Putin in Austria as OMV and Gazprom extend deal, push Nord Stream-2

OMV

Gazprom CEO Alexey Miller and OMV CEO Rainer Seele sign an agreement in the presence of Russian President Vladimir Putin and Austrian Chancellor Sebastian Kurz, Vienna, Austria, June 5, 2018.

“The view is that the EU, Germany in particular, may now be more inclined to proceed with the second gas pipeline and to ignore the US’ demand for it to be scrapped,” Weafer tells NE.


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Amid the buzz of Russian President Vladimir Putin’s visit to the Austrian capital of Vienna, OMV and Russia’s Gazprom signed an agreement to extend Russian gas supplies to Austria until 2040.

OMV CEO Rainer Seele and Gazprom CEO Alexey Miller signed the document on June 5 with both Putin and Austrian Chancellor Sebastian Kurz in attendance.

“Russia’s plans to increase gas deliveries to European consumers, including the Nord Stream 2 project, other energy and infrastructure projects enjoy the support of Austrian partners,” Russian state news agency TASS quoted Putin as saying after his negotiations with Austrian President Alexander Van der Bellen.

The signing comes at a time when the two countries are marking 50 years of Russian gas supplies to Austria, which was the first Western European country to import energy resources from the then-Soviet Union in 1968. OMV is Gazprom’s main partner in Austria, while Europe’s main gas hub is located at Baumgarten on Austria’s eastern border with Hungary.

Miller said Gazprom is ready to satisfy Austria and Europe’s growing gas needs. “By implementing the construction project for the Nord Stream-2 gas pipeline, we will make gas deliveries even more reliable for the benefit of consumers.”

Seele noted that by 2030, the EU would have to import more than 80% of the needed natural gas. “By extending this gas supply contract, we will provide Austria and other European countries with natural gas despite the increase in demand. Moreover, it will allow us to reduce CO2 emissions.”

Gazprom said Miller discussed Nord Stream-2 with Elisabeth Koestinger, Austria’s Minister for Sustainability and Tourism, and Vienna’s Minister for Digital and Economic Affairs Margarete Schramboeck.

Russia sees the current instability in the geo-political climate as an opportunity to push its plans Nord Stream-2, Chris Weafer, senior partner at Macro-Advisory in Moscow, told New Europe on June 5.

“The US decision to withdraw from the Iran deal and the threat of import tariffs being placed on steel has caused a rift with the EU. Officials and leaders in the EU are clearly angry that the US is disregarding and disrespecting the EU,” Weafer said. “The view is that the EU, Germany in particular, may now be more inclined to proceed with the second gas pipeline and to ignore the US’ demand for it to be scrapped. After all, the US pays no attention to the EU’s interests.”

Austria will take over from Bulgaria in the rotating EU presidency on July 1, which, according to Weafer, is an opportune time for Gazprom to push forward with Nord Stream-2 because the EU recently settled an anti-competition behavioural case that it filed against Gazprom in 2015. “Gazprom is now compliant with the EU regulations,” he said.

Germany and Austria, clearly want to move ahead Nord Stream-2, Weafer said. “It makes perfect economic sense, especially when the alternative is more expensive US LNG (liquefied natural gas) which also has question marks over volume availability and timing,” he said. “The 2nd line also makes sense from an energy security point of view because the only problems with Russian gas deliveries to Europe over the past 50 years have been associated with the transit countries, Ukraine in particular. Cutting out the transit countries eliminates those problems.”

Ukraine and some other Eastern European countries have strongly opposed Nord Stream-2, stressing that it will increase EU’s dependence on Russia. The European Commission has stressed that Ukraine should remain a transit country for Russian gas supplies to Europe even if a second line from Russia to Germany is built, something that Gazprom appears to now consider.

“For Ukraine Nord Stream-2 is a financial and strategic disaster. If completed, the need to send gas via the Ukraine transit will drop significantly and that will cost the Ukrainian economy billions of dollars annually in lost transit fees,” Weafer said. “The fact that the pipeline would then play a much smaller role in the EU’s energy supply chain would greatly reduce any political leverage it would otherwise have with the EU and with Moscow.”

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