Gazprom increase its influence in south-eastern Europe

Gazprom is gradually strengthening its position as a key gas exporter to south-eastern Europe. By building a gas pipeline in Serbia, it seeks to complete the transmission system. Ukraine is losing its importance as a transit country.

The Hungarian Government negotiated a gas supply contract with Gazprom, with a 15-year term. The contract, which is to be signed by the end of September and come into force on 1 October, envisions supply of 4.5 billion cubic metres of gas per year. The new agreement has more favourable terms than the previous 1995 agreement, the German daily Frankfurter Allgemeine Zeitung reported, citing Hungarian Foreign Minister Peter Szijjarto.

Russian gas will be transmitted to Hungary via a new gas pipeline Serbia. It will have to be extended by only a few kilometres. Hungary will receive 3.5 billion cubic metres of gas via this route. The remaining 1 bcm will reach Hungary from Austria, where Gazprom has huge gas storage facilities.


The agreement with Hungary weakens Ukraine

FAZ points out that the Hungarian-Russian agreement leads to a further weakening of Ukraine’s position as a transit country. The current agreement on the transit of Russian gas through Ukraine, which fetches Kiev a whopping $2 billion dollars a year, expires in 2024. The authorities in Berlin are seeking an extension of this agreement. Regardless of the dispute over Nord Stream 2, Gazprom’s influence as a key gas supplier in the region is growing, with Turkey holding a central position in the corporation’s strategy.

FAZ recalls that in 2014, Gazprom abandoned the construction of a gas pipeline (South Stream) to Bulgaria via the Black Sea due to opposition from the European Commission. Following that fiasco, the Russian company built two lines with a combined capacity of 16 bcm through the Black Sea to the westernmost part of Turkey. One line is to deliver gas to Turkey, the other to the countries of south-eastern Europe.


A key role for Turkey

Due to the increase in the price of liquefied natural gas (LNG), the scale of Russian gas supplies has increased by leaps and bounds. In the first seven months of this year, deliveries to Romania quadrupled, to Turkey tripled, to Serbia doubled and to Bulgaria by half. Imports to Germany have grown by 42% in that period.

The new pipeline through Turkey is playing an increasingly important role in Gazprom’s expansion. Bulgaria has received 7 bcm of gas since the beginning of this year. For comparison, Bulgaria’s combined imports amounted to only 5.8 billion of Russian gas in the whole of last year. The country’s pipeline is an investment by Saudi consortium Arkad, as Gazprom is not allowed to either build or administer pipelines in the EU. The Bulgarian media claim that Arkad acts as a front for Gazprom which retains full control.

Gazprom wants to be a monopolist

Gazprom is flooding the market in south-eastern Europe with Russian gas and making access more difficult for competitors. The EU-backed project to build a gas pipeline from Azerbaijan to Bulgaria is delayed by the lack of a Bulgarian branch. The 182-kilometre link is due to be commissioned in the middle of next year.

The planned connection of the transmission network with Serbia will complete the system in a move intended to exclude Ukraine. Once the Serbian branch is operational, Gazprom will deliver gas via TurkStream through Bulgaria and Serbia to Hungary. Unlike in EU countries, where this is legally impossible, Russia will have a majority stake in the Serbian pipeline. This will enable Gazprom to prevent other gas suppliers from accessing to south-eastern Europe.

By Martin Chomsky (photo: Gazprom).