Russia’s South Stream pipeline in deep freeze as EU tightens sanctions noose

gas pipeline

The European Union is close to freezing plans to complete the $50bn (£30bn) South Stream gas pipeline through the Black Sea from Russia, the first serious EU action to punish the Kremlin for the seizure of Crimea.

Key details emerged in a leaked briefing by the European Commission’s chief, Jose Manuel Barroso, to Bulgarian politicians, warning the country not to stand in the way of the EU’s tough new line on the project, or attempt to undercut a unified EU response over Ukraine. “We are telling Bulgaria to be very careful,” he said, according to reports in Bulgaria’s press.

Mr Barroso said there are “people in Bulgaria who are agents of Russia”, a reference to figures in the ruling Socialist party who have been trying to clinch a bilateral deal with the Kremlin.

The warning came as Ukraine once again rattled investors. Russia’s Micex index of stocks fell 2.4pc and the rouble slid 1pc against the dollar after armed pro-Russian protesters seized government buildings in the eastern Ukrainian city of Donetsk and declared the region “independent”. They also stormed offices in Kharkiv and Luhansk.

Ukraine’s premier, Arseniy Yatsenyuk, accused Russian president Vladimir Putin of preparing the ground for seizure of the Donbass region, home to most of Ukraine’s heavy industry. “The aim of this scenario is to divide Ukraine into parts and turn part of Ukraine into a slave territory under a Russian dictatorship,” he said.

There are still 40,000 Russian troops massing near Ukraine’s border. Mr Yatsenyuk said it was “crystal clear” that Mr Putin intended to go beyond Crimea, escalating the crisis to a much more dangerous level.

Brussels has been coy about the status of the South Stream project, which entails huge contracts for oligarchs close to Mr Putin. The official line is that the plans are still alive but Mr Barroso’s leaked comments confirm reports that it is politically dead.

The German group Siemens signed a contract with Gazprom as recently as last week to supply control systems for South Stream as if nothing had happened in Crimea. This followed a private meeting between Siemens chief Joe Kaeser and Mr Putin that caused a storm in Germany.

Professor Alan Riley, from City University, said the South Stream project – already well under way and intended to produce gas by 2015 – funnels energy long distances from Siberia to the Caucasus and then on to the Balkans purely to circumvent Ukraine. “It makes no sense. It provides no new gas and is intended solely in order to undermine Ukraine, yet the Western policy is now to spend huge sums of money to save Ukraine,” he said.

German Chancellor Angela Merkel has clearly lost patience with Mr Putin, who appears to have misled her twice in telephone calls – first promising that there would be no seizure of Crimea and then assuring her that no troops were at Ukraine’s border.

She warned Mr Putin that there would be painful consequences if Russia “violates” Ukraine any further. “Nobody should harbour any illusion. As different as we are in Europe, we will stand united,” she said. While she did not spell out details, the next tranche of measures is likely to target companies and banks in a bid to choke off Russia’s access to global finance.

The US has already listed Rossiya Bank and SMP Bank indirectly. It is tightening the noose by regulatory muscle, progressively complicating the ability of Russian companies to roll over $650bn of foreign debt. Diplomats say Washington may broaden targets in response to any concerted effort to destabilise Ukraine, even if it falls short of an invasion by troops.

This could be triggered if Gazprom acts on its threat to cut off supplies to Ukraine as of Tuesday. Gazprom’s chief, Alexei Miller, said the company will not deliver any more gas unless Ukraine “pays off” an immediate debt of $2.2bn for past deliveries.

The company has also increased the gas price from $268 per 1,000 cubic metres to $485, the highest in Europe. The White House said the move was a “tool of coercion”, not market pricing.

Financial markets have taken a nonchalant view of the crisis, betting that Mr Putin will get away with taking Crimea, with business returning to normal quickly.

“Investors are playing down the risks,” said Chris Weafer, from Macro Advisory in Moscow. “They think NATO is talking its own book with its hard-line rhetoric and that the defence companies can now frighten politicians into beefing up military budgets. The really cynical market view is that it’s all a godsend for the defence industry and we could even see a little boom.”

thEUnit Digest

EU vets foreign holdings in European airlines

virgin boeing

The European Commission is examining several foreign holdings in European airlines, including Delta Air Lines’ stake in the UK’s Virgin, and Etihad’s stake in Germany’s Air Berlin, to see if they comply with rules for running an airline in Europe.

