From hindsight the latter is surprising. Regarding SoS one has to distinguish at least between three quite different reasons why interruptions may occur: gas deliveries may fail: for unforeseen technical reasons; because somehow infrastructure cannot cope with demand, or because external gas supply stagnates for whatever reason. In the first case good technology helps, in the second case good planning and coordination, and in the last case good diplomacy.

It is probably fair to say that compared to the current situation in those days: technology was less advanced, planning tools less developed (think of less advanced computer support), and energy diplomacy still in its infancy. In fact the then cold war and iron curtain conditions and the less mature state of European integration would seem a far less reliable background for gas supply for and within Western Europe than nowadays!

And yet, in those days SoS for gas did not seem to be a matter of serious public concern.

In the mean time sensor- and computer technology has developed with an incredible speed and found its way into the gas industry; advanced computerised information systems have been introduced capable of optimising transport capacity allocation, balancing, etc.; gas markets have been liberalised in order to introduce the flexibility of the private trading system that supposedly would help to generate market equilibriums smoothly and fast; and the cold war is something only grandparents still talk about, the iron curtain lifted some 20 years ago; while at the same time the process of integrating the European gas market proceeded considerably.

And yet, nowadays SoS for gas is a matter of serious public concern.

In fact, SoS all in the sudden is an issue again high on the national and European political agenda. See, for instance, the Directive on the issue proposed by the EC last July. And it has inspired European politicians – aware: that 80% of Russian gas to the EU goes via Ukraine, that Russian gas represents some 25% of EU gas supplies, and that this share is scheduled to increase further - to act, witnessing the mid-July ‘Nabucco-deal’ and the August ‘EU-brokered Ukrainian deal’.

The main explanation why SoS has strongly entered the political agenda undisputedly was the unexpected gas supply interruptions last mid-January due to the Ukraine-Russian dispute about a complex set of issues, that caused serious SoS problems in Bulgaria, Romania and a few other eastern and south-eastern European countries on average almost completely dependent on Russian gas. If such supply interruptions would have been felt only once, one could have considered this to be just an unique incident. However, because the January 2009 interruptions were preceded by earlier Russia-Ukraine gas conflicts in 2006, the perception has grown that something similar may happen again. In considering this one also kept in mind president Medvedev’s public statement last summer that Russia would “never forget” the alleged Ukrainian military involvement in the 2008 Russia-Georgia conflict; the fact that prices paid by Ukraine for gas offered by Russia are still some 80% below market prices; and the complex set of initiatives to construct pipelines in South eastern Europe (Blue stream I and II, White stream, Nabucco, South Stream) that either are meant to circumvent Ukraine, or to support other than Russian gas supplies. One wonders if matters have been completely settled.

This raises the issue if the recent main EU-response so far is the right track to enhance SoS. Several actions have been taken. First, in July the initiative was taken to activate the 2002 Nabucco-initiative via the intergovernmental agreement signed between Austria, Hungary, Romania, Bulgaria and Turkey. Second, in the same month Brussels unveiled proposals via a Directive trying to deal with possible 60-day gas supply disruptions during winter conditions, and finally some month later a financial deal was struck with Ukraine. Time will tell, but a few questions seem in order.

First, as far as Nabucco is concerned, the question is if the euro 8 bn./3300 km/31 bcm project linking the Caspian area with the EU and scheduled to be operational by 2014 can become commercially feasible. So far hopes are that gas will be supplied from Azerbaijan, Turkmenistan, Iraq or Iran. However, Azerbaijan also negotiated a priority deal with Russia about gas sales from the Shah Deniz field and also delivers gas to the EU via the competing ITGI infrastructure; gas supply from Turkmenistan if at all available for the Nabucco-system would additionally require solving complex disputes over use of infrastructure across the Caspian Sea; and gas supplies from Iraq (Kurdistan region) and Iran are still absent, uncertain and potentially politically sensitive. In other words, uncertainty about gas supplies may make the project dependent on subsidies, at least during the initial stage, and may raise the issue what defines the boundaries of public support for SoS.

Second, can Nabucco be ‘outcompeted’ by the Southstream project? The actual deliveries of gas through this infrastructure do not seem to pose any foreseeable problem once the infrastructure is there and the parties involved (Gazprom, ENI) seem to fully agree that the construction of the pipeline that will cross the Black Sea is set to start next year. Moreover, a considerable part of South and South-east of the EU can be delivered through this system and even parts of the Middle East. It seems still unclear, if Southstream would be developed faster and more effectively than Nabucco, how this may affect Nabucco’s business case.

Third, how effective is it to try to secure SoS by organizing loans to Ukraine via EU-brokerage to a.o. pay its Russian gas bills and develop storage, as has been initiated recently via EBRD, WB and EIB (some 1.7 bn dollar)? The fact that this pledge together with euro 3.3 bn. IMF support for Ukraine could not prevent the Ukrainian finance minister threatening somewhat later to ‘restructure’ an about 0.5 bn dollar Naftogaz (the Ukrainian state company) foreign bond loan, would suggest that it is not at all easy to secure that Ukraine will cooperate on gas deliveries to the EU. One of the reasons is that raising gas prices within Ukraine towards market levels (now some 80% less than that) will not be politically easy.

Finally, how big is the risk that the various developments turn Turkey into a position comparable to the position Ukraine has right now, i.e. the indispensible factor in much of the EU gas imports? After all, Turkey has a crucial strategic position in both Nabucco, South Stream and Blue Stream delivering gas from the Middle East and Caspian region to Europe, and therefore takes a crucial position for both Russia and the EU. In the current situation there is some balancing power in that Russia and the EU have something to offer to Turkey, such as nuclear cooperation, export potential and oil and gas imports (70%) in case of Russia and trade opportunities and possibly EU membership in case of the EU, but what if such balance gets lost? Then for the Russian-EU gas relationship Turkey’s position becomes comparable to, if not stronger than, the one Ukraine has right now.

Just a few questions. Maybe securing SoS is not all that simple.

Catrinus J. Jepma

President of Energy Delta Institute