Tag Russia

Erik Vanagels™ – the extent of a money laundering supermarket

The full extent of the money laundering international Vanagels Connection, reported in a previous story, is not known at present day. But according to our experience, Erik Vanagels – together with some colleagues such as Stan Gorin, Juri Vitman, Elmar Zallapa, Danny Banger, Lana Zamba and Inta Bilder – preside over a sprawling network of companies with Baltic bank accounts (mostly at Trasta Komercbank, Rietumu Bank, Parex Banka, Regional Investment Bank JSG) and banks in Moscow and Cyprus. They have extensive dealings with several East European countries like Ukraine, Moldavia, Romania and Russia, covering everything from illicit arms exports, internet piracy, oil/gas/electricity related corruption, financial frauds, counterfeit pharmaceutical products, massive cyber criminality, drug dealing… Some of their customers are also overseas like the Asiatic Hoa Le Duc’s Mafia or the Mexicam Sinaloa Drug Cartel.

The Vanagels Connection

The organizations operates as a full service provider of off-shore companies: Its modus operandi is systematically based on the simple concept of forging beneficial owner identity documents and signatures (for example the real Erik Vanagels, is a simple homeless in Riga) to nominate fictive directors in off-shore companies in UK, Cyprus, Panama, Hong-Kong, New Zeeland… and opening respective bank accounts in Latvia, Cyprus or Russia. Sometimes, the same forged identity is used in multiple variations: for example Erik Vanagels (the most famous one) can occur in the following aliases: Eric Vanagelom, Erik Vanahels, Erik Vanagele, Erik Vallaste, … It is already like a Trademark: a symbol of quality and price in the money laundering industry. But the same is also valid, for example, for the proxy names of Juri Vitman (alias Juri Wittmann), Stan Gorin (alias Staņislavs Gorins, in reality he is a simple insurance broker in Riga), Lana Zamba (in reality she is a yoga trainer in Limassol) or Danny Banger (alias Daniel Banger)… For more information about the identity of these mythical persons see “A Farm Of Directors” by Inga Springe and Graham Stack.

The network is organized with several hubs of off-shores supermarkets in Riga, London, Limassol, Kiev and Moscow (with some supect also in Sotschi, to stay olympic). For excample….

XXXXXX this part of the XXXXXXXXXXXX

In Cyprus at the villa near the cemetery of Limassol in KIMONOS STREET or at the suites of PTOLEMAION 55 also in Limassol. Their customers are segmented as following: oligarchs, organized criminal groups, rebels/terrorist groups, simple individuals with the need of laundering money for business purposes. The latter is the less evident, but it covers the majority of the hidden cases: it is used for systematic commercial bribery or frauds. The access to the services of this network is exclusively based on recommendations of existing customers.

The Vanagels connectio’s role is only coming to light recently as the Latvian and Ukraine local press starts digging out more and more information. The network’s activity can be traced back over a decade to the establishment in the mid-1990s. Evidence suggests this connection laundered money for an amount of 10 to 100 billion $ around the world and those media information are only the ones that have come to light so far. This will catapult the value of the Erik Vanagels™ tradmark higher than the one of Apple! The Vanagels connection has been recently quoted in the media related to the following major allegued criminal cases:

  1. The Faina vessel Case – Ukraine / Sudan – Illicit Arm Trading
  2. The Chernomoreneftegas Case – Ukraine – Gov. Corruption
  3. The flu vaccines Case – Ukraine – Gov. Corruption
  4. The Ukrspetseksport Case – Ukraine – Illicit Arm Trading
  5. The Rockford Funding Case – Latvia – Financial Fraud
  6. The Moldavian Cases – Moldavia / Romania – Gov. Corruption / Fraud
  7. The Hermitage Capital Management Case – Russia / Switzerland – Massive Money Laundering
  8. The Trade Construction Company LLC Case – Russia – Financial Fraud
  9. Hoa Le Duc’s Mafia Case – Romania / Vietnam / China – Organized Crime
  10. The EURO 2012 Case – Ukraine – Corruption
  11. The Mexicam Sinaloa Drug Cartel Case – Mexico – Organized Crime / Drug
  12. The GT Group Case – North Korea / Iran – Illicit Arm Trading / Terrorism financing
  13. The ex.ua file-exchange Case – Ukraine – Massive Internet Piracy
  14. The forextime.com Case – Russia / New Zeeland / Nigeria – Money Laundering / Financial Fraud


(Dr. Andrea Galli, Scalaris AG)


