Key Banks, EU Line Up Behind Nabucco Pipeline Project

Hungary's prime minister, Ferenc Gyurcsany, says the EU should invest at least $395m in the $10.4bn project to help it succeed.

BUDAPEST, Hungary (Combined Sources)–Key banks and the EU presidency signaled financial and political backing Tuesday for a pipeline meant to reduce Europe’s energy dependence on Russia and limit new gas shortages if Russian gas company Gazprom again decides to turn off the spigots.

Azerbaijan’s President and Turkey’s Energy Minister were in Hungary on Tuesday participating in a summit of European leaders and gas suppliers to discuss the proposed pipeline that would carry energy supplies from the Caspian Sea to Western Europe through Turkey, bypassing Ukraine and Russia.

The 3,300 km Nabucco pipeline, which could cost up to 10 billion euros, has been progressing slowly as it has run into difficulty securing input supplies. Azerbaijan, a key potential supplier for the pipeline, has been its biggest hope for natural gas.

As far as Nabucco is concerned, Azerbaijan has always been supportive to this project and today once again we’d like to declare that we continue to support," Azeri President Ilham Aliyev told the conference participants.

Turkey’s Energy Minister Hilmi Guler, meanwhile, warned the participants that the project would fail without Turkey’s support. Turkey’s partners want it to serve as a transit country that would not use any of the gas pumped through it, but Ankara has demanded it keeps a net 15 percent of the energy supply. Everyone at the summit, he said, understands that the Nabucco project cannot be implemented without Turkey.

The summit comes after a recent dispute between Russia and Ukraine over gas prices, that saw large areas of Europe left without gas for two weeks. The tentative commitmen’s to the Nabucco pipeline Tuesday were informal and participants at the high-level meeting on the project acknowledged both its limitations and the work ahead to turn it into reality. Still, their tone of urgency reflected a sense of the project’s importance in the wake of the latest shutdown of Russian gas to Europe.

Philipp Maystatt, president of the European Investment Bank, told the meeting his institution could underwrite about a quarter of the 7.9 billion euro project. And Thomas Mirow, president of the European Bank for Reconstruction and Development, said his bank was "ready to examine the case for a financial contribution to the pipeline."

Other participants–prime ministers and other government representatives from European countries–expressed hope that the governmen’s and commercial companies involved would be able to complete plans by late spring, allowing construction to start shortly after.

Even if conditional, the backing is significant for a project whose difficulties in attracting investors have only increased due to the world economic downturn

The EU, backed by the United States, has proposed the 2,050-mile (3,300 kilometer) Nabucco pipeline to transport gas from Azerbaijan and Turkmen’stan, through Turkey and across the Balkans to Central Europe.

But since its inception seven years ago, the project has been mired in doubt about availability of non-Russian gas to supply it. That, in turn has dampened investor interest–a delay exploited by Moscow and Beijing to lock in gas from Central Asia, the projected source for Nabucco.

Last year’s Russia-Georgia conflict added to the uncertainties. The line would either have to transit Georgia or originate in Iran–an unpopular option at a time the West is pressuring Tehran to abandon its nuclear program.

And even if Europe could secure a route for Nabucco and fill it with gas, it would still carry only about six to eight percent of Europe’s gas deman’s by 2020.

Further muddying the waters, Russia proposed another pipeline in June 2007, called South Stream, which would ship about 30 billion cubic meters of the gas essentially the same route as Nabucco.

In a dig highlighting Russia’s gas superiority, Moscow’s ambassador to the EU, Vladimir Chizhov on Monday said the only difference is "that South Stream has gas and Nabucco seems not to have gas.

Russia already supplies Europe with about a quarter of its gas needs, through pipelines it also controls–a point most recently driven home when Gazprom supplies through Ukraine were halted as the year began.

Adding his support as head of the EU’s rotating presidency, Czech Prime Minister Mirek Topolanek warned participants that "our freedom and independence are at stake" in breaking Europe’s energy dependency.

"The more we are dependent on one source … the more susceptible we are to blackmail and the narrower our political options become," he said, urging all 27 EU members–and the EU Commission in Brussels–to fully back Nabucco.

In a written message to the meeting, Commission president Jose Manuel Barroso said he also supported the project.

Among other political leaders at the Nabucco talks was Premier Sergei Stanishev of Bulgaria–where tens of thousands endured chilly homes as gas from Gazprom, their only source, trickled to a stop before being restored last week.

President Aliyev was on hand with senior figures from other gas-rich central Asian countries as well as Iraq, which sits on an estimated 3.1 trillion cubic meters of natural gas reserves–the world’s 10th largest.

Topolanek described the Nabucco project as a "big test" for the EU’s ability to act as one in its own interest.

"If the EU as a whole doesn’t back this project … then it will be very, very difficult, no impossible, to implement," he told The Associated Press.

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