The EU foreign gas policy of transit corridors: autopsy of the stillborn Nabucco project

Abstract

AbstractIn this paper, we criticise the departure of the European Union (EU) from its traditional Soft Power vein in foreign energy policy, implying a strategy of gas corridors for import diversification in an intense political competition with Russia. We analyse intrinsic limitations of the EU initiative of promotion of Nabucco pipeline as a merchant line along three different economic perspectives. Firstly, the competition theory perspective which shows the possibility for Russia to challenge this project by a competing project (South Stream) because it could preempt access to Caspian resources. Secondly, the ‘transaction cost economics’ perspective which shows why long‐term commitments between producers and midstream buyers are necessary to jointly develop transport or transit infrastructures and new remote gas fields. Thirdly, the coalition theory perspective which sheds light on the weak cohesion of the Nabucco coalition in the competition with the South Stream coalition, which has more chance of success while it offers equivalent benefits in terms of transit risk suppression. We conclude with recommendations concerning the EU gas policy actions which are only relevant when focusing on better improved market integration, development of self‐insurances and solidarity, and diplomatic action turned towards energy markets integration.