One of the most important issues of the U.S. policy toward Europe is that of European energy security. Given that the E.U. has expressed its intention to reduce the use of coal by 2020, it is obvious that this energy “gap” should be covered either by renewable energy sources (RES) or by natural gas. Although that the RES are an environmentally friendly form of energy, their use requires expensive investments in new technologies that are difficult to be implemented within a context of economic recession. Therefore, the only economically viable alternative energy source is natural gas.
E.U. owns few natural gas reserves and it takes about 34%[1] of its total imports from Russia. This has led the E.U. to design a future energy policy which is based on three main pillars: 1) Security of its energy supplies 2) Creation of a more competitive energy market 3) Adoption of an environmentally friendly energy policy. To address the relative monopoly of Russian natural gas, the U.S. should help the E.U. to diversify both its suppliers and transit routes of energy. This goal can be achieved through three different strategic options: 1) Importing natural gas from the Caspian region through the construction of new pipelines that avoid the Russian territory, a route which is also known as the “Southern Gas Corridor” 2) Importing shale gas from the U.S. 3) Importing natural gas from the Eastern Mediterranean’s gas fields which have been discovered recently in Israel, Cyprus and prospectively in Greece.
We have to consider separately the feasibility of each of the above proposals: Helping the E.U. to import natural gas through new pipelines that wouldn’t cross the Russian and Ukrainian territory is an option that has been examined for many years in Washington, but it has not yet materialized. The fact is that a fierce competition exists among alternative proposals and routes. One of the proposed pipelines that it has the support both of the E.U. and the U.S. is “Nabucco”. The pipeline will start from eastern Turkey, it will cross Bulgaria, Romania and Hungary and it will end in the energy hub Baumgarten in Austria, pumping gas in Central and Western Europe. Nabucco’s supply source will be the Caspian region – mainly the Shah Deniz field in Azerbaijan– and perhaps Iraqi fields in the future. However, the original plan was revised and it was proposed the pipeline “Nabucco West” that will follow the same route but will start its way from the Turkish-Bulgarian border for reducing the initial construction cost. The new pipeline, which will carry annually 10 to 23 billion cubic meters (bcm) of natural gas, has to face strong “competitors.” Its main rival is “South Stream” pipeline that has the direct support of Russia which wants to maintain its dominant position in the European energy market. South Stream, with a capacity of 63 bcm per year, will transport Russian gas through the Black Sea to Bulgaria, Serbia, Hungary, Slovenia and it will end in Austria near the border with northern Italy. Furthermore, there is an intention of creating a “brunch” to Croatia and Bosnia-Herzegovina, while the expansion to southern Italy via Greece and the Ionian Sea has been canceled so far. At this moment, South Stream seems to prevail against Nabucco West for a number of reasons. First, Russia’s Gazprom –which is the main shareholder of the pipeline–, announced that the construction of South Stream will begin in Bulgaria in 2013[2]. On the other hand, the Bulgarian Minister of Finance, Energy and Tourism, Delyan Dobrev, stated that the final decision for the construction (or not) of Nabucco West will be delayed for at least six months, as the pipeline has not yet secured its supply from the Azeri gas fields[3]. Second, although that the Azeri Minister of Energy, Natik Aliyev, stated that his country prefers to “feed” the Nabucco West[4], the Azeri national parliament ratified an agreement in January 2013 in order to supply the Trans-Anatolian pipeline (TANAP). TANAP will start from the Turkish-Georgian border and it will end to the European Turkey border supplying from that point the rest of the Europe. Its construction is expected to begin in 2018, initially carrying 6 bcm to Turkey and 10 bcm to Europe, an amount that could potentially reach to a total of 31 bcm by 2026. The TANAP should not necessarily be considered a competitor of Nabucco West, as there is a future prospect for interconnecting the two pipelines[5]. Such a