Crimea Annexation Could Kill Russia’s South Stream Pipeline

Nord Stream pipeline construction

Nord Stream pipeline construction (Gazprom)

Russia’s invasion and annexation of the Crimea last month could have repercussions for its plans to lay a pipeline on the bottom of the Black Sea. Britain’s The Telegraph newspaper reports that the European Commission has warned Bulgaria not to intervene if it decides to block the project.

Bulgarian foreign minister Kristian Vigenin earlier insisted there was no long term threat to the construction of the South Stream pipeline. But in Brussels, Günther Oettinger, the European energy commissioner, said talks with Russia about the project were on hold.

With so many European companies involved in South Stream, governments may be reluctant to block its construction. France’s EDF, Italy’s Eni and Germany’s Wintershall are partners with Russia’s Gazprom in the consortium that plans to build the pipeline. Germany’s Siemens is contracted to supply the control systems. Just last month, the company’s boss, Joe Kaeser, met Russian president Vladimir Putin in Moscow where they both hailed the economic ties between Germany and Russia, despite official German condemnations of Russian aggression in Ukraine.

European countries have shied away from imposing heavy sanctions on Russia, targeting only individuals close to Putin’s regime with asset freezes and travel bans. However, they are looking for ways to wean themselves off Russian oil and, especially, natural gas.

The countries in the European Union get roughly a quarter of their gas from Russia. Half of it flows through pipelines in Ukraine. Most of the gas is used for heating, especially in Central and Eastern Europe where some countries are almost wholly dependent on Russia for imports. Western European countries, like Germany and the Netherlands, use much of the imported gas to produce electricity.

Last month, government leaders asked the European Commission to come up with a plan to reduce that dependence. Options are raising storage capacity — which has already increased since Russia twice shut gas transfers to Ukraine in 2006 and 2009, leaving other Europeans in the cold — and building interconnectors to enable gas, imported from Norway, Qatar or, longer term, the United States, to flow the other way, preventing Russia from blackmailing Eastern Europe.

The plan will probably also propose alternative pipelines. The European Commission previously advocated construction of the Nabucco pipeline which was designed to deliver gas from the Caucasus and Central Asia through the Balkans into Austria. It gave way to the Trans Adriatic Pipeline which will send the same gas through Greece and Albania toward Italy, crossing the Adriatic Sea.

The Trans Adriatic Pipeline is less of a threat to Russia’s hegemony, given that Nabucco would have directly served its biggest customer, Germany. That country also gets gas directly from Russia through the Nord Stream pipeline under the Baltic Sea which was built to reduce Russia’s export dependence on Ukraine.

Similarly, the South Stream pipeline would bypass Ukraine and deliver gas through Bulgaria, Serbia and Hungary into Austria. Planned for completion in 2018, it has already come under scrutiny from European antitrust investigators. If the European Commission signals its disapproval of the project, the member states that should host parts of the pipeline would be hard pressed not to give in.

That would hardly be an economic loss for Russia. It is estimated to use just 60 percent of its present pipeline capacity while its European customers are actively looking for ways to buy less Russian gas. South Stream, then, was a political project, designed to enable Russia to put pressure on Ukraine by denying it gas while continuing to service its European customers.

With the Europeans preparing financial aid for Ukraine and more sanctions for Russia, it looks like they, too, will sacrifice economic self-interest in favor of political and strategic imperatives. South Stream would help free them from Ukraine’s perennial gas disputes with Russia but the priority now is preventing Russia from taking up more of Ukraine’s territory.

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