Why does Japanese contango warn us to be more skeptical about an expected growth of European LNG market?

It is expected that liquefied natural gas (LNG) supplies will grow as a major potential energy source taking on one of basic roles in diversification of gas supplies to the EU. Let me remind you that in response to the political crisis in Ukraine and the threat of destabilizing energy supplies to the EU in May the European Commission adopted the European Energy Security Strategy. There is a number of LNG projects in this important energy policy paper listed among key security of supply infrastructure projects to be implemented in period up to 2020.

According to this strategy it is planned to build the following LNG facilities: LNG vessel in Lithuania, LNG terminal in Swinoujscie in Poland, Baltic LNG terminal with location to be decided, LNG terminal in Krk island in Croatia as well as two terminals in Greece - in Alexandroupolis and LNG floating terminal at Bay of Kavala. Along with that, the construction of the LNG terminal in Klaipeda in Lithuania is nearing completion at the end of this year but this project was not included into the Strategy covering medium term prospects.

LNG development is definitely one of the most important achievements in energy industry in the XXI century, and assimilation of these technologies is very essential.

But at the same time there are important questions.

Firstly, what are the prospects of filling our European LNG market with this source of energy to ensure all these projects are put into full capacity with an expected profitability?

Secondly, diversification involves maintaining a stable mixture of energy resources, and in our case, it is LNG and pipeline gas. Then why is it better not to rearrange further the historically achieved EC gas balance with high volumes of pipeline gas including those coming from Russia? In other words, why not reconsider the radical attempts to find at the long run a complete replacement of Russian gas supplies by LNG?

However, opponents, especially our politicians, argue that "gas pipe binds us up with a sole supplier that causes a loss of energy independence", etc. But excuse me for such a trivial argument that any pipe has two ends and gas suppliers also remain dependent upon us that means - upon our European gas distribution markets. This is not to mention more about the technologies used in gas production, where sharp fluctuations in volumes of gas field output are contraindicated. Virtually, on the one hand, there is a mutual dependence of consumers and suppliers in case of a pipeline gas, and, on the other hand, it is also a matter of common interest. After all, figuratively speaking, nobody of them is able to turn an existing pipeline in other direction.

It's another matter how to redirect LNG carriers. By different reasons all over the world, sometimes circumstances of insuperable force can alter LNG routes significantly.
So it happened, when in Japan a nuclear disaster at the Fukushima I Nuclear Power Plant on 11 March 2011 resulted in a meltdown of three of the plant's six nuclear reactors. Eventually it led to the closure of all 54 nuclear reactors in this country and the transition towards more sustainable use of LNG energy resources. As a result LNG flows were largely redirected to Asia and the nuclear disaster in Japan gave an unprecedented boost to LNG prices growth to 55%, which, in turn, made the European LNG market much less attractive.

Now let me remind you, that we are talking about the plans for the development of the LNG infrastructure in the EU countries. But at the moment even before the implementation of these plans, according to experts, the existing infrastructure of our LNG market is utilized only by 20%. It occurred primarily due to a high demand, and thus more attractive prices at Asian LNG market.
And the situation is still non reassuring. Prices of spot LNG for November delivery to Asia increased 12.4% month over month to average $14.426 per MMBtu, according to the latest Platts Japan/Korea Marker for month-ahead delivery.

The general manager of the trading department of a leading Japanese company Marubeni has been recently quoted by Reuters as saying that the Japanese LNG market continues to stay in a contango condition when prices with delayed delivery of LNG are significantly higher than prices for these energy resources on terms of immediate delivery.

Thus, we see that the Japanese contango has a real impact on competition in the global LNG market and it is not for the benefit of European consumers. Moreover an upcoming winter season most probably only will strengthen this market trend.

Therefore, it is worth repeating in the address of our esteemed politicians who are dealing with the future energy balance of Europe, analysts' estimates published in «oilprice.com» September 29 that “currently there is not enough LNG on the global markets to replace Russian imports… Any attempt to fully replace Russian gas with LNG in the short-term would force a 127 percent hike in Europe’s natural gas prices”.

Thus, favorable conditions to develop European LNG market is restrained by price competition with Asian markets of these energy resources. Along with that, now there is a competition between a pipeline gas and LNG continuing at the global gas market, in which the first traditional gas resource is not going to give up its positions. In this regard, for example, according to the Gazprom CEO Alexey Miller, LNG share on the global gas market will not surpass the 30% mark.

