 88 per cent of oil reserves. The only real opportunity is Iraq,” Mr Ghadhban said.
But while Baghdad was negotiating with some of the world’s biggest oil companies, many smaller ones decided to bet on Kurdistan, the more stable semi-autonomous region in the north of the country.
Their decisions were risky, because Baghdad retaliated by prohibiting those companies from bidding for work in the southern areas it controls.
But their audacity may also be about to pay off. The Kurdistan Regional Government this month announced it had asked Addax, a small Swiss oil company, and DNO, a Norwegian company, to export 100,000 barrels a day of its oil through the Iraq-Turkey pipeline.
Baghdad agreed, ending a stalemate that had for months hindered companies trying to recoup some of the hundreds of millions of dollars they invested in developing fields in Kurdistan.
Though the deal is still fraught with uncertainty, especially as money from the sale of oil will be controlled by Baghdad, it may work.
Addax and DNO, siding with Ashti Hawrami, the KRG’s determined oil minister, are willing to give it a shot. Jean Claude Gandur, president and chief executive of Addax, says he trusts Mr Hawrami to come up with the money, believing he may already have cut a deal with the finance ministry in Baghdad.
“He fears nothing, he is a man of determination,” Mr Gandur told the FT.
Meanwhile, Mr Hawrami recently may have won himself a big ally. Europe now has a vested interest in seeing exports from Kurdistan, after OMV of Austria and Mol of Hungary agreed to develop two big Kurdish gas fields eventually to feed the Nabucco pipeline.
Nabucco is the centrepiece of Europe’s energy policy and its drive to reduce the region’s dependence on Russia. But construction of the pipeline, which would bring gas from central Asia, has yet to begin, because it lacks suppliers.
The deal now makes Kurdistan’s gas a decisive factor in the success or failure of Nabucco.
That, and Iraq’s desperate need for revenue to fill the gap left by the drop in oil prices, may just speed up exports from Kurdistan, despite the bitter politics.
Together with the vast oil fields in the south, they may help the country fulfil its potential.
The consequences of this reach far beyond the country’s borders. Not only does Europe need Iraq’s gas, but analysts believe the world could again suffer an oil shortage if Iraq fails to develop its huge fields in time to fuel the recovery of the world’s economy.
Tuesday, May 19, 2009
Russia's South Stream Project Gets a Boost
By Jason Bush
Key countries have signed on to Russia's South Stream project, giving it an edge over the rival Nabucco pipeline proposal in a race with geopolitical repercussions.
On May 15, Russia signed deals with Italy, Serbia, Bulgaria, and Greece, bringing the South Stream project, a major new gas pipeline to Europe, one step closer to reality.
Russia has huge reserves of natural gas in Siberia -- but the cost of getting the gas to Europe is enormous.
At a meeting in Sochi, attended by Russian Prime Minister Vladimir Putin and Italian Prime Minister Silvio Berlusconi, Russia's Gazprom and Italy's ENI agreed to double the planned pipeline's capacity to 63 billion cubic meters. In addition to ENI, Gazprom signed memoranda of understanding with Greek natural gas transmission company DESFA, Serbia's Srbijagas, and Bulgarian Energy Holding.
The participating countries also signed documents needed to start work on the 2,000km (1,243-mile) pipeline. With completion planned by 2015, South Stream eventually will pump natural gas from southern Russia under the Black Sea, bringing it via Bulgaria, Serbia, Hungary, and Greece to terminals in western Austria and southern Italy.
The agreement represents a significant diplomatic coup for Russia in a great geopolitical race that will help determine the source of Europe's energy supplies for decades to come. That race has been visibly gaining pace over recent weeks. Backers of a rival pipeline to southern Europe are now vying to put together the necessary political support. "It's very much down to the wire now," says Chris Weafer, chief strategist at UralSib, a Moscow bank. "There's definitely a race on to get all the signatures in place."
Concerns About a Stranglehold
It's no coincidence that the agreements on South Stream come just days after a key summit in Prague designed to give political impetus to Nabucco, a proposed rival pipeline through Turkey that is backed by the European Commission and the US. In the eyes of the EU and the US, the key advantage of Nabucco is that it would bypass Russia, diminishing Europe's already heavy dependence on Russian gas. Imports from Russia presently account for around 40 percent of gas imports and 25 percent of gas consumption in Europe. Concerns about Russia's stranglehold on Europe's energy have only intensified recently, following this January's damaging price spat between Russia and Ukraine, which briefly saw Russia's gas supplies to Europe suspended.
Those fears help explain the recent burst of activity surrounding Nabucco, a project that has been under discussion since 2002. In addition to the Prague summit, the EU has also been busy courting Turkey, a key transit country, which is expected to sign an agreement in June paving the way for Turkey to host the pipeline. Previously, there had been concerns that Turkey would try to use the pipeline as a bargaining chip in EU accession negotiations.
But despite the recent progress on Nabucco, it all still looks to many analysts like a case of too little, too late. "I believe Nabucco still looks very problematic," says Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. "It might work, or it might not, but I don't think it's going to work quickly." He argues that the pipeline probably won't be viable until around 2020 -- much later than the 2014 starting date currently being advanced.
It doesn't help that Russia, eager to safeguard its dominant position as Europe's energy supplier, is already one step ahead of the game. The agreements reached in Sochi underscore Russia's success in winning over key customers and transit countries for South Stream -- a project that contradicts the EU's stated policy of diversifying Europe's energy supplies.
Where to Get the Gas
Even without the competition from South Stream, major question marks continue to hang over the whole economic viability of the Nabucco project. One key problem is financing: So far the EU has only committed a small fraction of the €7.9 billion ($10.6 billion) needed to build the pipeline. An even more basic question is where the gas for Nabucco (ultimately targeted at 31 billion cubic meters per annum) will come from.
The original idea behind the pipeline was to ship gas from the Caspian region and Central Asia, with gas-rich countries such as Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan supplying the fuel. The snag is that of these four countries, only Azerbaijan signed up to the Prague agreement backing the project.
The other three Central Asian countries, under diplomatic pressure from Russia, pointedly declined to do so. In any case, no one has figured out how Central Asian gas could be linked up with Nabucco. A pipeline under the Caspian is impossible until all the bordering states resolve a long-running dispute over the sea's legal status, giving Russia an effective veto.
Analysts therefore believe the only way Nabucco can be viable is if Iran can now be talked into supplying gas for the project -- a scenario that the US previously fought. And despite recent overtures from US President Barack Obama to improve relations with Iran, it's still far too soon to talk of any diplomatic thaw.
Meanwhile, the Russians are making progress with South Stream, which currently appears to be the more economically viable of the two. In sharp contrast to Nabucco, the Russians have no shortage of gas that could potentially be transported to Europe via the pipe, and the Russians also seem committed to financing the project. "It's expensive, controversial, and hard to implement," says Valery Nesterov, oil and gas analyst at Russian investment bank Troika Dialog. "But at least it has investment guarantees, and a resource base, to be secured by Gazprom. Though not without problems, the financial guarantees and resource base are still more realistic than those secured by Nabucco."
Snail vs. Tortoise
It's far too early, though, to declare victory for the Russians. The South Stream project also faces many daunting obstacles. Indeed, the great pipeline race might be said to resemble a marathon contest between a snail and a tortoise. "At this stage, it's not clear where the gas is going to come from for either route," says UralSib's Weafer.
Although Russia has huge gas reserves that could potentially be shipped Europe's way, most of those reserves are still sitting deep under the Arctic tundra, in the remote Yamal region of Northern Siberia. The cost of bringing them to market is gargantuan -- around $250 billion, according to estimates by Royal Dutch Shell. The current global recession has only increased the uncertainty about future gas demand, making Gazprom even more reluctant to invest. Russia and the EU have so far failed to hammer out legal agreements that would regulate joint ventures between Gazprom and Western partners. "It's a real mess," says Weafer.
Then there's the tremendous cost of the South Stream pipeline itself. Officially estimated at between €19 billion and €24 billion ($25.6 billion to $32.4 billion), it's around three times as expensive as the alternative Nabucco route. Those costs could now be especially problematic, at a time when the global financial crisis is depressing gas prices and Gazprom's profits. "Gazprom is facing financial difficulties in the years to come," says Nesterov, "and the cost of the project is tremendous."
So despite South Stream's diplomatic head start, the outcome of the great pipeline race is still far from certain. And neither pipeline is likely to provide any quick solution to Europe's mounting long-term energy needs.
Bush is BusinessWeek's Moscow bureau chief.
Key countries have signed on to Russia's South Stream project, giving it an edge over the rival Nabucco pipeline proposal in a race with geopolitical repercussions.
On May 15, Russia signed deals with Italy, Serbia, Bulgaria, and Greece, bringing the South Stream project, a major new gas pipeline to Europe, one step closer to reality.
Russia has huge reserves of natural gas in Siberia -- but the cost of getting the gas to Europe is enormous.
At a meeting in Sochi, attended by Russian Prime Minister Vladimir Putin and Italian Prime Minister Silvio Berlusconi, Russia's Gazprom and Italy's ENI agreed to double the planned pipeline's capacity to 63 billion cubic meters. In addition to ENI, Gazprom signed memoranda of understanding with Greek natural gas transmission company DESFA, Serbia's Srbijagas, and Bulgarian Energy Holding.
The participating countries also signed documents needed to start work on the 2,000km (1,243-mile) pipeline. With completion planned by 2015, South Stream eventually will pump natural gas from southern Russia under the Black Sea, bringing it via Bulgaria, Serbia, Hungary, and Greece to terminals in western Austria and southern Italy.
The agreement represents a significant diplomatic coup for Russia in a great geopolitical race that will help determine the source of Europe's energy supplies for decades to come. That race has been visibly gaining pace over recent weeks. Backers of a rival pipeline to southern Europe are now vying to put together the necessary political support. "It's very much down to the wire now," says Chris Weafer, chief strategist at UralSib, a Moscow bank. "There's definitely a race on to get all the signatures in place."
Concerns About a Stranglehold
It's no coincidence that the agreements on South Stream come just days after a key summit in Prague designed to give political impetus to Nabucco, a proposed rival pipeline through Turkey that is backed by the European Commission and the US. In the eyes of the EU and the US, the key advantage of Nabucco is that it would bypass Russia, diminishing Europe's already heavy dependence on Russian gas. Imports from Russia presently account for around 40 percent of gas imports and 25 percent of gas consumption in Europe. Concerns about Russia's stranglehold on Europe's energy have only intensified recently, following this January's damaging price spat between Russia and Ukraine, which briefly saw Russia's gas supplies to Europe suspended.
