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A Floating Alternative to Nabucco Undercuts Potential Disruptions to EU Energy Supplies

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In late February 2010, Romania, Azerbaijan, and Georgia finalized an agreement on the direct export of Azerbaijani natural gas to Romania. This has profound ramifications for halting Turkey's ability to hold the EU hostage to energy supplies via Turkey, and offers far more rapid easing of European energy pressures.

The new agreement calls for transporting the Azerbaijani gas via pipelines to the SOCAR-owned Kulevi terminal on the Georgian coast of the Black Sea. From there, the liquefied gas will be shipped across the Black Sea by tankers to new terminals in the Romanian port of Constanta. From Constanta, the gas will be distributed through the Romanian pipeline system. "In five years' time, Romania will become an energy hub in its geographical region thanks to this project," predicted Tudor Serban, the Secretary of State for Romania's Ministry of Economy, Commerce, and Business Milieu.

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This agreement is aimed primarily at ameliorating Romania's near-total dependence on natural gas delivered by the pipeline from Russia via Ukraine. During the Winter of 2008-09, Romania suffered disproportionally as a result of the Ukrainian-Russian gas crisis, when Ukraine disrupted the flow of gas to Europe via Ukrainian territory in order to avoid paying its debt to Russia. Hence, it became imperative for Romania to diversify its sources of gas supplies in order not to be so vulnerable in future crises.

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Moreover, given Romania's own economic crisis, Bucharest cannot afford to purchase and stores huge reserves, and therefore any disruption in ongoing gas supplies will have an immediate impact on Romanian customers. Hence the Romanian interest in, and commitment to, all previous alternatives to the pipelines via Ukraine. Romania is an active participant in the Nabucco pipeline project despite its growing problems and diminishing viability.

As well, Romania has expressed a growing interest in the Russian South Stream pipeline, and, with the volatile Government of Bulgaria having growing problems with Russia over energy security issues, Romania is increasingly emerging as the entry point of the South Stream into the EU.

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This approach is shared by the European Union's (EU's) Office of the Commissioner of Energy. In early 2010, the EU launched quick and profound changes such as a declared willingness to support South Stream. This policy change amounts to the EU virtually abandoning Nabucco, at least until a viable southern route, via Armenia rather than Georgia, is secured and the Azerbaijan-Turkey price dispute is resolved.

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I have an interest in the financial markets, commodities and Geopolitics.

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