Hi, my name is Paul Sampson, a London-based journalist for the newsletter Nefte-Compass who shares Steve's fascination with energy-related intrigue in Russia and Central Asia. When Steve asked me to contribute to his blog, I agreed partly because I really enjoyed his book, which ranks alongside those two oil greats, The Prize and The Seven Sisters, and partly because I’ve never blogged before. This is my first effort, so readers please go easy and save your ammo (or polonium) for later. A quick disclaimer: These views are strictly my own and no-one else's.As hard as it tries, the European Union and the
United States are no match for the 800-pound Russian gorilla when it comes to pipeline politics.
Russia’s natural gas colossus
Gazprom and its masters in the Kremlin have so far successfully countered the EU- and U.S.-backed
Nabucco natural gas pipeline. But can they actually stop Nabucco? My hunch is no. In the end, both Nabucco and the Russian-backed
Nord Stream and
South Stream pipelines will be built. And the EU and
Russia will find a modus vivendi that keeps Gazprom powerful, but lets new suppliers such as
Azerbaijan join the fray.
This is the way it has to be. After all, neither side wants a new cold war over gas supplies, do they? If Brussels and Moscow agree to work more closely on energy, then I see no reason why Washington wouldn’t go along.
It’s been an excellent 2008 so far for Gazprom and its chairman, Russia’s president-in-waiting, Dmitry Medvedev. Medvedev and his mentor Vladimir Putin signed a deal in Bulgaria giving Gazprom a 50% stake in the crucial European hub for South Stream, which Gazprom and Italy’s Eni plan to build under the Black Sea. Then Serbia's Boris Tadic gave Gazprom majority ownership of a trunk line into South Stream, plus a 51% interest in Serbia’s state oil company, NIS. Finally, the Russians won joint ownership of Central Europe's largest gas marketing hub at Baumgarten, the terminus for the West’s proposed Nabucco pipeline. According to Nefte Compass, Gazprom now has its sights set on a gas deal in Hungary.
These deals reveal the extent to which energy and politics are intertwined in Russia. Take the Serbian deal, which was signed ten days or so before today's second round of presidential elections in the country pitting pro-European incumbent Boris Tadic against the nationalist Tomislav Nikolic. That Tadic was in Moscow to sign the pact with Gazprom suggests that it was all designed to improve his chances of re-election. Crude tactics indeed.
In general, the deals help to polish Medvedev’s image as he campaigns to inherit Putin’s mantle next month. Having kept a low profile over the past years, Medvedev is now taking some of the limelight and portraying himself as a strong and credible leader. How much freedom he will have when he ascends to the throne and to what extent Putin and the siloviki will control him is a subject for another blog.
Horelma: Here is a quick addition to Steve’s blogs on the mysterious Kazakh buyer of the $100 million London property. My interest isn't who the real owner is – let’s face it, $100 million isn’t that much for your average Kazakh billionaire – but why anyone would pay so much for such a bizarre place on a busy street in north London. I drive down Bishops' Avenue perhaps once a month, and it never fails to astound me how over-the-top the houses on it are. Having lived for several years in Dubai, I've seen my fair share of post-modern eye-sores. But Bishops Avenue has to take the biscuit.
Photo: PingnewsRights:
Creative CommonsLabels: Caspian, european union, Gazprom, medvedev, nord stream, Putin, Russia, south stream
Hi, my name is Paul Sampson, a London-based journalist for the newsletter Nefte-Compass who shares Steve's fascination with energy-related intrigue in 
10 Comments:
"This is the way it has to be."
Why? This is wishful thinking at best.
There is no indication that the EU and Russia are anywhere near "...agree[ing] to work more closely on energy".
Paul - First, I completely agree with your praise for Steve's book, and in particular with your comparison with "The Seven Sisters." And that is, of course, high praise indeed, especially given who the author of that ground-breaking work was -- the legendary Anthony Sampson. Do you mind if I point out that he was your father?
Secondly, you're right that ultimately Brussels and Moscow will be forced to reconcile their energy differences. Wishful thinking? I don't think so. Practical reality, more like.
Thirdly, good piece. The world awaits your own blog with fascination.
Finally - yep, Bishop's Avenue is pretty much the strangest little street in the world. I too drop by from time to time -- as I live nearby and enjoy playing "spot the neighbours" every so often. Unsurprisingly, one seldom actually sees the residents. Just the occasional driver and the odd burly young man watching gawkers like me with a professional interest. Crap architecture aside, one has to wonder what kind of life such insularity represents.
The last time I drove down Bishops Av,a black Merc limo with the numberplate Rus 1 whizzed past me. Who knowns, may have been Putin on a quick tour of North London. Am hoping the next time, I see a car with a Kaz 1 plate.
Re Russia, Europe and energy, no it's not wishful thinking to predict that Moscow and Brussels will reach a modus vivendi. There will be competition over new gas pipelines, yes, but I think this is a healthy development that will ultimately benefit the European consumers.
Don't know about Kaz 1, but how about Az 1? Young Mr. Aliyev, the Azeri president, is rumoured to have a bolthole just round the corner, on Hampstead Lane. But perhaps, with revenues soaring, he's already traded up.
PMS: Mr. Putin is famous for saying that once spy is always a spy. He wouldn't be using a black Merc limo with the numberplate Rus 1. He would pretend to be a Polish plumber.
It now seems Putin may become Chairman of Gazprom, I wonder how that will affect future relations in pipe line building.
Excellent point about the Polish plumber, though he'd probably need a bushy moustache to make the disguise convincing...
on a more serious note, it seems that Zubkov is being tipped to be new Gazprom chairman, with VVP replacing him as PM and the Liberal Medvedev becoming pres. I'd imagine as Gazprom chairman, VVP would feel v. vulnerable...
Excellent post, Paul, and congratulations on your debut as a blogger.
"In the end, both Nabucco and the Russian-backed Nord Stream and South Stream pipelines will be built. And the EU and Russia will find a modus vivendi that keeps Gazprom powerful, but lets new suppliers such as Azerbaijan join the fray."
I think, that is more likely to happen if the EU hikes up its gas usage in the next couple of years. Then everyone will know the EU can take in all the supplies from all those pipelines. This spike in gas usage can happen if the EU implements its new carbon emissions policy. This policy aims to reduce use of coal. Gas is known as a greener alternative to coal.
thanks much the feedback...you've made a very good point.
Kaisa,
Europe doesn't need to boost its gas consumption. The EU already has plenty of room for gas supplies from Central Asia since Gazprom supplies only 30% of its needs.
I can't think of any incentive that Europe could possibly offer that would entice Russia to give up its monopoly over Central Asia's gas exports. That monopoly is very lucrative. The Russians make as much money from Turkmen gas exports as the Turkmens themselves.
Look at the last year's figures. Gazprom paid $100 per thousand cubic meters. It was selling the stuff to the EU for $250. Its transportation costs were around $50. That is under the generous assumption that Gazprom was paying Transneft the same transit fee as Ukraine: $1.7 per thousand cubic meters per hundred kilometers. We can safely assume it was paying less than that.
So, the Turkmens were making $100 minus their cost of extracting the gas. The Russian were making $100 in net profit. I wouldn't be surprised if the Russian remained uncooperative on the matter of Nabucco.
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