Transatlantic Politics

Creepy words from Vladimir Putin at the Black Sea Economic Cooperation summit in Istanbul that sound eerily familiar to Eastern Europeans of the "old days" of Soviet occupation:

"The Balkans and the Black Sea have always been a sphere of our special interests. And it is but natural that a resurgent Russia is returning here."

The last move that practically checkmates the timid EU strategy in lowering its dependency on Russia was made last Saturday, when the Italian company ENI signed a memorandum with Gazprom to build a pipeline through the Black Sea, thus undermining the Nabucco-project that would have crossed Turkey, Bulgaria, Romania, Hungary and Austria - bringing gas from the Caspian region and maybe Iran to the Western markets. Here is what the Moscow Times reports:

Gazprom and Italian oil firm Eni unveiled a plan Saturday for a big new pipeline to take Russian gas under the Black Sea to Europe, undermining an earlier plan to extend a Turkish route. The 900-kilometer South Stream pipeline would come ashore in Bulgaria and then branch to Austria and Slovenia in one spur and southern Italy in another, Eni CEO Paolo Scaroni said at a news conference with Gazprom deputy CEO Alexander Medvedev and the two countries industry ministers.

Austria, of course, is well off, after having signed a deal with Gazprom on building joint storage facilities at Baumgarten, the regional hub where the Nabucco pipeline would have ended. (See also: Russia: If we can't own the pipeline, we'll control the faucet) Coincidentally or not, the South Stream pipeline has a branch to Austria..

While the Russian monopoly has succeeded in cutting out British Petroleum of the Siberian gas fields, both the EU and US lack leadership in respect to the Black Sea and Caspian region. As Vladimir Socor puts it, the US and EU energy policies in Eurasia are collapsing:

In retrospect, Washington's retreat from leadership on Central Asia-Europe energy transit projects in 2001-2005, along with a policy vacuum in Brussels, set the stage for the debacle just seen. Even after the January 2006 "wake-up call" (triggered by Kremlin manipulations with Turkmen gas supplies to Ukraine and beyond), the U.S. and EU relegated Caspian energy policy mainly to mid-level officialdom, with only episodic top-level involvement.

In Washington, for example, a deputy assistant secretary of state was tasked to promote these energy projects in the relevant countries, in a direct match against Putin. The Russian president (along with his energy executives) was personally interacting with the same countries and leaders to pull his incomparably greater political weight for the Russia-favored projects. The United States and the EU did not seriously attempt to offset Kremlin pressures on the Kazakh and Turkmen presidents. Nor did they develop timely and convincingly resourced alternatives to the ready-made Russian projects.

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

The Nabucco project is one feeble EU attempt to build an alternative to the Gazprom-controlled, already-built natural gas pipeline-network. 

It is supposed to bring gas from Azerbaijan and/or Iran, through Turkey, Bulgaria and Romania to the huge gas-hub in Austria, at Baumgarten. Russia tried first to discourage the Azerbaijan government from moving forward with the project.  Instead, Russia built its own direct pipeline through the Black Sea via Turkey (entitled Bluestream), all the while openly dismissing the Nabucco pipeline, by saying that Russia needs to protect and expand its own pipelines in order to ensure an uninterrupted gas flow to its European clients.  Given Russia's recent history towards energy policy, some might view this sequence of events as disturbing.

But Russia's ultimate strategy came to life 10 days ago, during Putin's visit to Vienna. The gas hub in Baumgarten, where the Nabucco pipeline would be connected to other Western European pipelines is now a shared venture between OMV (the Austrian gas corporate) and..Gazprom - the Kremlin-controlled Russian oil conglomerate!

Can't own the pipeline? No big deal, we'll own the faucet.

This might just be the beginning of a "beautiful friendship" with the Austrians, similar to the Gerhard Schroeder affair.  The former German chancellor struck a deal with Putin just weeks before the election he lost that called for building a direct pipeline through the Baltic Sea linking Germany directly to the gas fields in Siberia.  Doing so conveniently reduces the gas flow through the Baltic states and Poland - who have openly criticized Russia. Punishment and reward in its most basic form.  Since signing this deal on behalf of the German government he no longer leads, Schroeder has been rewarded with a seat on the executive board of Gazprom and he is now actively lobbying for the continuation of this and other projects of the Russian state-controlled giant.

Pictured above is the map of the Nabucco-project. The construction of the pipeline is due to start next year and be ready by 2011. It is not clear yet which branches will be developed first. With Russia having also struck a deal with Kazakhstan and Turkmenistan regarding their Caspian Sea reserves, and with Iran being the second gas producer, there is only Azerbaijan left to feed the pipeline. And Azerbaijan's reserves are not sufficient. With Gazprom waiting patiently at the other end of the pipeline, one might ask if it really matters anymore.

