Ask Not What Lithuania can do for You…

Uncle Volodya says, “None are so empty as those who are full of themselves.”

But you can’t make people listen. They have to come round in their own time, wondering what happened and why the world blew up around them.

Ray Bradbury; Fahrenheit 451

Hey, remember that annoying nineties phrase, “Don’t go there”? It meant, don’t even talk about it, thereby implying that the subject introduced – or some association with it – is so fraught with social unacceptability as to be unmentionable.

Well, Petras Auštrevičius  just went there.

Let’s back up for a second; addressing the European Parliament, Auštrevičius summarized the goals of the energy union: to wit,

“The Energy Union was launched by the European Commission with the intention of developing consolidated action that would provide benefits to everyone involved: secure energy for consumers at affordable prices, competitive market opportunities for suppliers and strengthened solidarity and trust between EU member states.”

Remember that; you’ll see why,  in a minute.

Auštrevičius then goes on to bad-mouth Russia and the Nord Stream pipeline in the fashion we have become accustomed to seeing from stuffed-shirt EuroBullshitters, including the favourite canard that Russia constantly uses energy as a political weapon. To hear him tell it, Nord Stream II will ruin the entire Energy Union concept, if Europe is so foolish as to not take stopping it in its tracks seriously.

And just about here, the wheels fell off Auštrevičius’s truthwagon.

“The EU is heavily dependent on imported natural gas. And while Russia’s share has decreased rather dramatically over recent years it still remains very high: Russia supplies 39 per cent, Norway 30 per cent and Algeria and Qatar far less. Twelve EU member states rely primarily on one source, with Russia supplying between 75-100 per cent of their supplies. “

Has Russia’s share decreased rather dramatically over recent years? As usual, the devil is in the details. You could probably pick a moment last year when imports were down – say, the first quarter. What’d the picture look like at the end of the year?

“In the first 9 months of the year, imports from Russia were at the same level as for the comparable period of 2014 but the distribution of volumes throughout this period was markedly different: year-on-year, imports decreased by 22% in the first quarter, followed by 8% growth in the second quarter and 18% growth in the third quarter. The share of Russia from total extra-EU imports were 41% in the third quarter. This is lower than in the previous quarter (45%) but Russia remained the EU’s top supplier.”

Petras, you Lithuanian liar, you. You’re talking about eliminating your dependency on your main supplier. Do you know what those words mean? While we’re talking about shit you don’t understand, how about the fact that LNG imports decreased 7% year-on-year from 2014. But here’s Petras, shilling for Lithuania’s shiny new LNG terminal. According to Lithuania’s assessment, the fall in the price of Russian gas (in Lithuania) over 2014 was the result of Russian confusion over the introduction to Lithuania of Norwegian LNG – realizing it could no longer exercise political control over Lithuania, the dirty Russians backed down. It had nothing to do with a deliberate economic campaign, originating in Washington, to knock the bottom out of energy prices in an attempt to crash the Russian economy.

But then, the moment came when Petras tested the waters with his big toe.

“We cannot isolate economics from politics and price should not be the single decisive factor in this case.”

In case the impact of that statement did not quite reach you, let me translate: “Europeans should be prepared to pay more for their gas, in some cases a great deal more, to serve the cause of reducing our dependence on Russian gas.”

That was the breathless shortcut to the point. Now, let’s back up again and take a more measured look at it. It is critically important that Europeans fully realize what they are being asked to sign on for – the exchange of a stable supply of pipeline natural gas from a reliable supplier, for a costly supply of LNG which arrives by ship, combined with a maybe pipeline someday from Azerbaijan, whose leader was assessed as 2012’s most corrupt person in the world. As usual, the method upon which the much-desired switch depends is that Europeans swallow staggering amouts of bullshit from their elected and appointed representatives.

Just as a matter of curiosity, does nobody in Europe mind this? Is it just accepted now that deliberately telling the people you’re supposed to be working for something which you know very well – or should know – is a lie is really not all that big a deal? If so, I’m saddened to learn that. So late, I mean. I spent a considerable amount of time in Europe when I was younger, and I can remember a few girls I was tempted to tell I was an Italian fighter pilot, or a film producer or the Vice-President of General Motors. But I didn’t, because none of those were true, and it seemed unethical to gain advantage by lying. But now it seems de rigeuer,  just politics. Remarkable.

“It has been estimated that Europe’s gas deficiencies can be largely covered by the import of Liquid Natural Gas (LNG) from Australia and the United States and even Algeria, alongside investment in domestic or biogas production.”

Estimated by who? Your barber? That nice-looking brunette at the liquor-store checkout? Reporting which tries to push you toward a certain viewpoint uses the passive voice so frequently that there ought to be a law against using it. Ever run across a guy named Andrew Neff? Here’s his bio:

Principal Analyst, Petroleum Sector Risk Group, IHS Energy Insight

Mr. Andrew Neff serves as a Principal Analyst with the IHS Petroleum Sector Risk team, with a regional focus on Russia, Caspian and Eurasia.

He also coordinates team coverage of government policy and strategy assessments for the National Oil Company Service (NOCS). He has provided analysis and insight on government energy policy, company strategy, and investment risk for more than 15 years. Prior to joining IHS, he worked as an international energy analyst for a contractor to the Energy Information Administration, the statistical division of the U.S. Department of Energy. Mr. Neff’s degrees include a Bachelor of Arts in Communications from the College of Wooster, Wooster, Ohio, U.S., and a Master of Arts in International Affairs and Environmental Policy from the Elliott School of International Affairs, George Washington University, Washington, D.C., U.S.

