The project of Nabucco gas pipeline, which in the future could make a step towards lowering the dependence on Russian supplies, has been drawn in plans for a few years. Its main supporter became the European Commission; based on warning signals of increasing dependence on small number of gas suppliers, it is searching for possibilities of partial diversification of natural gas origin and route.

The gas in the pipelines of this route is supposed to come primarily from Azerbaijan, Turkmenistan and Kazakhstan. Russian deliveries currently terminating in Turkey are also planned to be included in the supplies. Deliveries from Iran are included in the plans as well, and they are very important for the project; however, UN sanctions are imposed on the country because of Iran’s nuclear program. Expenses for the route with its projected length of 3,300 km and the annual capacity of 25-31 billion cubic meters are calculated at approximately 5.8 billion USD. The new route should run through Turkey, Bulgaria, Romania and Hungary and terminate in Baumgarten, Austria. In June 2006, the pipeline project received political backing from the European Commission, the representatives of the Commission and five participating countries signed a contract on realization of the project and committed to “successfully complete” the project. (1). The project study has already been carried out in cooperation with the companies based in the countries the route runs through – Austrian OMV, Hungarian MOL, Romanian Transgaz, Bulgarian Bulgargaz and Turkish Botas. A challenge for the participating companies is the fact that they want to ask the Commission for an exception in granting the access of third parties to the facilities, which contradicts liberalization efforts.
Yet there are a few doubts in relation to the realization of the project. One of them is the ability to fill the pipeline. British Petroleum company, the largest gas producer in Azerbaijan, declared that the volume of gas appropriate for export to Europe will be at disposal in 2012 the soonest.  After the project had been announced, the Russian Federation in disagreement with the project proposed to extend and prolong the existing Blue Stream gas pipeline running on the bottom of the Black Sea from Turkey to Europe, which would terminate in Hungary.
The Russian project does not correspond with the concept of diversification of import routes supported by the European Commission. The proposition follows the route of Nabucco gas pipeline, but the origin of gas would be in the Russian territory. Ironically, the origin of imported gas could be also in Turkmenistan, which exports all the produced volume through the RF and to which the EU wants to get. The terminal station would be Hungary instead of Austria; its position of the regional natural gas hub is supported especially by Gazprom. Despite the cold, even rejecting attitude of European leaders, the project is likely to be successful, because it has an actual and stable supplier and it corresponds with the strategy of the Russian Federation, according to which the country endeavours to gain diversification of export routes. The cubic meters of gas would flow through Turkey, which for the RF is also a market, where a great volume of the raw material is consumed and which can be a base for further intended expansion southward to Israel.  By means of this project Russia would also stop the rival Caspian gas from entering the European market. Currently, Russia supplies more than a quarter of the gas consumed by the EU-27, it wants to strengthen its position in the future and it carries out the plan also by means of coordinated approach towards another large gas supplier to Europe (especially to Spain and Italy) – Algeria. Russia supplies gas mainly for Central and Northeast Europe; Algeria maintains the important position in the South European countries. By cutting out the countries of the Caspian region, the Kremlin would strengthen its influence also in the Southeast of Europe.
Russia is not comfortable with the EU efforts of joint energy policy, which is more efficient at least on the energy level than its realization on a national level. The main reason is that the projects are financially demanding and viable in a long-term run. To prevent the joint approach of the countries, Russia tries to negotiate with each individual country separately. Construction of the Nord Stream gas pipeline from Russia to Germany is one of examples that demonstrate the absence of joint approach. On the one hand, the gas pipeline increases securing of energy supplies to Germany, on the other it increases also vulnerability of the countries it bypasses, i.e. Poland and the Baltic states. The project was initiated exclusively by Russia and Germany.

Nabucco is strongly supported by the European Commission as well as by the USA. Hungary becomes the key country in the project. It is a member of both rival projects, and according to the words of the Prime Minister of Hungary, the country inclines to the Russian variant. Hungary has been in the viewfinder of Russian companies as well as Russian politics for some time. Unofficial sources speak about the influence of former largest oil company Yukos in the MOL, as well as about the influence of Gazprom in the same company. The main interest of Yukos in privatization of Traspetrol was interconnection of Druzba and Adria pipelines in the opposite direction – Russian oil was supposed to flow to Croatian port Omishail, while the Adria runs also through Hungary. MOL denationalized share in Croatia-based INA company, which corresponds with the general concept of transition of Russian gas to Western markets. Budapest is a place of foundation and a seat of Emfesz company, the second largest gas distributor in the country also active in Poland. Officially the head of the company is Dmytro Firtash, a Ukrainian enterpriser who also owns 45 % of the shares in RosUkrEnergo company (RUE), the exclusive gas supplier in Ukraine and which has penetrated into distribution networks of our Eastern neighbour as well. Unofficially they say that there are interconnections with the highest positions in Ukrainian and Russian politics in the background of these companies. Emfesz also plans construction of underground gas reservoirs in Hungary. Gazprom already owns some underground reservoirs in the country, gained from German E.On.

Hungary becomes strongly influenced by Kremlin, at least when it comes to decision-making in energy sphere. If the country decides for the Russian option of gas pipeline, the Nabucco project will be most likely never carried out.
The latest statements in relation to both projects were made in the beginning of March 2007 by the Hungarian Prime Minister Ferenc Gyurcsany, former Communist Youth leader, who has close ties with President Putin. According to these statements the country has decided to join the Russian project despite the support of European Commission and the USA, because its construction and possibilities of realization were more realistic (2). The reasons are rather sensible – a part of the Russian project already exists and functions (Blue Stream), the Russian Federation will have no problems to fill the line as it tries to split the gas flow into various routes anyway. The advantage of the Russian project is also the fact that there is no need of a wide discussion as in case of the inept Union. Nabucco project has been delayed also because of financing problems. Eventually the European Bank for Reconstruction and Development promised to finance 70 % of the project expenses. The project plans to deliver natural gas also from Iran, which has the second largest supplies of gas in the world, but there are the UN sanctions imposed on the country.

The ineptness of the Union and the non-existence of joint energy policy are the facts that play into the hands of Russia and Gazprom. Recently, remarks have appeared on creation of a cartel in natural gas sphere in the manner of OPEC. The idea is nothing new, the last time it appeared in form of signing contracts between Gazprom and Algerian Sonatrach at the end of 2006. The extension of the Blue Stream gas pipeline would strengthen Russia’s position of a supplier and mothball the present situation on the European market supplied by three companies: Norwegian Statoil, Algerian Sonatrach and Russian Gazprom. An agreement between only two of them creates a situation similar to a cartel. These reflections on increasing dependence, on Gazprom penetrating distribution companies directly or via third companies, on domination on the market, on natural competition which at least in the Central European region has not been accomplished even by privatization by the Western companies seeking for good relations to Gazprom and mutually exchanging assets, is supposed to coerce the EU to an agreement on joint foreign energy policy with strict rules. Without its existence, the small countries will succumb to the Russian pressure.

(1) EU gives blessing to gas pipeline.
http://www.ft.com/cms/s/3f10532a-0538-11db-9b9e-0000779e2340.html

(2) Hungary chooses Gazprom over EU. http://www.iht.com/bin/print.php?id_4885468