A spokesman for the European Union (EU) commissioner for transport policy, Siim Kallas, said on Friday the Commission was also looking at Korean Air’s stake in Czech Airlines and Chinese investment vehicle HNCA’s 35% stake in freight carrier Cargolux.

In order to obtain an operating licence in the EU as a European airline, a carrier must be more than 50% owned and “effectively controlled” by an EU member state or EU citizens.

“Accordingly, the Commission has asked the member state concerned to provide further information on how these investments comply with the rules on ownership and control of European airlines,” the spokesman said in an e-mailed statement.

A spokesman for Delta, which owns a 49% stake in Virgin, said that the partnership was examined and cleared by the UK’s Civil Aviation Authority last year.

Nothing has occurred since then that would lead us to believe that there are new issues,” he said, adding that Delta’s operations “continue to fully comply with our regulatory obligations”.

Air Berlin denied being controlled by Abu Dhabi-based Etihad Airways, saying that the two only worked closely together as strategic partners.

“Strategic decisions are made by Air Berlin alone. As a shareholder, Etihad has neither a blocking minority nor special rights,” a spokesman said in a statement.

Etihad owns 29.2% of Air Berlin, which is Germany’s second-largest airline but is struggling with debts and has twice postponed the publication of its 2013 results.

Etihad, which is building up a network of minority stakes in airlines around the world as it seeks to drive traffic to its Abu Dhabi hub, has provided loans to Air Berlin and bought a majority stake in its frequent flyer programme.

Etihad is also looking at the possibility of buying a stake in Italy’s ailing airline, Alitalia.

Separately, the Commission has asked Italy to be vigilant with regard to the ongoing negotiations between shareholders of Alitalia and Etihad Airways, a Commission source told Reuters.

thEUnit Digest, Tuesday 8th April

Dutch opposition MPs call on premier to explain ‘quit the euro’ claims


Opposition MPs have called on prime minister Mark Rutte to answer claims he threatened to pull the Netherlands out of the eurozone in 2012.

The anti-immigration PVV and Socialists have called on Rutte to return from holiday to take part in an emergency debate, while GroenLinks have called for a full briefing by midday on Thursday.

The claim is made in Wednesday’s Volkskrant and is based on an interview with European Council president Herman van Rompuy about a meeting between the two in 2012.

Alexander Pechtold, leader of the pro-EU D66 Liberals, told BNR radio such an outburst ‘was not sensible’, particularly when it was about something as important as the economy and in the presence of such an important European as Van Rompuy.


The meeting at the prime minister’s residence, the Catshuis, took place on June 5 2012 to discuss further European integration and Van Rompuy’s plan for strict contracts between Brussels and the eurozone members on necessary economic reforms.

In the interview, Van Rompuy says he was ‘surprised’ at Rutte’s threat to leave the euro if the ‘transfer union’ went ahead.

According to the Volkskrant, others who were present were also surprised because for Dutch consumption Rutte was hammering home the message that the euro was vital to the Netherlands’ economy. In doing so, he was reacting to calls from Geert Wilders’ PVV to leave the eurozone and the EU immediately.


The Catshuis meeting began with the two men taking a walk in the grounds. Once the lunch began, Rutte became agitated and when Van Rompuy reiterated his plan for more control from Brussels, Rutte answered: ‘If that happens, the Netherlands will leave the euro’, witnesses told the paper.

In his interview, Van Rompuy says he has wiped this ‘remarkable‘ page from his history with the Dutch prime minister. ‘So much has happened since then that I no longer think of it,’ he told the paper.

In a reaction, Rutte denies threatening to leave the euro, but said he did use ‘very strong words‘ to make it clear he would torpedo Van Rompuy’s plan with a veto if necessary., Wednesday 30 April

Anti-Corruption group finds fault with European Union


A prominent anti-corruption group on Thursday plans to report serious shortcomings in the management and governance of the European Union’s core institutions, as public confidence in Brussels remains at a low before elections next month.

In a 250-page report, the group, Transparency International, recommends tightening regulation of lobbying, reducing conflicts of interest, enhancing protection for whistle-blowers and curbing secret deal-making in sensitive policy areas like financial services.

Weak enforcement of the existing rules means that “corruption risks persist at the E.U. level”, the report warned, saying the risks contribute to public skepticism of “the commitment of politicians and bureaucrats to a more open and ethical style of government.”