As known, Gazprom continues extending the gas pipeline infrastructure, fulfilling the largest to date in the world gas pipeline projects South Stream and the Power of Siberia. Besides this Russian company is performing big plans for increasing its LNG capacities. There are the Vladivostok LNG and the Baltic LNG projects in Gazprom plans, as well as the project for expanding the existing LNG plant on Sakhalin. It is expected that once these projects are launched, Gazprom’s share in the global LNG market will rise from the current 5 to 15 per cent.

This means that the EU refusal of Russian pipeline gas imports in favor of increasing LNG supplies may turn round Europe again back to Russian LNG from the Baltic or the Arctic region, where the Yamal LNG is being built as well, or from the Far East.
In this case it appears that from what we in Europe are trying to get away, that's the same what we'll come back to again!
Then what for will be such "a run in circles"?
Here is again economic feasibility suffers that will affect adversely our out-of-pocket expenses.
Meanwhile we can see that both current and future changes in the Asian part of the world energy market insufficiently is taken into consideration in the European Energy Security Strategy.

Perhaps someone with a sense of humor would joke that Far East market is too far, so this Japanese contango is just out of view of our energy strategy makers.

But if we talk seriously, inevitably the question occurs why our economic well-being, including provision of comfortable temperature for essential living conditions, depends on the policy makers, whose personal experience often has never been directly linked to energy sector and who are offering strategic solutions based on myopic expectations leaving such factors as Japanese contango behind the horizon?

Why MEPs are dissatisfied with the candidates for the new European Commission?
European Parliament conducted hearings of candidates for the new European Commission on October 6, and, according to many MEPs, this test was failed in some cases.

Of course, it is difficult to imagine in politics full or close to that consensus. And particularly, it concerns our MEPs corps, given a width of political views and different party platforms presented in European Parliament.

And yet, as if to justify, we could mention that selection process of candidates is influenced by the desire to observe some gender balance in the new composition of the European Commission.
But all these arguments are not enough, and the composition of a new team of European Commissioners, unfortunately, does not reassure us in their abilities to solve the complex problems that they have to meet in the near future.

Probably, those who listened attentively to the records of three-hour Internet TV broadcasting of Hearings for Commissioners designate on June 6, , just like to me, it seemed that Mrs. Alenka Bratusek's speech who is proposed to the position of Vice President for Energy Union, was particularly unconvincing.

One of the first questions to Mrs. Bratusek put by MEP Marek Grobarczyk from European Conservatives and Reformists Group was related to a widely known issue about where the European Union can obtain gas supplies in case of replacement of gas from Russia, if the Commission implements its intention to reduce EU dependence on Russian gas. To everybody's disappointment, the answer was very general, and too short especially with regard to possible changes in the geography of gas supplies. In answer, Mrs. Bratusek stated that, in the short term it was expected to replace Russian gas with the supplies "from Norway and from the side of Mediterranean Sea."
Such an answer, obviously, was one of the reasons for the disappointment in the audience comprised of rather informed MEPs who even urged several times Mrs. Bratusek to answer more specifically.
However, real Norwegian capabilities reveal the converse. No doubts that many of the MEPs should be aware of Norway opinions on this particular issue.

Back in June of this year, the Norwegian company Statoil announced that it would be unable to replace Russia in the European gas market. In an interview published by Reuters CEO of Statoil Helge Lund argued that the company could increase somewhat (supplies – ed.) but it could not replace Russian gas.

And over the past few months after this statement Statoil position has not changed. Moreover according to the data of 8 months of this year, there was a reduction of the Norwegian gas deliveries to the EU by 4 bcm.

In addition Statoil has made a new gas discovery in the Pingvin exploration area in the Barents Sea. According to Statoil estimates the volumes in Pingvin to be in the range of 30-120 million barrels of recoverable oil equivalent. But the discovery is currently assessed as non-commercial.
Thus, there are no real grounds for the proposal of Mrs. Bratusek regarding possibilities to displace Russian gas from EC market by the northern gas supplies from Norway.

The prospect of extending the south direction of gas supplies in particular from the Mediterranean area is meeting with a number of problems as well. But this topic definitely deserves a separate discussion, and we will come to it more than once again.