Here’s what Mr. Neff – an energy-policy analyst for more than 15 years and former international analyst for the Energy Information Administration – had to say about Europe’s energy picture, back in 2014.

 “The EU’s reliance on Russia to meet approximately 30 percent of its total gas demand means that there is no realistic alternative to European dependence on Russian energy supplies…The desire to diversify suppliers and reduce dependence on Russia in order to bolster energy supply security has prompted European policymakers to suggest a hodgepodge of potential policy options…The pursuit of any one of these policies in isolation would have little effect on Europe’s reliance on Russian gas. But even in combination, there is no guarantee of success.”

Fairness bids me give equal opportunity to a dissenting opinion from the Beacon Of Freedom And Democracy.  Amos Hochstein insists the Southern Gas Corridor, which would carry Azeri gas from the Shah Deniz field, would be “far more efficient and more cost-effective”.  It is not difficult to see how he arrived at that estimate:

Amos J Hochstein currently serves as the Special Envoy and Coordinator for International Energy Affairs leading the Bureau of Energy Resources (ENR) at the U.S. Department of State. He oversees U.S. foreign policy engagement in the critical intersection of energy and national security. In this role, he advises the Secretary on global energy security and diplomacy, as well as promotes U.S. interests to ensure energy resources are used to increase economic opportunity, stability and prosperity around the world.

There would be a great deal less economic opportunity in Europe for US energy interests if Nord Stream II is built. However, a group of NGO’s led by Bankwatch poured cold water on Hochstein’s prognostication, arguing, “The Southern Gas Corridor is actually a corridor of abuses leading from the Caspian into Europe. From arbitrary arrests in Azerbaijan, to expected militarisation in Turkey along the route similar to what we have seen with the Baku-Tblisi-Ceyhan pipeline, to authorities ignoring court rulings in Italy just to push for the pipeline. This is no way for Europe to ensure its energy independence, it’s just switching our dependency from one authoritarian ruler to another.”

Bankwatch and its partners argued that greater energy efficiency and reduced usage was the way to go, relying as usual on the profoundly stupid assessment that European gas consumption is dropping and Europe is just going to end up with a dirty great surplus it doesn’t need.

“According to European Commission scenarios, natural gas imports to Europe are expected to decrease by 2050 under all scenarios included in the EU 2050 energy roadmap. This means that the infrastructure surplus will just widen over the next decades, potentially meaning that a costly mega-structure such as the Southern Gas Corridor will turn into a liability.”

I’d like to get in on the EU scenario-preparation business; it must be good money, except it keeps coming up with conclusions that are more grounded in blowing sunshine up your ass than in reality. While Europe has made some reductions in its gas consumption, domestic production is dropping much faster. There is just no way you can merge those two realities and come up with an answer that says European imports are lessening. They are not.

There was, though, an interesting fact in that article – I wonder how many perople spotted it.

Estimated to cost $ 45 billion, the Southern Gas Corridor is a chain of projects meant to bring gas to Europe from the Shah Deniz offshore gas field in Azerbaijan, owned by British Petroleum, Russia’s Lukoil and Azerbaijan’s SOCAR. The corridor would pass through Georgia, Turkey, Greece, Albania and Italy to other EU markets, and consists of the South Caucasus Pipeline extension, Trans-Anatolian Pipeline (TANAP), Trans-Adriatic Pipeline (TAP) and other branch lines. Turkmen gas may become a part of the equation at a later stage.

The Southern Gas Corridor is set to be backed with public money via the Connecting Europe Facility, potentially the European Investment Bank (EIB) and the Project Bonds Initiative, and indirectly via a loan by the European Bank for Reconstruction and Development (EBRD) to Lukoil for the second phase of developments at Shah Deniz, a loan set to be approved in early 2015.

Nord Stream II’s construction costs would be borne by the consortium and its investors. The Southern Gas Corridor would be financed with public money, and it’s a whopping $45 Billion.  All to get 16 BCm of gas from Azerbaijan, which is not in anyone’s wildest dreams enough to replace Russian gas imports – in the first two quarters of 2015 Europe imported 129 BCm of gas, and Russia supplied 41% of that. What do you say, Europeans? Got $45 Billion lying around, collecting dust? Don’t forget how many gazillions Ukraine is begging for in ‘loans’, ha, ha. You had better think about holding a continental bake sale, the first nice weekend.

That kind of leads us back to Petras Auštrevičius and his Amazing Lithuanian Logic. A signature goal of the EU’s  Energy Union is secure energy for consumers at affordable prices, but price should not be the only objective. What price freedom? Wouldn’t it make more sense to diversify away from Putin’s authoritarian gas pump in favour of inadequate supplies from that nice Mr Aliev, and then try to make up the difference with shipments of LNG across a huge ocean from the USA and Australia, for about double what pipeline gas costs?

Maybe it makes sense in Lithuania. Which is, just coincidentally, trying to reinvent itself as a regional gas hub for the Baltics. So far, it doesn’t seem to be going that well. That shiny new LNG terminal is, in fact, leased from Hoegh, a Norwegian company, and receives Norwegian gas. But Latvia has shown no interest in importing Lithuanian gas, and Estonia is pursuing its own project with Finland. For its part, Gazprom is planning a new LNG terminal at Kaliningrad, which would eliminate transit through Lithuania. Establishment of an integrated Baltic energy market arranged around a Lithuanian hub has thus far been a fizzle, leaving Lithuania holding the bag for a leased LNG terminal which will not be renewed if it is not profitable. Which, to date, it is not. That all adds up to time for the European Commission to take a hand and start making some decisions which will have serious consequences down the line. Especially terrifying given that the European Commission apparently does not include anyone who can add or subtract.

Your move, Europe. Don’t blow it.