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Germany Kills Nabucco, European Energy Security

This appeared in the Moscow Times, originally an editorial in Vedomosti.  Former Chancellor Gerhard Schröder sure has earned his money.

Although France and Italy also supported the downgrading of Nabucco, Germany, which stands to be on the receiving end of the Nord Stream pipeline, is Nabucco’s largest opponent. Nord Stream’s shareholders include Gazprom with 51 percent, German enterprises E.On and BASF with 20 percent each and Dutch Gasunie with 9 percent.

Most of the skepticism surrounding Nabucco centers on the lack of gas to fill it. Iran, with the world’s second-largest natural gas reserves, could easily fill the pipeline, but it is impossible to imagine Tehran as a reliable partner in Nabucco considering how many sharp points of contention there are between Iran and the United States (and many EU members as well) — mainly over Tehran’s nuclear program. Turkmenistan, which has the world’s fifth-largest reserves of natural gas, could play a prominent role in Nabucco, but this would require building a new Trans-Caspian pipeline. Moreover, there are security issues regarding transit routes through Georgia and Turkey.

Gazprom’s otherproposed project, South Stream, which would transport gas from Russiato Bulgaria and onward to other European countries via the Black Sea,would be Nabucco’s competitor.

Now Gazprom can see itself asthe victor. While Europe is shelving Nabucco until more prosperoustimes, Gazprom continues to see the ambitious South Stream and NordStream projects as their key strategic priorities.

On theother hand, Gazprom’s gas exports to Europe have shrunk since thebeginning of the year by 40 percent in comparison with the same perioda year ago. Moreover, long-term forecasts point to European demand forgas dropping much more than previously believed, which makes theNabucco deferral logical.

Gazprom may believe that the Nabuccodowngrade strengthens its status as a near-monopoly supplier of gas forEurope. But the price of having this privilege may prove to be veryexpensive.