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Neolibs use Gazprom as tool to break French & German energy companies

by Jerome a Paris Fri Nov 27th, 2009 at 05:13:02 AM EST

We get yet more hints of a "New Cold War" being revved up by the Wall Street Journal via the usual rhetorical flourishes (in this case, a "new Iron Curtain"):

But while at the moment Western Europe can bring this international gas into its networks, Eastern Europe can't. This divide, an affront to the idea of a single European market, is a "new iron curtain" that splits East from West, Pierre Noël of the European Council on Foreign Relations told a Brussels audience this week.

West of the divide, gas flows in two directions. East of it, the legacy of the past means that the pipelines allow gas to flow only from East to West, bringing gas from Russia but not allowing gas from the West.

In other words, Western Europe is relaxed about supposed Russian threats to cut gas deliveries, becuase it has alternatives, while Eastern Europe is stuck with that single supplier.

There is, of course, a basis in truth in such an assertion. Eastern Europe built its energy system to a good extent on the instruction of the Soviet Union, as it expanded its pipeline network and gas flowing from Siberia to these countries was one of the ties binding vassals tightly to their imperial master. Western Europe also connected itself to the Russian energy network, but on a more controlled way, and without giving Moscow a dominant place. And, as I've said enough, gas is an infrastructure business, and infrastructures cannot be changed overnight. However, as was noted rather prominently recently, it's been 20 years since the Berlin Wall fell, time enough to re-orient infrastructure.

First, an apparently legal obstacle:

One giant obstacle, however, is that Gazprom owns some of the key pipelines bringing Russia gas to the West. Why would it allow the building of so-called interconnectors that will allow competitors' gas to enter Eastern Europe from the West?

This suggests that for pipelines that are inside the territory of the relevant countries, and within the EU for those countries that are members, the local government or the EU cannot decide how such pipelines can be regulated? How much bad faith can there be? The EU Commission, prodded by the neoliberals, has been able to impose third party access on pipelines owned by the national utilities, which have rather more political power in their countries than Gazprom, and they wouldn't be able to impose anything on pipelines (partly) owned by Gazprom? And what about building other, independent, pipelines to ship gas from West to East if that's so important? Is it that these pipelines are not profitable? Or that States are not willing to subsidize them for the oh-so-important purpose of energy security? Is it because that would be a distortion of competition (the ultimate evil for neoliberals), or is it that governments cannot put a price on security of supply?

So new pipelines are vital, but both companies and States are apparently powerless to build them or control them? How can that be?

But wait:

How long this new iron curtain will last depends in part on how soon the EU can get its act together to push forward a single market in an environment where, as one senior EU adviser said this week, the bloc "doesn't address this with a strategic view."

A reason for that, said Charles Grant of the Centre for European Reform, is that "national energy champions" -- by which he means the likes of Eni and E.On -- have persuaded national governments to keep the European markets segregated.

Oh, right, it's the evil monopolies of Old Europe, the Italian, German and French (for some odd reason not mentioned here) gas companies that are somehow treasonously preventing new pipelines from being built... new pipelines that would give them new clients (remember, we're talking about pipelines going from West to East - hard to avoid Germany or Italy when going towards the vulnerable countries of Central Europe...)

And we get the usual suspects - the London think-tanks promoting "reform" and deregulation, telling us that the problem is GDF or E.On, when these companies have shown exactly how to deal with Moscow - diversify, make sure that Gazprom supplies less than it could, and tie the company under constraining long term supply contracts supported by intergovernmental negotiations.

We learn that Poland is now thinking of building gas storage (20 years after the fall of the Wall, and 10 years after they blackmailed Russia into coughing up more money for the Polish leg of the Yamal-Europe pipeline...). They still haven't built any LNG import terminal and as recently as 2006 imported 90% of their gas from Russia.

Or - countries with no (or incompetent) energy policies are blaming countries with actual energy policies and efficient tools to conduct them (such as national energy companies focused on long term infrastructure) for their problems. And, beyond asking for 'solidarity' - after spending years mocking those big infrastructure companies for not being nimble and efficient and cheap enough - they want to break the very companies that allowed some countries to not worry about Russia in the first place.

Or course, this is not about Russia at all. As I write often enough, if we worried about Russian gas, we'd stop having policies that ensure that energy companies exclusively build gas-fired power plants. No, this is about breaking the big energy companies that prevent the London commodity traders from playing as much as they'd like to with European gas and power prices, and ensuring in the process more work for the M&A bankers and assorted parasites as these companies are split, unbundled, floated, repurchased and remerged.

New Iron Curtain? Pfeh. I understand City bankers and their sycophants and bought politicians pushing this. But Brussels? Why is Brussels playing along? Why is Europe's energy policy a jobs programme for the City, based on the unspoken premise that our gas is under their toundra? And why is it that Europe's policies are driven by the whims of the country with the most spectacularly flawed energy sector? When will we learn the simple lesson: don't let bankers drive policy, especially strategic policies?


As the image above shows, energy companies in a deregulated market will built gas-fired plants to the exclusion of everything else.

In Europe, explicit policies (which specifically ensure that the sector is not subject to market prices) have made investment in renewable energy (mainly wind) happen as well, but that happen despite deregulation, via local re-regulation, and certainly not thanks to market "reforms".

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 26th, 2009 at 04:22:36 PM EST
the link to earlier stories on Russiangas and the crises with Ukraine.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Nov 27th, 2009 at 05:59:08 PM EST
[ Parent ]
I fail to understand why private capital doesn't build pipelines west to east just so they can connect Eastern Europe to the vast supplies of gas produced by the Neo-Conservative and Neo-Classical Think Tank gas bags, especially in the U.K.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Nov 27th, 2009 at 01:53:38 PM EST
Given that the North Sea fields are past their peak, the Brits need to keep that gas at home to make up for the planning shortfall.

For which the rest of Europe would be extremely thankful.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Fri Nov 27th, 2009 at 02:55:55 PM EST
[ Parent ]
The Wall Street Urinal has its gospel and will preach regardless of facts.
by rifek on Sat Nov 28th, 2009 at 01:14:06 PM EST

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