Much to everyone's dismay, there were many other incompetent answers. Assessing in overall the speech of Mrs. Bratusek at the hearing in the European Parliament, MEP Claude Turmes from the Group of the Greens/European Free Alliance argued that "the Energy Union, climate change - it requires a leadership, and we saw something completely different. There was no leadership, but just attempts of hiding behind the Articles of the EU Agreements... This is the end of progress in EU policy on energy and climate change".

As a result some days later The Parliament rejected Alenka Bratusek by 112 votes to 13, after she faced a strong criticism that she wasn’t up to the job of becoming the EU’s first-ever Vice President for Energy Union.

However in addition to reasonable concerns about our future energy well-being, which certainly our Europe and its citizens deserve to be better than now I have got a feeling that, unfortunately, our highest leaders are getting farther from a reality, carried away by political ambitions and globalist policies.

Now we have to focus on the question for who is it necessary to set up on the starting line of a new challenging phase of our European integration so much an inadequate team? And why should an essential level of energy security required actually for each European citizen be hold hostage because of this obvious incompetence?

Why doesn’t Europe respond to the threat of shutting down Russian gas transit declared by Ukraine?

The other day the information has appeared containing a statement of Mr. Kobolev, Chairman of the Board of "Naftogaz Ukraine". The essence of his statement is that Russia will shut off gas supplies to Europe, as it happened in the winter 2009.

Where does such a confidence come from? And what do we, Europeans really have to grasp from that message?

The basic meaning of that statement consists in the fact that Ukraine will siphon off gas from the export pipeline this winter.
It is no coincidence that we are sent back to the story of 2009.

What happened in winter 2009? And why was the gas transit through Ukraine to Europe disrupted?
At that time in the absence of a contract, Ukraine siphoned off an export gas as much as they needed, and the Russian side refused to compensate for such an illegal takeoff.

As a result of the conflict Russia shut off gas to Ukraine first since January 1, 2009 and after that since January 5 the gas supplies for European consumers were lowered. And then on January 7 the transit of Russian gas through Ukrainian territory was completely discontinued. After reaching agreements on prices and signing relevant contracts in Moscow on January 19 the supplies of gas to Ukraine and transit to Europe resumed next day. Thus, in the coldest part of winter for more than a fortnight Europe was surviving without the transit gas from Ukraine.

Meanwhile now, dear friends, there is a motion to suppress an undeniable fact that in 2009 Ukraine has neglected its transit responsibilities and their illegal actions caused shutting off the supplies of gas to Europe. In other words, in winter 2009 Ukraine focused on their own challenges of supplying gas to meet a local demand to the detriment of gas consumers in European countries.

In this context, the current statement of Mr. Kobolev should be regarded as a signal to Europe, in response to which our Europe has remained silent! But silence, as we know, means consent! That is, as it turns out, we agree that Ukraine will again siphon off the transit gas intended for Europe?!
Why?

The EU and Russia are no longer strategic partners, why?

A former Italian Foreign Minister Federica Mogherini appointed as EU’s foreign policy chief on 30 August 2014 stated publicly about it. This official statement regarding one of the important areas of international relations, obviously, will determine the foreign policy of a new team of the European Commission.

However, the question arises whether such a change is necessary for Europe? Will it be for the benefit of Europeans, and could it help reducing the risks of new shocks of the European economy, which only began to recover after the recent crisis years?

And answers here may be different. That, Gentlemen, depends on how to look at it. If we have a look from a policy making point of view, then there exists a great deal of experience in dramatic changes of inter-state relations often based on flimsy political grounds. That periodically occurs. But for business activities this kind of sharp curves in international relations are fraught with serious consequences, and in fact they should be avoided as much as possible.

Some of you are probably far from business and cannot realize fairly well both complexity and significance of this situation. Then let us imagine that you are sailing a boat and suddenly try to make a drastic turn in the direction of your movement. This maneuver creates a high risk that you will lose your balance and overturn. In the same way, similar rash acts in international relations can turn upside down even a successful and stable business that will suffer an undeserved damage.

Therefore, for many people in Europe and for me as well it is very doubtful of that the EU is losing Russia as a strategic partner and that it is a realistic statement, because we see it far otherwise both in theory and in everyday life.

