Balkan Energy Battlegrounds: Panel One – The Balkans at a Strategic Energy Junction

Welcome
Glen E. Howard
President, The Jamestown Foundation

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Panel One:
The Balkans at a Strategic Energy Junction

“The Balkans at an Energy Crossroads”
Margarita Assenova
Senior Fellow, The Jamestown Foundation

“Global Gas Markets and Russian Pipeline Projects: Impact on the Balkans”
Mikhail Korchemkin
Founder and Managing Director, East European Gas Analysis

“The Three Seas Initiative in the Balkans”
Ambassador Réka Szemerkényi
Vice-President, Center for European Policy Analysis

Okay good afternoon everyone my name is Glen Howard I’m the president the Jamestown foundation we’re delighted that each and one of you are here today to our discussion on Balkan energy battlegrounds gas pipelines and geopolitics it’s again an effort part of the jamestown foundation to continue to draw attention to the importance of

Energy geopolitics in Europe and Eastern Europe and today we’re focusing a little bit on the Black Sea in the baton and the Balkans certainly the Balkans is now had a strategic energy junction we’ve seen all eyes have been focused in Washington and Capitol Hill and on the Nordstrom tube pipeline project and

We’ve to great detriment have been ignoring the Black Sea region in the recent development of the of the Turk stream pipeline coming online and how important that has been in December and so what we’re trying to do today is trying to talk about the strategic importance as a backdoor of Europe in

The Balkans and why this is important certainly sanctions have worked in blocking Nord Stream two and despite this the Russian pipeline ship if you’re not following the news that turkey is making its way back to the Baltic under the instable purpose of laying pipeline and continuing their efforts to complete

Nord Stream 2 but unfortunately what is blocking it now are not sanctions but also the the the cod are apparently in the Baltic are now in mating season in May and that will be blocking its efforts for the foreseeable future I am told so this is very important as we

Kind of now focus and turn our attention to the Balkans our first panel will be exploring the bulk and energy dimension and explain why we’re in an energy crossroads and how Russian pipeline projects are affecting the Balkans and global gas markets we also have a discussion that will be part of the

Panel we’ll be talking about the strategic initiative of the three seas initiative and how it’s emerging is a key issue that’s certainly what warrants further watching our second panel will explore the southern gas corridor and the role of Turks stream and LNG and examine the competitive dimensions of

This rivalry we’re also delighted in the second panel to have Rob share from BP who will be speaking about the southern gas corridor and how it affects EU energy security we’re also on the second panel delighted to have that Ben Schmitz former US State Department is joining us to offer his

Perspective fresh firmest travels to the Antarctica but he’ll be back covering the crane and discussing this while Ralph’s mom Yetta will be discussing the prospects for energy supplies to the Balkans and a panel that will be moderated by former US ambassador to oz by Jean Robert Tokuda I’m delighted that

The turn the floor over now to our moderator and presenter margarita Asafa who is a senior fellow at the jamestown foundation margarita Thank You Glen and welcome everyone I’m glad to see so many people today in this afternoon rainy afternoon in Washington DC let’s start with looking at the maps of Russian gas

Supply at the moment this is where the pipelines are going through and I’m sure that everyone has seen those maps but sometimes we don’t remember everything so seeing how the most of the gas supply lines to Europe are going through Ukraine is an important reminder of what

Is going to happen in what the impact is going to be on Ukraine if North stream 2 is completed and turk stream 2 acquires our infrastructure to transit and transmit Russian gas from the Black Sea to all the way to bound Garden in Austria this is what North

Streams to looks like and as the Glen said while we are watching North stream 2 and when the sanctions are going to come into effect and whether the Treasury Department is going to approve everything that Congress has voted we missed what was happening with the

Extreme – why did we miss it because it was built in record time it was built in two and a half years it started in May 17 and was completed by November 2019 so by the time the sanctions came into effect in December last year and extreme

– was was completed and why is that important because the sanctions are concerning only certain vessels that are laying the pipelines in deep waters not everybody involved in the Russian pipelines is subjected to – sanctions only the vessels is these are very few companies in the world that are

Specialized to do that it’s a specific technology it’s also specific vessels that are required by the countries in in the regions where they buy they lay pipelines so all seas the Swiss based companies stopped building North stream immediately in December as soon as the sanctions were announced and the bill

Was signed by the president but the vessels had completed their work in the Black Sea already and why is it important to these sanctions stay in place and they are not removed because I believe that Russia is not going to limit itself with North street with a

Turkish stream one and two only I think that if the experiment is successful they are going to go and proceed with a couple more strings to devote the entire volumes of gas that is going currently through Ukraine to other Misha is going to talk about this in more detail but

This is how it looks now the blue line is turk stream one in turk stream – two strings each of them for 15.75 BCM of gas the extreme Europe needs gas in Russia has it well that’s a toilet title from euronews respectable publication and actually the article was pretty good

The title dough is wrong Europe in fact is buying less gas from Russia now than before there was a drop in Russian gas supplies to Europe last year and although Gazprom registered hundred in 99 BCM just a little bit lower than the previous year sources in Moscow Russian

Press is reporting that 30% of discuss about 30 BCM was actually bought by Gazprom Bank or others conduits that stored it in Europe and wasn’t actually sold to end to end users it was just taught in Europe this is why the storages in Europe were up to 97

Percent full last September which is a record in the last 8 years so 37 percent down for the for the three quarters of last year Russian sales to Europe and then we have to look at at the profits 45 percent lower yellow year decline in net profits for gas bomb in the third

