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Europe Split over Energy Security

Merkel Calls on EU to Support Baltic Gas Pipeline

In a letter to the European Commission, German Chancellor Angela Merkel has called on the EU's member states to support a controversial natural gas pipeline under the Baltic Sea. Her remarks come just days after her Czech counterpart expressed support for a rival scheme.

Will the EU get its future gas supplies via Nord Stream, South Stream or Nabucco? The three rival planned gas pipelines are causing rifts within the European Union, as German Chancellor Angela Merkel and Czech Prime Minister Mirek Topolanek put their support behind different projects and the European Commission announces financial assistance for the Nabucco pipeline.

In a letter to the European Commission President Jose Manuel Barroso and Topolanek, whose country currently holds the EU's six-month rotating presidency, Merkel asked the European Union and its member states for full support for the controversial Nord Stream pipeline under the Baltic Sea, the Financial Times Deutschland reported in its Thursday edition.

The recent gas dispute between Russia and Ukraine showed "that the EU must become more independent and crisis resistant in its energy supplies," Merkel wrote in the letter. The EU, she wrote, needed to better diversify its gas supply and transport routes. Hence it was of "great significance" that the Nabucco, Nord Stream and South Stream pipelines should be "politically desired and supported by all EU member states."

The Russian-backed South Stream pipeline is intended to transport gas under the Black Sea, while the Nabucco project, in which Russia is not involved, will take Caspian gas to Austria via Turkey. It is not clear which, if any, of the three proposed pipelines will eventually be built.

The Nord Stream pipeline is controversial on both environmental and political grounds. Sweden and Finland are concerned about the environmental impact of the project as well as increasing Russian influence in the Baltic region, while Poland and the Baltic states are worried about the fact that the pipeline would circumvent their territory and they fear being cut off from gas supplies.

If approved, Nord Stream would be built by a consortium led by the Russian energy giant Gazprom which also includes the German utility companies BASF and E.on and the Netherlands' Gasunie. Nord Stream is planned to go online in 2011 and will transport up to 55 billion cubic meters of gas to Germany annually. In the past, the Russians have repeatedly criticized Germany and the EU for not giving the project enough support.

Merkel's comments come in response to remarks Monday by Topolanek in which he harshly criticized the Nord Stream and South Stream pipelines and backed the rival Nabucco pipeline. At a conference on Nabucco in Budapest, he called the pipeline "a key project for the well-being and political independence of the whole of Europe." The Nord Stream and South Stream projects, on the other hand, "cement the EU's high level of dependence on Russia for its energy" and are "a direct threat to the Nabucco project." Nabucco is supported by the EU's new members in Eastern Europe, as well as Germany, whose RWE is part of the Nabucco consortium.

On Wednesday, the European Commission proposed investing €3.5 billion of unspent EU budget on energy infrastructure projects, including new gas pipelines and electricity networks which would inter-connect member states, as well as offshore wind projects and carbon capture facilities, as part of a €5 billion package to stimulate the economy and create jobs. Barroso said the recent dispute between Russia and Ukraine had showed "how important it is to achieve a greater level of energy security" as well as demonstrating the "vulnerability of the European Union."

Of the €3.5 billion, €250 million is earmarked for Nabucco. The money will form a "risk-sharing facility" with the European Investment Bank so that loans for the project can be raised at better rates than are currently available due to the economic downturn. Barroso said the Commission supported the project as part of its energy diversification policy.

However Merkel criticized the plan in her letter. "Additional funds from the EU budget will not solve our problems," she wrote. She called on energy companies to pay for infrastructure developments themselves: "We should not absolve the energy industry of this responsibility." As the largest contributor to the EU budget, Germany would have to provide around €1 billion of the €5 billion needed for the Commission's package, which still has to be approved by EU governments.

Meanwhile a Gazprom spokesman said Wednesday that Russia was considering increasing the capacity of the planned South Stream pipeline from 31 billion cubic meters to 47 billion cubic meters annually. The energy giant also criticized Topolanek's remarks. "Topolanek is trying to reduce Europe's trust in Russian gas," Gazprom's deputy head Alexander Medvedev told the news agency Reuters. The EU currently imports around a quarter of its gas from Russia.

dgs -- with wire reports