Those fears help explain the recent burst of activity surrounding Nabucco, a project that has been under discussion since 2002. In addition to the Prague summit, the EU has also been busy courting Turkey, a key transit country, which is expected to sign an agreement in June paving the way for Turkey to host the pipeline. Previously, there had been concerns that Turkey would try to use the pipeline as a bargaining chip in EU accession negotiations.
But despite the recent progress on Nabucco, it all still looks to many analysts like a case of too little, too late. "I believe Nabucco still looks very problematic," says Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. "It might work, or it might not, but I don't think it's going to work quickly." He argues that the pipeline probably won't be viable until around 2020 -- much later than the 2014 starting date currently being advanced.
It doesn't help that Russia, eager to safeguard its dominant position as Europe's energy supplier, is already one step ahead of the game. The agreements reached in Sochi underscore Russia's success in winning over key customers and transit countries for South Stream -- a project that contradicts the EU's stated policy of diversifying Europe's energy supplies.
Where to Get the Gas
Even without the competition from South Stream, major question marks continue to hang over the whole economic viability of the Nabucco project. One key problem is financing: So far the EU has only committed a small fraction of the €7.9 billion ($10.6 billion) needed to build the pipeline. An even more basic question is where the gas for Nabucco (ultimately targeted at 31 billion cubic meters per annum) will come from.
The original idea behind the pipeline was to ship gas from the Caspian region and Central Asia, with gas-rich countries such as Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan supplying the fuel. The snag is that of these four countries, only Azerbaijan signed up to the Prague agreement backing the project.
The other three Central Asian countries, under diplomatic pressure from Russia, pointedly declined to do so. In any case, no one has figured out how Central Asian gas could be linked up with Nabucco. A pipeline under the Caspian is impossible until all the bordering states resolve a long-running dispute over the sea's legal status, giving Russia an effective veto.
Analysts therefore believe the only way Nabucco can be viable is if Iran can now be talked into supplying gas for the project -- a scenario that the US previously fought. And despite recent overtures from US President Barack Obama to improve relations with Iran, it's still far too soon to talk of any diplomatic thaw.
Meanwhile, the Russians are making progress with South Stream, which currently appears to be the more economically viable of the two. In sharp contrast to Nabucco, the Russians have no shortage of gas that could potentially be transported to Europe via the pipe, and the Russians also seem committed to financing the project. "It's expensive, controversial, and hard to implement," says Valery Nesterov, oil and gas analyst at Russian investment bank Troika Dialog. "But at least it has investment guarantees, and a resource base, to be secured by Gazprom. Though not without problems, the financial guarantees and resource base are still more realistic than those secured by Nabucco."
Snail vs. Tortoise
It's far too early, though, to declare victory for the Russians. The South Stream project also faces many daunting obstacles. Indeed, the great pipeline race might be said to resemble a marathon contest between a snail and a tortoise. "At this stage, it's not clear where the gas is going to come from for either route," says UralSib's Weafer.
Although Russia has huge gas reserves that could potentially be shipped Europe's way, most of those reserves are still sitting deep under the Arctic tundra, in the remote Yamal region of Northern Siberia. The cost of bringing them to market is gargantuan -- around $250 billion, according to estimates by Royal Dutch Shell. The current global recession has only increased the uncertainty about future gas demand, making Gazprom even more reluctant to invest. Russia and the EU have so far failed to hammer out legal agreements that would regulate joint ventures between Gazprom and Western partners. "It's a real mess," says Weafer.
Then there's the tremendous cost of the South Stream pipeline itself. Officially estimated at between €19 billion and €24 billion ($25.6 billion to $32.4 billion), it's around three times as expensive as the alternative Nabucco route. Those costs could now be especially problematic, at a time when the global financial crisis is depressing gas prices and Gazprom's profits. "Gazprom is facing financial difficulties in the years to come," says Nesterov, "and the cost of the project is tremendous."
So despite South Stream's diplomatic head start, the outcome of the great pipeline race is still far from certain. And neither pipeline is likely to provide any quick solution to Europe's mounting long-term energy needs.
Bush is BusinessWeek's Moscow bureau chief.
Monday, March 23, 2009
‘Moment of truth’ on gas pipeline
Europe’s commitment to a strategic gas pipeline that would bypass Russia was hanging in the balance on Thursday night as member states made a final push to agree a €5bn energy infrastructure proposal that has proved unusually divisive.
The torturous negotiations over a relatively small set of projects intended to improve energy security and stimulate the economy have become a test of the European Union’s credibility and its ability to respond to larger challenges, according to several diplomats.
“This is the moment of truth,” one diplomat said on Thursday on the sidelines of the EU summit in Brussels.
At the centre of the dispute is the Nabucco pipeline, which would carry gas from the Caspian region to Austria via Turkey.
The European Commission promoted the 3,300km project in January – in the wake of the Russia-Ukraine stand-off that cut gas supplies – as it urged member states to commit €5bn ($6.9bn, £4.7bn) in unspent funds to a series of projects to improve energy security.
Germany, the biggest contributor to the EU budget, has repeatedly expressed reservations about the plan, which also includes funding for gas and electricity interconnections, offshore wind and carbon capture and storage pilot plants.
Its opposition in recent days has centred on Nabucco, which German government officials say would provide no stimulus to the economy because work would not begin for years. The focus on Nabucco was particularly sensitive since Germany has championed a competing pipeline project, Nordstream, which would bring Russian gas to the country through the Baltic Sea.
Poland, a staunch opponent of Nordstream – and ever wary of Russia’s influence – argued on Thursday that Nabucco had to remain in the plan if the EU were to make good on its promise to improve its energy security.
“It’s the best way for diversification and, consequently, for the energy security of Europe,” said Donald Tusk, the Polish prime minister, of Nabucco.
Other diplomats predicted that removing Nabucco from the list of projects so late in the negotiations could cause the entire plan to unravel, leading to embarrassment for all concerned.
The wrangling over the €5bn plan overshadowed EU efforts to agree on financial commitments ahead of a December meeting in Copenhagen to negotiate a global agreement on climate change.
The United Nations warned this week that those talks could be imperilled if the EU did not table a proposal for financial commitments it would make to developing countries to help them fight climate change.
Yet member states are expected to omit those commitments in the summit’s final communiqué, with several arguing there was no leverage to be gained by making the first offer.
The torturous negotiations over a relatively small set of projects intended to improve energy security and stimulate the economy have become a test of the European Union’s credibility and its ability to respond to larger challenges, according to several diplomats.
“This is the moment of truth,” one diplomat said on Thursday on the sidelines of the EU summit in Brussels.
At the centre of the dispute is the Nabucco pipeline, which would carry gas from the Caspian region to Austria via Turkey.
The European Commission promoted the 3,300km project in January – in the wake of the Russia-Ukraine stand-off that cut gas supplies – as it urged member states to commit €5bn ($6.9bn, £4.7bn) in unspent funds to a series of projects to improve energy security.
Germany, the biggest contributor to the EU budget, has repeatedly expressed reservations about the plan, which also includes funding for gas and electricity interconnections, offshore wind and carbon capture and storage pilot plants.
Its opposition in recent days has centred on Nabucco, which German government officials say would provide no stimulus to the economy because work would not begin for years. The focus on Nabucco was particularly sensitive since Germany has championed a competing pipeline project, Nordstream, which would bring Russian gas to the country through the Baltic Sea.
Poland, a staunch opponent of Nordstream – and ever wary of Russia’s influence – argued on Thursday that Nabucco had to remain in the plan if the EU were to make good on its promise to improve its energy security.
“It’s the best way for diversification and, consequently, for the energy security of Europe,” said Donald Tusk, the Polish prime minister, of Nabucco.
Other diplomats predicted that removing Nabucco from the list of projects so late in the negotiations could cause the entire plan to unravel, leading to embarrassment for all concerned.
The wrangling over the €5bn plan overshadowed EU efforts to agree on financial commitments ahead of a December meeting in Copenhagen to negotiate a global agreement on climate change.
The United Nations warned this week that those talks could be imperilled if the EU did not table a proposal for financial commitments it would make to developing countries to help them fight climate change.
Yet member states are expected to omit those commitments in the summit’s final communiqué, with several arguing there was no leverage to be gained by making the first offer.
Wednesday, January 21, 2009
EU Commissioner Stresses Importance of Alternative Gas Pipeline
Russia and Ukraine have finally agreed on a settlement over gas prices and transport fees, which could see supplies reaching Europe again within the next few days. Still, European Commissioner Günter Verheugen has sharply criticized the actions of both countries and is calling for secure gas supplies through alternative pipelines.
The infighting between Russia and Ukraine, which led to gas shortages across much of the European Union for two weeks, appears to have been resolved on Monday. Russia and Ukraine signed a 10-year gas supply deal that would see the restoration of natural gas shipments to Kiev. Still, although it appeared clear that gas supplies would soon be piped through Ukraine to the European Union, politicians said both Moscow and Kiev have proven to be unreliable partners for Europe -- and they are looking to secure alternate gas routes in case of future disputes.
"I can't give you any information about what procedures are being undertaken there or how you can sue," said European Commissioner for Enterprise and Industry Günter Verheugen of Germany. "But it is a fact that we are defending ourselves and that we are showing that we won't just sit back put up with it."
Verheugen was responding to recent threats made by European Commission President Jose Manuel Durao Barroso that Brussels would sue both its Russian and Ukrainian contract partners. He added that it was terrain that had never been covered before by the EU.
Verheugen also called for decreased dependence on Russian oil and gas supplies and Ukrainian pipelines for delivery. He furthermore stressed the importance of speedy progress on projects like an underwater Baltic Sea pipeline, which will bring Russian gas directly to Germany and bypass other countries.
Verheugen, who previously supported EU membership for Ukraine, expressed clear disappointment over the fact that the country blocked Russian gas from entering Europe after the Kremlin restored supplies under the watch of European observers last week. Ukraine's actions -- which resulted from disagreements over gas prices and transit fees -- undoubtedly hurt its hopes for future EU and NATO membership, Verheugen said.
Fingers have been pointed at both Ukraine and Russia. Ukraine has been accused of shutting off supplies to the EU. And last week, EU gas experts accused Russia of deliberately sending gas to areas where it is technically difficult to transfer on to Europe.