Quarter of 2019 this is yeah Europe paid less for gas because gas is cheaper now and why is cheaper now in Europe because of the abundance of LNG supplies that have increased by 75% in third quarter of last year and look and let’s look at the Russian surprise as I mentioned

Country 299 this by the way Russian billion cubic meters if we are going to if we are going to to transfer them into European a billion cubic meters we have to reduce by almost eight percent just the way of pressure and temperature works in Russian measurements in our measurements so this

Is going to be about 178 possibly that this has gone to Europe and Turkey European Union and Turkey and other countries that are not in the European Union in Europe and if we look at Turkey and what is happening there Gazprom is actually losing its market share in

Turkey as well turkeys there is lower consumption there is a very significant market diversification turkey has managed to diversify its sources of supply by increasing the supplies from Azerbaijan through the southern gas corridor by increasing the supplies of LNG and building new terminals so Turkey is no longer the second largest market

For for as prom in Europe after Germany its italy and turkey comes third turkey’s now the 2nd european largest lng importer and that’s that’s important thing to to to note because this is going to have impact in the entire region not only on turkey here is how

Mr. core champion put together this data at some point Russia’s gas supplies to Turkey a – 38% Azerbaijani gas supplies up 29% Iran a little change and lng up by 20% this is how it looks compared to 2018 you can see the drop in Russian gas

Supplies so why is this let’s talk a little bit about the prices because that’s that’s important – this is a map from 2013 howdy Via Rail prepared this beautiful map it’s interactive and you can find it on our website and can tell you exactly what the price of each

In each country is and you can see all these red countries that have been paying over four hundred and seventy five dollars per per thousand cubic meters of gas among them Ukraine Poland but you can also see Bulgaria Macedonia and Greece so these were the most expensive markets

The most lucrative markets for Gazprom although they have very small markets then you can see that Turkey was paying also about $400 per thousand cubic meters and let’s see what happened with the prices now this is the spot prices at the moment this as early as this

Morning the spot price has dropped down to 3 point 6 and this is the measurement is is different here is 4 million Btu but important number to remember under $4 last year in 2018 for exam around october/november the price was 8.8 dollars now it’s 3.6 why is that one

The warm weather in Europe the warm weather in in Asia allowed a lot of energy supplies to divert from Asian market to the European market and once the supplies available in such volumes of course the price goes down what happens when the price of LNG goes down

The spot markets go down see what happens with the contract market these are the gas contract prices in the white in the blue in the blue at the Russian contract prices in in the white is European spot prices so Russian gas prices even in the contracts of following the the European spot prices

And they’re going down as well this is why the profits of gas gas prom are dropping by almost 50% this is how extreme looks like look at the grey line there that was the prospective South Stream pipeline that failed it failed because Gazprom refused to comply with European regulations it didn’t fail

Because the Bulgarian government suspended the project the project has to be suspended if Bulgaria wanted to be member of the European Union FD of the energy union as well when the project was suspended for Russia to comply with European regulations they decided to cancel it in December and instead build

The other the red line which is South Stream light we call it – – Turkey – but not to the eastern part but to the western part of Turkey from the western part of Turkey there is a very little very little space here to the Bulgarian

Border and it was very easy to build a compression station and in interconnector which was built in record times as well this time not by Gazprom by but by Boog Argos the Bulgarian gas company because they really really wanted this gas to come thru bulgaria and be transited further to central Eastern

Europe and here we’re talking about the Balkan gas hub the Balkan gas cap looks like a very useful infrastructure that would allow a gas to come from different sources and to be sold to two traders in Bulgaria serve as a trading platform and from there it can be resold to other

Other prices problem is a mish is going to tell you this in the mall in a moment how this capacity is already booked by Gazprom companies so it means that the capacity that is coming from Turkey here this is going to use the trans Bakken pipeline in Reverse it means Ukraine

Ukrainian gas gas from Ukraine is no longer coming to the Balkans it’s connecting to another new pipeline brand new plateau in this yellow orange one that is going from Bulgaria to Serbia from Serbia it’s going to be further connected to Hungary and up to Austria and Baumgarten so who is

Building this pipeline presumably the Bulgarian government the money should be paid by the Bulgarian government it’s built by a Saudi Arabia company presume is reported that it has connections to to to Russian energy circles and the other information that is coming through the divine is that it’s actually Russian

Money that is funding at the moment this project but the project is already included in the list of priority projects of the European Union the European that means that once in March the European Parliament votes that list if it if it’s approved Commission already the relevant Commission has

Already approved that list the Bulgarian gas cap is going to be allowed to receive like funding from the European Union which in fact in practice means that the European Union is going to be funding a Russian geopolitical project geostrategic project of diverting us from the US transit from Ukraine pushing

It through the Balkans in order to subvert submit Ukraine and in order to keep the Balkans also and the political and economic influence is this going to happen probably it’s going to happen if the European Union is not smart enough to put conditions and not allow this new

Gas pipeline to be used more than 50% for Russian gas as is poor the gas directive the gas directive requires exactly that 50% to one supplier and the rest to alternative supplies such as Sun gas corridor and LNG and you can see here this I believe last graph that I I

Put here you can see exactly where the quantities are going to come from seventeen point 93 is coming from Russia only one person one BCM here local gas production and about three here from the Bulgaria Greece interconnect which is going to be as Erica’s the European Commission specifically requested from

Bulgaria that three gas from three sources is secured before they approved the project on paper yes this is gas from three sources is it proportionate is it comparable no the conditions should be three volumes comparable volumes from three different sources in order for this gas cap to work as a

