Putin and the pipelines
Simon Tisdall
May 17, 2007 10:00 PM
http://commentisfree.guardian.co.uk/simon_tisdall/2007/05/putin_and_the_pipelines_moscow.html

European Union efforts to loosen Russia's energy grip by seeking alternative supplies from central Asia via the Caucasus suffered a stunning setback this week. But even before President Putin agreed deals expanding his control of the gas and oil exports of Kazakhstan and Turkmenistan, Europe's drive to diversify was running on empty.
Russia supplies about 25% of Europe's gas and a rising proportion of its oil. That is increasingly seen as a strategic weakness that could leave the continent vulnerable to politically motivated energy blackmail. This is the fate that allegedly befell Ukraine and Belarus last year. Lithuania is currently under similar pressure after Moscow cut oil deliveries.
Energy security will figure high on the agenda at tomorrow's EU-Russia summit in Samara. A key aim is to induce Moscow to sign up to an energy charter, a set of rules covering trade, investment and transportation of oil and gas. But experts predict the Kremlin will continue to resist the scheme.
Russia is focusing instead on increasing its market dominance from production through to the point of sale by expanding its investments in Europe (while denying European businesses reciprocal access). The state-controlled energy giant Gazprom now has a stake in 16 of the EU's 27 countries. And while the EU remains divided on the question of how to respond, the Russians are busy maximising their advantage.
"Gazprom already has direct access to end consumers in three of the biggest EU gas markets: Italy, Germany and France," said Katinka Barysch in a study published by the Centre for European Reform. "In the UK, it hopes to raise its market share to 10% by the end of the decade. Not content with controlling pipelines, Gazprom is building power plants and gas storage facilities in various EU countries."
Russia's other main tactic is forging bilateral deals that undermine a collective pan-European approach. Its most spectacular success was agreement with Germany on a Baltic pipeline that is to bypass Poland. But Mr Putin has also dangled the prospect of individual supply-and-distribution arrangements with Slovakia, Hungary, Bulgaria and a host of other energy-hungry EU members.
Moscow's aggressive, and increasingly successful, attempts to entrench its dominant position have also undercut political and financial support for alternative European supply projects that would bypass Russia. One is the so-called Nabucco pipeline to bring gas from the Caspian, which may not now go ahead.
Russia's weekend deals with Kazakhstan and Turkmenistan have also raised possibly terminal doubts about the viability of US and European-backed ideas for a central Asia pipeline. Russia's energy minister, Viktor Khristenko, dismissed it this week as a "political project" that was unlikely ever to materialise.
"Russia is increasingly setting the agenda for EU-Russia relations while EU policymakers are struggling," Ms Barysch said.
Russia is not having it all its own way. EU foreign ministers agreed a counter-offensive this week to intensify energy and other cooperation with Black Sea countries, including new neighbours Ukraine, Georgia, Moldova, Armenia and Azerbaijan. Acting unilaterally, Poland is leading efforts to build east European links with Caspian Basin energy producers.
All the same, effective EU action to diversify energy supply faces particular difficulties that do not trouble Moscow. These include concerns about good governance and human rights in partner countries.
The political show trial of a former economy minister mounted this week by the democratically-challenged rulers of Azerbaijan, a key producer and transit route for central Asian gas and oil, has highlighted these contradictions. Azerbaijan's 2005 presidential election was blatantly stolen. It has an appalling human rights record and the use of torture is said to be endemic.
But for now at least, all this is largely tolerated in the west -- just as long as Azerbaijan's feudal oligarchs keep on the "right side" in the high-stakes energy war with Russia.