decision would reduce the need of Nabucco West to secure new suppliers, but the problem of finding the necessary funds and a broad clientele will remain. In any case, the quantities of Azeri gas cannot meet all the needs, as there are also some other proposed pipelines. The main competitor of Nabucco West for the gas of Shaz Deniz field is the Trans Adriatic pipeline (TAP). TAP is designed to start from Komotini (Greece), pass to Albania through the Adriatic Sea and finally end in northern Italy, supplying from that point the Western Europe. The E.U.’s Energy commissioner, Günther Oettinger, stated that there is no preference between the two competitors[6]. The outcome of this rivalry depends mostly on Shah Deniz’s consortium final decision (June 2013) that will define which pipeline will be supplied with the Azeri gas. Finally, another alternative pipeline is ITGI (Interconnector Turkey-Greece-Italy) which is designed to connect Greece, Turkey and Italy through the Ionian Sea. Moreover, an expansion it is planned from Thrace to Bulgaria via the IGB (Interconnector Greece-Bulgaria). The ITGI project that aimed to transport Azeri gas to European markets seems to have been canceled, as BP (the major shareholder of the consortium that controls the Shah Deniz II field) has decided to supply the TAP[7]. However, a revival of ITGI shouldn’t be considered impossible because there is the option of taking gas from Leviathan and Tamar fields of Israel and from the block 12 of Cyprus. The transfer of gas from Cyprus to Greece can be done either by ships in LNG form or through a new pipeline[8]. To sum up, one can say that the decision about which pipeline can
The second suggestion for the U.S. is to export some quantity of its shale gas to Europe. This option has arisen due to new technological innovations (horizontal drilling and hydraulic fracturing) that make possible the exploitation of the large shale gas reserves existing in various parts of the country (Texas, Louisiana, North Dakota, Pennsylvania, Ohio). According to the analysis of EIA (US Energy Information Agency) the U.S. that previously imported natural gas has the potential to become an LNG exporter by 2016 and a net exporter of natural gas by 2020. This is a great challenge for the American leadership enabling it to achieve four different targets: a) Ensure energy independence for the United States b) Provide energy security for the E.U. by reducing its dependence on the Russian natural gas c) The U.S. and E.E. will become less dependent on Middle East’s oil so they can handle more easily the nuclear aspirations of Iran d) Increase the U.S. revenue through gas exports hurting simultaneously the Russian economy. To attain the above objectives the U.S. should decide to sell the excess gas supply to the markets of Europe and not to these of Asia. This is not an obvious choice. Geopolitically speaking, securing greater energy autonomy for the E.U. is a key issue for the U.S. Furthermore, the potential economic weakening of Russia and the increase of U.S. gross domestic product will widen the military power gap between the two countries. On the other hand, shale gas exploitation requires from the U.S. to spend billions of dollars on infrastructure and natural gas liquefaction terminals. It is assumed that in the prevailing prices (approximately $ 4.00 per mmBtu in the U.S., $ 12 per mmBtu in the E.U. and $ 16.5 per mmBtu in Asia) the Asian market offers higher profit margins. In contrast, the European market is a question mark for the U.S. companies, as the EIA argues that there is a potential profit while Gazprom claims that only the Asian markets can offer some earnings[9]. We should also bear in mind that the U.S. does not act alone in the gas market. There are significant shale gas reserves in Poland and China while additionally Australia and Canada will raise their natural gas production driving the international prices down[10]. Finally, there is concern that the increase in the U.S. natural gas exports may cause a rise in domestic gas prices hurting businesses and households incomes[11]. This negative effect can certainly be offset by the creation of new jobs in the energy, plastic, chemical and fertilizer industries. In any case, factors such as the fluctuation of exchange rates and the economic crisis in the E.U. can change the preferences of the U.S. energy companies about the destination, the price and the quantity of the exported gas.
