Georgia crisis threatens EU bid for more energy sources (News Feature)

Vienna - Europe's declared goal to shift away from Russian oil and gas was always a challenge. It's even more difficult after Moscow's assault on Georgia, analysts say. Georgia's strategic role as a pipeline transit country, run by a US-backed leadership that Moscow detests, formed the backdrop to the conflict that erupted in early August. After Russian troops handed Georgian President Mikheil Saakashvili a humiliating battlefield defeat, the region's fragility and Moscow's clout are more obvious than ever. Monday's emergency EU summit on Georgia will not change that in the short term. The European Union will now be less likely to use 'volatile transit routes' that bypass Russia and tend toward 'solid and stable' energy ties with Moscow, said Ivailo Vesselinov, an economist at investment bank Dresdner Kleinwort in London. 'The signs point to the EU trying to cooperate more with Russia, rather than less,' he said. EU and US efforts to get around Russia are focussed on Nabucco, a 7.9-billion-euro (11.6-billion-dollar) pipeline slated to run Caspian gas to central and western Europe from Georgia via Turkey and Bulgaria to Austria. Nabucco's Vienna-based head office says the 3,300-kilometre project remains on track, with construction to begin in 2010 and gas to start flowing in 2013. Analysts are not so sure. 'I don't think it's dead, but it will be postponed ... because of the political uncertainties and the military intervention,' said Claudia Kemfert, an energy expert at the DIW economic think tank in Berlin. 'That's a major difficulty for the project.' A pipeline deal signed last year by Georgia, Poland, Ukraine, Azerbaijan and Lithuania to pump Caspian Sea oil to western Europe also seems more uncertain, Vesselinov said. Russia is the EU's single largest energy source, supplying 28 per cent of the bloc's oil and gas, according to the European Commission. Some ex-communist countries, like the Baltics or Slovakia, depend on Russia for all of their gas. Key nations in the old EU, notably Germany, have long worked to expand energy ties with Russia, seeking cooperation rather than confrontation. In parallel, the search for alternatives was on. The Baku-Tbilisi- Ceyhan oil pipeline, involving British Petroleum, Azerbaijan, Georgia and Turkey, was launched in the late 1990s with EU and US backing, a response to the perceived need to lessen dependence on Russia. US President George W Bush even appointed a family friend as special envoy for Eurasian energy, Brussels-based diplomat C Boyden Gray. But while analysts in Washington have tended to see the Russian invasion of Georgia as a strategic defeat for US interests, Europeans have taken a more muted view. Former German Chancellor Gerhard Schroeder, who heads the shareholder committee of a Russian-German pipeline consortium, firmly took Russia's side. 'Only dreamers can run after the notion of a western Europe independent of Russian oil and gas,' he told Der Spiegel magazine. 'Creating mutual dependence also creates mutual security.' Nord Stream, the company Schroeder is involved with, is building a pipeline under the Baltic Sea to move Russian gas to Germany. The project will raise Russia's share of Germany's gas supply from about 40 per cent to 50 per cent, Kemfert said. Moscow also is countering Nabucco with the South Stream project, designed to route Russian gas under the Black Sea to Bulgaria and Serbia, with one leg ending at the same Austrian terminal as Nabucco and the other in Italy. Nord Stream has created fissures in the EU similar to the east- west split over the Iraq war: Poland and the Baltics, always suspicious of Russian intentions, have raised environmental concerns about the undersea pipeline. Fighting in Georgia appears to have trumped those worries. 'Our German partners must stop viewing the Baltic Sea pipeline as a purely economic project. They should understand that Russia can use the gas conduit to keep Europe in check,' Poland's Rzeczpospolita daily said in an editorial. Russia's muscle-flexing may yet spur Europe's push for other energy sources, including wind and solar energy - already a European strength - and liquefied natural gas transported in tankers. 'For sure, the energy debate will start now,' Kemfert said.