Between Scylla and Charybdis: Energy privatization in Greece

Greece is in the process of privatizing two energy-related companies: the Public Gas Corporation (DEPA) and the Administrator of the Natural Gas System (DESFA). In both cases the highest bidders appear to be Russian companies: Gazprom for DEPA and Sintez for DESFA. But Athens finds itself between a rock and a hard place.

On the one hand it is under heavy pressure from the troika of Greece’s international lenders – the European Union, the European Central Bank and the International Monetary Fund – to privatize and meet specific fiscal targets, and on the other it is the recipient of “friendly advice” from the US and the European Commission to avoid selling DEPA and DESFA to Russian companies because of geopolitical considerations.

More specifically, there is concern about Russia’s business practices in its own energy sector and also about Europe’s dependence on Russian natural gas. The latter is, of course, very important, although there is a feeling of double standards as a close energy relationship like the one between Germany and Russia (with the construction and operation of the Nord Stream gas pipeline) did not cause similar concerns.

Energy-related projects can be instrumental in Greece’s effort to repair its image, regain a leading regional role, increase its influence, accumulate diplomatic capital and fuel its economy in the medium to long term. In this context, the Southern Gas Corridor can play an important role.

Should the Trans-Adriatic Pipeline (TAP) – crossing Greece and Albania on its way to Italy – be selected for the transportation of natural gas from Azerbaijan, it will provide a major boost for Greece’s economy and regional role, as well as for regional cooperation in the Western Balkans and European energy security. In addition, Greece should be expected to try to enlarge its footprint on the energy map through other projects, in addition to the exploitation of potential hydrocarbons deposits in various parts of the country, notably in Western Greece and the maritime areas south of Crete.

Although it is clear that Greece’s basic foreign policy orientation remains fundamentally European (and in many ways also Euro-Atlantic), following the example of many of its EU partners, there is an effort to diversify its relations with key global and regional powers. Greece is exploring available opportunities for improving economic and political relations with existing and emerging (non-Western) powers, the so-called BRICS – Brazil, Russia, India, China and South Africa. Russia and China especially are demonstrating a strong interest in Greece’s energy and transport infrastructure sectors.

Unfortunately our Western friends failed to put their money where their money is in the case of Greece’s energy privatization program and the only reasonably serious bid from a non-Russian company is that of the Azeri state company SOCAR. What should Greece do? A reasonable compromise solution would be to sell DEPA to Gazprom and DESFA to SOCAR. This would guarantee that no companies from the same country would control the Greek natural gas market.

It would also facilitate the operation of TAP, should it be selected in the context of the Southern Energy Corridor. A number of other problems of lower importance in connection to Gazprom’s acquisition of DEPA will have to be resolved, such as lower gas prices for the Greek domestic market, the possible construction of South Stream’s southern leg and the issue of the Interconnector Greece-Bulgaria (IGB) pipeline. The deal will, of course, have to be approved by the European Commission. In this context, Gazprom’s enigmatic decision not to team with a Greek or other European partner may cause some problems.

Russia’s motives are certainly not altruistic. Moscow aims to penetrate the European energy market from several directions and maintain as much influence and leverage as it can. To meet increasing natural gas demand and reduce high levels of energy dependency on Russia, European authorities need to promote the realization of projects contributing to the diversification of natural gas supply, alongside improving Europe’s relationship with Russia, two targets which are not necessarily mutually exclusive.

A Greek decision to sell DEPA to Gazprom and DESFA to SOCAR would both serve Greek national interests and strengthen Europe’s energy security (by increasing the market share of non-Russian gas through TAP/Southern Energy Corridor and potentially natural gas from Cypriot, Israeli and Greek deposits). It would also help Athens to comply with the troika demands regarding privatizations. Finally, a balanced evolution of Greek-Russian cooperation in energy and other areas might allow Greece to become a complementary bridge between the West and Russia, working quietly to assist in the full normalization of relations and the development of a strategic partnership among fundamentally status quo powers in the emerging international system.


* Thanos Dokos is director-general of the Hellenic Foundation for European & Foreign Policy (ELIAMEP).