The signing of the pipeline deal linking Bul-
garia’s Black Sea port of Burgas with
Alexandroupolis in northeastern Greece is
seen as a large step in placing the country
on the European energy map and a move
expected to pry open the door of new business
opportunities for the region.
The deal, which will involve pumping mostly
Russian crude to the Mediterranean, will take
Greece a step closer to transforming into an ener-
gy hub at a time of soaring petrol prices and a
growing world appetite for power.
Construction of the 280-kilometer pipeline is
scheduled to start at the end of 2008 with a com-
pletion date set for the start of 2011.
Once completed the pipeline will be able to
transport around 35 million tons of oil per year.
This amount could increase to 50 million tons at a
later stage, according to officials involved in the
project.
Politicians have repeatedly called the signing of
the deal an ‘historic occasion’ as they point to the
fact that it is Europe’s first major pipeline project
in the last 40 years. The signing of the deal
between the three countries — Greece, Russia and
Bulgaria — took 14 years to complete.
‘Greece’s position on the international energy
map... is now a fact,’ Deputy Foreign Affairs Min-
ister Evripidis Stylianidis told Greek Economy and
Markets.
‘It is evident that Greece is an equal interlocu-
tor among the international energy players and the
Greek government a trustworthy partner in the
energy sector in the region of Southeastern
Europe,’ added Stylianidis.
The pipeline had been repeatedly delayed,
mostly due to concerns about its financial viability.
However, soaring oil prices and the recent inau-
guration of the Baku-Tbilisi-Ceyhan pipeline, link-
ing the Caspian Sea with the Mediterranean,
prompted Bulgaria, Russia and Greece to speed up
the signing of the deal.
Indicative of the support behind the pipeline
are the two recent visits to Athens by Russian
President Vladimir Putin.
In September last year Putin visited Greece to
revive the long-stalled pipeline along with Greek
Prime Minister Costas Karamanlis and Bulgarian
President Georgi Parvanov. The Russian president
visited Athens again in March to attend the signing
ceremony.
The project is seen to be of strategic impor-
tance, for the first time giving Greece a role in
helping ensure the steady flow of petrol to other
European countries.
‘It is the first important step in upgrading
Greece’s geopolitical role and safeguarding securi-
ty in the region. It will also help in supplying Euro-
pean Union nations with petrol,’ Constantinos Filis,
head of the Center for Russia and Eurasia, a think
tank set up by Panteion University’s International
Relations Institute, told Greek Economy and Mar-
kets.
Experts point out that the pipeline could help
secure stability in the region of Alexandroupolis,
which lies next to the Greek-Turkish border, since
the supply of energy to Greece’s EU partners could
be interrupted in the event of any military conflict
arising between the two nations.
A Russian consortium of the energy companies
Transneft, Rosneft and Gazprom will hold a 51
percent stake in the project.
Greek and Bulgarian companies will evenly split
the remaining 49 percent.
The majority of Greece’s stake (24.5 percent)
will be held by a joint venture between state-con-
trolled Hellenic Petroleum and Thrace, belonging
to the Copelouzos group, while the remaining 1
percent will be held by the Greek government.
The project foresees oil being transported by
tanker to Burgas from Novorossiysk, Russia, and
from there the new pipeline will transport it to
Greece.
Tankers currently make the entire trip via the
Bosporus Strait but traffic along the waterway has
intensified in recent years, raising congestion con-
cerns.
Tanker accidents often endanger the environ-
ment and the safety of residential areas on the
banks of the strait.
‘This pipeline will improve the situation in the
Black Sea straits, accelerating and reducing the
cost of oil supplies. It will help not only Russia,
Greece and Bulgaria but also a number of other countries, both oil producers and consumers, to
feel more secure,’ Russian Ambassador to Greece
Andrei Vdovin told Greek Economy and Markets.
Economic impact
The government says the economic benefits are
numerous.
Apart from construction of the project demand-
ing a 1-billion-euro investment for the region,
Greece also expects to earn tens of millions of dol-
lars from government-imposed oil duties.
Deputy Development Minister Tassos Nerantzis
said the economic impact can be broken into two
stages.
‘The first one relates to the construction phase
of the program, which involves an investment in
today’s prices of 1 billion euros. Then there is the
second phase that involves the operation of the
pipeline,’ Nerantzis told Greek Economy and Mar-
kets.
‘Already there is strong business interest from
banks, energy, construction and shipping groups
with multiple economic and growth consequences
for our country,’ the deputy minister added, with-
out giving further details.
On the job front, the project is seen creating
300 permanent positions after the completion of
its construction.
Other areas that could open up to Greek busi-
nesses include transporting crude oil from Russia’s
Novorossiysk to Burgas before it is pumped down
the pipeline to Greece.
Experts point out that Russia does not have an
adequate number of tankers for this part of the
route and is likely to require the services of foreign
shipping companies to transport the petrol.
‘Given Greece’s strength in shipping, new
opportunities may open up here,’ said Filis.
Steps made in helping make world fuel supplies
more stable could also trim the price volatility of
international oil markets.
‘(The pipeline) will reduce the transit cost in
general for Russian and Kazakh crude oil coming
onto the world market. All of this will be good for
consumers, producing more choices and hopefully
reducing the upward cost pressures in the oil mar-
ket,’ US Ambassador Charles Ries pointed out at a
recent energy conference.
Apart from supplying Greece’s EU peers with
fuel, the pipeline will help provide the country with
a steady flow of petrol for its own growing needs.