As Ed Lucas puts it in this week's Europe view column -

"Russia has largely won the gas wars before most Europeans even noticed they were being fought. So far this year the Kremlin has stitched up the Caspian (by striking a pipeline deal with Turkmenistan and Kazakhstan). It has nobbled Austria, Belgium and Hungary (to add to its powerful position in Germany, France and Italy). By schmoozing other producers it has begun to form a gas cartel. Russia has also built a strong pro-Kremlin camp elsewhere in the European Union (Greece, and Cyprus chiefly; Hungary, Latvia and Slovakia increasingly; and probably Bulgaria too if anybody looked closely). Its banks and businesses have created a fifth column in the City of London and other world financial centres."

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

Again, it is Kiev that gets all the headlines. But the similarities to Bucharest are there. Just like in November-December 2004, when both countries held elections and the orange opposition candidate won the presidency. It was weeks of protests in the cold winter streets of Ukraine for Viktor Yushchenko who managed to reverse the framed first result and topple Viktor Yanukovich, Kremlin's protegee. It was a massive turnout, media reports on fraud and the look at the neighboring Ukraine that got Traian Basescu into power, although the parliamentary elections were won by the post-communist Socialist Party (former president Iliescu being a Kremlin-fan trained in Moscow when he was young). Like in Ukraine, Basescu's allience was orange and formed of 2 parties - the Democrats (Basescu's party) and the Liberals (Premier Calin Popescu Tariceanu's party). Like in Ukraine, where the Premier Julia Timoshenko didn't play the same game with the President, the Romanian Premier demonized the President and preferred deals with the post-communist and corrupt Opposition, sabotaging and ultimately kicking out the Democrats from the governing coalition. Unlike Ukraine, the Romanian president has neither the right to dissolve Parliament and call for early elections nor to fire the Premier. Even if Tariceanu is not a Kremlin protegee like the current Ukrainian Premier Yanukovich who organized the counterrevolution in Kiev, ignoring Yushchenko's constitutional right, the Romanian Premier and his new cabinet formed just of Liberals and members of the tiny Hungarian Party plays now exclusively by the book of the Socialist opposition who voted unanimously in favor of this new "ultra-minority" government. The numbers prove it: representing just 20% of the current Parliament, the current cabinet has yet obtained almost 80% of the votes. Corruption, Romania's nr.1 problem before accession to the EU and the reason for the unprecedented "post-accession monitoring" from the EU Commission, is no longer a priority for the current government. After sacking the only true reformist and dedicated minister in the cabinet, Monica Macovei, the Premier stated that Romania's main objectives are promoting a better image abroad and withdrawing the troops from Iraq. The new Justice Minister, a young lawyer with the appropriate "political friends" has already made clear that "my concern lies in the needs of the citizen, not in getting a good report from the EU". What he seems to ignore is the fact that a bad report from the EU will affect precisely the citizen, as the Romanian verdicts would no longer be recognized in the EU, with a huge negative impact on the economy and on property rights.

Like in Ukraine, everything evolves around energy. The Premier, the new Defense Minister and the new Transport Minister are all close friends of the main financing patron of the Liberals, the CEO of a Romanian oil company called Rompetrol. He's charged for money laundry, insider trading, fraud, tax evasion and manipulating the stock exchange. The Premier tried several times to intervene in favor of his friend - by calling the Attorney General, by arranging a meeting with Patriciu and Justice Minister Macovei, even by writing a memo to the President asking him to talk to the prosecutors about his case. The former Energy Minister is being investigated for giving insider information on strategic privatizations. The new Communication minister appointed by the Premier on Monday is also under investigation in this case. The President himself has been accused, on the other hand, of trying to influence the energy distributors in dropping the price for certain industry sectors. Just like in Ukraine, where former premier Julia Timoshenko accused the President of cutting a bad deal with Gazprom after the natural gas crisis in the winter of 2005.

The current situation in Ukraine looks like a gordian node. The Economist sums it up perfectly. "Early elections? Maybe." The following analysis fits perfectly to Romania as well:

The coalition's leaders are now openly bent on amassing a majority big enough to override the presidential veto and strip Mr Yushchenko of his residual powers. It sounds like the sort of constitutional fine-tuning to be expected in a young democracy. In Ukraine, alas, disputes that may seem like issues of principle are often disguised struggles for wealth. Politicians' attitudes to any given office depend on their prospects of occupying it. Beyond the Rada, the country is worryingly divided between Yanukovich supporters in the east and south, and those mostly in Kiev and the west who want a more enlightened government.

 It seems like the EU membership has changed only the surface and the language of the Romanian politicians. Deep down, the same post-Soviet deals are still being made. And with the EU focusing on climate change and the famous Constitution, what is happening in Romania doesn't seem to bother too many. Ukraine even less.

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

There’s a witty editorial in the yesterday’s Wall Street Journal (requires subscription) about Angela Merkel’s totally softened policy-making. The title "Angela Schroeder" says it all, the current holder of the EU-presidency has actually more resemblance to her predecessor than to what she initially was supposed to stand for: closer US-German relations, stronger NATO involvement, "less government", cutting taxes, economic reform.