Trade platform fully and properly and not just collect transit fees for transiting Russian gas to Central and Eastern Europe okay I will stop here this is going to be one option in the future maybe to get there it goes all the way to Ukraine through the now reversed Balkan transport pipeline but

We will discuss this further later and now I will stop here and give give the microphone to me Shakur champion thank you thank you Marcus an energy expert with vast experience in in in energy and Russian energy projects his he’s been teaching at University of Pennsylvania and he’s a consultant to free Russian

Free Russia foundation at the moment Thurston was built really fast so I didn’t have time to get myself a t-shirt about your team I just ignore stream anyway the Turk stream was a part of big plan of Gazprom which is to bypass Ukraine and they’re worth gas flows to

The Baltic Sea and to the Black Sea from both sides and to do that guests from and his partners built already 90 billion cubic meters a year of capacity had the border of Germany and Czech Republic and more than 31 BCM the Turkish or this is more than guests from

Ships for Ukraine last year it was about 19 the whole plan costs more than hundred billion dollars and I think this was the main reason for launching it Putin wanted gaps from contractors to have a nice piece of this hundred billion dollars which they did and his close friend became multi billionaire so

The richest people among the richest people of Russia so this is a reminder that The plan the big plan of guests from is combined with the so called optimization program that was about physical liquidation of pipelines that are delivering gas from West Siberia and elsewhere to the Ukrainian border so just one officially declared that it would reduce the capacity the transit

Capacity of Ukraine from the current 140 billion cubic meters a year to 10 billion and remarkably this program was sold under the flag of Europe needs more Russian gas at the first stage Turk stream was designed it was meant to replace the trans bulken gas pipeline actually this pipeline is one of

Probably the only project that gastrin worked on in this century in this millennium and expanded it by about 4 billion cubic meters in 2003 jointly with NAFTA gas and some other companies so this pipeline as you can see supplies used to supply air to Romania Bulgaria Turkey Greece and in most Macedonian

It’s educated to look at the actual daily gas flow at the inlet of trans Balkan pipeline we can see that it drastically declined in 2019 and compared to the capacity of even one line of chalk stream it’s insignificant so the if gas firm wants to load most

Lines of chalk stream it would need to triple the volume of gas looking at the market supply DeMarcus is supplied by turk stream first of all all of them are declining and first of all it’s turkey which is using much less gas for power generation the first place and

This is due to the commissioning of the major hydropower plant over a year ago and russia is also working on the construction of a kuia nuclear power plant which will eventually cut another piece from the gas using the power market and Turkey now it imports more gas from Azerbaijan and

LNG from many sources it’s very important that more greater just mentioned the guest guest competition finally made it to the Balkans there are many sources the Balkan countries can get gas room these are several LNG terminals in Turkey in Greece coming terminal in Croatia plus the new ton of pipeline and maybe

Some Mediterranean guests later on it’s very unlikely that Gazprom would increase gas sales in this area it is already declining and this is just the initial stage of competition not mentioning the competition with other sources clean sources like hydro energy in Turkey gas from believes that additional markets would come with the

Expansion of near links this is map from Russian Kommersant newspaper the gas transplant to build pipeline sections from Turkey through Bulgaria Serbia to Hungary and Slovakia but this is this takes would take the extreme gas to the markets that or to be supplied by Northland – so technically gastrin foresees the

Competition of Turk stream gas with the gas from north team – there is excessive capacity already built that enters Czech Republic and Slovakia from the north and there are no new markets in the area no new consumption the overall gas consumption is not to grow any fast and especially considering the availability

Of other gas in Europe prospects of just Ramar not good another concern is that about the exemption from the energy package by the European law exemption should not affect the performance of existing transit operators such as for instance bulgar trans gas and specifically the Romanian transit transit gas company and in this

Case it will affect because remain is lost everything already physical volumes but not any revenue yet I don’t just think sometimes it’s about the Turk stream propaganda if you compare it with the propaganda around Northland – you see that truck stream business was very weak and in fact the public support of

Trucks team was not needed in that part of the world simply everything was achieved by bilateral talks of Putin with Erdogan and leaders of Bulgaria and Hungary so public opinion just mirrors much less than one in northern europe and northern members of the european union gastrin did not use this

Information and lies about Turks team selling additional gas as they did with since they simply said that strictly straightforward that this is about bypassing Ukraine nothing else and neither it was Turks theorem was called the shortest or the cheapest route which obviously was very but it’s very difficult to prove impossible rather

Guess from just said that this option to ship Siberia and gas to Austria through the Black Sea is the best one and indeed it is the best for the contractors of gastrin no doubt about that officially the pipelines built in the developed plains of South and Russia

Where they have a lot of existing right of ways for pipelines railroads roads electricity will not power lines was three times more expensive per kilometer than at identical projects in Germany and Czech Republic so gas from very generously paid its contractors and moreover after the completion of all projects inside Russia including power

Siberia the feeling pipelines of North stream and truck stream guests from bought out the construction business from mr. Rotenberg at a very good price like several times higher than they sold it to him and Putin never initially did he did hide the fact of this were his friends

But at some point he started to recognize it and finally even became proud of having such good friends about the economic effect of truck stream in the midterms there is no one in Europe transit income the readiness of Ukraine Romania Bulgaria protected by okay contracts the only party that

Lost because of the project is guestroom itself because the on top of the existing costs they have additional ship or pay transit costs in Turkey and huge depreciation costs in the Russian section of its pipeline system there is a major concern I want to end my presentation with this is the role of