A series of prominent scandals in recent years have included the resignation of a European commissioner in the face of suspicions he knew about attempted bribery to soften anti-tobacco legislation, and the prosecution of lawmakers for agreeing to large payments in exchange for proposing amendments at the European Parliament.

Europeans have also suffered a more general loss of confidence in their ability to influence policy at a time of concerns about their prosperity and security after five years of economic anxiety.

Less than a third of the public trusts the European Union, according to the most recent Eurobarometer poll, published in December by the European Commission. That figure was down from 57 percent in spring 2007, before the start of the financial and sovereign debt crises.

In the past, Transparency International has examined international agreements like the United Nations Convention Against Corruption. The group also produces an annual global Corruption Perceptions index that ranks countries based on perceived levels of public sector misconduct.

But the report on Thursday is the group’s first head-on assessment of an international body like the European Union. The aim, the group said, is to urge the union’s institutions, like the European Parliament and European Commission, to enforce existing rules and make necessary changes to improve public decision-making in Europe.

But whatever encouragement the report might provide toward those ends, the findings could bolster the views of critics who say some of European institutions are not worth saving because they have become elitist and unaccountable. Rising discontent with the union is expected to aid candidates from populist parties and other groups skeptical of the European project, who are expected to win a record number of seats at the European Parliament.

The Parliament, the only directly elected institution in the European Union, was the subject of particularly tough criticism by Transparency International, which cited a lack of cooperation by the lawmakers while it gathered research from June 2013 to February 2014.

“We met delays, prevarications and long silences by the authorities at the Parliament, and we find that acutely worrying in light of the body’s growing powers,” Carl Dolan, the director of the European office of Transparency International in Brussels, said ahead of the report’s publication. “The attitude of the Parliament’s hierarchy shows that there is a tendency there to circle the wagons and take the attitude of, ‘You’re either for us or against us,’ ” he said.

A spokeswoman for the Parliament, Marjory van den Broeke, said that the institution was already the subject of rigorous scrutiny from other European bodies and that there was no reason to give more access to Transparency International than to other nongovernmental organizations. “Compared to other parliaments, it’s a very transparent parliament,” Ms. van den Broeke said.

Other institutions, including the European Commission, the union’s administrative arm, took a more helpful approach by granting interviews with senior administrators, Mr. Dolan said.

Political analysts, including Vivien Pertusot, the head of the Brussels office of the French Institute of International Relations, are predicting that nearly 20 percent of the 751 Parliament seats up for election in May will be won by parties that are intent on reining in the European Union’s power, like the National Front in France and the U.K. Independence Party in Britain.

“The E.U. is going to have to find a way to address intense criticism from these protest parties over issues like corruption,” said Mr. Pertusot, who had not yet seen the report by Transparency International.

Mr. Dolan said his group was publishing the report now because it wanted to participate in the debate about the future of the bloc since the financial crisis, which had shaken confidence in the European institutions.

“This report should not give any comfort to euro-skeptics, because it shows there is a good foundation in the rules and regulation in place, and that what we need now is proper follow-up and enforcement,” Mr. Dolan said.

One of the most common problems identified in the report is a form of lawmaking that takes place behind closed doors, called trilogues, in which a handful of representatives from European governments, the European Commission and the Parliament hash out compromises on legislation,, often in sensitive policy areas like regulating car emissions and using taxpayer money to bail out banks.

Those meetings are among a number of “blind spots” where public scrutiny is extremely limited and where negotiating positions taken by the Parliament were susceptible “to external — and unseen — influence by interest groups and member state pressure,” the report said. It recommended that all documents from those meetings, and from other meetings of European Union experts, be made publicly accessible.

The report also found problems with the main watchdog for the union’s institutions, the European Anti-Fraud Office.

That office played a leading role in an investigation during 2012 that led to the resignation later that year of John Dalli, a politician from Malta who was the commissioner in charge of health and consumer protection. It concluded that Mr. Dalli, who has repeatedly said he did nothing wrong, had probably been aware of a solicitation of a nearly $80 million kickback from the tobacco industry.

But the anti-fraud office has faced fierce criticism from a number of groups, including lawmakers at the Parliament, for not acting transparently during its investigation of Mr. Dalli and, more generally, for being too cozy with administrators at the European Commission.

The report by Transparency International said the outcry over the conduct of the anti-fraud office and the commission during the events surrounding Mr. Dalli’s departure showed the need for the office to be given “watertight operational independence” to ensure proper checks and balances at the European level.

