It is common knowledge that the EU has always complained about the South Stream, long before the Ukrainian crisis. These complaints are based on Europe's desire to preserve its energy independence and to get cheap (or almost free) energy sources from outside (since there are no domestic energy sources).
Apparently. Europe cannot to without Russia's natural gas but it is afraid of Gazprom's monopoly in this sector, which makes Europe dependent on the Russian energy giant in many aspects. Indeed, Russia can use the gas pipeline as a political weapon in all those endless confrontations and conflicts of interests between Russia and the West.
That is why Europe is constantly trying to built multiple defensive blocks to secure itself against the Russian «Bear».
In particular, it is trying to promote the idea of depriving Gazprom of its monopoly, including pipeline ownership. This means Gazprom cannot reach European consumer directly. Europe want its own energy companies to act as hubs and mediators.
The European Commission presses Austria, Bulgaria. Hungary, Greece, Slovenia, Croatia and Serbia to reconsider their energy acts with Russia (claiming that the existing acts violate the EU legislation).
The Eu authorities threaten Gazprom with antitrust legislation, hinting that a trial may well result in a bi-scale fine for the Russian energy giant.
At the same time, EU politicians are desperately trying to find alternative ways of getting energy they need without being too much dependant on Russia. Many alternative projects are considered. First, Nabucco, now some transatlantic pipeline by BP (which is aimed at transporting natural gas from the Caspian region to the EU through Greece and Italy).
At the same time, the EU authorities claim that NG transportation fees should be set by independent regulators. On top of that, they promote the idea of making the pipeline available to third parties like energy companies form Germany, France, Italy and other EU states.
Europe also wants to abandon the practice of concluding long-term agreements, which are said to harm the flexibility of pricing.
In other words, Europe needs the South Stream as a European (collective) project rather than a Russian one. Well, this stance of the EU is understandable but it doesn't take into account Russia's interests.
Despite all the mentioned above, earlier this year, the parties started getting closer to each other. This couldn't but affect NG prices.
As of March 13th, the futures called Natural Gas April 2014 (NGJ14, NYMEX) is trading within the framework of a bearish sloping channel around 4,434 for 1000 thermal units, Masterforex-V Academy reports.
According to the experts of Masterforex-V Academy, if the EU really abandons the South Stream, this may eventually affect the European economy. Even despite multiple claims that the EU is going to reorient itself from the Russian natural gas to the one produced in the USA, there is no such infrastructure to handle NG transfers that are big enough to satisfy the needs. It will take years to built such infrastructure.
Amid the existing sanctions against Russia (caused by Russia's annexation of the Crimea), it remains unclear how Europe is going to decrease its energy dependency on the Russian Federation.
The most likely scenario is that Europe is going to gradually decrease Gazprom's share of imported natural gas thanks to American partners without getting down to sanctions.
Meanwhile, the EU’s rejection of the South Stream will result in billion-dollar losses for European investors along with higher instability in terms of the European import of natural gas through Ukraine.
In this aspect, investing in Gazprom's stock looks interesting, If the price of the stock falls below 100RUR per share, Masterforex-V Academy recommends going long with the mid-term and long-term targets around 134RUR and 180-200RUR per share respectively.
The bottom line is that the EU won't be able to make up for the lack of the Russian natural gas in the near future. Therefore, the EU's rejection of the South Stream is probably nothing but big words and will have short-term effect at most. In he worst-case scenario, this will be ridiculous since in this case the EU will be the only major loser form its own thoughtless step…