The third option for the U.S. is to provide E.U. with all the necessary political, diplomatic and economic means that will make possible the use of Eastern Mediterranean’s gas fields. This proposal advantages over the two other options for a number of reasons. First, surveys are showing so far that the gas reserves of Israel, Cyprus and Greece are sufficient for exporting significant quantities of natural gas to the E.U. Second, this fact does not come in conflict with the existing plans for the construction of new pipelines. In contrast, the abovementioned countries could supply additional quantities of gas creating complementarities that will make more feasible the construction and interconnection of the new pipelines. Third, if the gas could be transferred from Israel and Cyprus fields to Greece through a new pipeline, then a twofold target will be achieved: The E.U. will reduce its dependence on the supplier (Russia) as well as on the transit country (Turkey). That will give a good lesson to Turkey for its two-faced foreign policy against the U.S. and Israel (remember the Turkish refusal in the Iraqi war and the Mavi Marmara incident). It will also strengthen the Greek and Cypriot economies that facing serious fiscal problems bringing political stability for the region through a closer cooperation among Israel, Cyprus and Greece. Moreover, such a development would significantly harm the gas revenue of Russia (estimated to be almost 70% of its state budget)[12] as Eastern Mediterranean gas production will reduce prices and may “steal” a share of the Russian clientele (Israel, Cyprus and Greece might be able to charge lower prices than Russia due to their geographical proximity to the E.U.).
On the other hand, Russia won’t stay inactive. There are already two Russian companies, Gazprom and Negusneft, which want to acquire the Greek public gas companies DEPA and DESFA that soon will be sold according to the IMF’s privatization program. Both the E.U. and the U.S. exert diplomatic pressure on Greece to prevent this sale that would allow Russia to maintain its influence on European energy issues. Another Russian company, Novatek, has tried unsuccessfully to acquire the economic control of block 9 of the Cypriot Exclusive Economic Zone (EEZ) but its offer was rejected by the Cypriot government. Nevertheless, we should not forget that Russia has given a loan of €2.5 billion to Cyprus in order to deal with its fiscal problems (a new loan agreement is also possible in the near future) and that many Russian citizens have high bank deposits in Cyprus. Furthermore, Russia seems to increase its presence in Greece through the businessman Ivan Savvides, who became president in the Greek football club of PAOK. Savvides owns one of the biggest tobacco companies in Russia and he is a former member of the Duma, belonging to the friendly environment of Vladimir Putin. In the past, Putin had placed Savvides as a member in the Committee on Foreign Affairs of Russia and as a deputy coordinator of intergovernmental relations between Russia and Greece. If we add to these facts the statement of the deputy president of the Russian oil company Transneft, Michael Barkof, that “the project for the Burgas-Alexandroupoli pipeline (that was designed to transfer Russian gas to Europe through Bulgaria and Greece) has not been canceled but it is only “frozen””, then we understand that Moscow is ready to seize every opportunity given to raise its economic and political presence in the Eastern Mediterranean.
In conclusion, the Nabucco project may not flourish and the U.S. shale gas reserves require money and time to be exported, if they finally be channeled to Europe and not to Asia (and that is a big if). So, the U.S. has one and clear option in order to secure the energy independence of the E.U. and that is to help the “triad” (Israel, Cyprus, Greece) to export its gas in Europe. For start, the U.S. should make diplomatic “push” on Turkey, Libya and Egypt to solve their EEZ border problems with the triad. Second, it will be of great importance for the U.S. and the E.U. to develop mutual funding programs for the construction of pipelines or LNG terminals in the area. Third, the U.S. and the E.U. should give more space and time to the economies of Greece and Cyprus to avoid political and social instability. Finally, the U.S. must take the initiative for a final solution of the Israeli-Palestinian conflict and the Cyprus dispute that will bring political peace and economic prosperity to the Eastern Mediterranean. Otherwise, Russia may appeal as the best alternative ally for Greece and Cyprus (if not for Israel). Well, Nature abhors a vacuum, so does diplomacy.