As to theory, almost any university student in Europe should learn from courses of "Business Administration" or "Corporate Governance" that in business a strategic partnership means a mutually beneficial and long-term commitment between organizations. This partnership is accompanied by investment process, exchange of various assets, joint work to strengthen their market position. And all that is going on for many years.

Meanwhile in practice, we are witnessing now a serious undermining of strategic business relationships, imposing of economic sanctions as a tool of political pressure that, I would like to emphasize, creates significant problems for business partners.

In this case, we are talking about our European Union and Russia. Currently, our politicians' activities, especially in Brussels, cause a great concern and displeasure in European business circles. It happens because European business for its part sees no reasons to freeze its long-term partnerships in Russia. And the more so as European business dealing with Russia is against such rash political acts and sanctions that endanger to turn "upside down" many strategic projects that have been developed with mutual benefit for many years.

An outstanding example is the position of the Association of European Businesses (AEB), which brings together hundreds of European companies working with and in Russia. There are many well-known international energy companies among AEB members, including Dutch companies Gasunie and Shell E & P, French GDF SUEZ, German companies Wintershall and E.ON, Italian companies Eni and Enel and others In September the AEB sent official letters to all 28 Heads of States and Governments of the EU, as well as of Russia and Ukraine with request to protect foreign investors from both sides from any further restrictive measures.

It is stated in the letter in particular that there are members in AEB with businesses in sectors, which would be directly affected by these measures. Further on the letter read as follows “the introduction of such measures could lead to a serious decline in production volume and the number of workplaces, affecting not only the manufacturers themselves, but also suppliers and retailers working in these sectors. All this would harm not only the business of the companies concerned, but also fiscal revenues through the loss of tax and duty payments. The AEB strongly requests EU and Russian authorities to protect foreign investors from both sides from any further retaliatory measures”.

In other words, to protect against those forces that are stubbornly trying to cause troubles between the European Union and Russia and to undermine mutual economic relations, which was built for the last decades. Therefore, it is a matter of urgency to realise the importance of this situation and as a result to demonstrate on the contrary a political goodwill by supporting strategic partnerships of European Businesses in Russia.

Now you can see that currently such pressure on international business partnerships are rather illustrative of the energy sector, where the EU and Russia have reached significant results. Due to a high share of Russian gas in the total EU consumption as it was mentioned in previous articles Russia holds the first place among gas suppliers, although only slightly ahead of Norway. In Brussels, it is commonly known, this fact is indicated as something containing a threat to our energy security. However, it is beyond our doubts that in previous decades the imports of energy products from Russia went up entirely under conditions of mutual economic interests. That was correct for energy prices too.
For example, the official report on statistical analysis of EU trade in energy products, with focus on trade with Russia says the unit values for Russian imports of the two most important products - crude oil and natural gas in gaseous state - were of a similar size to those for the EU’s other trade partners in these products.

It's interesting to note that the relative importance of the EU in Russian exports of energy products decreased over the period 2005 - 2012, the same report points out. This means that Russia is also diversifying the geography of export deliveries of energy products, including natural gas. It reminds us how several years ago European energy companies enthusiastically discussed their participation in the project devoted to the Shtokman gas field development in the Barents Sea with subsequent deliveries to Europe. But later on Russia changed the geographical priorities in further development of production and exports of gas commencing new projects far to the east of the country.

But we see this process of gas flows relocation not only on the east. Expansion of energy supplies especially routes aimed to South and South-East Europe now provides for a real opportunity of obtaining a reliable gas flow from Russia thanks to construction of South Stream gas pipeline, which is being built to bypass a very unstable region of Ukraine.

No wonder many of us who are following the situation would like to join the call of European business for reducing a political rhetoric of Brussels politicians on cancellation of strategic partnership with Russia, which is being alleged in support of Ukraine. The ratification of the EU-Ukraine association agreement by comparison with a political impulse of reducing the strategic partnership with Russia in energy sector now looks like as an exchange of Russian gas for Ukrainian schnapps. We could hardly imagine that anybody does not understand the irrationality and the disparity of such an exchange for Europe.

I am confident that just as business consumers of gas so too owners of households in our countries do realize that if the EU energy market would be at least partially "liberated" from the so-called Russian gas dependence, a vacant place will be occupied by other energy supplies mostly imported at new prices well above the former prices.

