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from Stratfor.com
Summary
A tanker carrying 110,000 metric tons of Russian crude oil ran aground in the Gulf of Finland on Feb. 9. Though the ship’s hold was not compromised and no spill was detected, the incident will be perceived in Europe as a bad omen regarding the safety and reliability of Russian energy supplies.
Analysis
The Greek-flagged oil tanker Propontis ran aground in the Gulf of Finland about 30 miles south of the Finnish coast Feb. 9. The tanker had recently loaded Russian crude from an oil port near St. Petersburg for delivery to Western Europe. Despite two holes in the hull, the cargo compartment was not breached and no oil leaked.
Even so, the incident will serve as a lightning rod in Europe for concerns about the environmental aspects of Europe's dependence on Russian energy.
The Russian government enjoys the income from its robust energy sales to Europe, along with the political deference such European dependence generates. Though Europeans hotly deny it and the Russians certainly hotly deny they ever exercise such influence, the truth is that the European Union regularly gives the Russians more attention and less flack because Russia is Europe’s premier energy supplier, providing it with roughly one-quarter of its oil and natural gas needs.
This open secret has been complicated lately, however, as Russia has experienced problems getting its energy to Europe. In January 2006, a dispute with Ukraine temporarily reduced natural gas shipments to Europe, while this January a similar dispute with Belarus interrupted oil shipments. To reduce its dependency on such transit states, Russia has prioritized the development of what it calls the Baltic Pipeline System (BPS). This network links many of northwestern Russia’s oil pipelines into a single export hub at Primorsk on the Gulf of Finland, which is an extension of the Baltic Sea.
This effort has not met with an enthusiastic response in northern Europe. While most Europeans – particularly Western Europeans – are glad to have an energy source that is not Middle Eastern, the nations in the Baltic region are concerned about the potential for heavy ship traffic. The Gulf of Finland is not only shallow, narrow and rocky (as the Propontis abruptly discovered), but it also is normally completely frozen over in the winter. This requires the use of icebreakers to get oil out. Since the European Union is the only bloc of states to enthusiastically adopt the Kyoto Protocol, one can imagine what Europeans think about the potential environmental consequences resulting from Russia flooding the region with oil tankers.
The Russians also want to lay a pipeline under the Baltic Sea – to be called the Nord Stream – to ship natural gas directly to Germany. The pipeline would broadly parallel the route oil tankers like the Propontis sail, bypassing all those troublesome transit states. The Baltic states and Poland hate the idea since the project was designed expressly to cut them out of the loop, while Sweden quietly but forcefully has expressed opposition on environmental grounds.
Formally, Russian state energy major Gazprom has struck a deal with a German-Dutch consortium to build the line, but so far no one has offered a cent to fund it, and the Russians lack the technical expertise for underwater work. No doubt one reason for the hesitation of potential underwriters is that the Russians first claimed the project could be completed for a mere 4 billion euros (about $5.2 billion). In the past few months, that estimate has been revised upward to 12 billion euros (about $15.6 billion), a figure that is likely still far shy of the true price for what aims to be the world’s largest-ever underwater construction project. As of Feb. 8, the European Investment Bank said it would not get involved in the project because such a move would require unanimity among its stakeholders – which include all of the Baltic littoral states save Russia itself.
But though Russia’s Nord Stream plans might be sinking into the deep, exports from the BPS are not about to slow. Unlike most infrastructure projects promulgated by the Russians, the BPS network was built entirely by Russians with Russian money. And now the Russians plan to expand its capacity from the current 1.5 million barrels per day (bpd) to 2.5 million bpd over the next three years. Unlike Nord Stream, the Russians have the technology and the cash to make this vision a reality by themselves. So, despite Europe’s protests, more and more ships will be plying the Gulf of Finland – and sooner or later, one will not be as lucky as the Propontis.
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