Tuesday, November 4, 2008

ROMANIA FIRMLY ABOARD NABUCCO PROJECT, HINTS AT LEVERAGE VIS-À-VIS SOUTH STREAM

The Jamestown Foundation

By Vladimir Socor

Monday, November 3, 2008

President Traian Basescu and Prime Minister Calin Popescu-Tariceanu have ruled out Romania’s participation in Gazprom’s South Stream project. Instead, they reaffirmed the country’s full commitment to the Western-backed Nabucco project. The two leaders acted after Gazprom had hinted at the possible inclusion of Romania in South Stream, apparently tempting a few Romanian officials with that deceptive prospect (see EDM, October 21, 24, 31).

Basescu and Popescu-Tariceanu’s convergent responses reflect a top-level consensus on this issue in Romania, transcending a deep partisan divide. The president and the prime minister are long-time political rivals and confronting each other in this month’s parliamentary elections. The elections almost certainly played a role in Gazprom’s timing of its overture to Romania, but the overture has fallen flat at the political level.

“Regardless of our internal confrontations, Nabucco is our priority and Romania is firmly committed to this European project,” Basescu told a news conference. He also alluded to Moscow’s attempts to entice various countries into competing against each other for participation in South Stream: “If somebody wants to force Bulgaria’s hand, pretending to offer to build South Stream through Romanian territory, that somebody must be naïve for making such calculations” (Cotidianul, October 31).

Gazprom’s overture to Romania also triggered concern in Serbia (Politika, October 24). Bulgaria and Serbia each signed on to South Stream earlier this year and are now negotiating specific terms with Gazprom. To pressure them, the Russian company hinted at the option to circumvent them by building a pipeline through Romania.

Popescu-Tariceanu’s response focused on the imperative of diversifying gas imports:

"The Romanian government’s position is clear: Nabucco is the priority. Russia is interested in preserving its status as sole supplier. Romania’s interest is a commercial partnership with Russia for gas supplies, while at the same time creating competition by finding an alternative supplier. We would certainly fall into dependency unless we pit two competitors against each other."

The National Strategy on Energy, adopted by the government, enshrines Romania’s commitment to the Nabucco project.

In the same statement, the prime minister criticized the Romania-Russia Chamber of Commerce (a business and political lobby in Bucharest) for relaying the Russian Embassy’s invitation to Romanian companies to join “reconstruction” projects in South Ossetia. The Romanian government finds such actions “inappropriate, given Romania’s engagement in Georgia’s reconstruction efforts” (Evenimentul Zilei, Romania Libera, October 30).

The president’s and prime minister’s interventions promptly squashed Gazprom’s overture and the initially favorable response by several Romanian officials, primarily Economics and Finance Minister Varujan Vosganian, who oversees the energy sector. After a preliminary discussion on October 17 in Moscow, Gazprom’s board member and strategic development director Vlada Rusakova followed up on October 29 in a semi-official setting in Bucharest with Romanian representatives (NewsIn, October 29; Business Week, October 30).

Apart from reaffirming the commitment to Nabucco, Basescu’s press conference statement alludes to Romania’s own leverage over South Stream, potentially being capable of halting that project at least temporarily. Basescu said that “If the South Stream project is implemented, it would need to cross Romania’s exclusive economic zone [in the Black Sea]. The pipeline would have to pass through it. This is an issue that would have to be negotiated” (Cotidianul, October 31).

South Stream’s manifold adverse implications can be avoided, if the project is stopped long enough to gain a new lease on life for Nabucco. This would involve opening access to Central Asian gas through direct pipelines to Europe, as well as developing Iranian gas deposits and transport outlets.

The South Stream pipeline is designed to run from Russia’s Black Sea coast to Bulgaria, and from there to ramify in several directions into Europe. The pipeline’s 540-mile (900 kilometer) section on the seabed of the Black Sea is the key to the entire project. Gazprom (with Italy’s ENI as contractor) has decided to bypass Turkey’s exclusive economic zone. Instead, that section is planned to traverse Ukraine’s exclusive economic zone for most of its length, as well as a small part of Romania’s exclusive economic zone. This situation can give both countries potentially decisive leverage over the project.

South Stream bypasses Ukraine’s gas transit system, so as to reduce the share of Russian-delivered gas to Europe through Ukrainian pipelines. Meanwhile, Romania is the only Nabucco consortium member to have turned down Gazprom’s offer to join South Stream. Both countries are interested in stopping South Stream. This pipeline, if built, would kill the Nabucco project, thus depriving Romania of alternative gas supplies and transit revenue from Nabucco. For its part, Ukraine is interested in continuing large-scale transit of Russian-delivered gas to Europe, rather than seeing part of that transit re-routed through South Stream.

The Black Sea riparian countries divide the sea into exclusive economic zones. These maritime zones are immediately adjacent to each other. Thus, construction of the South Stream pipeline on its presently designated seabed route from Russia to Bulgaria would require the consent of Ukraine and Romania.

Under international law, Ukraine and Romania cannot officially veto South Stream outright; but they can question it thoroughly; can demand extensive study of the project’s impact on environment, fisheries, shipping, and maritime safety generally; and are entitled to evaluate these studies independently and return them to Gazprom for clarifications and improvements. Romania and Ukraine are also entitled to demand modifications to the Russian-proposed route.

In the Baltic Sea in the last two years Estonia, Finland, Poland, Sweden, and Lithuania have used their rights under international law in that manner, thoroughly questioning Gazprom’s Nord Stream seabed pipeline project. As a cumulative result, Nord Stream has been temporarily halted, and its overall prospects seem increasingly clouded for intrinsic reasons also.

The Russian government and Gazprom have apparently failed to initiate consultations with Romania and Ukraine about South Stream’s seabed section. Clearly, Romania and Ukraine hold legal leverage of a potentially decisive character over seabed pipeline projects in their Black Sea exclusive economic zones.

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