Meanwhile, EU Trade Commissioner Karel De Gucht has recently stated once again that he would want to see oil and natural gas exports from the US to Europe included in the forthcoming transatlantic trade free trade zone and that allegedly Europe wants US oil and gas to help offset its dependence on Russian energy. And what is more the high level representative of Brussels pointed out that it should generate a pressure on Russia due to a downturn in world energy prices. But to expect a decrease in world prices as the phrase goes, indulge in wishful thinking. A prevailing majority of experts argue against anticipated downturn trends of world prices of energy in a near future.

In conclusion, I would like to quote the words of the well-known American economist Michael Porter: “The essence of strategy is choosing what not to do”.
The question remains: why to be exact does not do it?

I cannot ignore the remarkable event near Slovakia–Ukraine border. Why?

It is a Grand Opening of gas supplies from Slovakia to Ukraine.
Prime Minister of Ukraine Arseniy Yatsenyuk, Prime Minister of Slovakia Robert Fico and Director for Internal Energy Market of the European Commission Klaus-Dieter Borchardt opened the commercial Vojany-Uzhgorod pipeline in Veľké Kapušany in Slovakia that was really an important event, a very important ... for Ukraine!

It is no wonder that Prime Minister Yatsenyuk was quoted as saying that “we replaced 40% of gas, which we had previously bought in from Russian Gazprom, due to the opening of the reverse from Slovakia and opened opportunities for Ukraine to buy gas in Europe”.

The nominated volume of a reverse supply of gas from the territory of Slovakia to Ukraine amounts to 27 mcm a day, or about 10 bcm per year.

However as far as Europe is concerned, how is this event important for us? From the point of view of solidarity and other political incentives, everything is clear.
And how is it important for us in view of coming winter?

And also what does it matter in view of the dispute between Ukraine and Gazprom?
And especially, how it is important under the conditions when there is not enough gas in the Ukrainian UGS in order technically to provide transit to Europe in winter season?

But particularly interesting question is that whether our gas consumers in Europe understand what the gas reverse really means on the occasion of which this Grand Celebration was arranged?
Sometimes the reverse is called "virtual". Why?

Let's clear up in case of reverse whether the gas from Europe is transported in the direction of Ukrainian consumers physically in the literal sense of the word?
I'll start with the most important - such a reverse can exist only when there are supplies of gas from Russia to Europe. And no other way!

That is because just a part of the Russian gas after crossing the border between Ukraine and Slovakia then is rotated 180 degrees and is transported by the other pipe back to Ukraine. But upon arrival back on the territory of Ukraine, this gas is returned again into the transit pipeline directed to Slovakia. And by such a way this so-called reverse gas is pumped through a relatively small circle made with pipes and other equipment. It should be mentioned that the construction of "gas roundabout" cost 20 million Euro.

It is noteworthy for us that European and Ukrainian policy makers call now these operations of whirling gas from Russia around the boarder as "diversification of supply."
It is important that gas meters measure the volume of gas both on the way from Ukraine to Europe and on return way when it is coming back into the Ukrainian territory.

In this situation the same physically gas can be taken into metering records of volumes of reverse and transit gas many times. But this gas only is circulating around the ring of pipelines and is not sent back to consumers in Ukraine, for whom it is allegedly intended. In fact, the reverse gas is impossible to transport technically in eastern direction further back to Ukraine, because there is no any gas transmittal pipeline in Ukraine running in this direction opposite from Europe. There is only a transit long distance transmittal pipeline delivering gas in one direction - to the west!

You would ask how in this case the reverse gas is reaching consumers in Ukraine? It's very easy to explain since it is no means the same reverse gas. As a matter of fact instead of it another gas is taken out of the volume of TRANSIT GAS (!) in any place in Ukraine convenient to meet local needs.
Thus, the "virtual reverse" in fact turns into legalized SIPHONING OFF transit gas intended for European consumers.

This scheme reminds us how we transfer cash over long distances, for example, using Western Union services. Then it looks like as we put cash in one "pocket" of this company in order to get them back somewhere far away out of "another pocket." We mostly trust such a virtual cash transfer service as reliable but nobody expects to get back remitting cash out of "another pocket" more than a send amount.