Bypassing pipelines of pipelines bypassing Ukraine back in 2007 and yes from built but then looked unnecessary by passing project to make it possible to supply south and Russian regions of rostov-on-don and other without getting into Ukraine and get from claimed that they did it to save about 40 million

Dollars a year of transit fees they were paying on that tiny section with the multi-billion pipeline and compressor station the operating expenses were much higher than 40 million a year so at that point it didn’t make any sense but shortly not shortly but after several years Russia invaded that area of

Ukraine and it by a coincidence no combat activities involving artillery and even small arms never took place near the operating pipelines everything was happening in the area of abandoned pipelines so it just may be that without this bypassing pipeline the war might never have happened at all so in general

Any pipelines bypassing Ukraine means a higher risk of war thank you that’s a great presentation and now we’re going to turn to ambassador Rick Zamir Kenny who is a vice president of the Center for European policy studies here European Policy Center in in Washington she is going to talk about

The three C’s initiative the initiative by several European countries to combine their efforts and connect the eastern part of the continent from north to south as up as opposed to what is now from east to west or west to east so that they can increase their energy

Security both in a gas sector in the electricity sector like what is going to be the impact of turkic Stream and the other energy sources that are coming to the Balkans on the three seas initiative thank you very much Margaret and thank you Jamestown foundation for organizing

This event I think it’s a very timely and a very important moment to touch base on what is happening in in particular in the Balkans in the energy security side the attention to the importance of this region I think was largely underlined by the recent munich security comfort and state announcement

Of Secretary of State Michael Pompeo who announced the u.s. support for a European concern and that was a very important message for all of Europeans and primarily for the three seas initiative countries because it came after a period of a good two years of statements and political preparatory

Work at the three seas initiative framework in which we could see that there were an increasing number of political leaders who were supporting the three seas initiative who were talking about it verbally there was an increasing amount of understanding of the strategic importance of the various fields of cooperation within this three

Seas initiative countries but it was still an initiative there was still very few projects and there was absolutely very little money contributed to it so it came Risa’s initiative itself came to a moment of being at the crossroads of seeing whether this initiative is going to become one of those grandiose ideas

That sort of vanish in history because nothing happens of them or actually it will be able to give a big push to the strategic infrastructure investment projects that make the concepts reality this was the moment when we saw the the the support of the American foreign policy

What is towards the region especially I think the countries of this thesis initiative that is not very obviously in the focus of strategic concerns when we see is with special regards of course the South East European countries when we see these countries role in energy security even in the Central East

European region we can see that their role is fundamentally truly peripheral the broader region combined even the total demand is only about 33 BCM per year the gas demand of several countries are practically zero none existent Montenegro is zero a Republic of North Macedonia 0.2 bosnia-herzegovina 0.4 Kosovo zero vania zero Slovenia 0.9

Serbia 3.5 and then Bulgaria for Greece 3.8 Croatia 2.6 and their largest consumer is Romania with an annual 17 BCM even together of course this would not necessarily under explain you know a strong concern but as we know very well there are two reasons to make a region

Strategically important in the world of energy security either its consumption and market size or its geo strategic location for transit and what we can see in the case of the South East European countries it is location and the strategic vulnerability that makes it off particularly important for

Us to understand and to focus on this region especially you know when we come to this Balkans area it’s very customary I hear it often times in Washington that it is really Europe that should be primarily supporting the geopolitical stabilization and the Economic reintegration of this part of the of the

European continent the Balkans if not for an altruistic value based democracy and free market agenda then for their own interest of stability and security that is a common American vision of the region stabilization and integration are the light motifs of this American vision of the Balkans but for Washington

Stabilization of the Balkans and the integration of these countries into a European continent are not only no brainer as if I may say but these are also goals that can be achieved at a relatively reasonable effort in cost the success of the Dayton Agreement showed that an intensive diplomatic commitment

Can bear long-lasting fruit the NATO integration of the region showed that engagement can be strategically successful the problems of the region are very complex and have very deep historic roots we scare most Americans away but there is a feeling rightly or wrongly that through active commitment these problems can be solved and through

An inactive presence they can be at least kept and exit an acceptable low level that’s the American vision of the Balkans but I say there are at least four other visions that are competing about the Balkans areas which I think are driving the fate and the history of

This area and other vision about the Balkans is formulated by the central Europeans I think because they are the ones who have the Balkans on their radar for most of them it has become increasingly clear that whatever happens in the Balkans will spill over and hit them directly in their vision the

Balkans is now a key periphery of the continent and an integral part of the future of the European continent so cooperation stability integration these are the driving elements of their vision these are the founding principles that are behind a three-season it should concept so this is sort of the political

Name of the of their vision however for the rest of Europe the Balkans is very far from that for the rest of Europe the Balkans is the backyard and at that a problematic one scene from Paris Brussels and most of the European Union capitals the inclusion of this region

Into the European institutions is more likely to cause headaches than solve problems from this perspective nagging the integration process of these countries is not surprising nor a wrong strategic approach from this perspective this is the right thing to do so for them the vision about the Balkans is a

Very troublesome one but what is and this is the third vision about the Balkans there’s a fourth one what is an unattractive backyard for one is a very convenient loading deck for another this is China’s vision of the Balkans it’s a great logistical bay base a key entry

Point towards the EU countries markets we’re investing in transport infrastructure has a long-term strategic benefit hence by jings 16 plus one strategy of sweeping aside the currently existing institutional frameworks of NATO and EU membership in which these countries operate and they launched a completely different dialogue which is defined by Beijing’s interests

