National Perspective: When pipelines become political, everyone suffers

There are many examples of pipeline routes selected for geopolitical purposes.

The Baku-Tbilisi-Ceyhan pipeline from the Caspian Sea to an export terminal on Turkey’s Mediterranean coast was not the obvious business choice to bring Azerbaijani crude to the market, but it was chosen because it met the objectives of avoiding Iran (even though it was cheaper to build there and gained better access to Asian markets) and being independent of transit through Russia.

And as I wrote before, Russia’s construction of the Nord Stream 2 gas pipeline to Germany is the culmination of a 30-year strategy to remove legacy transit routes through the former Soviet republics and the allied countries. But the use, or shutdown, of already constructed pipelines has recently become a more disturbing example of their politicization.

As Europe grapples with a looming winter energy crisis, it seems beset on all sides by suppliers and transit countries using pipelines for political purposes.

Although President Vladimir Putin denies that there are political motives behind Russia’s failure to deliver more gas to Europe, few, if any, in Europe believe so. And it’s not hard to see why. Russian pipeline gas export monopoly Gazprom PJSC says it has met all of its customers’ delivery demands, but prices have skyrocketed as storage levels are low and, in Germany at least, storage sites that are almost empty are those controlled by Gazprom.

The price of European gas has risen again recently amid fears that Russia will keep flows low in retaliation for delays in certifying the new Nord Stream 2 pipeline, which would seriously affect winter supply.

But it is not only in northeastern Europe that pipeline policy is disrupting markets. Across the continent, Spain finds itself caught in a political dispute between the main gas supplier, Algeria, and the transit country, Morocco. This adds more upward pressure on energy prices in Europe, as Spain joins the rush to secure liquefied gas shipments in a market dominated by high-paying Asian customers.

Heightened tensions around Europe’s energy supply lines made the sudden interruption in Russian oil flows through Belarus to Poland at the start of last week all the more worrying.

The disruption was due to unscheduled maintenance on the line in Belarus and flows were restored after a few days. But amid a crisis of fabricated migrants at the country’s borders with the European Union, and previous threats from Belarusian President Alexander Lukashenko to cut off Europe’s energy supply, fears were widespread that the shutdown would be something. more sinister.

It can still be. The EU is threatening new sanctions against Belarus, while its eastern neighbor continues to send potential migrants to the EU from countries affected by the crisis, including Iraq and Syria.

Putin, whose oil and gas circulate in pipelines crossing Belarus, warned that “nothing good” would come from Belarus disrupting energy flows to Europe. He also has a lot to lose. Russia’s reputation as a reliable supplier of energy to Europe has been severely tarnished in recent months. While the disruption of transit flows would strengthen its argument for the Nord Stream pipelines connecting Russia directly to Germany, its close ties to Lukashenko would raise the question of its own complicity in any disruption.

Meanwhile, on the southeastern border of Europe, Turkey’s estrangement from its NATO allies has raised fears that gas supplies to Greece, the Balkan countries and Italy may not be. will soon become more precarious as well.

Europe is increasingly becoming hostage to the politicization of pipelines. The energy transition away from hydrocarbons cannot happen quickly enough for the continent, as supplies of oil and gas to the North Sea dwindle.

While the immediate risks weigh more on consumers than on the region’s energy suppliers, in the longer term these suppliers will also suffer, as Europe accelerates its efforts to become more energy self-sufficient in the post-consumer era. hydrocarbons.

Julian Lee is a London-based Oil Strategist for Bloomberg. He previously worked as a senior analyst at the Center for Global Energy Studies in London.

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