During a visit with German Chancellor Angela Merkel on Friday, Russian Prime Minister Vladimir Putin strenuously denied the allegation. At the same time on Friday, a group of German, Italian and French gas companies -- including E.ON-Ruhrgas, ENI (Italy) and Gaz de France -- said they would create a consortium that would provide the "technical gas" needed by Ukraine to run its compressor stations in order to again pump normal gas supplies to Europe again. This will mean buying 21 million cubic meters of gas per day at a cost of a half-billion euros during the first quarter of the year.
This plan is part of the EU's attempt to help both countries move passed their dispute, which has left many Europeans without heat since the start of the year.
The impasse between Moscow and Kiev ended on Sunday night after Putin and his Ukrainian counterpart Yulia Timoshenko met an agreement after hours of negotiations. Under the terms of the deal, Ukraine will pay world market gas prices starting next year and, for the rest of 2009, will receive a 20 percent discount provided it does not increase gas transit fees, which will remain the same as before the standoff.
EU officials welcomed Sunday night's settlement, but many were hesitant to believe that peace in the gas conflict would be lasting. On Sunday, a spokesperson for the Czech Republic, which is currently the six-month rotating president of the EU, said greeted the deal. At the same time, the spokesperson added, many past agreements have been reached only to be violated later on.
German Economics Minister Michael Glos of the conservative Christian Social Union, the Bavarian sister party to Merkel's Christian Democrats, said: "As pleasing as this agreement may be, it is just as important that customers again get their gas quickly and that deliveries in the future follow reliably."
The infighting between Russia and Ukraine, which led to gas shortages across much of the European Union for two weeks, appears to have been resolved on Monday. Russia and Ukraine signed a 10-year gas supply deal that would see the restoration of natural gas shipments to Kiev. Still, although it appeared clear that gas supplies would soon be piped through Ukraine to the European Union, politicians said both Moscow and Kiev have proven to be unreliable partners for Europe -- and they are looking to secure alternate gas routes in case of future disputes.
"I can't give you any information about what procedures are being undertaken there or how you can sue," said European Commissioner for Enterprise and Industry Günter Verheugen of Germany. "But it is a fact that we are defending ourselves and that we are showing that we won't just sit back put up with it."
Verheugen was responding to recent threats made by European Commission President Jose Manuel Durao Barroso that Brussels would sue both its Russian and Ukrainian contract partners. He added that it was terrain that had never been covered before by the EU.
Verheugen also called for decreased dependence on Russian oil and gas supplies and Ukrainian pipelines for delivery. He furthermore stressed the importance of speedy progress on projects like an underwater Baltic Sea pipeline, which will bring Russian gas directly to Germany and bypass other countries.
Verheugen, who previously supported EU membership for Ukraine, expressed clear disappointment over the fact that the country blocked Russian gas from entering Europe after the Kremlin restored supplies under the watch of European observers last week. Ukraine's actions -- which resulted from disagreements over gas prices and transit fees -- undoubtedly hurt its hopes for future EU and NATO membership, Verheugen said.
Fingers have been pointed at both Ukraine and Russia. Ukraine has been accused of shutting off supplies to the EU. And last week, EU gas experts accused Russia of deliberately sending gas to areas where it is technically difficult to transfer on to Europe.
During a visit with German Chancellor Angela Merkel on Friday, Russian Prime Minister Vladimir Putin strenuously denied the allegation. At the same time on Friday, a group of German, Italian and French gas companies -- including E.ON-Ruhrgas, ENI (Italy) and Gaz de France -- said they would create a consortium that would provide the "technical gas" needed by Ukraine to run its compressor stations in order to again pump normal gas supplies to Europe again. This will mean buying 21 million cubic meters of gas per day at a cost of a half-billion euros during the first quarter of the year.
This plan is part of the EU's attempt to help both countries move passed their dispute, which has left many Europeans without heat since the start of the year.
The impasse between Moscow and Kiev ended on Sunday night after Putin and his Ukrainian counterpart Yulia Timoshenko met an agreement after hours of negotiations. Under the terms of the deal, Ukraine will pay world market gas prices starting next year and, for the rest of 2009, will receive a 20 percent discount provided it does not increase gas transit fees, which will remain the same as before the standoff.
EU officials welcomed Sunday night's settlement, but many were hesitant to believe that peace in the gas conflict would be lasting. On Sunday, a spokesperson for the Czech Republic, which is currently the six-month rotating president of the EU, said greeted the deal. At the same time, the spokesperson added, many past agreements have been reached only to be violated later on.
German Economics Minister Michael Glos of the conservative Christian Social Union, the Bavarian sister party to Merkel's Christian Democrats, said: "As pleasing as this agreement may be, it is just as important that customers again get their gas quickly and that deliveries in the future follow reliably."
Sunday, January 18, 2009
EU wary as Russia and Ukraine reach gas deal
By Oleg Shchedrov
MOSCOW (Reuters) - The prime ministers of Ukraine and Russia said on Sunday they had reached an outline deal to restore disrupted gas supplies, while the European Union said it was waiting to see gas actually flowing on to Europe.
The row between the two ex-Soviet neighbors enraged the EU by leaving large parts of Europe without gas in the middle of the winter, and eroded Russia's and Ukraine's credibility as gas supplier and transit route respectively.
The dispute, the worst in an annual tug-of-war over prices between Ukraine and Russia, has pushed European consumers and policymakers to think hard about building new gas routes to cut their heavy reliance on Russian supplies.
"Gas transit, the Ukrainian side assured us, will be restored very soon," Russian state channel Vesti-24 showed Russian Prime Minister Vladimir Putin saying in a brief statement after the marathon talks, which lasted into the small hours of Sunday morning.
But Czech Industry Minister Martin Riman, speaking for the EU, said: "We remain realistic. Over the past few days we have seen several similarly hopeful moments. The only thing that counts for the EU is the resumption of gas supplies. For the time being it is not clear when this resumption takes place."
ONE-YEAR DISCOUNT
Putin, standing next to his Ukrainian counterpart Yulia Tymoshenko, said Moscow had agreed to give Ukraine a 20 percent discount from the price European consumers pay, "on condition Kiev keeps preferential tariffs for Russian gas transit to Europe across Ukraine in 2009 at last year's level."
"We also agreed that, starting January 1, 2010, we will fully move to gas prices and transit tariffs in line with European levels, without any reductions and discounts," Putin said.
Tymoshenko said contracts would be prepared by Monday.
"Once all the documents on gas transit and gas purchases have been signed, gas transit to Europe will be fully restored."
Neither premier spelled out the agreed gas price.
In Kiev, a spokeswoman for Tymoshenko said she would fly back to Moscow on Monday for a signing if the respective gas companies, Gazprom of Russia and Naftogaz of Ukraine, managed to finalize all details of the deal by then.
Russia's Interfax news agency quoted a Russian government source as saying: "It is expected that the documents will be ready for signing on Monday and will be signed in the presence of the prime ministers of Russia and Ukraine."
A Russian government source said the two sides had agreed not to use intermediaries. Previous deals have been complicated by the use of the Swiss-based intermediary Rosukrenergo, a 50/50 joint venture between Gazprom and two Ukrainian businessmen.
Putin and Tymoshenko were under intense pressure from the European Union to resolve the dispute, which has cut gas supplies to much of eastern Europe since January 7.
While Putin had full authority to seal an agreement, it remained unclear whether Tymoshenko's domestic political rival, President Viktor Yushchenko, would respect the deal.
A source in Yushchenko's office said: "It is our understanding that this is an agreement between the two prime ministers and that the two sides in Moscow are now drawing up an agreement."
OCTOBER DEAL
Last October, Tymoshenko and Putin clinched a deal calling for a three-year transition period after which Ukraine would pay market prices.
Yushchenko had no objections to that deal and said repeatedly Ukraine must be prepared to pay market prices, while saying a formula had to be found to determine the price.
Yushchenko and Tymoshenko had disagreed on some tactics in the run-up to the deal, notably on whether gas for Ukraine and gas transiting to Europe should be handled separately.
The all-night talks followed a meeting in Moscow of gas-consuming nations at the Kremlin on Saturday afternoon which failed to resolve the dispute.
Russia cut off supplies to Ukraine on January 1 because it would not pay higher prices for its gas. Six days later, export flows to eastern Europe through Ukraine ceased amid Russian accusations that Kiev was "stealing" gas intended for export.
Kiev, whose economy is forecast to contract by up to 5 percent this year, says it cannot afford to pay market prices and wants Russia to pay higher transit fees for gas it exports through Ukraine.
A hurdle appeared to have been overcome when a consortium of European companies agreed to supply enough gas to fill the empty pipeline and restore pressure so that exports could resume.
But the key sticking point remained the price Ukraine must pay for its own supplies. Yushchenko insisted exports could not resume to Europe until Ukraine had agreed this with Moscow.
Gazprom wanted Ukraine to pay European-level prices of $450 per 1,000 cubic meters (tcm) of gas for 2009, up from $179.5 per tcm in 2008. But Ukraine, heading into its worst recession for a decade, had said it could afford only $201.
MOSCOW (Reuters) - The prime ministers of Ukraine and Russia said on Sunday they had reached an outline deal to restore disrupted gas supplies, while the European Union said it was waiting to see gas actually flowing on to Europe.
The row between the two ex-Soviet neighbors enraged the EU by leaving large parts of Europe without gas in the middle of the winter, and eroded Russia's and Ukraine's credibility as gas supplier and transit route respectively.
The dispute, the worst in an annual tug-of-war over prices between Ukraine and Russia, has pushed European consumers and policymakers to think hard about building new gas routes to cut their heavy reliance on Russian supplies.
"Gas transit, the Ukrainian side assured us, will be restored very soon," Russian state channel Vesti-24 showed Russian Prime Minister Vladimir Putin saying in a brief statement after the marathon talks, which lasted into the small hours of Sunday morning.
But Czech Industry Minister Martin Riman, speaking for the EU, said: "We remain realistic. Over the past few days we have seen several similarly hopeful moments. The only thing that counts for the EU is the resumption of gas supplies. For the time being it is not clear when this resumption takes place."
ONE-YEAR DISCOUNT
Putin, standing next to his Ukrainian counterpart Yulia Tymoshenko, said Moscow had agreed to give Ukraine a 20 percent discount from the price European consumers pay, "on condition Kiev keeps preferential tariffs for Russian gas transit to Europe across Ukraine in 2009 at last year's level."
