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The secrets behind the energy game with gas pipelines

09 April 2015 / 16:04:08  GRReporter
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According to the information on the energy sector, which leaked yesterday from government members, it was agreed during the meeting between Alexis Tsipras and Vladimir Putin in Moscow to explore the possibility of building a gas pipeline to carry Russian gas from the Greek-Turkish border and on Greek territory, states Harris Floudopoulos in his analysis for capital.gr.

Putin's words made it clear that the pipeline "with the new route will provide for Europeans’ fuel needs and will allow Greece to become one of the main power distribution centres." The Russian President mentioned the prospect of Moscow funding the project, stressing that the Russian side was ready "not only to credit some joint projects that are discussed today", but also "to solve the problems in the financial and credit relations." Putin added that "the possibility of an immediate advance payment in return for future profits and repayment of the loan still at the start of operation of the pipeline" was also explored.

The advance payment against future profits that would be received after 2019 is part of the package agreement that might accompany the pipeline.

According to sources, the agreement on the pipeline construction would include the issue of cancelling the take or pay clause (i.e. the fine imposed on Greece in 2014 because of reduced consumption of natural gas, below the minimum agreed quantities), and the prospect of reducing natural gas prices from 2019 onwards, i.e. when the pipeline begins to operate, or even earlier.

What are the conditions for the project to be launched? Firstly, the details of the Greek-Russian agreement should be discussed, as stressed at yesterday's meeting. This means that negotiations would begin between the Russian Gazprom and probably the Greek gas company DEPA on the establishment of the company that would implement the construction of the pipeline, but also on the means of financing the project, which Greece believes would cost about 2 billion euro. According to sources, the Russian proposal for the sale of shares of DEPA was rejected, and a joint entity would eventually be created which would also direct the Russian private capital to finance the project.

Now, however, the whole discussion about the pipeline is complicated by the assurance of the Greek Prime Minister that the rules and laws of both Greece and the European Union will be fully respected. "We respect our commitments to all organizations we are part of," said Alexis Tsipras, allowing for many possible interpretations of the scope of the agreement with Russia on the pipeline, which would be a continuation of Turkish Stream on Greek territory.

What does European law mean? 

Why is the statement of the Greek Prime Minister about the respect of European law important? The Turkish Stream pipeline or its continuation through Greece to Europe is an alternative route chosen by Russia and Gazprom after the failure of South Stream - a project in a more advanced stage, the construction of which had already started and which was intended to pass through Bulgaria. However, when Bulgaria requested from the relevant authorities in Brussels (the Directorate "Energy" and Directorate "Competition") a construction permit for the pipeline, the European Commission did not give the green light, as the Russian side did not agree to comply with the European framework that mainly provides for two things. One is the separation of production companies from the companies that manage the energy infrastructure, such as pipelines (i.e. the framework prohibits a company to be both a natural gas producer and an operator of the pipeline) and the other is to secure free access of third parties to the pipeline, so that other companies or gas other than Russian gas passes through the pipeline. In the case of South Stream, Russia did not comply with these conditions in European law. Now, if in the case of the Greek part of Turkish Stream Moscow and Gazprom adopt these rules, the pipeline will be realized.

Why does Brussels react and what is the position of Russia?

Tags: Gas pipelinesTurkish StreamSouth StreamNord StreamGazprom
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