In contrast with financial services, the virtual reverse gas scheme in Ukraine causes a great concern. Properly speaking, this is exactly what today all of us are afraid of. Moreover, before now we felt ourselves the same, and there are certain reasons for it. Why?

The point is that at present there are all prerequisites that the dispute between Ukraine and Russian Gazprom will not be solved in the near future. In this case, on the one hand, Gazprom will not resume gas supplies to Ukraine. On the other hand, Ukrainian UGS are not filled with gas at a volume that is necessary for simultaneous support of both domestic consumption, and transit to Europe.
It means that in December Ukraine will proceed siphoning off the transit gas for its own needs deeper and deeper getting into a "virtual pocket" of the transit gas. In previous times it was illegal and was regarded as theft. Now the European Union has legalized this scheme and officially inaugurated a reverse gas supplies from Slovakia!
Of course, the first thought is that we could stop the reverse. Only the question arises whether is it possible?
Let's see what do we know about the contracts?
It was stated by the Slovak company Eustream that "according to Open Season procedure (binding of volume commitments for interstate transportation service of the reverse to Ukraine - Ed.) several European firms have provided binding bids for pumping gas through the pipe ...". However company Eustream refused to name these firms referring to a confidentiality of commercial transactions and only stated that their approximate number was from 5 to 10.
In other words supposedly they did not know anything …

It causes a big concern and a keen disappointment with that at present time, trying to please our Atlantic allies, we are deleting previous great efforts of our European business to establish long term relations with Russian companies, put off indefinitely conclusion of many prospective contracts, impeached the existing contracts in the energy sector, and in addition, as a backward result, created serious problems for our agriculture.

And how much would it cost us to make one more effort in this direction of shutting down relations and to opt out of energy supplies at all?
Why not?

PS. As an epilogue, when this article had been already completed, it was reported that the volume of daily gas supplies from Russia to Europe reduced. Information from different sources is very controversial. Some sources have reported about a decline in gas supplies, and others said that everything is fine. But it is important that just those companies and countries which are dealing with the reverse gas to Ukraine have stated about gas supplies reductions.
I have ventured to suggest that this problem, as mentioned above, is the result of the "legitimate" gas offtake from transit pipeline in Ukraine for their own needs in the volume exceeding the amount of reverse gas circulating at the border.

Fitch: Europe can’t reduce its dependence on Russian gas. Why? 

Despite frequent statements by European politicians regarding the need of reducing dependence on Russian gas, the chances to do it are few, says Fitch Ratings report "How to live without Russian gas." Gas consumption in the EU will increase and there is no substitute for Russian gas, taking into consideration weak prospects for shale gas production, lack of facilities available to import LNG and the absence of significant non-Russian pipeline projects in Europe.

We could theoretically lower our dependence on Russian gas, reducing consumption, but Fitch's analysis shows that in the long term demand for gas in the EU will only increase - an average of 1.3% per year over the next 15 years. In 2013, the European demand for gas was 530 billion cubic meters and Russia has supplied 145 billion, 27% of this volume.

Gas could be replaced by oil, coal or nuclear power, but all of these alternatives involve "economic, political or environmental costs." In addition, Russia is not only significant supplier of natural gas, but also oil, coal and nuclear fuel. In the past year, Russia has covered 36% of the needs of European nuclear power plants in enriched uranium, and Bulgaria, Czech Republic, Slovakia and Hungary depend on Russian nuclear fuel supplies by 100%. Renewable energy projects are very expensive and without significant government subsidies cannot compete with conventional energy resources, said Fitch.

In the long term, Russia will remain the dominant supplier of gas to Europe, as alternative sources are insufficient, the report said. Conventional gas production in Europe has been steadily declining, and "shale revolution" like in the US is not possible in Europe. Shale gas can only make up the reduction of conventional gas production. Concerning the technology of hydraulic fracturing, overruns of water, use of chemicals,  risk of seismic activity as a result of drilling have led to "social restraint, or even resistance" towards the prospects of shale gas production in Europe, says Fitch report. As for high expectations for LNG imports, the growth of global liquefaction capacity, according to Fitch, will not be enough to compete with Russian gas in Europe.