"We also agreed that, starting January 1, 2010, we will fully move to gas prices and transit tariffs in line with European levels, without any reductions and discounts," Putin said.
Tymoshenko said contracts would be prepared by Monday.
"Once all the documents on gas transit and gas purchases have been signed, gas transit to Europe will be fully restored."
Neither premier spelled out the agreed gas price.
In Kiev, a spokeswoman for Tymoshenko said she would fly back to Moscow on Monday for a signing if the respective gas companies, Gazprom of Russia and Naftogaz of Ukraine, managed to finalize all details of the deal by then.
Russia's Interfax news agency quoted a Russian government source as saying: "It is expected that the documents will be ready for signing on Monday and will be signed in the presence of the prime ministers of Russia and Ukraine."
A Russian government source said the two sides had agreed not to use intermediaries. Previous deals have been complicated by the use of the Swiss-based intermediary Rosukrenergo, a 50/50 joint venture between Gazprom and two Ukrainian businessmen.
Putin and Tymoshenko were under intense pressure from the European Union to resolve the dispute, which has cut gas supplies to much of eastern Europe since January 7.
While Putin had full authority to seal an agreement, it remained unclear whether Tymoshenko's domestic political rival, President Viktor Yushchenko, would respect the deal.
A source in Yushchenko's office said: "It is our understanding that this is an agreement between the two prime ministers and that the two sides in Moscow are now drawing up an agreement."
OCTOBER DEAL
Last October, Tymoshenko and Putin clinched a deal calling for a three-year transition period after which Ukraine would pay market prices.
Yushchenko had no objections to that deal and said repeatedly Ukraine must be prepared to pay market prices, while saying a formula had to be found to determine the price.
Yushchenko and Tymoshenko had disagreed on some tactics in the run-up to the deal, notably on whether gas for Ukraine and gas transiting to Europe should be handled separately.
The all-night talks followed a meeting in Moscow of gas-consuming nations at the Kremlin on Saturday afternoon which failed to resolve the dispute.
Russia cut off supplies to Ukraine on January 1 because it would not pay higher prices for its gas. Six days later, export flows to eastern Europe through Ukraine ceased amid Russian accusations that Kiev was "stealing" gas intended for export.
Kiev, whose economy is forecast to contract by up to 5 percent this year, says it cannot afford to pay market prices and wants Russia to pay higher transit fees for gas it exports through Ukraine.
A hurdle appeared to have been overcome when a consortium of European companies agreed to supply enough gas to fill the empty pipeline and restore pressure so that exports could resume.
But the key sticking point remained the price Ukraine must pay for its own supplies. Yushchenko insisted exports could not resume to Europe until Ukraine had agreed this with Moscow.
Gazprom wanted Ukraine to pay European-level prices of $450 per 1,000 cubic meters (tcm) of gas for 2009, up from $179.5 per tcm in 2008. But Ukraine, heading into its worst recession for a decade, had said it could afford only $201.
Saturday, January 17, 2009
Germany could hold key to gas deal
As Germany prepares to welcome Russian Prime Minister Vladimir Putin, the BBC's Berlin correspondent Steven Rosenberg considers how Germany could broker a deal to end the energy dispute between Russia and Ukraine.
Of all the countries in the European Union, it is Germany which has the best relations with Russia. And which, perhaps, is best placed to help negotiate an end to the gas crisis.
The two countries are major trading partners. They are even building a pipeline together - North Stream - which will bring Russian gas to Europe under the Baltic Sea, bypassing Ukraine.
Moscow claims this route will ensure there are no further interruptions to Europe's energy supplies.
Vladimir Putin is best friends with the German chairman of the pipeline consortium - former Chancellor Gerhard Schroeder.
What is more, Mr Putin speaks fluent German from his days as a KGB spy based in Dresden. (Angela Merkel speaks fluent Russian - so no language barrier there.)
But as the energy dispute between Moscow and Kiev drags on, the Germans are growing increasingly frustrated with the Russians.
Prior to Mr Putin's visit to Berlin, Chancellor Merkel warned the Kremlin its credibility as an energy supplier was on the line. She promised to pass that message on personally to Mr Putin during his visit to Germany.
Embarrassed and annoyed by the images of Europeans shivering without Russian gas, the Germans have been threatening to diversify their energy sources.
"Within the European Union, the subject of energy security is now very important," Guenter Gloser, Germany's minister for Europe, said.
"We need to be independent of those supplying our energy - so we need more energy efficiency, we need more renewable energies like solar projects and we need a range of energy partners - not just Russia."
That is easy to say - and it has been said many times before, not only by Germany, but by other EU countries.
History repeating itself
The last time Russia turned off the gas taps to Ukraine in 2006, causing temporary gas shortages further west, European leaders vowed that never again would they allow energy disputes to the east to leave Europe freezing.
The phrase "energy security" became the rallying cry of the EU.
There were calls to boost solar energy, wind power, and make plans to import liquid gas by sea. Anything to ensure that Europe would not be too dependant on the Russians and get caught out twice.
But three years on, it has happened all over the again.
Another dispute between Russia and Ukraine - and once again Europe is freezing. The EU is facing accusations it was too complacent and too divided over European energy policy.
"The usefulness of a crisis is that it forces you to look into the mirror," chief correspondent of Die Welt newspaper Michael Stuermer said.
"That didn't happen. This present crisis could be seen on the radar over the last three months. The signals were coming all the time. I don't think the German government or the EU Commission took note of the seriousness. We didn't learn much from the crisis of 2006."
Micahel Stuermer believes the latest row could nudge the EU to come up with a "coherent energy strategy".
Considering that the European Union currently gets a quarter of its gas from Russia, it is difficult to imagine such a strategy excluding Russia.
Of all the countries in the European Union, it is Germany which has the best relations with Russia. And which, perhaps, is best placed to help negotiate an end to the gas crisis.
The two countries are major trading partners. They are even building a pipeline together - North Stream - which will bring Russian gas to Europe under the Baltic Sea, bypassing Ukraine.
Moscow claims this route will ensure there are no further interruptions to Europe's energy supplies.
Vladimir Putin is best friends with the German chairman of the pipeline consortium - former Chancellor Gerhard Schroeder.
What is more, Mr Putin speaks fluent German from his days as a KGB spy based in Dresden. (Angela Merkel speaks fluent Russian - so no language barrier there.)
But as the energy dispute between Moscow and Kiev drags on, the Germans are growing increasingly frustrated with the Russians.
Prior to Mr Putin's visit to Berlin, Chancellor Merkel warned the Kremlin its credibility as an energy supplier was on the line. She promised to pass that message on personally to Mr Putin during his visit to Germany.
Embarrassed and annoyed by the images of Europeans shivering without Russian gas, the Germans have been threatening to diversify their energy sources.
"Within the European Union, the subject of energy security is now very important," Guenter Gloser, Germany's minister for Europe, said.
"We need to be independent of those supplying our energy - so we need more energy efficiency, we need more renewable energies like solar projects and we need a range of energy partners - not just Russia."
That is easy to say - and it has been said many times before, not only by Germany, but by other EU countries.
History repeating itself
The last time Russia turned off the gas taps to Ukraine in 2006, causing temporary gas shortages further west, European leaders vowed that never again would they allow energy disputes to the east to leave Europe freezing.
The phrase "energy security" became the rallying cry of the EU.
There were calls to boost solar energy, wind power, and make plans to import liquid gas by sea. Anything to ensure that Europe would not be too dependant on the Russians and get caught out twice.
But three years on, it has happened all over the again.
Another dispute between Russia and Ukraine - and once again Europe is freezing. The EU is facing accusations it was too complacent and too divided over European energy policy.
"The usefulness of a crisis is that it forces you to look into the mirror," chief correspondent of Die Welt newspaper Michael Stuermer said.
"That didn't happen. This present crisis could be seen on the radar over the last three months. The signals were coming all the time. I don't think the German government or the EU Commission took note of the seriousness. We didn't learn much from the crisis of 2006."
Micahel Stuermer believes the latest row could nudge the EU to come up with a "coherent energy strategy".
Considering that the European Union currently gets a quarter of its gas from Russia, it is difficult to imagine such a strategy excluding Russia.
'Last chance' gas talks stumble
High-level talks in Moscow between the prime ministers of Russia and Ukraine have so far failed to resolve the dispute disrupting supplies of gas.
Moscow has indicated that the Ukrainian PM Yulia Tymoshenko does not have the full authority needed to negotiate a deal, a claim denied by Ukraine.
Almost 20 countries in Europe have been affected. Russia supplies gas to Western Europe via Ukraine.
It switched off the gas this month amid payment and theft allegations.
Earlier, the EU said the talks were Kiev and Moscow's "last chance".
Some central and east European states have been reduced to rationing gas, while others have been seeking alternatives to the pipelines carrying Russian gas via Ukraine.
Russia's President Dmitry Medvedev said he hoped gas deliveries would begin in the next few days.
The BBC's Richard Galpin in Moscow says Brussels stepped up pressure to bring an end to the EU's worst ever energy crisis, ahead of Saturday's meeting between Russian Prime Minister Vladimir Putin and the Ukrainian PM.
European Commission spokesman Johannes Laitenberger said the talks "offer the last and best chance for Russia and Ukraine to demonstrate they are serious about resolving this dispute".
"The gas must flow. We will regard this period as a test case for judging whether or not they are credible partners."
EU states import a quarter of their gas from Russia and 80% of supplies come via Ukraine.
Russia halted supplies of gas to Ukraine on 1 January after talks on the price Kiev should pay in 2009 collapsed.
A week later it cut the supply to Europe via Ukraine, saying it was forced to do so because Kiev was stealing the gas.
Ukrainian officials deny the allegation and accuse Russia of provoking the crisis.
Rival positions
Mr Putin, fresh from a visit to Germany, one of Moscow's biggest gas clients, said on Friday that a deal could be nearer after he discussed the formation of a gas transit consortium.
He said a deal was being brokered between Russia's Gazprom and EU firms to cover part of the cost of pumping gas from Russia to Europe.
It is not clear whether Ukraine would accept such a deal.
Meanwhile, divisions exist in Ukraine over the domestic supply and transit supplies.
Ukrainian President Viktor Yushchenko has said the two contracts were linked but Mrs Tymoshenko, his political rival, argued they were not connected.
