The United States is putting Hungary under great pressure due to its objections to the Russian-backed South Stream pipeline and the expansion of the Paks nuclear power station, Prime Minister Viktor Orban said in Munich on Thursday evening, after an address delivered at the Hanns Seidel Foundation.
At a question and answer session, Orban said the pipeline and expansion project were primarily economic issues, but they had become entangled in “geopolitical, military-policy and security-policy issues” due to the Ukraine-Russia conflict.
Washington interprets both issues as “getting closer to Russia”, whereas “we don’t want to get any closer to anyone; neither do we wish to distance ourselves from anyone.”
“We are not pursuing a Russia-friendly policy but a Hungary-friendly policy,” he added.
The prime minister said that construction of the South Stream gas pipeline and the Paks expansion were both in Hungary’s national interest.
The construction of South Stream, which is a “twin” of Nord Stream that supplies Russian gas to Germany, bypassing Ukraine, serves Hungary’s interests, ensuring secure gas supplies by eliminating risks posed by the situation in Ukraine, Orban said. Even if this project does not diversify gas sources, it does diversify delivery routes, he added.
Concerning the upgrade of Hungary’s sole nuclear power plant at Paks, Orban said cheap energy was key in strengthening Hungary’s competitiveness. Unlike Germany, Hungary does not have vast funds to direct towards supporting renewable energy production, and the country’s own energy resources are scarce, he said.
The “only possible means” for Hungary to reduce its dependence on external energy resources is the expansion of the state-owned Paks nuclear plant, he said. Since the plant has been built using Russian technology it is “evident” that its expansion must be carried out in cooperation with the Russians, Orban said. Yet the US interprets this as Hungary’s “moving closer to Russia” at a time when its position is that Europe should instead “move away” from Russia rather than cooperate with it. This is why the US “is strongly opposed” to Paks, Orban said, noting the US “would have also been rather keen” on constructing its two new blocks. … Full article
The Hungarian parliament has approved a law on Monday which allows building the South Stream gas pipeline without approval of the European Union. The European Commission has already demanded an explanation from Hungarian authorities.
The European Commission’s spokesperson said at a press briefing in Brussels on Tuesday that the EC was in contact with Hungarian authorities to get an explanation for their decision.
The law was passed with 132 votes in favor and 35 votes against, allowing a company to construct a gas pipeline even if it doesn’t have the licenses needed to operate it. According to the new law the only requirement for a company which wants to take part in construction is approval from the Hungarian Energy Office.
“This is meant to give a boost to South Stream and is to show Russia that Hungary is taking the project seriously,” Attila Holoda, an expert on energy regulation, said as cited by Bloomberg.
South Stream is “extraordinarily important” for Hungary because it enhances the security of gas supplies to the country, Janos Lazar, the Minister in Charge of the Prime Minister’s Office, told reporters on October, 22.
The South Stream gas pipeline was projected to deliver gas to south and central Europe via the Black Sea and the Balkans, bypassing Ukraine. The project, with a capacity of 63 billion cubic meters of gas a year, is seen as critical for European energy security. Ukraine has been an unreliable transit country, and building a new pipeline could result in avoiding numerous risks.
The South Stream would run across Bulgaria, Serbia, Hungary, Austria, and Slovenia before entering Italy and Greece. The crisis in Ukraine has made the South Stream project a political issue rather than a legal debate. The EU Commission has been pressuring member states to stop the building of the pipeline. Last year it started an investigation claiming the project contradicted the European Union’s Third Energy Package regulations.
Bulgaria and Austria have temporarily suspended the project but are leaving it on the table.
MOSCOW — The current stand-off between Russia and the West over the situation in Ukraine will not affect the scheduled construction of South Stream gas pipeline, the Financial Times reported Sunday quoting the head of the Austrian energy group OMV.
“Nobody can tell you not to build a pipeline. It’s a matter of national law… Everybody can decide for themselves. A pipeline is a 50-year project, so one should look at things realistically… A few months is not an issue,” Gerhard Roiss was quoted as saying.
He added that possible EU sanctions against Russia targeting the country’s gas industry would be an unwise decision.
“We have had integration in the area of gas with Russia for 45 years. Customers rely on getting their gas delivered. For that reason I don’t see any room for sanctions on gas,” the OMV chief elaborated.
Roiss also stressed that Russia is already delivering gas via the Opal pipeline with an annual capacity of 36 billion cubic meters even though Russia’s Gazprom had not secured an EU approval to run the pipeline at full capacity. Opal passes through Germany connecting the new trans-Baltic North Stream pipeline with gas transmission networks in Western and Central Europe.
Ross also insisted that an increase in the number of supply routes to Europe will benefit energy security.
“Four pipelines are better than three, and five are better than four. That is the pragmatic view,” he said.
Gazprom is constructing the South Stream pipeline across the Black Sea to Southern and Central European countries with aiming to diversify export routes for Russian gas. The construction started in late 2012, with the first deliveries expected in 2016. The pipeline is expected to become fully operational in 2018.
The European Commission is trying to hamper the project saying it violates the EU Third Energy Package banning the companies involved in gas production from owning long-distance pipelines in the region.
On June 24, Gazprom and OMV signed a shareholder pact of the joint venture South Stream Austria, defining the principles of construction and further operation of the respective gas pipeline on the Austrian territory.
Russia and Austria have agreed on a joint company to construct the Austrian arm of the $45 billion South Stream gas pipeline project, which is expected to deliver 32 billion cubic meters of Russian gas to the country, bypassing Ukraine.
