EU rules out funding Nabucco gas pipeline

EU Energy Commissioner Andris Piebalgs said there will be no European funding for the Union's flagship pipeline project, turning down appeals from Hungary at a two-day "Nabucco summit" in Budapest organised in the wake of the Russia-Ukraine gas crisis.
The Nabucco pipeline project aims to decrease the EU's dependence on Russian gas imports by bringing Caspian gas to a hub in Austria via the Balkans. Azerbaijan is seen as the project's most likely first gas supplier, while in future, it would also bring supplies from the Middle East. The gas would be shipped to Europe via Turkey, Bulgaria, Romania and Hungary.

The pipeline is scheduled to begin operating in 2013, but it is not yet certain that it will be built. Continued hesitation by the private sector to finance the project, not to mention the brief war between Georgia and Russia in August 2008, means that Nabucco faces an uncertain future.
Officially, the European Commission refuses to admit to any setbacks. But the project faces many obstacles, including the planned rival South Stream pipeline supported by Russia's Gazprom. Recently, leading energy experts warned of a series of difficulties in implementing Nabucco in the wake of the Russia-Ukraine gas dispute.

The Nabucco consortium comprises leading European energy companies: OMV of Austria, MOL of Hungary, RWE of Germany, Bulgargaz of Bulgaria, Transgaz of Romania and BOTAS of Turkey. But three consortium members -- OMV, MOL and Bulgargaz -- have already signed up to Gazprom's South Stream pipeline, raising questions about conflicts of interest, or indeed their commitment to Nabucco. Several EU governments, including Germany, France and Italy, which have close ties with the Kremlin as well as long-term gas contracts with Gazprom, are not convinced about the need for the new pipeline.
Speaking at the summit, Hungarian Prime Minister Ferenc Gyurcsany described Nabucco as an issue of national security and suggested that the EU should finance the strategic project.

The summit's Hungarian host also called for an "International Nabucco Board" to be established, and suggested that Budapest had the resources to host such an institution. He also stressed that the EU must make further commitments towards Nabucco's resource and transit countries, as they do not want to be mere suppliers.
The two-day summit brought together heads of state and energy ministers from twelve countries, along with representatives of the European Commission and financial institutions, with the aim of re-launching the EU's flagship project in the wake of the Russia-Ukraine gas dispute.

In a first set of comments, Piebalgs said "the voice of Prime Minister Gyurcsany will be heard". But later on, he made clear that the Union should not finance the pipeline.
"I believe that we can facilitate getting loans" for the project, Piebalgs said. However, he said the EU would "not go beyond it, because then it doesn't make sense, it's not anymore the consortium's project but a public-private partnership".

"I'm not ready at this stage to even consider such a type of option," Piebalgs added.
The EU energy commissioner added that a number of open questions regarding Nabucco remained to be answered. If concrete answers are not given by May, the project would be in jeopardy, he warned.

No compensations for gas crisis either
Gyurcsany also urged the EU to adopt a common position on the issue of compensation for the damage caused by the Russia-Ukraine gas row. He was very optimistic, saying "the member states of the European Union have understood that the damage is something we suffered together".
"I urge the Czech Presidency and the Commission to organise that member states take common steps".

Piebalgs said compensation issues are dealt with via commercial contracts. He pointed out that the Commission "needs to know the figures of the damages first" before it can take any kind of action. He also warned that compensation may prove very hard to obtain as each side blames the other.
"Russia would say it is Ukraine's fault, and Ukraine would say it is Russia's fault," the commissioner said.