"The issue of natural gas supplies to Ukraine and the issue of transit are interlinked and must be discussed as a single package," Mr Yushchenko's office said on the eve of the Moscow talks.
Speaking the same day, Mrs Tymoshenko said: "The Ukrainian government does not link the issue of concluding an agreement on [Russian] gas supplies to Ukraine with the issue of resuming gas transit to Europe."
Such a link, she added, would be "groundless and unfair".
She also demanded that Ukraine speak with one voice in the negotiations.
"Simply speaking, I need two things: Don't throw a spoke in the wheel and don't stab any backs," she said in Kiev.
Russian President Dmitry Medvedev has invited EU leaders to an emergency gas summit on Saturday but it appears that only envoys will be sent, including EU Energy Commissioner Andries Pielbags.
Russian Foreign Minister Sergei Lavrov was scathing about the decision not to send EU heads of state.
"We expect anyone interested in resolving the problem as soon as possible to come to the summit being held in Moscow tomorrow," he said on Friday.
He urged the EU to "show its famous solidarity" and put pressure on Ukraine.
Moscow has indicated that the Ukrainian PM Yulia Tymoshenko does not have the full authority needed to negotiate a deal, a claim denied by Ukraine.
Almost 20 countries in Europe have been affected. Russia supplies gas to Western Europe via Ukraine.
It switched off the gas this month amid payment and theft allegations.
Earlier, the EU said the talks were Kiev and Moscow's "last chance".
Some central and east European states have been reduced to rationing gas, while others have been seeking alternatives to the pipelines carrying Russian gas via Ukraine.
Russia's President Dmitry Medvedev said he hoped gas deliveries would begin in the next few days.
The BBC's Richard Galpin in Moscow says Brussels stepped up pressure to bring an end to the EU's worst ever energy crisis, ahead of Saturday's meeting between Russian Prime Minister Vladimir Putin and the Ukrainian PM.
European Commission spokesman Johannes Laitenberger said the talks "offer the last and best chance for Russia and Ukraine to demonstrate they are serious about resolving this dispute".
"The gas must flow. We will regard this period as a test case for judging whether or not they are credible partners."
EU states import a quarter of their gas from Russia and 80% of supplies come via Ukraine.
Russia halted supplies of gas to Ukraine on 1 January after talks on the price Kiev should pay in 2009 collapsed.
A week later it cut the supply to Europe via Ukraine, saying it was forced to do so because Kiev was stealing the gas.
Ukrainian officials deny the allegation and accuse Russia of provoking the crisis.
Rival positions
Mr Putin, fresh from a visit to Germany, one of Moscow's biggest gas clients, said on Friday that a deal could be nearer after he discussed the formation of a gas transit consortium.
He said a deal was being brokered between Russia's Gazprom and EU firms to cover part of the cost of pumping gas from Russia to Europe.
It is not clear whether Ukraine would accept such a deal.
Meanwhile, divisions exist in Ukraine over the domestic supply and transit supplies.
Ukrainian President Viktor Yushchenko has said the two contracts were linked but Mrs Tymoshenko, his political rival, argued they were not connected.
"The issue of natural gas supplies to Ukraine and the issue of transit are interlinked and must be discussed as a single package," Mr Yushchenko's office said on the eve of the Moscow talks.
Speaking the same day, Mrs Tymoshenko said: "The Ukrainian government does not link the issue of concluding an agreement on [Russian] gas supplies to Ukraine with the issue of resuming gas transit to Europe."
Such a link, she added, would be "groundless and unfair".
She also demanded that Ukraine speak with one voice in the negotiations.
"Simply speaking, I need two things: Don't throw a spoke in the wheel and don't stab any backs," she said in Kiev.
Russian President Dmitry Medvedev has invited EU leaders to an emergency gas summit on Saturday but it appears that only envoys will be sent, including EU Energy Commissioner Andries Pielbags.
Russian Foreign Minister Sergei Lavrov was scathing about the decision not to send EU heads of state.
"We expect anyone interested in resolving the problem as soon as possible to come to the summit being held in Moscow tomorrow," he said on Friday.
He urged the EU to "show its famous solidarity" and put pressure on Ukraine.
Friday, January 16, 2009
Europe makes new threat to Russia and Ukraine on gas supplies
By Stephen Castle
Friday, January 16, 2009
BRUSSELS: After days of fruitless diplomacy, the European Commission threatened to review its entire relationship with Russia and Ukraine unless there is a breakthrough this weekend that leads to the restoration of gas supplies to Europe.
Johannes Laitenberger, the European Commission spokesman, said that failing a resolution of the crisis that has left Europe without most of its Russian gas supplies since Jan. 6 the whole range of ties would be reviewed. "We will have to look," he said, "point by point, at our relationship with Russia and Ukraine and whether we can continue to do business as usual in these circumstances."
Absent a resolution, the areas likely to be reviewed are talks on a new partnership agreement with Russia as well as support for Moscow's accession to the World Trade Organization. For Ukraine, the areas to be revisited would include the negotiation of a new association agreement with the European Union, and energy cooperation.
The European Union put its credibility on the line by intervening in the dispute between Russia and Ukraine, which centers on the price Ukraine will pay for its own supplies of Russian gas.
But the diplomatic gamble has failed to get the Russian gas flowing across large parts of Europe. It has also damaged the diplomatic prestige of the 27-nation bloc.
Exasperated European officials are now pinning their hopes for a breakthrough on a meeting Friday in Berlin between Angela Merkel, the German chancellor, and the Russian prime minister, Vladimir Putin. It is Putin's first visit to Berlin since he stepped down as president last March.
Russian officials, who said the country's gas monopoly, Gazprom, had lost significant revenues as a result of the dispute, have sought to place the blame on Ukraine.
But political experts say that neither side is motivated to compromise, because the dispute has never been about the stated issues - natural gas prices and transit fees. Instead, it has been a proxy for more fundamental and insoluble matters, particularly Ukraine's 2004 turn to the West in the "Orange Revolution," which deeply disturbed Russia's nationalists.
Friday, January 16, 2009
BRUSSELS: After days of fruitless diplomacy, the European Commission threatened to review its entire relationship with Russia and Ukraine unless there is a breakthrough this weekend that leads to the restoration of gas supplies to Europe.
Johannes Laitenberger, the European Commission spokesman, said that failing a resolution of the crisis that has left Europe without most of its Russian gas supplies since Jan. 6 the whole range of ties would be reviewed. "We will have to look," he said, "point by point, at our relationship with Russia and Ukraine and whether we can continue to do business as usual in these circumstances."
Absent a resolution, the areas likely to be reviewed are talks on a new partnership agreement with Russia as well as support for Moscow's accession to the World Trade Organization. For Ukraine, the areas to be revisited would include the negotiation of a new association agreement with the European Union, and energy cooperation.
The European Union put its credibility on the line by intervening in the dispute between Russia and Ukraine, which centers on the price Ukraine will pay for its own supplies of Russian gas.
But the diplomatic gamble has failed to get the Russian gas flowing across large parts of Europe. It has also damaged the diplomatic prestige of the 27-nation bloc.
Exasperated European officials are now pinning their hopes for a breakthrough on a meeting Friday in Berlin between Angela Merkel, the German chancellor, and the Russian prime minister, Vladimir Putin. It is Putin's first visit to Berlin since he stepped down as president last March.
Russian officials, who said the country's gas monopoly, Gazprom, had lost significant revenues as a result of the dispute, have sought to place the blame on Ukraine.
But political experts say that neither side is motivated to compromise, because the dispute has never been about the stated issues - natural gas prices and transit fees. Instead, it has been a proxy for more fundamental and insoluble matters, particularly Ukraine's 2004 turn to the West in the "Orange Revolution," which deeply disturbed Russia's nationalists.
EU's prestige at risk in continuing gas crisis
By Stephen Castle and David Jolly
Thursday, January 15, 2009
BRUSSELS: More than a week after the European Union put its credibility on the line by intervening in an energy dispute between Russia and Ukraine, the diplomatic gamble has failed to get the gas flowing - damaging the prestige of the 27-nation bloc in the process.
But after eight days of hectic negotiating, exasperated Europeans now are resting their hopes for a breakthrough on a meeting Friday between Angela Merkel, the German chancellor, and the Russian prime minister, Vladimir Putin, in his first visit to Berlin since he stepped down as president last March.
Were this breakthrough to happen, though, it would only underline Russia's preference for dealing with big European nations individually rather than the EU, further undermining the tattered image of Brussels and the institutional machinery that relies on the rotating presidency, now held by the Czech Republic, to lead Europe's dealings with the rest of the world.
The dispute that has left Europe without most of its Russian gas supplies since last week continued Thursday for a ninth day, with Gazprom, the Russian gas monopoly, saying Ukraine had "again today refused to transit Russian gas to Europe through its export pipelines."
The Russian company said it had requested that the Ukrainian pipeline operator Naftogaz accept nearly 100 million cubic meters, or 3.5 billion cubic feet, of gas for export to Moldova, the Balkans and Slovakia, "but Ukraine has now declined on the grounds that there was not a technical agreement in place for gas transit throughout 2009."
It marked the third straight day that Gazprom has sought to send gas to Europe, though the amount was far less than the roughly 300 million cubic meters required for Europe at this time of year. And once again, Naftogaz declined, arguing that the Russian shipment would disrupt its domestic network.
On Thursday the European Commission announced that its energy commissioner, Andris Piebalgs, and the Czech energy minister, Martin Riman, would attend talks in Moscow on Saturday, provided the Russian and Ukrainian leadership were involved.
But since Russia had invited the president of the commission, José Manuel Barroso, the offer to send a less senior official reflects growing frustration with Moscow. Behind the scenes European officials, who helped broker a deal to put monitors into Ukraine and Russia, are increasingly critical of Russia.
"The Russians are not putting gas into multiple entry points as requested," said one EU official close to the negotiations. "And they are clearly not providing the level of supply needed for transit."
During the past week Barroso has made at least four calls to Putin and has also talked frequently to his Ukrainian counterpart, Yulia Tymoshenko. Mirek Topolanek, the Czech prime minister, has visited both Moscow and Kiev.
But Andrew Wilson, senior policy fellow and expert on Russia and Ukraine at the European Council on Foreign Relations, describes the EU's crisis management as "awful."
"Russia showed during the Georgia crisis," he said, "that it clearly has a preference for negotiation with big member states - in that case France and its presidency, Nicolas Sarkozy."
