EU gets wake-up call as Gazprom eyes rival TAP pipeline

A worker rides a bicycle past gas pipes at Gas Connect Austria's gas distribution node in Baumgarten some 40 km east of Vienna, in this March 6, 2013 file photo. (Reuters)
Updated 14 February 2017
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EU gets wake-up call as Gazprom eyes rival TAP pipeline

BRUSSELS/MILAN: Gazprom’s bid to tap into a pipeline meant to wean Europe off Russian gas threatens to undermine a pillar of European energy policy and slow plans to develop rival deposits in the east Mediterranean.
As the EU struggles against the “iron embrace” of Russian pipelines, it has made opening a new Southern Gas Corridor to carry gas from Azerbaijan by 2020 a priority.
The 10 billion cubic meter (bcm)-capacity Trans Adriatic Pipeline (TAP) is the project’s end piece, joining up with the Trans Anatolian Pipeline at the Turkish border, then crossing Greece and Albania to reach Italy.
Construction work on TAP gives EU officials the first non-Russian gas pipeline to supply Europe since Algeria’s Medgaz link nearly a decade ago, paving the way for diluting Gazprom’s large one-third share of Europe’s gas market.
That at least was the plan, until Gazprom’s deputy head Alexander Medvedev last month said the company was considering pumping gas through the link under an auction system giving equal access to any would-be supplier.
Medvedev questioned Azerbaijan’s ability to fill the pipeline, saying Russia could step in to plug any shortfalls once the link is expanded. “It will not lie empty,” he said.
“That would be very bad,” one EU official said. “It would be totally contrary to everything we have agreed with partners.”
The EU worries Gazprom has abused its dominant position to overcharge central and eastern European states, some of which are nearly wholly reliant on Russian gas.
It foiled Russia’s South Stream project to pump gas to southeastern Europe under the Black Sea by insisting on anti-trust rules banning suppliers from owning pipelines, without giving other vendors access.
Taken together with separate Russian plans to double its Nord Stream pipeline to Germany, EU nations must fend off “this iron embrace from the North and from the South,” another EU official said.
While the first phase of TAP’s capacity will be filled by the BP-led consortium developing Azerbaijan’s Shah Deniz II gasfield, TAP says any gas supplier can bid for another 10 bcm of capacity through so-called Open Season auctions.
Some of TAP’s shareholders — including Italy’s Snam and Belgium’s Fluxys — said they would welcome Gazprom’s entry and EU sources admitted there may be little they can do to keep Gazprom from bidding when the pipeline is expanded after 2020.
“We see the Southern Gas Corridor foremost as a major source of diversification: New gas, new route, new supplier,” European Commission Vice President Maros Sefcovic told Reuters.
EU sources said Russian gas flows via TAP may jar with the terms set by its financial backers, such as the European Investment Bank. The bank said it is carrying out due diligence.
At most, officials say they could extend an exemption from EU anti-trust rules to TAP in order to keep Gazprom out, but Brussels would require the firms and governments concerned to initiate the move.
Intervening may also run counter to the bloc’s goals of promoting an unregulated gas market. And it risks triggering a backlash from Moscow, whose plan to join TAP still hinges upon the construction and expansion of a major gas link to Turkey.
By accessing TAP, Gazprom is seeking to defend market share by flooding Europe with cheaper piped gas than would-be challengers, including from the east Mediterranean and North Africa, industry sources say.
“The hub around Israel, Cyprus, Egypt could compete, but if Russia can saturate the TAP, it will not be easy,” a senior Italian industry source said.
Last year Gazprom pursued another pipeline scheme — the Interconnector Turkey Greece Italy (ITGI) Poseidon, first backed by the EU as an alternative to Russian imports — for its own use.
“In the geopolitical game around Turkey and the EU, Russia is trying to keep all its options open,” said Kirsten Westphal of the SWP Foundation in Berlin. “That is clever ... because it makes it hard for others to take decisions on projects.”


Merkel seeks united front with China amid Trump trade fears

Updated 22 May 2018
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Merkel seeks united front with China amid Trump trade fears

  • Merkel seeks common ground to ward off trade war
  • Plans complicated by US policy moves

Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.

Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.

“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.

But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.

China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.

The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.

Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”

Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.

No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.

In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.

Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”

But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.

Ahead of her visit, Beijing fired off a rare salvo of criticism.

China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.

Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.

“Economic exchange cannot work as a one-way street,” he warned.

Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.

Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.

Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.

“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”