Alone keeping the best loading deck and developing infrastructure from there makes perfect sense it also makes sense that serious investment in this infrastructure can only start on the basis of sufficient confidence of long-term stability this is the Chinese strategy about the Balkans and yet from yet another point of view what is the

Problematic backyard for the Europeans and what is a convenient loading deck for another outside power the Balkans is the key base of operations for another actor in Russia’s vision historic relations may help it like with Serbia or leave it Newt but the fact is that there is no real

Strong anti Russian sentiments in any of these countries of the region practically and that this part of Europe is very conveniently fragmented and divided among ethnic and nationality lines religious lines politically separated not many of them are integrated into the European Union or NATO yet is strategically located so

This is a fantastic base for operation and a platform for continental influence obviously for Moscow the vision about the Balkans is strategic one it’s not just to exploit the weaknesses it’s to build from on this a very powerful and proactive presence in the rest of the European continent what we could see is

Also that a decline in in the economic presence of the European Union a decline of the strategic presence of the United States is further opening the possibilities for a strategic basing in this area but out of these widely diverging strategic visions the Balkans is in a fundamentally imbalanced and

Asymmetric situation in which these international actors that are active in the region have no benign interest in the genuine development of the region and those that would have an interest in the real social and economic development of the region are not sufficiently active there no better example of this

Asymmetric position than the situation of the energy sector in the region what we can see through the energy sector developments is a series of steps that I think are almost as sort of classical sort of handbook practices that are operated there’s a continuous overcharge of the energy price says in provided for

This region however small the markets are the operation of these as markets is very far from the operation of an market economy even there is a strong possibility and a strong use of earning monopoly rents there there is a very history of successful frustration of the diversification of energy supplies and

Of the liberalization of the energy markets in these countries and what are the Russian tools for this there is a whole range of very handful tools to achieve this successes quote unquote this there is a whole list of structural market deficits in the country’s energy markets which can be easily exploited

There is a lack of independent regulators in many of the countries or if there is some kind of an independence there is a strong imbalance in the operation of the regulator’s the management of state-owned companies and enterprises is also lagging the lacking the best practices to say the least

Availability of local brokers to the to provide an extra access to political and governmental decisions is also there making it very easy so what we can see is that as a result of these tools the the goals of drawing these countries into massive energy infrastructure projects which are probably not in the

Interest of the region itself not in the interest of any of the individual countries itself is far easier than in many other parts of the European continent so we what we can see is that this framework and that we have launched two years ago in Central Europe or that

These countries have launched the three seas initiative is trying to reach out to these countries and trying to provide the necessary strategic framework which is broader than the region because of obviously the internal regional ethnic and historic conflicts no simply regional solution has been working I have been working on these regional

Cooperations over the last 20 years most of them first frustrated because of the internal tensions of the region self a slightly larger framework is needed to be able to make a strategic step forward but not as large as the European Union because then again we have an additional problem but the three

C’s initiative approach is providing the proper strategic environment for going forward and to allow this region to have these three big power centers of gas supplies which we are trying to link in the three C’s in which the three C’s initiative project is trying to link together these three big power centers

Of potential gas supplies is of course one in the Baltic one in the Black Sea area and one in the Adriatic Sea hence the name of the initiative so what is very what we have seen is a very important moment for this approach both for the South East European countries

Development as well as for the Central East European larger region’s energy security one is the coming back big time of US interest and US presence in the region it is a very important and very powerful political message that has to be repeated and has to be understood a second however equally important key

Development that defines the region’s stability and future potential is another announcement if you recalls secretary Pompeius announcements on February 15th I think on February 13th there was another statement announced by vitaly bobrov the deputy vice president of sokar who announced that the southern gas corridor SGC was almost ready and that it would

Be fully operational by the end of 2020 at having access to the broader region for the border region to the Azzurri gas is a long-held dream that have been that has been on the under the surface for a long time so that brings me very quickly to see what are the most recent

Developments in the energy projects in the region what we can see is that already at this stage of of the pause on and hopefully halting of the nor seem to construction the impact and the region is visible gas flows are currently going through a major changes

In the Central East European region as a result of the Russia Ukraine conflict with direct spillover in fact affects the South East European part of the continent as well the traditional direction of flows will change from east to west to the other way round or from

North to south there is a lot of reconsideration and a lot of free thinking of the Epley of the applicability of the currently existing infrastructure but we can see that very clearly this will completely redraw the current gas map of the region and the cost of these changes is going to be

Huge third stream the Russian guests is entrance into the region has been really an at an initial phase small volumes arrive into the region however the route that previously was used has been dried already since January 1st 2020 as the turkey stream 1 & 2 are already operational Russia’s supplying these

Countries from this new direction so the important role that the transits a position of the southeast European countries have been able to play is being reshaped and decreased I very much believe that there is something this is something that we have to focus on new LNG terminals access to the LNG markets

The new infrastructure that is being built is playing a fundamental role in the future development and the future stability of this region very quickly there are some success stories in the three seas initiative list of projects that are important for the region and there are some open challenges for the

Southeast European part of the continent that we have to be aware of to be able to understand what next steps to do some success stories the Breuer line the Bulgaria Romania Hungary corridor is already operational will be fully ready by the laughs 2020 the police Slovakian interconnector will be constructed in

2022 so the Polish part of the project from to reach this we know a terminal has been strategically important and will continue to be more important as its further capacities will be available the Baltic pipeline project is on its way to and to allow 10 B cm in 2022