"Moscow was very rude," Wilson added, "even to accompanying EU diplomats, and has been very skeptical about the Czechs. They may be waiting for big member states to step in."
Jan Sliva, spokesman for the Czech presidency, rejected criticism of its handling of the crisis. "The question is being asked," Sliva said, "as to whether it takes a big member state to get involved. But the Czech Republic is holding its own and is doing what every big member state would do."
The EU's biggest asset is its size and the fact that, as the world's biggest trading bloc, it can exert considerable influence when united.
But with Brussels sputtering, the European efforts have begun to splinter. Bulgaria and Slovakia - two nations that have been particularly hard hit by the gas crisis - have voted with their feet by sending their own missions to Moscow even as they were careful not to contradict EU policy.
Slovakia has also tested the unity of the bloc by signaling its desire to restart a Soviet-vintage nuclear power station that it agreed to close as part of its agreement to join the EU.
In the long-term, the only positive outcome may be that the EU's very impotence will shake the bloc into action. For three years the EU has talked about producing a coherent energy policy without much to show for it.
"Clearly the crisis has helped to stiffen resolve," Wilson said, "on energy security, national action plans and energy interconnections between EU member states."
Thursday, January 15, 2009
BRUSSELS: More than a week after the European Union put its credibility on the line by intervening in an energy dispute between Russia and Ukraine, the diplomatic gamble has failed to get the gas flowing - damaging the prestige of the 27-nation bloc in the process.
But after eight days of hectic negotiating, exasperated Europeans now are resting their hopes for a breakthrough on a meeting Friday between Angela Merkel, the German chancellor, and the Russian prime minister, Vladimir Putin, in his first visit to Berlin since he stepped down as president last March.
Were this breakthrough to happen, though, it would only underline Russia's preference for dealing with big European nations individually rather than the EU, further undermining the tattered image of Brussels and the institutional machinery that relies on the rotating presidency, now held by the Czech Republic, to lead Europe's dealings with the rest of the world.
The dispute that has left Europe without most of its Russian gas supplies since last week continued Thursday for a ninth day, with Gazprom, the Russian gas monopoly, saying Ukraine had "again today refused to transit Russian gas to Europe through its export pipelines."
The Russian company said it had requested that the Ukrainian pipeline operator Naftogaz accept nearly 100 million cubic meters, or 3.5 billion cubic feet, of gas for export to Moldova, the Balkans and Slovakia, "but Ukraine has now declined on the grounds that there was not a technical agreement in place for gas transit throughout 2009."
It marked the third straight day that Gazprom has sought to send gas to Europe, though the amount was far less than the roughly 300 million cubic meters required for Europe at this time of year. And once again, Naftogaz declined, arguing that the Russian shipment would disrupt its domestic network.
On Thursday the European Commission announced that its energy commissioner, Andris Piebalgs, and the Czech energy minister, Martin Riman, would attend talks in Moscow on Saturday, provided the Russian and Ukrainian leadership were involved.
But since Russia had invited the president of the commission, José Manuel Barroso, the offer to send a less senior official reflects growing frustration with Moscow. Behind the scenes European officials, who helped broker a deal to put monitors into Ukraine and Russia, are increasingly critical of Russia.
"The Russians are not putting gas into multiple entry points as requested," said one EU official close to the negotiations. "And they are clearly not providing the level of supply needed for transit."
During the past week Barroso has made at least four calls to Putin and has also talked frequently to his Ukrainian counterpart, Yulia Tymoshenko. Mirek Topolanek, the Czech prime minister, has visited both Moscow and Kiev.
But Andrew Wilson, senior policy fellow and expert on Russia and Ukraine at the European Council on Foreign Relations, describes the EU's crisis management as "awful."
"Russia showed during the Georgia crisis," he said, "that it clearly has a preference for negotiation with big member states - in that case France and its presidency, Nicolas Sarkozy."
"Moscow was very rude," Wilson added, "even to accompanying EU diplomats, and has been very skeptical about the Czechs. They may be waiting for big member states to step in."
Jan Sliva, spokesman for the Czech presidency, rejected criticism of its handling of the crisis. "The question is being asked," Sliva said, "as to whether it takes a big member state to get involved. But the Czech Republic is holding its own and is doing what every big member state would do."
The EU's biggest asset is its size and the fact that, as the world's biggest trading bloc, it can exert considerable influence when united.
But with Brussels sputtering, the European efforts have begun to splinter. Bulgaria and Slovakia - two nations that have been particularly hard hit by the gas crisis - have voted with their feet by sending their own missions to Moscow even as they were careful not to contradict EU policy.
Slovakia has also tested the unity of the bloc by signaling its desire to restart a Soviet-vintage nuclear power station that it agreed to close as part of its agreement to join the EU.
In the long-term, the only positive outcome may be that the EU's very impotence will shake the bloc into action. For three years the EU has talked about producing a coherent energy policy without much to show for it.
"Clearly the crisis has helped to stiffen resolve," Wilson said, "on energy security, national action plans and energy interconnections between EU member states."
Thursday, January 15, 2009
Russia-EU energy
By letting its Russian gas dispute drag on for two weeks, Ukraine has discharged a double-barrelled shotgun into its nether regions. Russia and the European Union have forceful incentives to back pipeline routes skirting round it, reducing transit fees that earn Ukraine $2bn a year. Russia’s reputation is further tarnished, too. Even so, three years after the first Ukraine gas shut-off, the EU has made limited progress in diversifying energy sources. Today’s talk is more of diversifying gas supply routes – and planned alternative pipelines tend to lead back to Russia.
The most advanced project is Nord Stream, under the Baltic Sea from Russia to Germany. Poland and other bypassed states say it threatens EU unity; Sweden voices environmental concerns. But the European Commission has made it a priority project, warming further to it after Russia’s conflict with Georgia, another energy transit state, apparently persuaded Brussels of the merits of direct pipelines. Gazprom’s consortium partners include Germany’s Eon Ruhrgas and BASF/Wintershall and the Netherlands’ Gasunie, with former German chancellor Gerhard Schröder, as chairman, lending clout.
The other arm of Gazprom’s pipeline pincer movement, South Stream, intended to bring gas across the Black Sea and Balkans, is progressing too. Gazprom has signed up Bulgaria and Serbia, and Italy’s Eni. Brussels is wary of South Stream as it competes with the EU- and US-backed Nabucco project, which aims to transport Caspian basin gas through Turkey – bypassing Russia. But concerns persist that Nabucco lacks gas. One possible source, Turkmenistan, has contracted most production to Russia and China; another, Azerbaijan, is being courted by Moscow. Nabucco says it may carry Russian gas – ironic for a venture seen as a way of bypassing Russia. Until it can develop other sources, the EU’s best option to avoid future shut-offs may be to deepen its partnership with the Bear.
The most advanced project is Nord Stream, under the Baltic Sea from Russia to Germany. Poland and other bypassed states say it threatens EU unity; Sweden voices environmental concerns. But the European Commission has made it a priority project, warming further to it after Russia’s conflict with Georgia, another energy transit state, apparently persuaded Brussels of the merits of direct pipelines. Gazprom’s consortium partners include Germany’s Eon Ruhrgas and BASF/Wintershall and the Netherlands’ Gasunie, with former German chancellor Gerhard Schröder, as chairman, lending clout.
The other arm of Gazprom’s pipeline pincer movement, South Stream, intended to bring gas across the Black Sea and Balkans, is progressing too. Gazprom has signed up Bulgaria and Serbia, and Italy’s Eni. Brussels is wary of South Stream as it competes with the EU- and US-backed Nabucco project, which aims to transport Caspian basin gas through Turkey – bypassing Russia. But concerns persist that Nabucco lacks gas. One possible source, Turkmenistan, has contracted most production to Russia and China; another, Azerbaijan, is being courted by Moscow. Nabucco says it may carry Russian gas – ironic for a venture seen as a way of bypassing Russia. Until it can develop other sources, the EU’s best option to avoid future shut-offs may be to deepen its partnership with the Bear.
Wednesday, January 14, 2009
Ukraine Admits Blocking Gas to Europe
Just hours after Russia resumed delivery of natural gas to the European Union through Ukrainian pipelines, Kiev has admitted to blocking the supplies. Ukraine is claiming that Gazprom has established "unacceptable" conditions for the transit of the gas to Europe.
Calm in the gas dispute between Russia and Ukraine lasted for only a few hours on Tuesday. After six days of blocking supplies, Russia began pumping natural gas through Ukraine at 8 a.m., bound for European Union customers.
But before the supplies could even get to the EU, the pipelines were reportedly shut down again. European Union observers in place to monitor gas flows said they had measured "little or no gas" in Ukraine. They said it was too early to draw conclusions from the observation, but the situation "is obviously very serious and must be improved quickly."
Kiev soon admitted that it had, in fact, blocked the transit of Russian gas through its territory, citing "unacceptable conditions for transit" that had been imposed by Gazprom, a spokesperson for Ukraine's state-owned Naftogaz, which manages the pipelines, told the French news agency AFP.
Gazprom deputy chief Alexander Medvedev called the incident a "violation" of the deal that had been reached between Moscow, Kiev and the European Union.
Gazprom officials also blamed the United States for the current state of the gas dispute with Ukraine, claiming that the US government was steering Kiev's negotiations. The company claimed that Ukraine was stealing gas despite the presence of EU monitors and that it could, therefore, not provide supplies to Europe.
EU officials had no initial comment on the renewed gas stoppage on Tuesday. The European Union had been hoping to put the crisis behind it quickly, after bearing the brunt of the dispute between Kiev and Moscow in recent days. A handful of EU member states, led by Bulgaria, are massively dependent on Russian energy supplies. According to newspaper reports, the six-day energy outage caused by the gas dispute led to an estimated €35 million ($46.3 million) in losses for industry. Around 80 percent of the natural gas imported by the EU from Russia is delivered via Ukraine pipelines.
On Monday, the energy ministers of the EU member states met to discuss the crisis. According to EU Energy Commissioner Andris Piebalgs, Europe is seeking ways to make itself less dependent on Russian gas. He said Europeans needed to diversify their sources and delivery routes for energy supplies. In order to defend itself against future crises, he said the EU needed to increase the number of storage facilities for gas reserves and to have a better network of pipelines.