A similar view on the future of European gas security shares International Energy Agency (IEA). "In the short term, Europe has very few opportunities for diversification of gas supply. In the foreseeable future Russia will be a vital need for Europeans ", - said the director of the IEA Maria van der Hoeven at the energy conference in Norway. Quick change of energy supplier is unlikely for several reasons.

Firstly, the gas consumption in Europe is growing steadily and domestic production is decreasing. According to 2013 IEA report, the annual gas import to the EU will rise by a third and will be 450 billion cubic meters by 2035. "Diversification takes time, - said Maria van der Hoeven. - It is necessary to invest in infrastructure and improve relations with potential suppliers".

The IEA report also predicts that LNG export from the US will be about 50 billion cubic meters by 2035. Therefore, US supplies cannot fully meet European market demand. "Billions of cubic meters of LNG won’t solve the issue as European gas production falls to similar volumes," - stated Maria van der Hoeven. She also noted that now the center of gas consumption is shifting to Asia where gas prices are higher, and Brussels should not count on the entire volume of American LNG export.

Thus, we have to pursue very smart and balanced energy policy with sustaining strong relationships with current suppliers and developing new opportunities to secure energy supplies for the future.

Why Brussels and Washington boost pressures on Bulgaria to halt construction of the pipeline South Stream attempting to create near Ukraine another Bulgarian bastion against energy supplies to a number of countries in South and South East Europe?

And this "why" is a particularly acute issue amid the civil war- struck "Ukrainian Energy bastion", which threatens not only to default of Europe's energy security, but also causes a significant profits loss for national economy of several countries in South and South East Europe.
Maybe there is no more need to remind you that Ukraine is standing in the midst of events extremely aggravating the problems of European energy security. However, regardless of the public opinion of Europe's majority with the political support from Brussels and our Atlantic allies there was a change of political administration in Ukraine, which recently resulted in erection of like-kind the "Ukrainian energy bastion" in this country. Its goal is a gas-blackmail by threatening to block the channels of Russian gas supplies to Europe that have been properly functioning for many decades.

It stands to mention about the negotiations between the Ukrainian authorities and potential western investors, which, according to the law adopted by the Verkhovna Rada, can join a newly created company - a gas transport operator to be established for managing the Ukrainian gas transportation system. There is American company Chevron among these potential investors, so you can expect to see the star-spangled American banner above the "Ukrainian gas bastion" soon.

What is the Europe's reaction on obtaining control over the transit of Russian gas by an American company? Most of all, obviously, it should raise discontent of Europeans… But in Brussels politicians are still telling us about a monopoly position of Russian gas supplies to Europe and apparently underestimate the consequences of the Ukrainian crisis.

The Ukrainian crisis has provoked an interchange of European economic sanctions against Russia and the Russian counter sanctions. Many European companies has already suffered from these responses of Russia.
Furthermore any of us has to think hard finding out that in Ukraine the law on sanctions also was adopted providing Kiev for a possibility to stop transit of Russian gas to Europe. A great deal of people do not believe that Ukraine will apply anti-gas sanctions in practice. But taking into account the current political situation in Ukraine we cannot exclude any even the most unexpected and inappropriate actions. After all, if the current Ukrainian government unleashed an internecine civil war to assassinate their own people, it is unlikely possible to hope they will take care of people in other countries.

There is a high probability of upcoming severe scenarios of deterioration in Ukraine and expanding scales of heavy consequences too, which are unlikely anyone can adequately anticipate or much less take an effective control over them. Moreover, even if gas transit via Ukraine is not blocked all the same nobody gives assurances of preventing an illegal uptake of Russian gas intended for Europe in winter season.
It seems to be like a natural disaster with almost unpredictable scenario, like the one that is brewing in Iceland, where about thousand recorded recently episodes of earthquake denotes that an eruption is maturing in depths of Bardarbunga volcano. The principal point is the same - if it can happen, how to limit the effects.

There is a discussion about paradox of the Ukrainian crisis, which, on the one hand, overflows with horror of huge economic and human losses, but on the other, although it sounds cynical, the crisis could also result in a beneficial effect. It means that the crisis in Ukraine gives an important signal to our politicians about the threats related with the "Ukrainian gas bastion", is not it? In fact this signal would have to convince our politicians that at least in the current decade, while a real alternative to Russian gas is still absent, it is necessary to use the opportunity to diversify gas supply routes through the construction of the gas pipeline South Stream bypassing half-demolished and soon sinking into a bitter cold Ukraine.

