John Helmer in Moscow The Russian and Azeri governments have taken the air out of a scheme to provide Europe with an alternative source of gas supply to Gazprom, which signed an agreement on Monday with the State Oil Company of the Azerbaijan Republic (SOCAR). When it comes to putting the gas into high-priority political schemes for Europe's energy needs, the Kremlin proves once again that it is prepared to put money where its mouth is, while the European Union raises hot air in think-tanks and editorial columns. The new deal, signed in Baku during a visit by President Dmitry Medvedev, provides for Gazprom to begin purchasing gas from Azerbaijan from the start of next year. The initial volumes are very small -- just 500 million cubic metres per annum. But they give Gazprom the option to increase them, as Azeri production from the Shah Deniz field, in the Caspian, ramps up. "All things being equal among potential buyers, priority will be given to Gazprom," Gazprom CEO Alexei Miller said at the signing ceremony. "Other buyers would have to offer conditions that are more financially attractive." [...] In the feasibility and bankability stage of the Nabucco pipeline, western investors and governments have now to worry that they cannot afford a bidding contest with the Kremlin over the price of Shah Deniz gas. And if Nabucco is deflated before it starts, the political dividend earned by the Kremlin can be translated into more flexible pricing later on, when South Stream starts delivering. As Medvedev explained in Baku, the agreement has been devised "absolutely not on political motives but on mutual benefits." Nabucco, Miller implied, has been a political "fetish".
The Russian and Azeri governments have taken the air out of a scheme to provide Europe with an alternative source of gas supply to Gazprom, which signed an agreement on Monday with the State Oil Company of the Azerbaijan Republic (SOCAR). When it comes to putting the gas into high-priority political schemes for Europe's energy needs, the Kremlin proves once again that it is prepared to put money where its mouth is, while the European Union raises hot air in think-tanks and editorial columns.
The new deal, signed in Baku during a visit by President Dmitry Medvedev, provides for Gazprom to begin purchasing gas from Azerbaijan from the start of next year. The initial volumes are very small -- just 500 million cubic metres per annum. But they give Gazprom the option to increase them, as Azeri production from the Shah Deniz field, in the Caspian, ramps up. "All things being equal among potential buyers, priority will be given to Gazprom," Gazprom CEO Alexei Miller said at the signing ceremony. "Other buyers would have to offer conditions that are more financially attractive."
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In the feasibility and bankability stage of the Nabucco pipeline, western investors and governments have now to worry that they cannot afford a bidding contest with the Kremlin over the price of Shah Deniz gas. And if Nabucco is deflated before it starts, the political dividend earned by the Kremlin can be translated into more flexible pricing later on, when South Stream starts delivering. As Medvedev explained in Baku, the agreement has been devised "absolutely not on political motives but on mutual benefits." Nabucco, Miller implied, has been a political "fetish".
Russia is buying Azerbaijani gas because it has a pipeline to actually take the gas. The alternatives don't (there is a pipeline going to Turkey, but its capacity is already fully used by BP's Shah Deniz production in Azerbaijan) In the long run, we're all dead. John Maynard Keynes
