The Great Game is (back) on

Putin’s European ambitions on hold as EU delays two Russian gas pipelines

RIYADH, Saudi Arabia, Mar 18, 2014/ Troy Media/ – The Great Game is (back) on!

A maze of pipelines crisscrossing Ukraine, carrying Russian gas to Europe, makes Kiev strategically important to both Moscow and the West.Kiev is dependent on Moscow for its energy.

And 34 per cent of Europe’s natural gas needs are also met through imports from Russia, carried through pipelines passing through Ukraine. Last year Russia’s state-controlled Gazprom sold about 160 billion cubic meters of natural gas to Europe and half of that travelled through Ukrainian pipelines. With its current dependence on Ukraine to meet its sales obligations to its largest gas market – Europe – Moscow does not appear ready to accept a pro-western government in Kiev.

Legendary Texas energy man T. Boone Pickens says the real danger to the world is that oil and natural gas are once again being used as a weapon of war. In his column in the Guardian, titled “Ukraine crisis is about Great Power, oil, gas pipeline rivalry” Nafeez Ahmed says: “Ukraine is increasingly perceived to be critically situated in the emerging battle to dominate energy transport corridors linking the oil and natural gas reserves of the Caspian basin to European markets . . . Resource scarcity, competition to dominate Eurasian energy corridors, are behind Russian militarism and U.S. interference . . . Ukraine is caught hapless in the midst of this accelerating struggle to dominate Eurasia’s energy corridors in the last decades of the age of fossil fuels.”

The implications of the Crimean referendum are dreadful – from a western viewpoint. According to Bloomberg’s Carol Matlack, without Crimea, Ukraine looks set to lose an important piece of its economic energy future: valuable undersea oil and gas fields that lie just offshore the Crimean peninsula. Exploiting those Black Sea fields could help reduce Ukraine’s dependence on Russian gas. Within the area now under Ukrainian jurisdiction, however, “the most interesting exploration areas are all effectively (under) Crimean waters,” Julian Lee, formerly of the Centre for Global Energy Studies in London was quoted as saying in the press.

With the loss of Crimea as a result of the referendum, authorities in Kiev will not only lose political control but also the major state-owned companies based in the peninsula. Rustam Temirgaliyev, Crimean first deputy prime minister, told Interfax that the Crimean authorities were planning to take over state-owned giant Chornomornaftogaz “in the near future.” Termirgaliyev’s comment follows similar remarks by Sergei Aksyonov, the pro-Moscow Crimean prime-minister.

Making its countermove on the energy chess board, Brussels dealt blows to two major Russian pipeline projects to supply natural gas to Europe bypassing Ukraine. In order to achieve its strategic objectives, Russia has been building the South Stream pipeline project to carry up to 15 per cent of Europe’s annual gas demand via the Black Sea by 2018.

But the European Commissioner for Energy, Guenther Oettinger, told the German newspaper Die Welt that discussions with Russia on the link were suspended. “I won’t accelerate talks about pipelines such as South Stream for the time being; they will be delayed,” he said.

Meanwhile, one of Russia’s existing alternative routes to supply western Europe bypassing Ukraine, the Nord Stream Pipeline, was also hit by the growing crisis. Nord Stream pumps gas from Russia via the Baltic Sea into Germany. But the pipeline is underused, and Russia’s Gazprom says it could pump more if EU rules allowed it full access to the Opal pipeline project, which aims to link northeastern Germany, where Nord Stream makes landfall, to the Czech Republic.

Russian President Vladimir Putin said in January the Commission had agreed to allow Russia 100 per cent access. But an EU spokeswoman last week said the executive had delayed the decision on this access – citing the need for technical clarification.

But there is a silver lining too. New opportunities seem to be cropping up for Canada. Some are of the view that the crisis could be a “game changer” for the Canadian and global energy industry.

Bruce Cameron, President of strategic research consulting company Return On Insight, believes that the heated debate over oil sands and pipeline development in North America may cool off considerably, as geopolitical events push Europe, the U.S. and Canada closer.

Cameron is of the view that the return of a “cold war” posture between Russia and the West would lead to increased support for pipelines across America’s heartland and selective support for some projects on B.C.’s coast, such as the creation of LNG export terminals and the tripling of the Trans Mountain pipeline corridor.

Rashid is an energy analyst and a widely published expert on global energy affairs. He appears regularly on BBC and other news media. He operates an energy consultancy, Husain’s Associates, from Toronto, dividing his time between Canada and the Middle East. For almost 25 years, he has served as Vice President of a leading Saudi trading and consulting house.

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