Derek Brower: Nabucco is Dead

So is another part of the EU’s energy strategy By Derek Brower HUNGARY’S prime minister Ferenc Gyurcsany did the decent thing this week and admitted what many have known for some time: his country has no real intention of participating in the Nabucco pipeline project. nabucco.jpg At least Verdi’s version exists “Nabucco has been a long dream and an old plan,” he said in an interview with the IHT. “But we don’t need dreams. We need projects.” Instead of Nabucco, confirmed Gyurcsany, Budapest would back a rival project to import Russian gas into Hungary. The €5bn Nabucco project was conceived to be the “anti-Russian” pipeline. Stretching from Turkey through the Balkans into central Europe, it would take some 30bn cubic metres a year of gas from Central Asia, the Middle East and Egypt into the EU. The European Commission, which instructed its development banks to finance the bulk of the project, prioritised the pipeline as key to reducing the continent’s dependence on Russian gas. Hungary’s state energy company, Mol, is one of five companies in a consortium that was planning to develop the Nabucco pipeline. Mol might remain in the consortium – but without Hungary’s political backing for the project, it has no chance of proceeding. That is because Budapest favours a rival pipeline project that would bring Gazprom’s gas through the Blue Stream pipeline – under the Black Sea between Russia and Turkey – and up through the Balkans into Hungary. It would target the same markets as Nabucco. Analysts rule out the possibility of both coming on stream. More likely is that the Nabucco developers will join Gazprom’s project. On the face of it, Hungary’s motivation in backing Gazprom’s Blue Stream extension is clear. The country hopes to become a regional gas hub, building storage capacity and earning income from transit fees. But Gyurcsany’s opponents have also hinted at darker reasons behind his government’s backing for the Russian project. Hungary has become a refuge for several prominent Russian businessmen with shady histories. But Budapest has simply done its sums, calculating that siding with Gazprom will guarantee its own security of supply – even if such a deal angers its neighbours, who are worried about increasing the region’s dependency on Gazprom. When they signed a memorandum of understanding relating to the project in the summer, both Budapest and Moscow emphasised Hungary’s future security of supply as a feature of the deal. “The single problem with Nabucco is that we cannot see when we will have gas from it,” Gyurcsany said. “If someone could say to me definitively, you would have gas by a certain time, fine, but you can only heat the apartments with gas and not with dreams.” He added: “Blue Stream is backed by a very strong will and a very strong organisational power – and there is capacity behind it.” For Brussels, Hungary’s decision exposes yet again the failure of the EU’s member states to put the Union’s strategic interests ahead of their own. Berlin made a similar decision when the Gerhard Schröder government backed Gazprom’s Nord Stream pipeline through the Baltic Sea to Germany. Like Budapest’s cooperation with Gazprom in Central Europe, Berlin’s bilateral agreement with Moscow angered Germany’s neighbours, who felt that the pipeline would compromise their energy security. It also infuriated Brussels, which hadn’t seen so much as a feasibility study of the line before it was announced. And Hungary’s decision exposes another failure of the EU’s common energy strategy. Although Nabucco was designated a “strategic priority”, in the words of energy commissioner Andris Piebalgs, its slow progress has undermined its viability. It is also questionable whether Nabucco’s ambition to secure supplies from the Middle East and North Africa was ever realistic. Iran’s export capacity remains limited for political reasons; and Egypt, the other potential supplier, would prefer to export liquefied natural gas or supply its own growing domestic market. Gazprom has known that all along. And, having successfully separated Berlin from the rest of the EU to agree the Nord Stream deal, the company is aware of how empty claims about a “common voice” on energy in the EU really are. Gazprom has openly spoken about Germany and Hungary as “hub states” for its gas in Europe. In November, Alexander Medvedev, head of Gazprom’s export arm, told me that Nabucco posed no threat to Gazprom’s plans to extend Blue Stream. “Nabucco is a virtual pipeline,” he said. He even had time to make a joke at its expense. Referring to the opera from which it takes its name, he said: “Unlike the Verdi opera, there will be no execution of this Nabucco.” Europe’s problem remains the same: Gazprom keeps having the last laugh.