The core conflict behind Europe's gas shortages this week -- a price and past-due billing dispute between Kiev and Moscow -- continues to simmer. The unprecedented freeze on gas deliveries was prompted by the ongoing dispute between Russia and Ukraine over gas pricing and the lucrative transit fees paid to Kiev for gas transported across its pipelines. Ukraine has been hit severely by the economic crisis, but Moscow is still demanding a price of $400 per 1,000 cubic meters of gas. Up until now, Kiev has paid $179.50. In exchange, Ukraine wants Russia to pay higher transit fees for the gas traveling through its country.
No end to the dispute is currently in sight. Russian President Dmitry Medvedev has only reiterated that Moscow would like to meet Kiev at the half-way point in pricing negotiations. One proposal currently being discussed is an EU loan to Ukraine that could also be partially backed by Russia. Russian Prime Minister Vladimir Putin has also stated that Moscow is interested in taking partial ownership of the Ukrainian pipeline network.
Meanwhile, bickering has already begun over the duration of an EU-led monitoring mission in Ukraine. Gazprom officials would like to see ongoing monitoring of gas deliveries through Ukrainian pipelines to Europe, but Ukraine would like to limit the operation to one month.
Putin made the EU monitoring mission a precondition for resuming gas deliveries. Observers still hadn't been dispatched to several important measuring stations as of Monday. But Russian President Medvedev said airplanes had been made available by Moscow to fly inspectors to those sites.
Negotiations surrounding the monitoring agreement were tense and collapsed several times before it was finally signed on Monday. An initial agreement collapsed after Ukraine added handwritten notes to the contract claiming that Kiev was a reliable transit partner, that it hadn't stolen any gas and that it had no outstanding debt to Russia gas delivered in 2008. Medvedev said the additions were false and declared the deal null and void. Throughout the dispute, Russia has accused its neighboring country of siphoning off and "stealing" gas intended for Europe.
After eliminating the notes and signing the agreement for a second time, Ukraine bizarrely accused Russia and Gazprom of not even having enough gas to supply to its European customers and that, as a consequence, it would take even longer to bring an end to the crisis.
Meanwhile, Slovakian Prime Minister Robert Fico has said that his country will not seek to resume operations of its controversial Bohunice nuclear reactor. Slovakia, he said, "would suspend all preparations for a resumption of service" if Russia resumed delivery of gas on Tuesday as it had promised, Fico told Austrian Chancellor Werner Faymann on Monday afternoon. The EU had made the closure of Bohunice, a Soviet-era reactor considered dangerous by most Western European countries, a precondition for Slovakia's membership in the European Union in 2004. Facing a massive energy shortfall as a result of the cut in Russian gas deliveries, Slovakia in recent days has threatened to put the reactor, which only suspended operation in December, back only, prompting the vociferous protest of neighboring Austria.
Calm in the gas dispute between Russia and Ukraine lasted for only a few hours on Tuesday. After six days of blocking supplies, Russia began pumping natural gas through Ukraine at 8 a.m., bound for European Union customers.
But before the supplies could even get to the EU, the pipelines were reportedly shut down again. European Union observers in place to monitor gas flows said they had measured "little or no gas" in Ukraine. They said it was too early to draw conclusions from the observation, but the situation "is obviously very serious and must be improved quickly."
Kiev soon admitted that it had, in fact, blocked the transit of Russian gas through its territory, citing "unacceptable conditions for transit" that had been imposed by Gazprom, a spokesperson for Ukraine's state-owned Naftogaz, which manages the pipelines, told the French news agency AFP.
Gazprom deputy chief Alexander Medvedev called the incident a "violation" of the deal that had been reached between Moscow, Kiev and the European Union.
Gazprom officials also blamed the United States for the current state of the gas dispute with Ukraine, claiming that the US government was steering Kiev's negotiations. The company claimed that Ukraine was stealing gas despite the presence of EU monitors and that it could, therefore, not provide supplies to Europe.
EU officials had no initial comment on the renewed gas stoppage on Tuesday. The European Union had been hoping to put the crisis behind it quickly, after bearing the brunt of the dispute between Kiev and Moscow in recent days. A handful of EU member states, led by Bulgaria, are massively dependent on Russian energy supplies. According to newspaper reports, the six-day energy outage caused by the gas dispute led to an estimated €35 million ($46.3 million) in losses for industry. Around 80 percent of the natural gas imported by the EU from Russia is delivered via Ukraine pipelines.
On Monday, the energy ministers of the EU member states met to discuss the crisis. According to EU Energy Commissioner Andris Piebalgs, Europe is seeking ways to make itself less dependent on Russian gas. He said Europeans needed to diversify their sources and delivery routes for energy supplies. In order to defend itself against future crises, he said the EU needed to increase the number of storage facilities for gas reserves and to have a better network of pipelines.
The core conflict behind Europe's gas shortages this week -- a price and past-due billing dispute between Kiev and Moscow -- continues to simmer. The unprecedented freeze on gas deliveries was prompted by the ongoing dispute between Russia and Ukraine over gas pricing and the lucrative transit fees paid to Kiev for gas transported across its pipelines. Ukraine has been hit severely by the economic crisis, but Moscow is still demanding a price of $400 per 1,000 cubic meters of gas. Up until now, Kiev has paid $179.50. In exchange, Ukraine wants Russia to pay higher transit fees for the gas traveling through its country.
No end to the dispute is currently in sight. Russian President Dmitry Medvedev has only reiterated that Moscow would like to meet Kiev at the half-way point in pricing negotiations. One proposal currently being discussed is an EU loan to Ukraine that could also be partially backed by Russia. Russian Prime Minister Vladimir Putin has also stated that Moscow is interested in taking partial ownership of the Ukrainian pipeline network.
Meanwhile, bickering has already begun over the duration of an EU-led monitoring mission in Ukraine. Gazprom officials would like to see ongoing monitoring of gas deliveries through Ukrainian pipelines to Europe, but Ukraine would like to limit the operation to one month.
Putin made the EU monitoring mission a precondition for resuming gas deliveries. Observers still hadn't been dispatched to several important measuring stations as of Monday. But Russian President Medvedev said airplanes had been made available by Moscow to fly inspectors to those sites.
Negotiations surrounding the monitoring agreement were tense and collapsed several times before it was finally signed on Monday. An initial agreement collapsed after Ukraine added handwritten notes to the contract claiming that Kiev was a reliable transit partner, that it hadn't stolen any gas and that it had no outstanding debt to Russia gas delivered in 2008. Medvedev said the additions were false and declared the deal null and void. Throughout the dispute, Russia has accused its neighboring country of siphoning off and "stealing" gas intended for Europe.
After eliminating the notes and signing the agreement for a second time, Ukraine bizarrely accused Russia and Gazprom of not even having enough gas to supply to its European customers and that, as a consequence, it would take even longer to bring an end to the crisis.
Meanwhile, Slovakian Prime Minister Robert Fico has said that his country will not seek to resume operations of its controversial Bohunice nuclear reactor. Slovakia, he said, "would suspend all preparations for a resumption of service" if Russia resumed delivery of gas on Tuesday as it had promised, Fico told Austrian Chancellor Werner Faymann on Monday afternoon. The EU had made the closure of Bohunice, a Soviet-era reactor considered dangerous by most Western European countries, a precondition for Slovakia's membership in the European Union in 2004. Facing a massive energy shortfall as a result of the cut in Russian gas deliveries, Slovakia in recent days has threatened to put the reactor, which only suspended operation in December, back only, prompting the vociferous protest of neighboring Austria.
The Gas Hostages
The drama being played out by Russia and Ukraine has been full of sudden reversals. Germans commentators argue that Europe must take its energy security more seriously in order to avoid an encore performance of this hostage drama.
Despite what looked like the beginning of a solution to the Ukraine-Russia gas dispute, gas is still not flowing to Europe through Ukraine.
Many in Europe breathed a (visible) sigh of relief Tuesday morning when the news emerged that Gazprom would start pumping transit gas through Ukraine once again on its way to a Europe gripped by record colds. But they might have breathed easy a little too soon.
According to media reports, Russia's state gas monopoly Gazprom starting pumping gas back into Ukraine at 8:00 a.m. (CET). Late in the morning, however, new reports emerged that the deliveries had been halted once again, with both sides blaming the other for the sudden reversal.
Whether the gas starts flowing again soon or not, given the distance it must travel, officials in Brussels still estimate that it will take between 24 and 36 hours for the gas to pass into European pipelines.
What originally started as a payment and pricing dispute between the countries led to charges from Russia that Ukraine was siphoning off gas destined for Europe. On Jan. 1, Russia cut off the gas used by Ukraine and, on Jan. 7, Gazprom halted all shipments of gas through Ukraine.
The decision to restart shipments came in the wake of a concerted and successful European effort led by the current Czech presidency of the EU to broker a deal, which will now see international observers deployed along the pipeline route to monitor whether Ukraine is siphoning off any transit gas. That is, of course, if and when the gas starts flowing again.
Although Europe welcomed what looked like a positive development, many issues have yet to be addressed. It's anyone's guess when Ukraine will start shipping Russian gas again, but even after the previous agreement, Moscow was still refusing to let Ukraine use the gas itself and the pricing dispute had been left unresolved.
More importantly, however, the crisis has shown just how dependent Europe is on Russian gas. Europe imports nearly a quarter of its gas from Russia, and 80 percent of that is piped through Ukraine. But the hardest-hit countries have been those in Eastern Europe, where a lack of gas reserves, infrastructure and alternative resources has given them much more limited options when their larger and more powerful neighbors scuffle.
In Germany, commentators seem to be less focused on the ongoing Ukrainian-Russian drama and more on how the situation has drawn many thick underlines under Germany's -- and all of Europe's -- need to improve the security and diversity of its energy supply.
The center-right Frankfurter Allgemeine Zeitung writes:
"In this conflict, which has both political and business relevance, the European Union has been unavoidably -- and successfully -- cast in the position of mediator. Now it should draw conclusions from lessons learned: Europe's dependence on Russian natural gas … is nothing new. But the recent dispute has revealed that Europe also relies on Ukraine's pipelines. ... This twofold dependence is felt most keenly by the new EU member states that were once part of the Soviet Union's sphere of power. In the interests of solidarity and for its own benefit, the EU would be wise to diminish this dependence."
