EU-Russia-Ukraine Tactical Gas Game

Russia has invested lots of capital and they have invested politically in the Ukrainian pipeline system, Constantinos Filis, director of research at Institute of International Relations, told New Europe on October 13.

"I don’t think that they will exclude it as they say from 2019. They will keep the Ukrainian system as part of their export policy to Europe. They will add probably more quantities to Nord Stream with the expansion of Nord Stream 2 and then maybe if there is further need they might explore the idea of bypassing Ukraine from the southern branch. But Ukraine in my view will remain part of the equation. The Europeans want that, the Russians want that so it’s just a matter of a tactical game between the three sides,” Filis said, speaking on the sidelines of a conference on Investing in Energy in Athens.

Gazprom accounts for around a third of Europe’s gas needs and typically about half of that is pumped via Ukraine.

Russia signed recently an agreement with five European companies to increase the capacity of the Nord Stream pipeline from Russia to Germany under the Baltic Sea to 110 billion cubic metres per year from as early as 2019,” Filis said.

Filis said that the two recent agreements between Gazprom and Royal Dutch Shell as well as Gazprom and Germany’s BASF show that business interests "show us the way in a kind of rapprochement between Europe and Russia”.

"The Russians have realised that if they continue their policy which ignores the main interests of Europe as well as some realities they would risk isolating themselves and this not something they want because the Europeans are very good clients for the Russians and its not easy to make this strategic shift – we keep listening from many circles – to China,” he said.

"It’s not easy, it’s costly and it could take time. So the Russians want to improve their ties with Europe, they have shown bigger flexibility in recent months with a number of moves and I think that Russia would very much like to continue to having this strategic cooperation and this strategic goal with regard to Europe,” Filis said.

Gazprom CEO Alexei Miller said on October 6 that Gazprom has almost halved the planned capacity of its Turkish Stream gas pipeline project to 32 billion cubic metres per year from an original capacity of 63 billion cubic metres.

Filis argued that there is no need for Turkish Stream and there are no clients. "From the very beginning I was very cautious about Turkish Stream given the fact that, if we exclude the 16 bcm that are directed to the Turkish market, the rest of Turkish Stream, as it was described at first, speaking about 63 bcm reaching the European market, I don’t think that it was realistic,” he said.

He opined that if Moscow and Ankara finally agree on Turkish Stream, the pipeline could have two 16-billion-cubic-metre branches: one reaching Turkey and one reaching Italy via Greece through the revival of the Interconnector- Greece-Italy (IGI Poseidon).