At Tuesday’s meeting in Vienna, the creation of South Stream Austria was announced. The company will be 50 percent owned by Gazprom, Russia’s largest gas producer, and 50 percent by Austria’s OMV Group, the country’s largest oil and gas company.
Construction on the Austrian section is expected to begin in 2015 and that the first deliveries will start in 2017, reaching full capacity in January 2018.
OMV spokesman Robert Lechner was more optimistic, and said the first South Stream deliveries could come as early as 2016.
In April, Gazprom and the OMV Group signed a memorandum to implement the South Stream project in Austria.
At Tuesday’s meeting in Vienna, OMV CEO Gerhard Roiss said that South Stream fully complies with EU legislation.
“This project- investment in European energy security- will fully comply with EU legislation,” Roiss said, as quoted by ITAR-ITASS.
There has been controversy over South Stream, as is it needs EU approval so that it doesn’t violate Europe’s ‘Third Energy Package’, which says a company cannot both own and operate pipelines within the European Union.
Ahead of Putin’s visit to Vienna, Austrian ministers said they remained committed to Russia’s South Stream project and that they plan to speed it up.
The geopolitical conflict in Ukraine has also complicated the South Stream project, as EU energy lobbying groups are campaigning against the project, to lessen Europe’s dependence on Russia.
“So far [Austria, Ed,] takes a very clear position, avoiding pressure from the European Commission and in general, public opinion in Europe that wants to halt or even stop the project. At the same time it [Austria, Ed] has enough political clout to promote this project. It’s not Bulgaria, which on its own cannot defend itself,” Fyodor Lukyanov, Chairman of Russia’s Council on Foreign and Defense Policy, said on Monday.
South Stream will deliver gas to Europe bypassing Ukraine, which is seen as an unreliable transit state.
After switching Ukraine to a prepayment system, Russia and Gazprom fear Ukraine will start to siphon gas supplies headed towards Europe, as the country did in 2006 and 2009. Miller worries Ukraine may resort to this tactic in winter, once it runs out of its underground storage supplies of natural gas.
“If Ukraine begins to siphon off gas, we will increase supplies via North Stream, and maximize the load through Yamal-Europe,” Aleksey Miller, CEO of Gazprom, said Tuesday in Vienna.
The 2,446 km pipeline will stretch across southern and central Europe and will transport over 64 billion cubic meters of natural gas to Europe per year.
Gazprom has said the project, estimated to cost $45 billion, can be completed without any funding from international partners.
Gazprom is Russia’s largest producer of natural gas and provides roughly one third of Europe’s gas needs.
The head of the Russian Duma’s International Affairs Committee, Aleksey Puskhov, wrote on Twitter on Tuesday that “Ukraine is in a long-term phase of unpredictability. Thus, South Stream is the only guarantee of uninterrupted gas supply to Europe.”
The Turkish newspaper, Hurriyet, reported that Turkish Prime Minister, Recep Tayyip Erdogan, will meet Russian President, Vladimir Putin, in Moscow at the end of November, when discussions will focus on the Syrian crisis.
Hurriyet noted that Erdogan will visit the Russian capital where he will head a delegation of a large number of ministers and will preside over the meeting of the joint ministerial committee of the Turkish-Russian Cooperation Council during 21st to the 22nd November. The meeting will discuss several political, trade and investment issues between the two countries.
Deputy Russian foreign minister, Alexei Meshkv, said that the two sides will address several regional and international issues of mutual interest and will discuss ways to develop bilateral relations. In an exclusive interview with the Turkish newspaper Meshkov asserted that Russian-Turkish relations are evolving in several areas, especially in the energy field. The two sides are also cooperating on the construction of the Mersin Nuclear Power and the South Stream natural gas pipeline project, which will pass through the Black Sea.
Norway, Russia’s closest rival in the European gas market, seems to overtaking Russia’s Gazprom. Norway boasted record high exports in 2012, while Gazprom suffered the worst numbers in 10 years.
Norway increased its exports 16% in 2012 to reach 107.6bn cubic metres, according to Europe’s key statistics office Eurostat. This is “a record level, close to the Russian gas exports to Europe,” Michael Korchyomkin, head of East European Gas Analysis, told Kommersant daily.
During the same period, Russia’s gas giant Gazprom cut sales to Europe and Turkey by 8%, according to the company’s head Aleksey Miller. That’s the lowest export level for the last decade, Korchyomkin said.
At the moment Norway is breathing down Russia’s neck in its key European market – Germany. In 2011 Gazprom supplied 30bln cubic meters out of the total 80bn cubic meters of gas Germany consumes annually. Norway sold just a bit less – 28bn cubic meters. Norway’s Statoil accounts for about 70% of the country’s exports and in 2012 signed a 10 year contract to supply gas to Germany’s Wintershall.
Norway’s lower gas prices are another tool to win customers. The country’s Petroleum Ministry is suggesting charges for gas transportation in new contracts should be significantly cut, according to Reuters citing Norwegian Petroleum Minister Ola Borten Moe.The exact price cut remains unclear, with Kommersant daily assessing it at 7%.
Competitive pricing has become a crucial issue at a time when crisis – stricken Europe can’t afford huge bills.
On Thursday Gazprom 9M 2012 IFRS results showed things are not that rosy for Russia’s’ gas monopoly. The company’s profit for the period was down 12% year on year to $27.1bn, with the net sales of gas decreasing by 8% year on year, to about $61.4bn.
Net sales exclude the amounts paid by the company in form of value added tax and customs duties.
Earlier in the week Fitch rating agency predicted a further fall of sales for Gazprom in 2013, referring to weak economic conditions and slack demand.