Ardent skiers might rejoice in it, but the snowy and unexpectedly cold winter has laid bare some of the inconsistencies in Slovenia’s energy policy. Things were brought to a head when the Russian energy giant Gazprom cut off the supplies of gas to the country at the beginning of January, citing an unresolved pricing dispute with Ukraine. Although the gas is flowing freely at the moment, the episode should give a jolt to Slovenian policy makers negotiating with Russian energy tsars.
The thought that a dispute over the price of gas between two faraway countries such as Russia and Ukraine should worry the average Slovene might have seemed far-fetched a decade ago when Russian influence in the ex-Soviet region was still relatively uncontested. However, as a number of the so-called colour revolutions have established market democracies and brought western-sponsored leaders to power on its borders, Russia has obviously decided that it is time for the former satellites to put their money where their mouth is, i.e. to start paying market prices for the gas they buy from Gazprom, Russia’s state-owned energy giant.
At the beginning of January, when Ukraine, a transit country for 80 percent of Russian gas exports to the European Union, started diverting some gas destined for European consumers to its own gas distribution system, nobody was surprised. That had happened in 2006 and again in 2007, with authoritarian Russia demanding too high a price for its gas in order to punish the country for its pro-Western leanings; Ukrainians are doing the only thing they can to keep their homes warm, fumed the commentators. This year, however, Russians called their neighbour’s bluff and cut off the gas to Eastern and Central Europe, putting a couple of countries in a tight spot. Righteous indignation gave way to fear.
Southern comfort
Although natural gas accounts for only around 14 percent of Slovenia’s energy needs, industry depends on it for a little more than a third of its final energy consumption. When Geoplin, the operator of the gas transmission network and the country’s biggest gas importer, announced that Gazprom had stopped supplying gas to Slovenia, industrial facilities were first to suffer reductions. There was no talk of cutting off the supply of gas to private households, but the gas reserves could have lasted only a few weeks. The lesson was clear: Slovenia depends on Russian natural gas; energy security should therefore be the top priority of the country’s energy officials.
Coincidentally, Alexei Miller, Gazprom’s boss, was in Slovenia just at the time when nervous government officials were assuring the public that the country had enough gas reserves to keep their homes warm and dry. Miller came to discuss the possibility of Gazprom’s planned South Stream pipeline crossing Slovenia on its way from Russia to Italy. The pipeline will start on the Russian shores of the Black Sea, cross underwater, then continue through Bulgaria, Serbia and Hungary and will reach Italy either through Austria or Slovenia, perhaps both.
By agreeing to establish a joint company with Gazprom to build the Slovenian section of the pipeline, Slovenia would arguably settle the gas issue once and for all. South Stream will bypass Ukraine, so abstruse pricing disputes far to the east would no longer be a concern of the Slovenes. Furthermore, the security of supply would be greatly enhanced by the country being one of the transit countries for gas destined for western European markets.
Fault lines within
It thus came as a surprise when Matej Lahovnik, the minister of the economy, appeared to be less than enthusiastic about the prospect of quickly concluding talks with Gazprom. He said that it had to be certain that Slovenia’s strategic interests are safeguarded and that the project would have to be checked for conformity with EU law before it could proceed. Miller did not succeed in persuading the new government to continue the negotiations from where the previous government had left them.
One may conjecture that this is just a clever negotiating tactic on the Slovenian side. Miller is known for his hard bargaining style, evidenced by the favourable terms obtained for Gazprom in joint ventures with national companies in two other transit countries, Bulgaria and Hungary. Perhaps Lahovnik wants to obtain better terms for Slovenian companies than the standard 50-50 joint venture and is holding out for a better offer from Gazprom. But since none of the negotiating parties wanted to comment on the talks, there is no clarity on this issue.
What is clear, however, is that Lahovnik’s way of negotiating with Gazprom provoked Slovenian president Danilo Türk to warn publicly that the country cannot afford to drag its feet on the issue of South Stream for much longer. “This pipeline will enhance Slovenia’s energy security,” read the statement issued by the office of the president.
The big game
Inadvertently, perhaps, the president may not have exposed only different views within the Slovenian politics on the negotiating tactics to be employed in talks with Gazprom, but also differences within the government itself. Well-informed sources say that Vlado Dimovski, whom Prime Minister Borut Pahor proposed preside over the government’s strategic energy council, is a staunch supporter of South Stream. But after Zares, Pahor’s junior coalition partner, demanded that Lahovnik chair the council in his ministerial office, Pahor backed down.
Dimovski was not present at talks with Miller. Observers say this may be a sign that Lahovnik has warmed up to the Nabucco option, an EU-sponsored pipeline that is supposed to bring gas from Central Asia to Western Europe via Turkey, circumventing Russia but following more or less the same route as South Stream after hitting the Balkans.
Slovenia could connect to the Nabucco pipeline that is planned to cross Hungary on its way to the Baumgarten gas hub in Austria, supplying several EU countries. Energy experts state that this would reduce the country’s dependency on Russia’s gas, while proceeding with the South Stream option would certainly increase it. To tap the huge LNG terminals on the Croatian island of Krk that are due to come on line after a few years would also be a step in the direction of an ideally diversified gas supply.
The energy business, however, deals with hard money rather than ideals. While you may not have noticed it, next winter is literally around the corner, global warming notwithstanding.