However, our hopes of even such a partly positive outcome are not really justified. There is nothing that can encourage our optimism, since actually we see that a real direction of policy makers in Brussels and Washington has almost nothing to do with our expectations of rational choice, the choice in favor of Europeans! On the contrary, there is an urge over there to use along all possible excuses to prevent the implementation of the South Stream project, despite the fact that its construction was agreed on the level of bilateral intergovernmental agreements a long time ago in 2008.

Bulgaria happens to be in the center of the Brussels-Moscow confrontation over Ukraine. Representatives of the European Commission and even rare visitors - US Senators have repeatedly visited Bulgaria to make Bulgarian government freeze construction of the South Stream gas pipeline, thereby creating another "Bulgarian energy bastion" in the way of gas supplies from Russia.

It's disappointing to see that political pressure from outside is put upon the country - one of equal members of our overall economically powerful European Union, but which, meanwhile, is still very much inferior to other member states in economic development. According to Eurostat figures published in July the level of GDP per capita in Bulgaria is 45% below the average at 28 countries of the EU, while, for example, in Austria it is by 29% higher than the average. And in terms of actual individual consumption per capita in 2013, Bulgaria was in last place behind all 28 EU states.

Appealing to common sense there should be a double larger economic aid for Bulgaria instead of attempts to push this country under even more difficult economic situation.
Besides other countries where alongside with Bulgaria the South Stream gas pipeline is to be laid are not distinct from Bulgaria in economic development and also remain at the level below the average with the exception of Austria and Italy.

Let's imagine for a moment how much all of these countries are interested in gas supplies and new gas infrastructure development and how they worry and with what concern and sympathy they look at political disputes in Bulgaria against the construction of the South Stream pipeline, triggered by the efforts of politicians from Brussels and Washington. It turns out that Bulgaria and all these countries happen to be on the edge of losses of these future economic and social benefits. Initially Brussels dictates their terms to South and South East countries, but there is nothing adequate offered by Brussels politicians to them as a reasonable reimbursement. I doubt that it is a surprise for European business especially working in agricultural sector because they have already tried to get reimbursements to cover the consequences resulted from Russian counter-sanctions.

In the long term, without importing Russian gas ultimately some European countries will have either to start production of shale gas, or to buy LNG or pipe gas from other sources at higher prices. And the coming months unfortunately rather many Europeans may spend in uncomfortable cold homes and offices under the conditions of tightening electricity savings.

Of course not the whole Europe will freeze. Most of the EU will continue getting electricity, gas and heat. These problems will affect the population in South and South East Europe, by other words in countries beyond the "Bulgarian gas bastion", including countries outside the EU. The situation might turn up a real disaster for the region located "beyond the bastion".
The current Ukrainian route provides 60-70% of the needs of the South and South-Eastern region of Europe in gas. In 2013 the EU obtained 69 bcm of gas via Ukraine, including Bulgaria - 2.5 bcm. Turkey imported 13 bcm, Serbia and other Balkan countries outside the EU - about 2 bcm of gas, Moldova together with the Transnistria - about 2 bcm.

Russia covers via the Ukrainian route 84% of Bulgaria's requirements in gas, 34% of Turkey and 100% of Serbia and Moldova. Slovakia and Slovenia is 100% dependent on Russian gas transit via Ukraine. Austria, Greece, Czech Republic and Croatia - on 50%, Italy - on more than 40%.

As you can see, Bulgaria is one of the most dependent on Ukrainian transit countries in the EU and currently consumes 3.4 million cubic meters per day. In case of deteriorating of the situation caused by transit shutdown Bulgaria would be forced to start a gas withdrawal from the only one in the country UGSF "Chiren". But it is filled with gas only by 75%, and these stocks are not enough for the whole winter season. It would be also difficult to ensure the gas supplies to Greece. Therefore, Bulgaria, Turkey and Greece could face with the most severe gas shortages even before Christmas.
It doesn't take too much time to see what will happen.

Feeling better when see that so many people in so many European countries look forward to the results of the negotiations of the European Union, Russia and Ukraine to be commenced again for searching a way out of these "gas bastions." Then why not?