ČR to lose transit fees with North Stream

The Nord Stream pipeline was launched Nov. 8, providing the most direct route for Russian gas into Europe but also sparking opposition from transit countries farther east that will lose out on fees and dredging up long-standing fears about Russia's influence on European gas supply.

"This project was never supported in Poland, and we are of the view that it is a very expensive project under the control of Russia and that it is very dangerous for the energy policy of the European Union and the monopolization of markets," said Tomasz Chmal, an energy expert at the Sobieskiego Institute in Poland.  

The 1,224 kilometer pipeline, which cost around $12 billion (8.8 billion euros/227 billion Kč), goes under the Baltic Sea, bypassing normal East European transit states like Poland, Belarus and Ukraine. It has a capacity of 27.5 billion cubic meters (bcm) for the first year, to be increased to a total of 55 bcm.

The pipeline is expected to play a significant role in increasing gas flows to the European Union as many nations, such as Germany, look to find a lower emissions energy source that isn't nuclear power to fill the gap before renewable resources become cost competitive.

The celebratory launch of the pipeline - which drew German Chancellor Angela Merkel and Russian President, Dmitry Medvedev, among others - is juxtaposed by the European Commission (EC), which has strongly positioned itself against Russian dominance in EU energy markets. In late September, the EC's anti-trust office carried out raids at about 20 different European branches of Russian gas companies - especially Gazprom.

Russian gas giant Gazprom has a 51 percent stake in the pipeline, alongside German utilities BASF and E.ON, which have 15.5 percent each, Dutch gas infrastructure company Nederlandse Gasunie and French GDF Suez, both of which have 9 percent.

For the Czech Republic, the launch of Nord Stream is mixed news. The Czech Republic will be the only CEE country to benefit from Nord Stream as an alternative gas supplier, as Nord Stream will be connected to the OPAL pipeline, which in turn will connect to the Gazela pipeline meant to be completed next year that will link the north Bohemian town of Hora Svaté Kateřiny to the German town of Waidhaus.

"In one sense, regarding energy security, Nord Stream increases Czech energy security by decreasing the transit dependence on Ukraine, and that will offer some flexibility," said Petr Lang, an analyst at the Prague Security Studies Institute.

"The Czech Republic is in quite a good situation because it is very close to Germany, which is the main destination for Russian gas … Russia is technically unable to cut supplies to the Czech Republic without severely reducing gas exports to Germany," Lang said.

Until now, around 80 percent of Russian gas exports to Europe flowed through Ukraine, which was at the heart of the 2009 gas crisis. That winter, Russia cut off gas flow to Ukraine because of a dispute involving Ukrainian debt to Gazprom and the price of gas. The cutoff lasted about a month, reducing supplies throughout Europe.

Transit fees

On the other hand, the Czech Republic could lose out on transit fees for Russian gas, which amount to around 5 billion Kč per year as gas would flow to Germany through the Gazela route. This is shorter than the existing route, which enters the country through Lanžhot and exits via Rozvadov.

But the Czech Republic's neighbors, including Ukraine, Poland, Slovakia and Belarus, are in a far worse position and stand to lose hundreds of millions of dollars annually in transit fees. For example, it is estimated Ukraine could lose as much as 700 million euros per year in transit fees, while Slovakia could miss out on around 174 million euros worth, according to a report in the daily Hospodářské noviny.

In addition, there are fears that by excluding those countries from the Nord Stream project, Russia will be in a better position to flex its geopolitical muscle in the region without disturbing exports of gas to valuable West European customers.

"Each monopoly behaves in the same way, and has a tendency to increase prices to get other benefits," Chmal said.

Europe is now closely watching the race between the two additional pipelines in the works: Gazprom's South Stream and the European Commission-backed Nabucco, which is meant to be filled with gas from the Caspian region.

Nabucco has been delayed for almost three years since its original projected finish date and the cost has risen significantly.

Doubt was also cast over the future of South Stream after Russian Prime Minister Vladimir Putin proposed building a liquified natural gas plant on the Black Sea that would reduce the necessity for South Stream.

"If the Russians win South Stream, that will be like another step in the direction of a monopoly," Chmal said.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com