Hopefully the Croatian LNG finally energy terminal finally is on its way to point 6 B cm in 2021 open challenges in the southern region of Europe I think one of the most important one is clearly the Romanian offshore project that is unfortunately being hauled and I think

Would be very important for the region in the long term the development of the interconnector system in the Central East European part of the continent is helping to to be able to reach the to the potential of the Romanian offshore development but it has to be pursued and that needs that underlines the

Importance of a number of an important strategic presence of the United States in the region what are the conclusions that we can see from the past few years in the Balkans one is a very strong message that wherever there is a weakening of the European Union and the

US presence in the region that creates a power vacuum in which we have seen in this region that will very quickly be filled in by outside actors the United States is again becoming an independence of all counterbalance in the region to counterbalance the destructive forces in the Balkans the European Union has a

Special role which it has been fulfilling to a large extent by supporting the strategic priority projects of the region but the energy market liberalisation and the southeast European market integration is still challenges that we have to focus on and the European Union will have to work on in the near future

As well it has to allow for and push for a renegotiation of the long term natural gas contracts as well in the region I think the list could be continued the priority list projects that are important for infrastructure development have been identified a lot of the progress has been accomplished and I

Think this is a very important positive development yet where we are is a real kruspe crossroads if the lessons of this very recent past is are not understood and if we do not go forward in implementing the rest of the missing infrastructure we may easily see another

Backlash in the region thank you very much like this is how you go from pipelines to geopolitics the strategic importance of the region I completely agree the entire region from Romania to Greece including Slovenia imports from Russia about nine point nine B cm of gas

Under 10 B cm of gas for that little volume Russia has immense political influence in quite a lot of countries making advances advancing its positions in even in new NATO members such as Bulgaria and Croatia in Hungary and most of this is based on energy so let’s open

To questions I’m not going to ask questions so that we have more time for questions from the audience please oh I’m from Ukrainian embassy first of all thank you for the wonderful presentation and thoughts upon the issue my question is two margaritas yes so early before

You told us that the Turkish pipeline is already finished but there’s a certain part of a pipeline that is still under construction and it goes directly in a territory of Bulgaria how much time do you think he’ll take doesn’t really without focusing on the company or contractor who will do

Let’s say the quickest amount of time there will be needed to finish the Turkish pipeline sort of coming into the Serbian soil thank you Putin is incredibly intense in pressing the Bulgarian government and personally the Prime Minister to speed up the construction of this pipeline it’s not

Going to be as quickly as he wants though because there’s certain requirements first of all they started the construction they’re saying that school is going to be ready by the end of the year I don’t think that’s going to be the case the Serbian part is ready apparently of

The interconnector but the Bulgarian part it’s longer it goes horizontally on the entire from almost Varna on the Black Sea all the way to the Serbian border any I think it’s going to take in a half to build that pipeline and then the European Commission would have to decide whether they’re going to

Implement the gas directive to that pipeline I think they will have to because we have the president already of the European Court of Justice decision on the Opel pipeline this is the pipeline that connects North stream one with the network of Germany and all the way to the Czech Republic this pipeline

Is called or POW it’s 36 BCM capacity a decision by the European Court of Justice last September mandated that this using 800 percent by Gazprom is in detriment to the clause of solidarity between countries in the European Union since countries members of the European Union such as Poland and

Estonia and Lithuania opposed to – that pipeline to be usefully by Gazprom as it it harms their national security energy interests energy security interests so it’s Greece going to object to that pipeline being fully used by Gazprom I think Greece should object because Greece has interest to provide infrastructure to

Secure interest infrastructure for the LNG deliveries that are coming to one rivet or so and to Alexandra Poulos the new terminal that is still in a market study phase but it’s going to be built eventually so you have two LNG terminals and they would need infrastructure the interconnect between Greece and Bulgaria

Is only for three VCM but would compressor station can increase to five there are the inter connectors between the two countries that could be optimized as well so the the bottom line is even if the pipeline is built very quickly then the action of the European Union should limit the usage of this

Pipeline for one source only to 50% otherwise Boris efficient on the immense pressure to the extent that they are now speculations there are reports about him being involved in money laundering and I just want the way all this oh this is coming from we will see what is related

To pressure and come from Moscow because yeah they have the the capacity to to to harm somebody’s name well Greece oof is engaged in this he’s very eager to do it he’s not reluctant to do it the opposite that was all his idea the Balkan Gasca but also he decided that the government

Should take stake in the river in the new LNG terminal and Alexandra police to secure sources from more gas from all sources so if he is put in the right if the government is put under the right conditions by the European Union even if the pipeline is completed it will

Probably transit about seven and a half BCM of Russian gas no more than that yeah you’re very much Valentin mudo Embassy of Romania excellent presentations and very useful very useful information I have two questions for for margarita you mentioned that Turks stream to end point would be Baumgarten yeah and that would

Mean that Hungary would have to basically connect to the earth two or three tree either to expand or build a new connection which they’ve declined on the Brewer pipeline so I was wondering if you have more information on this and connect it to the first question I was

Wondering if you have more information on the capacity bids or negotiations or whatever on the sections of Turk stream was there a hub reference price or what what was the mechanism because Bulgaria and Hungary are new member states in Serbia is an candidate so energy union

Conditions apply to all of them can we go back to misha’s presentation there was this actually the booked capacities through the European Union advance booking action that was already offered and it was already booked and mostly companies that either related to gas promote derivative of Gazprom you see the

Capacity coming the volumes coming to Bulgaria 15.75 and then it goes to serbia goes to 11 it means that some is come gases used in Bulgarian some goes to Macedonia and then it goes 11 to survey that capacities book 2 then you have 2 hungry 9 and then in Slovakia

