How a Pyrenees pipeline could weaken Putin’s grip on European energy

LISBON, Portugal — As Russia’s conflict with the West risks solidifying into a long-term standoff, a meeting this week in Madrid could play a key role in blunting one of the Kremlin’s most potent weapons.

Leaders of Spain, France and Portugal struck an accord in the Spanish capital on Wednesday to build new pipelines and power cables, ending bottlenecks that have cut off the Iberian Peninsula from core European energy markets.

Those new connections could slash Europe’s reliance on Russian energy imports — by carrying electricity generated at Spain and Portugal’s extensive wind farms and solar plants to the rest of Europe, as well as pumping gas from eight liquefied natural gas (LNG) terminals installed in Iberian seaports.

“This meeting in Madrid could be historic,” Portugal's Energy Minister Jorge Moreira da Silva said ahead of the deal.

“We have a huge capacity but only a very narrow pipeline. If we could broaden that, we could get our gas onto European markets,” he told reporters. “We can find solutions on the Atlantic seaboard so Europe can diversify geographically and not have all its entry points for gas in the east.”

European Commission President Jean-Claude Juncker said Wednesday: "We have agreed today on the first concrete deliverables of the European Energy Union. … We have paved way for new investments and better energy interconnections strengthening the links between France, Portugal and Spain."

Opening up the Iberian Peninsula, where Spain, Portugal, Andorra and Britain’s Gibraltar lie, is part of an ambitious blueprint to overhaul the European Union’s energy policy that was unveiled last week at EU headquarters in Brussels.

The planned European Energy Union is not just about Russia.

The EU’s head office believes overcoming snags to the free flow of energy across borders within the 28-nation bloc could slice 40 billion euros ($45 billion) a year from energy bills. That could give a much-needed boost to European industry, whose US competitors pay 30 percent less for their power.

By improving efficiency, cutting waste and promoting a more coherent approach to renewable energy, the EU says the plan will also fight climate change, helping the bloc meet its target of reducing greenhouse gas emissions 40 percent by 2030.

EU Energy Commissioner Maros Sefcovic claims his proposals represent the “most ambitious European energy project” since the EU’s foundations were laid in the early 1950s.

Why now?

Officials in Brussels have long dreamed about ending the fragmentation of Europe’s energy market. But previous attempts have been thwarted by divergent national interests. France, for example, for years sought to protect domestic power companies by delaying the construction of connections across the Pyrenees Mountains to Spain.

Now fear over Europe’s reliance on Russian oil and gas has given renewed impetus to the energy union ambitions.

Despite ongoing attempts to diversify sources, the EU stills gets about 30 percent of its natural gas from Russia. Around half of that comes via Ukraine. Some EU members like Bulgaria, Finland and Latvia get all their gas from Russia.

The Kremlin’s latest threat to cut off supplies through Ukraine prompted emergency talks among Russian, Ukrainian and EU officials on Monday, although the dangers of Moscow turning off the tap have lessened over the past year of crisis in Ukraine.

European nations have built up stocks and found alternative supplies — helped by falling global prices.

Pipeline connections have been improved by “reverse flow” arrangements that mean gas can be pumped from west to east. Some allow EU countries to supply Ukraine.

Lithuania — which had been 100 percent dependent on Russia — opened an LNG plant in January and ships in gas from Norway. Last week, it signed a deal to buy gas from the United States, which is expected to start LNG exports this year.

The impending end of winter will also lessen the immediate impact of any drop in Russian supply.

Nevertheless, the EU is anxious to improve longer-term resilience to pressure from Moscow. Its plan speaks of “reframing the energy relationship with Russia.”

It includes proposals on pipeline projects to bring gas from Central Asia and the Caucasus, building new LNG hubs in northern and southern Europe, and speeding up the development of domestic energy sources, as well as further upgrading internal pipeline networks within Europe to ensure gas can get to where it’s needed.

Solidarity ain't easy

A green light this week for a new pipeline through the Pyrenees would be a significant step forward. Spanish officials say they could use it to substitute 10 percent of gas currently pumped from Russia.

French President Francois Hollande, Spanish Prime Minister Mariano Rajoy and Portuguese PM Pedro Passos Coelho will be joined by the European Commission’s President Jean-Claude Juncker to discuss funding for the new gas and electricity connections.

Another key energy union proposal urges EU members to consult with the bloc’s headquarters when negotiating fuel import deals. The aim is to have the EU “speak with one voice” and counter the Russian practice of offering favorable terms to individual countries to undermine unity. 

Despite the positive buzz from Brussels, however, the energy union faces resistance.

It’s unclear how far governments will be prepared to go in removing protection of domestic power companies, granting EU headquarters veto rights over energy import deals or coughing up billions for investment in new energy infrastructure.

In Britain, which is holding elections in May, politicians have denounced the energy union as a power grab by the EU bureaucracy. There are complaints in Germany against letting European officials sit in on confidential negotiations that have previously secured Russian gas bargains.

Russia is working to exploit such doubts, using contacts with more friendly governments within the EU.

Hungary’s Prime Minister Viktor Orban said he was expecting “an escalating conflict” with the EU over the energy union proposals after he struck a favorable gas import deal with Russian leader Vladimir Putin last month.

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Shortly after Greek Prime Minister Alexis Tsipras was elected in January, Putin was on the phone to discus making Greece a hub on a new pipeline project transporting Russian gas via Turkey.

Such moves will test the EU’s ability to put the energy union plan into practice.

“There has been a lack of political cohesion and solidarity, with all these bilateral energy deals. Has the world really changed? Realists will say ‘no,’” says Annika Hedberg, energy expert at the European Policy Center, a Brussels think tank.

“Yet the idealist in me says we’ve gone so far, we’ve seen how bad the situation has become. The situation is worse than we’ve ever had with Russia, when Russia shows itself to be an unreliable partner,” she added, speaking by phone. “The only hope that I would have is that there would be a realization in the EU that energy security is essential and the only way we can handle that is by collaboration.”