Gas dispute with Russia boosts European interest in alternative pipeline

The recent gas dispute between Russia and Ukraine, which led to a severe energy crisis across Europe, may breath new life into a troubled pipeline project designed to wean the European Union off its dependence on Russian gas supplies, experts say.

At the same time, they warn of many hurdles facing the $12 billion project, which has come to symbolize the EU's struggle to find a common energy policy.

To jump-start the project, Hungary is hosting a two-day conference this week in Budapest that brings together the countries involved in building the pipeline.

"[The Nabucco project] is being talked a lot about again. I think the EU has been shaken up by what happened over the slow pace at which it tackles energy security and diversification," says Amanda Akcakoca, an analyst at the Brussels-based European Policy Centre. "The issue ... should be taken more seriously and ... there are signs that this is being done, but the proof of the pudding is in the eating."

Europe gets a quarter of its gas from Russia, with 80 percent of it passing through Ukraine. Some countries, like Bulgaria, are almost entirely dependent on Russia's Gazprom for their gas and were left shivering after the supply through Ukraine was cut earlier this month. At one point, Slovakia threatened to restart some of its Soviet-era nuclear reactors.

The 2,050-mile long Nabucco pipeline – named after a Verdi opera whose subject is liberation from bondage – is designed to bring gas from the Caspian region and the Middle East to European markets via Turkey, Bulgaria, Romania, Hungary, and Austria. Construction is scheduled to start in 2010 and be operational three years later.

Nabucco officials have said the Russia-Ukraine dispute has given the project new life. "This crisis has shown ... that diversification of supplies and transport routes is very important ... to ensure and improve stable consumption and a stable supply of gas," Reinhard Mitschek, managing director of the Nabucco project, recently told Radio Free Europe/Radio Liberty.

Indeed, European Commission president Jose Manuel Barroso said: "The message I will take to the March European Council [meeting] is that now we have to be serious about diversifying and investing in Europe's energy security future."

But analysts warn that Nabucco faces major hurdles – such as how the pipeline will be filled. So far, only Azerbaijan has committed itself to supplying gas to Nabucco, but it can only fill a fraction of the pipeline's capacity. Other potential suppliers, such as Turkmenistan or Iran, are problematic for logistical or political reasons.

And while Turkey's role as a transit route is crucial, Nabucco is under threat of being held hostage to the politics of Ankara's troubled EU membership bid.

Nabucco could also be undercut by Moscow, which suggests that Europe diversify its shipment routes (not its supply) by constructing South Stream, a pipeline that would bring Russian gas under the Black Sea to Bulgaria.

"What we have is a series of agreements and a theory," says Bulent Aliriza, at the Center for Strategic and International Studies in Washington, about Nabucco. "It's got problems all the way down the line."

Other critics worry that Nabucco is being put forward as a kind of panacea for Europe's energy woes, without taking the discussion of what real energy diversity and security would mean any further.

"Simply building a pipeline slightly south is not a strategic issue; it's a regional one," says Andrew Monaghan, a research adviser at the NATO Defence College in Rome.

The EPC's Ms. Akcakoca says that if Europe doesn't want another winter without gas, Nabucco must be part of a unified EU energy policy. "[The EU's] energy policy is quite weak, because each ... member state negotiates its energy deals," she says. "There needs to be one EU energy policy. That's what they should be aiming for."