Entering sawaki 4.3 the idea was initially to get that Gaston Baumgarten I don’t know what the state of the connections is but whatever goes to Baumgarten is going to be small at the end of the orange line but this is a small this is a small quantity

Probably you wouldn’t need any kind of expansion as I said at the beginning I look at this at this as more of an experiment to see how it’s going to go and whether they can multiply that infrastructure and bring more gas to central Eastern Europe the other thing

Is the ragas prom is trying to preempt everybody else they’re trying to preempt the southern gas corridor they’re trying to preempt the increased lng deliveries to the balkans in order to to lock the market to resolve the market for itself and they didn’t succeed with South Stream they’re trying with Turk stream I

Think Russia is failing which Turks Turk stream to be honest the pipeline is not delivering as much gas to Turkey as they wanted to deliver it actually it’s only about 8 B cm at the moment it’s just very small compared to capacity to Bulgaria they might end up with no more

Than 7 and a half I mean building this expensive pipeline to deliver 15 B cm of gas to Turkey and the Balkans is in my opinion it’s it’s a economic and financial and strategic failure question is what the European Union is going to be forum and strict with its own laws

Not to allow this to happen but in order to do that they have to be firm and strict on North stream as well because you cannot be strict on on Turkish stream and Bulgarian gas cap and B lacks about North stream and North stream too um my name is Glenn Howard uh president

Jamestown um McHale what when you listen to what Margaret is saying about over capacity by Gazprom and its strategy to build all these pipelines where do you think Putin stands now and his strategic thinking on energy he’s seen some problems with Nord Stream to Europeans us sanctions so what are were your just

General impressions about where Putin is he just wanting to build and just have complete excess capacity so that he can just dominate everything what’s his thinking the old plan was initiated in the early 2000s when the consumption gas consumption in Europe was growing and it coincided with the

Growth of gas price which is a rare coincidence but Putin and his administration assumed that would go forever and the old plans of gastrin anticipated exports of like 330 billion cubic meters by this year Miller announced the plan in 2010 Miller announced plan for 2020 to act to

Increase exports by 200 billion cubic meters which results in 330 is something consonant 14 billion by now which is nearly twice significantly much higher than basically things went wrong with the old plan of Putin did not anticipate availability of new gas first of all the shell years in America even gastrin

Questions even the Turkmenistan Reserve they insisted on running audit for this reserves and dwyane Turkmenistan for like inflating the numbers but when and it turned out to be truly and exceeded the expectations of Turkmenistan gas from just canceled everything all relations with Turkmenistan because originally the Kremlin Putin

Wanted to buy all gas around Europe and resell it on Russian terms their original plan was like that by getting Turkmenistan from Libya from even from Nigeria through transicare pipeline leaving no gap for any other gas to make it to Europe but as I mentioned new gas discoveries reduction sharp reduction of

Cost of LNG production development of LNG transportation especially alternative energy which took over and taken over gas in power generation in Europe so the plants collapsed but the construction plan remains the same even it’s growing if you look at the whole picture here no he’s going like he’s

Like doesn’t have reverse its capable if he goes like a car yeah that’s like if you have a broken card without reverse if you make it to the dead end narrow street with the end you won’t make it back that’s it period so if you look at the whole picture in Europe it’s

The consumption peaked in about 2010 and the import capacity if you sum up for all LNG terminals and the existing pipelines from all around Europe exceeds the highest anticipations of gas consumption but still from the market standpoint Europe doesn’t need build anything at all simply it’s a competition is driving some someone is

Still trying to sell cheaper gas but it’s not the case of Putin because he’s not selling new gas he is selling same gas with different way which doesn’t make sense if they invest hundred billion dollars for into North streams and truck stream just to bypass to divert same volumes to

In other routes its total loss from market standpoint Nordstrom to enter keystream this capacity is going to grow to 176 BCM so why why does Russia need more capacities when it already has 100 BCM of unused unutilized capacity and everyone we started raising this question they immediately adapted the

Answer well but we need this capacity for peak hours when gas consumption is bigger and we need this capacity because consumption in Europe definitely absolutely is going to grow all the studies that have been prepared by BP and other institutes and research institutes are showing that gas demand

In Europe is not going to grow gas production is going to go down that’s true but as gas production is going down new sources of energy are coming such as L and G so that value that deficiency doesn’t need to be met by Russian gas again it could be met by by alternative

Sources of energy but the studies of BP for example in 2040 years predicted that European energy consumption as a whole is going to be reduced by 11 percent and the gas the share of gas within the energy mix is going to increase only by 1 percent so Europe is switching to

Renewable energy sources and they’re looking at gas as transition of U and if GU mirror is a reliable was he or she she was supposed to come to this conference she would tell you that the discussions in energy circles in Europe are now about alternative energy sources renewable energy sources looking at gas

Is only as a transitional fuel an option one of the options on the table not the one that’s going to necessarily replace coal but the one that is going to be on equal par with renewables done on the vogel adding on to your comments can you factor in the new pipeline from Poland

To Norway and the effect that has on everything you’ve been discussing so far the Baltic pipeline is at European Union normal business relations with Russia it wouldn’t be needed at all but unfortunately the energy program of strategy of Russia doesn’t say sell gas it says control gas flows from east to

West and this is absolutely different from just trading relations it assumes that and there are many examples of that that Russia can turn off gas flows to whenever it wishes and to whoever is not acting properly which is judged by the Kremlin so it is unfortunately necessary infrastructure for the cause of this