Another set of recommendations by the group are aimed at preventing a rerun of a scandal that began in 2011, when members of the Parliament were caught on camera apparently prepared to propose amendments in return for cash payments of up to about $138,000 in a sting operation conducted by The Sunday Times of London.

According to Transparency International, the Parliament, as well as other institutions, should introduce a procedure to create a so-called legislative footprint, recording and disclosing all input received from lobbyists for draft policies, laws and amendments. Another recommendation is to establish a European Public Prosecutor who could take action in cases where the union’s financial interests are threatened, including by corrupt lawmakers.

Currently, any prosecutions must be carried out at the national level, where procedures and punishments can vary widely.

This post was first published in thEUnit Digest, Thursday 24th April

Pledge to free up UK jails sees just 17 EU prisoners sent home to serve time

prison door

Just 17 foreign criminals have been sent home to serve their sentences under a treaty that was intended to clear Britain’s jails of mainland European offenders.

Ministers had hoped to deport thousands of offenders under a European Union treaty that would see convicts serve their sentences in their home countries. But in more than two years of operation, just 17 European criminals have been removed.

The number of criminals from the rest of the EU has risen markedly under the Coalition, despite David Cameron promising to “personally intervene” to have them sent home in greater numbers.

The EU Prisoner Transfer Agreement was signed by Britain and 17 other member states and came into force in December 2011.

Since then three Belgians, a Latvian, a Maltese and 12 Dutch prisoners have been sent home. Ten were guilty of drugs offences, three of sexual offences, one for causing death by dangerous driving and one for a stabbing.

At the same time, 10 British citizens have been transferred from other EU states, meaning overall the scheme has opened up just seven extra prison spaces.

There are 10,695 foreign prisoners in British jails, costing around £370  million a year.

That is a modest fall of around 500 since the Coalition came to power, despite a pledge by Mr Cameron to do “everything in my power” to get them removed, including raising the issue with other foreign leaders. In the same period, the number of European prisoners has increased from 3,670 to 4,700.

Poles make up the largest group, with 938 in prison in December 2013, up from 650 in September 2010 – meaning they have overtaken Jamaicans as the largest group of foreign nationals in British jails.

They are followed by Irish prisoners (up from 680 to 779), Romanians (up from 381 to 547) and Lithuanians (from 384 to 502).

However, Poland and Ireland were granted an opt-out from the scheme by the last Labour government.

Sadiq Khan, the shadow justice minister who uncovered the figures, said the failure to implement the agreement presented an “enormous drain on stretched budgets”.

“Back in 2010 David Cameron said he would personally intervene to make sure thousands of foreign criminals would be sent back to their home countries to serve their prison sentences. Yet, four years on and still only a handful have been repatriated. The Prime Minister must, as a matter of urgency, roll up his sleeves and make sure the EU repatriation scheme is working properly and that all of the nation states are signed up to it, if the number of foreign criminals in our jails is to be cut.”

Jeremy Wright, the prisons minister, admitted the number of prisoners sent home “remains low”, but said the agreement was at “an early stage”. He said nearly 2,000 foreign offenders were deported last year before their prison sentence had finished.

“Whereas this government has begun to reduce the foreign national population in prison since 2010, between 1997 and 2010 the number of foreign nationals in our prisons more than doubled.”


This post first appeared in thEUnit Digest, Monday 14th April

EU’s first earth observation satellite put into orbit

sentinel 1a

The European Union’s Earth observation satellite was put into orbit on Friday after a successful launch from Europe’s spaceport at Kourou, French Guiana.

The successful launch of Sentinel 1A, the first satellite dedicated to EU’s Earth observation program – Copernicus, was described by the European Commission as a significant achievement, not just for the Copernicus program, but also for European Space Policy and the involvement of the European Union in space activities.

Sentinel 1A is the first satellite of the first of six families of dedicated satellite missions, which will be launched between 2014 and 2021.

Copernicus will ensure the regular observation and monitoring of Earth sub-systems, the atmosphere, oceans, and continental surfaces, and will provide reliable, validated and guaranteed information in support of a broad range of environmental and security applications and decisions.

European Commissioner for industry and entrepreneurship, AntonioTajani said Sentinel 1A’s “brand new eyes will observe our living Earth as never before and these eyes will be European!” “The data provided by this satellite will enable considerable progress in improving maritime security, climate change monitoring and providing support in emergency and crisis situations. Multiplying, in this way, the benefits that European citizens will reap from our space programs,” he added.

This post appeared in thEUnit Digest, Monday 7th April