BADEN, Austria – The first thing you notice when riding on the train after landing at Vienna International Airport is the extensive facilities of Austrian oil and gas group OMV.
Even though it’s not as a large consumer of gas as Germany and Italy, Austria has a symbolic importance for Russian gas monopoly Gazprom because OMV signed the first natural gas supply contract with the former USSR in 1968.
Austria is also a staunch defender of the controversial Gazprom-led South Stream gas pipeline project in the face of opposition from the European Commission. In late June, during a visit of Russian President Vladimir Putin to Vienna, Gazprom and OMV sealed the deal to build a branch of South Stream to Austria. OMV Chief Executive Gerhard Roiss said at the time that Europe needs Russian gas. “Europe will need more Russian gas in future because European gas production is falling … I think the European Union understands this, too,” he said.
On October 21, Gazprom said the board of directors of the Russian gas giant will consider acquiring a stake in South Stream Austria, the operator of South Stream’s onshore part, on October 29. Gazprom will own the company on a parity basis with OMV. The EU responded by saying on October 23 that “the European Commission takes note but it has no further comment to make”.
Meanwhile, Russia is monitoring the situation after OMV announced a week ago that Roiss would leave at the end of June, nearly two years ahead of schedule, as part of a shake-up that will involve its gas business being merged into a downstream division.
The Austrian part of South Stream measures around 50 kilometres and its capacity is projected at up to 32 billion cubic metres of gas per year. The 63-billion-cubic metre South Stream pipeline will carry Russian gas to the EU bypassing Ukraine. Gas will be pumped to the Bulgaria’s Black Sea port of Varna before extending overland through Serbia, Hungary, and Slovenia to supply gas to the Western Europe via Italy and Austria.
In 2013, the European Commission urged to review bilateral intergovernmental agreements between Russia and EU member states to ensure that they comply with the Third Energy Package. In the case of Bulgaria, the Commission (DG MARKT) has launched an infringement procedure with regard to EU public procurement legislation.
Diplomats told me that ties between Vienna and Moscow are close despite the recent Western sanctions against Russia for its role in Ukraine. They reminded that Austria backs South Stream, adding that they hope European industry and the pipeline’s supporters will prevail over politicians in Brussels.
As the temperature dropped suddenly mid-week in Baden where I’m participating in a conference of the Moscow-based International Academy of Television and Radio (iATR), couldn’t help but think about the possibility of another gas crisis this winter although it now appears that Russia-EU-Ukraine talks may pan out. Earlier this month, a source close to Gazprom told me that a disruption of gas supplies to Austria was unlikely. “We and the Austrians understand each other,” the source quipped. Nevertheless, Austrian officials have said the country’s gas storage capacity allows it to pass this winter should Russian gas deliveries cease completely.
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Previously on Energy Insider:
Putin Pushes South Stream In Belgrade, Milan
Gazprom Neft Well-Prepared For US-EU Sanctions
US, EU Sanctions Push Iran Toward Russia, China