Upon assuming the presidency of the bloc in January, Ms. Merkel decided to use this rare opportunity to shape the Brussels agenda for six months to advance the softest of all soft policies: to revive the European Constitution.
(…)The EU’s real challenges are elsewhere: enlargement to the Balkans and Turkey, economic reform, the incomplete single market, terrorism, immigration, energy security to name only a few. Any of those would have proved more challenging for Ms. Merkel — and so much more beneficial for the EU.

Instead of immigration or energy security, Ms. Merkel has given in to the green obsession (despite her center-right orientation) currently so trendy in the EU: gas emission targets that are merely "PR gimmicks" - 20% by 2020 - when just 2 of the 15 old EU member states are on track to meet the Kyoto protocol. On issues like Iran, Merkel has also visibly given in to her Social-Democrat predecessors and members of cabinet. If one year ago, she was comparing Iran’s rhetoric to the Nazis, now she softened the tone and let her Foreign Minister and Schroeder’s former chief of staff do the talking. In Afghanistan, NATO is "fighting uphill" because of her refusal to move the 2700 troops out of the stable north to the more dangerous south.

The latest Merkel disappointment involves American plans to expand its missile defense shield. Poland and the Czech Republic are in talks with Washington to install radar and missile sites to better protect the U.S. and Europe against an Iranian missile attack. To stir up nationalist furies at home and pressure the Poles and Czechs, Vladimir Putin lashed out against the missile plan, knowing full well this limited system could never put a dent in Russia’s own nuclear threat. Germany’s foreign minister immediately rushed to the defense — of the Kremlin. Mr. Steinmeier accused the U.S. of supposedly failing to inform Russia about the missile plans.
Ms. Merkel could have set her foreign minister straight for resuscitating the Schröder-style coddling of Moscow. But she, who grew up in East Germany, only seconded him. Ahead of a trip to Warsaw last week, the chancellor said, "We, and I will say it in Poland, prefer a solution within NATO and also an open discussion with Russia about it." The Germans aren’t so concerned with NATO cohesion in Afghanistan. In this case, the countries directly involved are the ones to decide.

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

An EU member from January 1st, Bulgaria is preparing now for their first elections for the European Parliament, to be held on May 20. Here is what their right-wing party leader and former Prime Minister Ivan Kostov is warning about:

"We need MEPs who know how to read and understand Bulgaria’s interests, unlike what we have witnessed for the last six years. We need MEPs, who will not turn Bulgaria into Russia’s Trojan horse in the European Parliament. "

Bulgaria’s socialist government has tempered down the pro-NATO, pro-EU orientation of the previous leadership under the former king Simeon. Mafia gangs with strong connections to the Russian ones are still a huge problem for a largely unreformed justice system, where no high ranking official has yet been put on trial for corruption and/or organized crime. For instance, the most famous weapon dealer in the world, Viktor Bout, a former (or still?) KGB operative has had most of his weapon-deliveries to Africa made via Bulgaria.

Viktor Bout’s name is regularly linked with Bulgaria in connection with the deals he makes with Bulgaria-manufactured weapons. There was significant space devoted to Mr Bout in the 2000 UN Security Council report in connection with suspicions that he had supplied weapons for the Angolan grouping UNITA instead of for the officially declared end client - Togo. In the same report, Bulgaria was accused that it did not adhere to UN-imposed embargo resolutions. Later, Bulgaria was exonerated of these allegations. The investigation, however, showed that counterfeit documents were used, which declared an end client. These documents were made from original copies of a legal arms shipment to Togo.

With all the pressure from the EU to reform and "put the mafia bosses behind bars", as Justice Commissioner Franco Frattini was saying  yesterday in Sofia, Bulgaria seems to be counting on a powerful friend in the East much more than on the bureaucrats in Brussels. A Trojan horse for Russia?On the energy field, this might already be happening..A few days ago, Russia, Bulgaria and Greece (what a surprise..) signed a pipeline-agreement that basically blows up the recent efforts of the EU to get a strategy implemented that will reduce its dependency on Russia. But since Turkey’s deal with Georgia and Azerbaijan bypasses Russia and Greece signed a deal for a pipeline with Turkey, the Kremlin thought to reactivate its good comrades in Bulgaria and try to get the pipeline done before the Turks. Construction will begin next year and is scheduled to last 3 years. The Russian companies Rosneft, Transneft, and Gazprom will share a 51-percent stake in the venture, leaving Greece and Bulgaria with 24.5 percent each. The pipeline project’s estimated cost is $1.2 billion.
Russia has no interest whatsoever in a common EU energy policy that would reduce its dependency and thus promotes one-to-one-deals-you-can’t-refuse with its member countries. Most famous case: former German chancellor Gerhard Schroeder, a buddy-buddy of Putin signed a pipeline deal just days before the 2005 German elections (when Angela Merkel got elected), linking Northern Germany directly to Russia through a pipeline under the Baltic Sea. Three months later, Schroeder accepted a job with the Gazprom..

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!