Hungary goes for Gazprom ’Blue Stream’ instead of EU’s ‘Nabucco’ gas pipeline (Mar 13, 2007)

Mar 13, 2007 (International Herald Tribune and Romania Report)

On March 12, ‘International Herald Tribune’ published analysis ‘Hungary chooses Gazprom over EU’ signed by Judy Dempsey. “As the European Union struggles to achieve a common energy security policy, the Socialist-led government of Hungary has broken with the bloc by joining forces with Gazprom, the Russian energy giant, to extend a pipeline from Turkey to Hungary,” the IHT reads.

To our knowledge, in December 2006, Gazprom signed a MoU with Serbia in order to build a natural gas pipeline based on the underused ‘Blue Stream’. The projected pipeline is to cross Bulgaria, Serbia, Croatia and Slovenia in order to reach North Italy (see the red line in Fig. 1). Hungary was not mentioned when the above MoU was signed.

On another hand, following the oil Russia delivery disruption on Jan 8 2007, EU decided on Jan 10 to revive the “Nabucco” project – which, by 2012, will bring Azerbaijani gas to EU. The “Nabucco” pipeline is planned to cross Turkey, Bulgaria, Romania, and Hungary in order to end at the Baumgarten hub in Austria (see the dark blue line in Fig. 1).

”Therefore, the ‘Blue Stream’ “joint project would compete directly with an EU plan to construct its own pipeline to reduce dependence on Russian energy supplies,” IHT analysis goes on.

“Starting in Turkey and crossing Bulgaria and Romania, the extended Gazprom pipeline, called Blue Stream, would follow almost the same route as the EU project, cost just as much and be finished at about the same time.”

“The immediate advantage to Hungary in joining the Russian project was unclear, because Budapest could end up contributing to the construction of competing pipelines,” IHT reads.

Again to our knowledge, IHT is wrong – the ‘Blue Stream’ bypasses Romania, which, therefore, is the only country to loose in case Nabucco project fails. IHT said the Hungary’s immediate advantage was unclear – but those who read the history of Hungarian-Romanian, Russian-Romanian relationships, and are aware of Russian special care for the Southern-Slavic states in the Balkans will surely better understand “the immediate interest” of both Hungary and Russia.

“The opposition in Hungary claims that Prime Minister Ferenc Gyurcsany, who leads the former Communist Party and has close ties to President Vladimir Putin of Russia, supports Gazprom's strategy to expand its influence in central and southeastern Europe,” IHT report further reads.

The Hungarian Economy Ministry, however, says that the country has ambitions to become a major energy hub in central Europe and that the Blue Stream project, with access to more Russian natural gas, would further this aim.

Gyurcsany said in an interview that because the EU project, known as Nabucco, had experienced significant delays and could face further problems, the Russian plan was more realistic.

When completed, at the earliest in 2011, the €5 billion, or $6.6 billion, Nabucco project would benefit all the bloc's 27 members and carry at least 30 billion cubic meters, or 1 trillion cubic feet, of natural gas a year to the Union. Currently, more than a quarter of the Union's gas, or 150 billion cubic meters, is imported annually from Russia.

"Which of these two pipelines exists?" asked Gyurcsany, whose country joined the Union in 2004. The Blue Stream line already runs under the Black Sea to Turkey.

"The Nabucco has been a long dream and an old plan," he said. "But we don't need dreams. We need projects."

"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."

Andris Piebalgs, the Union's energy commissioner, said the Nabucco pipeline would transport natural gas across from the Caspian region, mostly from Azerbaijan to Turkey. It would then be sent through Bulgaria, Romania and Hungary and finally to Austria. These transit countries have established a consortium for the Nabucco pipeline, IHT further reads.

Gyurcsany said Hungary would support Russian plans to extend the Blue Stream pipeline into central Europe despite its being a member of the Nabucco consortium.

"Blue Stream is backed by a very strong will and a very strong organizational power," Gyurcsany said. "And there is capacity behind it." The cost of extending the Blue Stream pipeline to Hungary would be €5 billion, according to the Hungarian Economy Ministry.

The Blue Stream pipeline is one of the world's deepest undersea pipelines. But because of low compression and other technical problems it pumps less than three billion cubic meters of gas a year, well below the total of regional needs. It was built to supplement Gazprom lines through other countries, including Ukraine and Belarus.

Once the Russian natural gas arrives in Hungary through the Blue Stream line, it is to be either sold to other European countries or stored in facilities that Gazprom recently acquired.

Gyurcsany said he still wanted Hungary to diversify its energy supplies. Hungary depends almost completely on Russia for natural gas.

Fidesz, the main opposition party in Hungary, said Gyurcsany was making the country even more dependent on Russia by teaming up with Gazprom.

"I would be most thankful if we could diversify our supplies," Gyurcsany said. "I can hardly overestimate the risk that Hungary runs. Any prime minister would be a fool if he did not want to diversify or if he bound himself to one supplier. But chasing dreams is also foolish instead of building on realities."

Janos Koko, the Hungarian economy minister, said he saw no inconsistency in the Hungarian position because it would lead to competition. "We also want to diversify our energy supplies," he said. "Over 80 percent of our gas comes from Russia. There are two competing projects. But Nabucco is more imagination than tangible. I would like to see a stronger Nabucco."

The EU agreed to speed up the construction of the 3,000-kilometer, or 1,900-mile Nabucco pipeline after an energy dispute between Russia and Ukraine in January 2006 that led to shortages of natural gas in some EU countries. Piebalgs said the Nabucco pipeline would "concretely contribute to energy security."

The pipeline has been subject to many delays, not least because of uncertainty over whether it would be able to ship natural gas from Iran. Iran is now subject to UN sanctions because it refuses to halt its uranium enrichment program.

There also have been problems with financing the project. The European Bank for Reconstruction and Development, which advocates competition in the energy sector as well as diversification, agreed last year to finance 70 percent of Nabucco's construction costs, IHT analysis concludes.



‘International Herald Tribune’ analysis, with comments by Romania Report