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Gazprom’s European Agenda

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Against the crisp backdrop of Vienna under snowfall, the message resonated loud and clear: Russia considers itself as the primary guarantor of West European gas security and the time has come for European political circles to face up to the realities of the situation.

“For too long, too many Europeans have considered gas not as a tool, but as a weapon. The moment has now arrived to exit this mindset”

Viktor Zubkov, Chairman, Gazprom

Delivering the keynote address at this year’s European Gas Conference, Gazprom Chairman Viktor Zubkov’s statement was forceful, but optimistic. “Political solutions need to be found now, not in the future… because Russia is ready, willing and able to supply gas to meet demand wherever it is felt,” he resolutely declared. “For too long, too many Europeans have considered gas not as a tool, but as a weapon. The moment has now arrived to exit this mindset and bow to the inevitable with Gazprom thoroughly confident that Europe will prove to become its most reliable partner,” he continued.

A casual glance at the facts certainly seems to confirm such assertions. Russia remains the largest exporter of gas to Europe, sending last year a full 12 percent more gas to Europe than it did back in 2015. Indeed Gazprom, the monopoly exporter reported last week that its sales volumes had hit record levels increasing to 160.9 billion cubic meters in the period January to September 2016 compared with 125.3 billion cubic meters the year before. Conversely Europe’s need has never been greater. “According to a consensus forecast of the world’s leading energy agencies, thanks to new spheres of growth, Europe will require some additional 90 bcm of gas by 2025 from the current level of supply and more than 120 bcm by 2035,” wryly noted Gazprom’s deputy chief executive Alexander Medvedev.

Energy Boardroom's Louis Haynes talks to Gazprom Chairman Viktor Zubkov at the European Gas Conference 2017, Vienna

Energy Boardroom’s Louis Haynes talks to Gazprom Chairman Viktor Zubkov at the European Gas Conference 2017, Vienna

Into this breach, Gazprom is keen to style itself as the savior and most rational partner of choice. “We constitute by a long way the most cost-effective and reliable source of gas in Europe… We are, quite frankly, the only gas producer that can reliably and flexibly supply gas in any amount… We can supply whatever Europe desires…even an additional 150 Bcm/year if necessary,” resoundingly assures Medvedev. Moreover the Russian gas giant proclaims it is ready to put in place a powerful new infrastructure that would cost European taxpayers “not a single euro cent.”

“My advice is not to go searching for a black cat where there isn’t one … Nord Stream 2 is categorically not about isolating the Ukraine.”

Viktor Zubkov, Chairman, Gazprom

One of the centerpieces of this new infrastructure is, of course, the somewhat controversial Nord Stream 2 pipeline which aims to double the shortest route from Russian gas fields to Europe to some 110bcm per year and enter into operation by 2019. In the eyes of some East European nations, the proposed pipeline, by passing through the Baltic sea and circumventing traditional land routes, carries political consequences in that it will trigger undermining of the Ukrainian economy and generate the loss of billions of dollars of transit fees. Polish President Andrzej Duda, for example has referred to the pipeline as a “Deeply anti-Ukrainian project both that neglects Polish interests and endangers European unity.”

Gazprom for its part has been eager to refute any such suggestions. “My advice is not to go searching for a black cat where there isn’t one,” laughs Zubkov. “Nord Stream 2 is categorically not about isolating the Ukraine, it is about responding to the demands of our clients who are seeking a more advanced level of energy security… We faced all these sorts of obstacles with the original Nord Stream and yet today every sensible actor acknowledges that that pipeline was absolutely essential.”

“Europeans need to exude much greater self-confidence and pull their weight in putting in place a reliable legislative framework to make the most out of its partnerships with Russia… There is no Plan ‘B’”

Manfred Leitner, Executive Board Member, OMV

Indeed it would be hard to argue that Nord Stream 2 doesn’t carry a strong commercial logic. The majority of Gazprom’s largest customers today can be found in, or accessed through, northwest Europe, while the need for imports there is rising sharply as output declines in the Netherland’s Groningen field and the UK continental shelf oil and gas reserves reach full maturity. In the word’s of OMV executive board member Manfred Leitner, “Gas needs to be regarded as the feedstock for European economic growth and represents the only true pathway to a less carbon-intensive future so it is about time that Europe reconsidered its neighborhood policy towards Russia so as to make this much-needed transition a reality.” “Europeans need to exude much greater self-confidence and pull their weight in putting in place a reliable legislative framework to make the most out of its partnerships with Russia… There is no Plan ‘B’, there is no alternative,” he counsels.

Writer: Louis Haynes

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