OPINION

Pipeline politics, in perspective

The agreement between Greece and Russia for the construction and management of part of the South Stream natural gas pipeline that will cross Greece to Italy and the rest of Western Europe is, without doubt, an important development. The statements made by Greek and Russian officials, and the reservations expressed by Americans, make Greece look like the new major player on Europe’s energy map. The numbers, though, tell a more complicated tale. The agreement was signed in Moscow on April 29, at a ceremony that was one of Vladimir Putin’s last appearances as president, with Prime Minister Costas Karamanlis in attendance. The deal is that the pipeline will be completed around 2013-2014 and will convey up to 10 billion cubic meters (bcm) of natural gas from Russia each year. The number looks impressive, but if we consider the forecast of the International Energy Agency that in 2015 Europe will need 536 bcm annually, then we can see Greece’s involvement in its true context. In 2008, Greece is expected to consume about 4.3 bcm of natural gas. Putin predicted that this will double over the next eight years. So, whether Greece uses up nearly all the gas that the new pipeline will carry or whether capacity is increased in the pipelines already in Greece (via Bulgaria and Turkey), the capacity to be offered to Italy via an undersea link will be relatively small. Italy is already linked to networks from the north and through undersea pipelines with Libya, Algeria and Tunisia. So the Greek pipeline will simply provide Italy with one more choice rather than a lifeline. In any case, the amounts that will be transported will not generate such transit dues as to change Greece’s economy. Meanwhile, Greece’s DEPA state gas company and Italy’s Edison have already agreed to build an undersea pipeline that will carry natural gas from Central Asia and the Middle East to Italy. The undersea link of the so-called ITGI pipeline, which has the blessing of the United States, is expected to cost about 950 million euros. Will there be a convincing argument for a second such pipeline across the Adriatic? US officials have repeatedly voiced reservations about Greece’s apparent growing dependence on Russia’s Gazprom for natural gas supplies. Given the difficulty in finding other suppliers, these declarations appear more a means of exerting pressure than a real gripe. In 2007, Greece obtained 77 percent of its natural gas from Russia and the rest from Central Asia and Algeria (the latter in liquefied form). The truth though is that aside from Iran (from which any pipeline would pass through Turkey), Russia is the major source of natural gas and Gazprom has already got a hold on most of the supplies coming out of countries east of Turkey anyhow. On May 5, Development Minister Christos Folias forecast that «by 2012-13 domestic demand for natural gas will have reached about 7.5 bcm per year, of which 3 bcm will come from Russia, 3 bcm from ITGI and 1.5 bcm in liquefied form.» Given the situation described above, it remains to be seen how supplies from Central Asia will grow to the extent mentioned by Folias. Washington is fully aware of the situation – as are Athens and Moscow. But it seems to suit all the players to pretend otherwise, in order to win points in a game of influence. The fact that Greece is now part of the South Stream network will not change things for Europe nor, on the other hand, will it be easy for Greece to avoid dependence on Russian gas. For Russia, the agreement with Greece is important because it provides a small alternative at a time when the ambitious plan for the North Stream pipeline under the Baltic Sea, which is designed to carry 55 bcm annually, has not yet received a permit from any of the several countries that have a say in its construction. Also, it strengthens Moscow’s influence in an important southern nation. For Athens, the investment of Russian capital is the best guarantee for its future supplies. For Washington, it is a test of how far it can go toward alienating a longstanding ally while still remaining its major partner. All of these factors are in themselves important for all parties involved, without anyone needing to exaggerate. Only if we see the issue clearly will we be able to weigh the true benefits and dangers – both financial and political – of the agreement.