The expansion of the European Union in 2004 and 2007 indirectly led to several crises at a level not seen since the oil embargo of 1973. The accession of several former Warschau pact countries introduced an extra dimension to European politics: Russia. Due to historical reasons some of these countries have a high dependency concerning hydrocarbons on their large eastern neighbour. Several serious disputes concerning supply, pricing, and debt between Moscow and Kiev from 2005 until 2009 led to disruptions in supply to EU member states. These conflicts highlighted the need for reduced dependency on Russia.
During this period the search for alternative sources was already on its way, but the shutdown of gas supplies as a consequence of these disputes accelerated the process. The completion of two LNG liquefication plants in Poland and Lithuania has decreased the dependency of this region on Russia. The south-eastern flank of the EU, however, is in a direr state. In order to alleviate dependency, the European Commission obstructed construction of the South Stream pipeline from Russia through the Black Sea to Bulgaria.
This region is on the brink of a breakthrough as it stands to benefit from the diversification of routes to the east and south. Moscow, however, has not been sitting idle in improving its chances to maintain market share. In July 2018 the second phase of the Southern Gas Corridor, the Trans-Anatolian Pipeline or TANAP, will be finalized to export 6 bcm of gas for the domestic Turkish market from the Shah Deniz field in Azerbaijan. Another 10 bcm will be sent to Europe when the third phase Trans-Adriatic Pipeline or TAP, is finished in 2020.
Furthermore, the discovery of significant energy resources in the Eastern Mediterranean provides for an additional source. The most obvious beneficiary, due to its geographic location, would be the EU. There are several options on the table to transport natural gas to customers in Europe: LNG facilities in Egypt, pipeline through Turkish territory, and pipeline directly through EU member states Cyprus and Greece.
Israel will be exporting natural gas worth $15 billion or 64 bcm under a ten year deal with Egypt. These imports will add to Egypt’s domestic production in order to supply its idle liquefication facilities. Other alternatives to export significant volumes are pipelines through Turkey and Cyprus/Greece. Although infrastructure on land is significantly cheaper than subsea pipelines, the bellicose rhetoric of Turkish president Erdogan and the deteriorating relations between Turkey, Israel, and Cyprus deem such an option something of the past (for now).
A more expensive but politically safer alternative would be a subsea pipeline which Israel, Cyprus, and Greece have been exploring, the EastMed pipeline. This would transport 10 bcm of gas from the Eastern Mediterranean to Greece at a cost of $7.3 billion. The follow-up project that is supposed to take the gas from Greece further into Europe is called Poseidon and will run from the Greek coast to Italy. This pipeline has recently been upgraded to transport 20 bcm, 10 more than the EastMed pipeline. According to the project team, the upgrade has been designed to “allow multiple sources of gas, from Turkey/Greek border and from Eastern Mediterranean region”.
Despite opposition from Brussels, the countries in the region show continued interest for Russian gas due to lower prices compared to LNG or other sources. In order to meet this demand, Moscow struck a deal with Ankara on 26th of May 2018 for a second string of the Turk Stream subsea pipeline to supply 15.75 bcm of natural gas to Europe. Gas giant Gazprom already opened a potential export route in 2017 when it struck an agreement with Italy’s Edison and Greece’s Depa to use the southern route for Russian gas through Poseidon, where the expanded 10 bcm capacity could be used.
However, Moscow’s plans also extend to other infrastructure in south-eastern Europe such as the TANAP and TAP pipelines constructed for Caspian gas. Moscow intends to participate in the auction system for the pipeline giving access to any would-be supplier. This would be contrary to the intention of the EU, which proposed diversification away from Russia. The ‘unbundling legislation’ of the EU provides equal access to transport infrastructure, meaning that legally Brussels does not possess alternatives to block Moscow’s intentions.
In recent years serious challenges have arisen for Russian gas export to Europe: the foiled South Stream pipeline, the EU supported rival Southern Gas Corridor, and the rise of the Eastern Mediterranean as a gas hub. However, Moscow has proven to be resourceful and relatively successful in maintaining its market share. The participation in multiple projects, including the Southern Gas Corridor meant to loosen Russia’s energy hold on Europe, has shown the interest for Siberian gas from European partners. Furthermore, the multitude of plans and intentions to participate in several projects has increased uncertainty for other would-be suppliers who potentially could invest in alternative sources. Ultimately this plays in the hands of the Kremlin whose export capacity remains essential until the near future.