"In terms of European energy politics, the EU must think more about the aspects of supply routes than it has in the past. It must strive for diversification, not only in terms of sources of gas but also in transport routes. A monopoly like Gazprom, with its strong ties to the Kremlin, isn't going to budge unless the EU speaks with a unified voice. And Ukraine's business structures lack transparency. Under these circumstances, the EU would benefit from commercializing (and depoliticizing) the business as much as possible. Progress in this direction -- possibly through the involvement of Western businesses -- is probably easier to achieve in Kiev than in Moscow."
The center-left Süddeutsche Zeitung writes:
"The most recent dispute over deliveries of natural gas has allowed the world to clearly see what it means to be dependent on the political calculus of a major power. …"
"However you assess the (gas) transit conflict between Russia and Ukraine, the fact is that the neighboring countries are freezing and must feel like mere hostages. They see now that (Russia) pays no heed to any collateral damage resulting from efforts to protect its interests. And, in a humiliating fashion, these countries are experiencing what it means to be second-class states that must sudden worry about their sovereignty despite the fact that they are geographically located in the middle of pacified Europe. In dramatic fashion, both they and all the observers in Western Europe are witnessing just how important the issue currently being so hotly debated in the EU on energy security really is."
"The fact that the only thing being put on the table in Slovakia and Bulgaria in terms of (energy) alternatives is putting decommissioned nuclear reactors back into service goes to show just how depressingly hopeless the current situation there really is. And despite the fact that, a few years back, a lot of money was spent on purchasing Western safety technology for these reactors, they still do not meet EU standards. Now is the time for fresh ideas rather than tired fixes. At least then the crisis might have taught us something."
The right-leaning Die Welt writes:
"It's all about the money. … And in times of crisis, every dollar counts for Gazprom, the Russian gas monopoly that recently suffered a marked decrease in market value. Since Ukraine is essentially incapable of paying up, the Russians are now casting a covetous eye on Ukrainian businesses. To compensate for unpaid gas deliveries, Gazprom would love to take some of these over -- especially in the country's gas-transit sector, of which Russia already owns up to 25 percent."
"This time around, political aspects have played a more prominent role than they did during similar earlier conflicts. Prime Minister Vladimir Putin and President Dmitry Medvedev have unabashedly involved themselves in Ukrainian affairs like never before and revealed the political intentions behind their conduct as well. As they see it, the Ukrainian leadership has been dragged into criminal intrigues, and the Kremlin was simply hoping to aid the unfortunate Ukrainian population. Top Russian politicians have also made it quite clear that they view the present situation as a result of the Orange Revolution in Kiev, which has been a thorn in Moscow's side from the start."
The left-leaning Berliner Zeitung writes:
"Since the weekend, the pretense that this was really a fight between two commercial enterprises has finally dissipated. And the thing to make this clear was the fact that the heavy hitters among the political leadership of both Russia and the Ukraine made an appearance. …"
"The Putin-Medvedev and the Yulia Timoshenko- Viktor Yushchenko leadership duos could hardly be more different. But they do share one thing in common: No one can say that either the Russian or the Ukrainian leaderships entered into the current gas conflict with a political strategy. For Timoshenko and Yushchenko, the reason for this is simple: They have never had a single strategy but, rather, two. The leaders of the Orange Revolution are at such odds with each other that they are both primarily concerned with distancing themselves from the other on the domestic stage."
"In Russia, things are different. Putin and Medvedev leave the outward impression of closeness. But, in the course of this crisis, it has only become clearer who is more powerful and who is guiding what they are so keen to describe as a 'tandem'."
"So, what is this drama really all about? We don't know, at least not with the necessary degree of exactitude. We -- meaning the EU -- really have no insight into what the elites of Moscow and Kiev are really working out, and that makes the conflict completely absurd. When both Putin and Timoshenko complain in hushed tones about the meddling of obscure middlemen, the EU should address the issue and insist on transparency. The citizens of Russia and Ukraine are themselves in no position to insist on this transparency."
-- Caroline Winter and Josh Ward, 1:00 p.m. CET
Despite what looked like the beginning of a solution to the Ukraine-Russia gas dispute, gas is still not flowing to Europe through Ukraine.
Many in Europe breathed a (visible) sigh of relief Tuesday morning when the news emerged that Gazprom would start pumping transit gas through Ukraine once again on its way to a Europe gripped by record colds. But they might have breathed easy a little too soon.
According to media reports, Russia's state gas monopoly Gazprom starting pumping gas back into Ukraine at 8:00 a.m. (CET). Late in the morning, however, new reports emerged that the deliveries had been halted once again, with both sides blaming the other for the sudden reversal.
Whether the gas starts flowing again soon or not, given the distance it must travel, officials in Brussels still estimate that it will take between 24 and 36 hours for the gas to pass into European pipelines.
What originally started as a payment and pricing dispute between the countries led to charges from Russia that Ukraine was siphoning off gas destined for Europe. On Jan. 1, Russia cut off the gas used by Ukraine and, on Jan. 7, Gazprom halted all shipments of gas through Ukraine.
The decision to restart shipments came in the wake of a concerted and successful European effort led by the current Czech presidency of the EU to broker a deal, which will now see international observers deployed along the pipeline route to monitor whether Ukraine is siphoning off any transit gas. That is, of course, if and when the gas starts flowing again.
Although Europe welcomed what looked like a positive development, many issues have yet to be addressed. It's anyone's guess when Ukraine will start shipping Russian gas again, but even after the previous agreement, Moscow was still refusing to let Ukraine use the gas itself and the pricing dispute had been left unresolved.
More importantly, however, the crisis has shown just how dependent Europe is on Russian gas. Europe imports nearly a quarter of its gas from Russia, and 80 percent of that is piped through Ukraine. But the hardest-hit countries have been those in Eastern Europe, where a lack of gas reserves, infrastructure and alternative resources has given them much more limited options when their larger and more powerful neighbors scuffle.
In Germany, commentators seem to be less focused on the ongoing Ukrainian-Russian drama and more on how the situation has drawn many thick underlines under Germany's -- and all of Europe's -- need to improve the security and diversity of its energy supply.
The center-right Frankfurter Allgemeine Zeitung writes:
"In this conflict, which has both political and business relevance, the European Union has been unavoidably -- and successfully -- cast in the position of mediator. Now it should draw conclusions from lessons learned: Europe's dependence on Russian natural gas … is nothing new. But the recent dispute has revealed that Europe also relies on Ukraine's pipelines. ... This twofold dependence is felt most keenly by the new EU member states that were once part of the Soviet Union's sphere of power. In the interests of solidarity and for its own benefit, the EU would be wise to diminish this dependence."
"In terms of European energy politics, the EU must think more about the aspects of supply routes than it has in the past. It must strive for diversification, not only in terms of sources of gas but also in transport routes. A monopoly like Gazprom, with its strong ties to the Kremlin, isn't going to budge unless the EU speaks with a unified voice. And Ukraine's business structures lack transparency. Under these circumstances, the EU would benefit from commercializing (and depoliticizing) the business as much as possible. Progress in this direction -- possibly through the involvement of Western businesses -- is probably easier to achieve in Kiev than in Moscow."
The center-left Süddeutsche Zeitung writes:
"The most recent dispute over deliveries of natural gas has allowed the world to clearly see what it means to be dependent on the political calculus of a major power. …"
"However you assess the (gas) transit conflict between Russia and Ukraine, the fact is that the neighboring countries are freezing and must feel like mere hostages. They see now that (Russia) pays no heed to any collateral damage resulting from efforts to protect its interests. And, in a humiliating fashion, these countries are experiencing what it means to be second-class states that must sudden worry about their sovereignty despite the fact that they are geographically located in the middle of pacified Europe. In dramatic fashion, both they and all the observers in Western Europe are witnessing just how important the issue currently being so hotly debated in the EU on energy security really is."
"The fact that the only thing being put on the table in Slovakia and Bulgaria in terms of (energy) alternatives is putting decommissioned nuclear reactors back into service goes to show just how depressingly hopeless the current situation there really is. And despite the fact that, a few years back, a lot of money was spent on purchasing Western safety technology for these reactors, they still do not meet EU standards. Now is the time for fresh ideas rather than tired fixes. At least then the crisis might have taught us something."
The right-leaning Die Welt writes:
"It's all about the money. … And in times of crisis, every dollar counts for Gazprom, the Russian gas monopoly that recently suffered a marked decrease in market value. Since Ukraine is essentially incapable of paying up, the Russians are now casting a covetous eye on Ukrainian businesses. To compensate for unpaid gas deliveries, Gazprom would love to take some of these over -- especially in the country's gas-transit sector, of which Russia already owns up to 25 percent."
"This time around, political aspects have played a more prominent role than they did during similar earlier conflicts. Prime Minister Vladimir Putin and President Dmitry Medvedev have unabashedly involved themselves in Ukrainian affairs like never before and revealed the political intentions behind their conduct as well. As they see it, the Ukrainian leadership has been dragged into criminal intrigues, and the Kremlin was simply hoping to aid the unfortunate Ukrainian population. Top Russian politicians have also made it quite clear that they view the present situation as a result of the Orange Revolution in Kiev, which has been a thorn in Moscow's side from the start."
The left-leaning Berliner Zeitung writes:
"Since the weekend, the pretense that this was really a fight between two commercial enterprises has finally dissipated. And the thing to make this clear was the fact that the heavy hitters among the political leadership of both Russia and the Ukraine made an appearance. …"
"The Putin-Medvedev and the Yulia Timoshenko- Viktor Yushchenko leadership duos could hardly be more different. But they do share one thing in common: No one can say that either the Russian or the Ukrainian leaderships entered into the current gas conflict with a political strategy. For Timoshenko and Yushchenko, the reason for this is simple: They have never had a single strategy but, rather, two. The leaders of the Orange Revolution are at such odds with each other that they are both primarily concerned with distancing themselves from the other on the domestic stage."
"In Russia, things are different. Putin and Medvedev leave the outward impression of closeness. But, in the course of this crisis, it has only become clearer who is more powerful and who is guiding what they are so keen to describe as a 'tandem'."
"So, what is this drama really all about? We don't know, at least not with the necessary degree of exactitude. We -- meaning the EU -- really have no insight into what the elites of Moscow and Kiev are really working out, and that makes the conflict completely absurd. When both Putin and Timoshenko complain in hushed tones about the meddling of obscure middlemen, the EU should address the issue and insist on transparency. The citizens of Russia and Ukraine are themselves in no position to insist on this transparency."
-- Caroline Winter and Josh Ward, 1:00 p.m. CET
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