Type of relations not alone but combined with the expanding LNG terminal it does and actually pollen can import more through the so-called virtual import scheme they can take off gas from the flow that’s going to Germany and other countries west of Poland so they simply buy it in

Germany and use it in Poland while the SS crossing it’s a normal operational procedure in Europe thanks Bob Sakura I was you know we were talking here about sort of the Russian piece on this there’s a new Commission and their new plans of the Commission and that you sort of noted it’s very

Green but realities are there how do you see this new Commission sort of acting in the situation what do you do you can you sort of talk a little bit about the role Brussels the role you think Brussels might play as the Turks Truman comes on on board and and also whatever

Happens with North stream to in my view Brussels should use the European equivalent of unfair business practices act they have a special directive with the same name European directive of unfair business practices of atterberg because this is exactly what gastrin is doing and what doing with the North

Stream – they were selling it and placing ads in a whole type of media promising something that it was not it was not going to was not supposed to deliver like commercials of Gazprom in nursed him – were saying about this gas replacing coal and saving like hundred

Sixty hundred seventy million tons of co2 emissions a year it’s not true as this is not replacing anything because this 55 billion cubic meters replaces same 55 billion cubic meters that goes to the same customers different routes through Ukraine instead of Germany so this is exactly what is wrong and the

New Commission should understand without the understanding that there is no new gas coming from any pipeline projects of Gazprom they would keep saying that it’s gas is clean few replacing coal blah blah blah thank you so much yeah can I insert in my pessimistic central European approach I don’t see the

European Commission confronting on strategic issues especially not on energy but I would however add that I think the strategy that they have already practiced that they have we have seen over the past few years and after was very interesting after a very slow wakening after a long period of inaction

And lack of understanding of some of the developments in the energy sector I believe they have shown a remarkable approach of regulating of using the regulatory tools and regulating a lot of the fundamental issues in a very sort of European market economic logic which has not been unsuccessful in terms of

Creating a larger platform of proper gas to gas competition in the European Union’s membership and I think you know ultimately this is the goal to make sure that energy is not a strategic tool but it’s a commodity and I think this is the point that the European Commission has

Been following not just with the third energy package which at the time we criticized largely of saying yeah of course it’s important to regulate you know who gets access to a pipeline but we don’t have the necessary pipelines in Central East Europe for you know how to

Share the the usage of them but in the long term as the European Union was focusing on supporting the strategic infrastructure projects of the region and I think has been doing it over the past five years in a very consistent way so actually a lot of the really important infrastructure projects are

Being done now I mean a lot of money was was put into this we are getting closer to a situation in which most of the countries are going to be able to have a gas to gas competition and then it’s a commodity and I think that’s when sort

Of the a large part of the discussion within the European framework is going to be different and so I think the regulatory tool that they can use combined with the financial investment decisions that they do and the financial commitment for these projects is in fact a very efficient and

A very effective way of going about of creating a real energy market in the European Union framework talking about real energy market just wanted to give you a couple of numbers that I didn’t put in the presentation the price of gas in Europe per thousand cubic meters at

The moment is about maybe hundred and forty dollars or below this is what Western European countries are paying Ukraine which is importing gas from the European Union on the reverse it’s Russian gas but it’s rain 42 Ukraine face about hundred and eighty dollars per million cubic thousand cubic meters

Do you know how much Bulgaria pays two hundred and eighty dollars for one thousand cubic meters this is because Russian gas is so cheap right so let’s take off the table this myth about cheap Russian gas it’s not it’s actually the most expensive gas in Eastern Europe because the Balkan countries are paying

About thirty percent more for Russian gas than any other country in in in Western Europe particularly the southern part of Europe so the alternatives there are going to be so critically important not only for energy security but also for gas prices and when bulgar gas is saying okay we’re

Going to save about forty million or eighty million from transit because we don’t have to transit all these guys from Ukraine it’s going to come through a short away what they have to first take care to reduce the gas prices that exorbitant still exorbitant Bulgaria was paying close to six hundred dollars per

Thousand cubic meters in the past in the 2012 so now this still one of the highest in Europe regardless of the small quantities of this is its Gazprom but it’s also a spreading Russian corruption throughout the energy Network people who are involved in an energy distribution networks throughout the region which

Goes back I think to pre 1990 as well when we were in the big Brotherhood of socialist countries the same predatory prices were used against the the countries of the satellites and the markets of the satellite countries the teaching point of view I was watching the support for NATO joining NATO in in

Bulgaria growing in 98 from 38 percent in 98 growing to gradually to 70 percent and eventually the country became NATO member and now I see major political parties wanting Bulgaria to leave the European Union to leave the NATO alliance and the belief that Russia’s Friends of Bulgaria going up to 78% not

The United States not the European Union Russia is the best friend of Bulgaria so if you see this happening this is something really wrong that is going on in politics of the region it’s not only Bulgaria there other countries in the region as well historically it’s not the

First time Bulgaria is paying the highest price in Europe it had happened before and I think it was used like oh by the Bulgarian government as an example of friendship of the year and benefits from friendship with Russia the price on previous occasion with South Stream was up then right after the

Signing of the South Stream agreement it went down so and everybody applauded this is the result of our friendship with Russia same is going to happen soon because right now there again is paying the highest price we have questions okay we’re going to take 15 minutes break okay William take 20

Minutes break talking we’re finishing a little earlier ahead of time the annual plan was met in quota gasps prom a we don’t have to sell to Gazprom bank I will see you at 3:15 or for the our next panel which is going to be very very interesting thank you [Applause]