Strong economic growth in the last few years
has increased Greece’s thirst for energy in a trend
that is likely to keep growing in the future.
According to figures from the International
Energy Agency (IEA), final energy consumption in
Greece reached 23.5 million tons of oil equivalent
in 2004, about 50 percent higher than levels
recorded in 1990.
Experts estimate that this growth rate indicates
that Greece will be required to double its current
energy supply within the next eight years.
Due to delays in introducing alternative energy
sources, Greece is one of the EU countries with the
highest dependency on oil imports.
Economists also draw attention to the fact that
although Greece’s economy is growing at a fast
rate there exist other economies in the region that
are showing larger economic expansion rates which
demand increasing power supplies.
Energy hub
Experts agree that the Burgas-Alexandroupolis
pipeline will help place Greece on the energy map
but stress that more is needed to develop the coun-
try’s weight on the world energy scale.
‘More projects are needed if Greece is to
become an energy hub like Turkey,’ said an
Athens-based energy analyst.
The government says that this has already
started.
‘The government’s energy policy is being deliv-
ered at a fast pace in converting the country into
an energy channel,’ said Nerantzis.
After the signing of the petrol project, progress
is expected on the building of a new natural gas
pipeline connecting Greece with Italy and Turkey.
Greece’s link with Turkey is expected to be
ready in July, while construction of the branch with
Italy is scheduled to start in June 2008.
Stretching over 300 kilometers, two-thirds of
which is on Turkish territory, the pipeline will
transport gas from Azerbaijan and other Caucasus
producers to European countries.
Greece has been importing natural gas for a
decade, 80 percent of it from Russia via a pipeline
through Bulgaria.
Greek domestic gas consumption rose by 35
percent between 2003 and 2006 and is expected
to double between now and 2010 to 6.5 billion
cubic meters on higher industrial and consumer
demand and ambitious plans for new gas-fired
electrical power plants.
‘Additionally, we are in the process of connect-
ing electricity grids with neighboring countries
(such as the one with Turkey which closes the loop
of Mediterranean countries and will be ready in
January 2008) either by upgrading the existing one
or planning new ones,’ added Nerantzis.
Other plans on the energy front include imple-
menting changes to the regulatory framework of
bio-diesel energy production.
Development Minister Dimitris Sioufas recently
announced that Greece would spend over 4.5 bil-
lion euros up until 2010 on investments in biofuels
and other renewable energy sources.
Supply concerns
Greece’s new role in the sector has triggered con-
cerns over who will supply the pipelines with gas
or fuel.
‘What the European governments, including the
Greek government, are seeking to do is safeguard
their energy security by not allowing just one single
provider to supply them with energy,’ said Stylian-
idis.
‘In this regard, Greece is increasing its suppli-
ers in natural gas by adding LNG (liquified natural
gas) from Algeria, Egypt, Qatar and third sources
into its own energy mix. As far as oil supplies are
concerned, the suppliers of Greece in crude oil
include many countries,’ he added.
On a recent trip to Athens, European Energy
Commissioner Andris Piebalgs said that Russia
should not be allowed to dictate Europe’s energy
supply.
‘I am not worried about dependence on Russia
in oil as long as we have diversity of supply,’ he
said. ‘The problem is not Russia, the problem is
that Gazprom is a monopoly supplier.’
Piebalgs stressed the importance of the Turkey-
Greece-Italy interconnector but added that it
should serve multiple producers.
‘It is very important that it involves natural gas
from the Caspian. We should get gas from many
suppliers, including Azerbaijan, Kazakhstan, Turk-
menistan, Iran and Iraq, not just Russia,’ he
stressed.
Ries has also backed the notion of using multi-
ple suppliers, saying that otherwise Europe will
miss an opportunity to improve market efficiency.
‘If the interconnector is filled with Russian gas,
a huge opportunity for increased competition in the
European gas market will be lost,’ according to the
US ambassador.
Russian springboard
The signing of the deal has brought Greece and
Russia closer together as the two countries look
into further boosting bilateral economic ties.
‘We see this development as a way toward
expanding cooperation to additional fields, in par-
ticular investments and larger exports of Greek
products into the Russian market, tourism, and so
on,’ said Stylianidis.
‘It is the firm belief of our government that we
could use bilateral energy cooperation as a pilot
case to achieve equally substantial results in other
fields of economic cooperation,’ he added.
Greek media reported after the signing of the
deal that Athens will play a larger role in Russian
plans to invest 300 billion euros in European busi-
nesses.
Russian conglomerate Sistema bought a major-
ity stake in Intracom Telecom last year for 120 mil-
lion euros. The company said that it might also be
interested in other telecom investments in Greece.
‘The idea is to use the dynamic momentum,
created in the sphere of the energy cooperation, to
boost other mutual investment projects in a large
spectrum of activities,’ said Russian Ambassador
Vdovin.
‘Russian capital has already entered the
telecommunications market in Greece and some
other opportunities may arise. There are also
prospects for enhancing Russian-Greek cooperation
in the military field,’ added Vdovin.
According to figures presented by the Hellenic
Center for Investment (ELKE), Russia accounted
for 4.7 percent of Greek foreign trade turnover in
2004. Greece imports from Russia mostly crude
petroleum, gas and metals while export products to
Russia mainly consist of fur, tobacco and fruit.
Greece’s position on the
international energy map is now
a fact. It is evident that Greece is
an equal interlocutor among the
international energy players and
the Greek government a
trustworthy partner.
By D.P.
