How do we safeguard our gas supply?

gas pipelineIn a plot reminiscent of a James Bond film, in late December 2013 the British government announced the construction of a massive new oil pipeline across Europe.

The geopolitical narrative that underlies this development is, of course, the diminishing resources of gas in Europe, and the reliance many countries now have on Russia.  Russia holds the supplies, controls the pipelines, and to continue our Ian Fleming analogy, has the power therefore, to turn the taps on or off, controlling supply…. And therefore pricing.

The response, announced by William Hague (Britain’s Foreign Secretary) is, however, rather less shadowy and convoluted.  Essentially it’s this: if you won’t let us play with your pipeline, we’ll build our own… and bypass you.  The continent, it is felt, has been too reliant on Russia, and this new pipeline will create an alternative route and thereby stabilise energy supply.  However, it’s a rather more expensive version of playground realpolitik, as this pipeline is set to cost approaching £30 billion, and runs not through the infants’ sandpit, but from the Caspian Sea via Greece, Turkey, Bulgaria and Italy.

The so-called Shah Deniz 2 deal was announced in the Azerbaijan capital, Baku, and as BP is the major shareholder, the UK now becomes the de facto biggest investor into Azerbaijan.  And that creates its own political issues, as the political situation in this country is considered, by some, to be equally as unstable as the energy supply.  Back to our James Bond plot, where we find President lham Aliyev, whom Human Rights campaigners have accused of rigging elections, amongst other abuses of power.  One example.  In October of this year, a government phone App released the results of the Presidential elections.  Nothing wrong there, you might think, only… the election was to take place the next day.

The App predicted President lham Aliyev would enjoy a landslide victory over his opponents, notably one Jamil Hasanli.   The government responded that it was a technical glitch and that the App merely released the test data from the previous election.  The only issue there is that Jamil Hasanli wasn’t actually contesting that earlier election.  In any case, the election took place the next day.  And?  lham Aliyev won by the predicted landslide.

Of course much of this might be conjecture on the part of the Human Rights campaigners, but certainly it raises questions as to whether this is the sort of area that the UK should be investing.  Set against that is this bigger picture of Russian dominance over diminishing gas supplies.  Naturally, British officials will not admit to that central truth behind this deal, but one need only open a paper to realise what high stakes there are in the global energy market.

Energy security is now high on the agenda across Europe.  The competition that this pipeline represents, and the role of BP and other UK companies in loosening the grip of Russia on international gas supply, might well help secure the UK energy industry.  Bypassing Russia will provide a boost to British business, and in terms of business and domestic energy consumers, might lead to that all important consideration: lower prices.  Like James, we want our gas shaken… not stirred.

Leave a Reply