Latvia files for Krajbanka bankruptcy

RIGA, December 2 (Itar-Tass) — The Latvia’s Finance and Capital Markets Commission filed on Thursday a lawsuit to the Riga court to recognize as bankrupt the oldest national bank – Latvijas Krajbanka – after close to 200 million dollars were siphoned off reportedly by Russian businessman Vladimir Antonov who controlled Krajbanka through a 60 percent stake owned by Snoras Bank in Lithuania. Snoras was nationalized after a huge asset shortfall was expoed, while the Latvian regulator suspended and took control of Krajbanka due to the unexpected outflow of funds. Lithuanian prosecutors issued a European arrest warrant for Antonov, 36, who also owns the Portsmouth Football Club, and for his partner Raimundas Baranauskas, who held over 25 percent in Snoras. Kraibanka’s former president Ivars Prieditis and several top officials were arrested. Antonov recently made an unsuccessful attempt to buy out the Swedish automaker Saab and the Latvian regulator believes it might have triggered the downfall of the two Baltic banks. The regulator said it will request Swedish law enforcers to return Krajbanka’s funds which Antonov had allegedly invested in his Swedish projects and the Saab deal, in particular. On November 29 Krajbanka began to pay to private depositors the insured amounts of up to 100 thousand euro. In the first three days close to 213.4 million dollars were reimbursed.

Lithuania suspends Snoras bank: Russian Saab candidate owner face prison

Lithuania’s banking regulator has suspended operations of Snoras bank, the 5th largest in the country, appointed a temporary state administrator and announced its plans to takeover 100% of the lender’s shares. Vladimir Antonov was arrested in the UK on 24 November 2011.

The Lithuanian government discussed the situation surrounding the bank, and the president made a statement. The Lithuanian central bank acted

Vladimir Antonov

after it emerged that some of the bank’s assets were of worse quality than it had been expected. The bank declared some foreign securities, worth of 290 million euros, as assets, which the investigation showed did not exist.

Antonov has swapped bad assets of Snoras for Sergei Polonsky’s former Mirax (now Nazvanie.net) frozen development projects in Moscow that have high liquidity. The move enabled Polonsky to siphon off most of the money of defrauded shareholders and creditors into his foreign accounts. It is now a headache of Russian and Lithuanian authorities to fix the problem. The debt, which Nazvanie.Net has declared, is $45 million, but in fact it exceeds this figure and amounts to hundred millions of dollars.

Antonov has been involved in a number of financial scams before. He has always had problems with banking regulators. His Conversbank and Conversbank-Moscow were barred from participating in deposit insurance scheme, run by the Russian government, and the U.K. Financial Services Authority denied Snoras permission to operate in Britain, because “the bank would be unable to cooperate with the FSA in open and constructive manner”.

The scam was very simple. Antonov bought or set up banks – for instance, he acquired Lithuanian Snoras and Russian Investbank. The banks borrowed money from individuals and private companies for high interest. Antonov moved accumulated money into various projects of his own. He owned a lot of financial institution that enabled him to keep afloat, moving funds from one institution to another in order to fill in financial holes, if the problems occurred.

The scam worked until 2010, when it became obvious that Snoras and Investbank were on the verge of insolvency and even minor economic instability could have defrauded tens of thousands of people. The situation was even more dangerous in Lithuania. The hole in the bank’s balance sheet amounted to $100 million. The money was moved to the accounts of front companies in the form of unsecured loans. Antonov found no other way out, than to bring notorious Sergei Polonsky into his business.

By 2010 Polonsky and his Mirax Group had already gone bankrupt. The debt of his companies was estimated from $600 million to $1 billion. Former oligarch dreamt about saving at list part of his wealth and moving the assets abroad. He was open to any proposals, including that of most suspicious nature. This was common ground for talks between Antonov and Polonsky. They discussed the scam first in London, than in Antonov’s private chalet in Switzerland. The sides discussed the details of large-scale fraud.

Under the agreements reached by Polonsky and Antonov, Snoras swapped the securities of front companies for the ownership rights over developments, run by Mirax Group in Moscow (Dubrovskaya Sloboda, Mirax Park and Kutuzovskays Milya residential complexes, and Federation tower in Moscow-City business centre). Through his connections in the Staff of the Russian Federation President Polonsky received permission to strike share pledge agreements with the third party – the front companies, which Antonov had used to move money from his bank. After all, Polonsky sold his developments and got money, which had been siphoned off from Snoras.

The money of defrauded shareholders and creditors of Polonsky’s Mirax filled in the financial hole in Snoras. Now the bank owns a few objects in Moscow, which are despite being under construction are above all real and liquid, unlike the securities of the front companies.

Polonsky has also benefited from the scam. Antonov committed himself to move large sums of money to offshore companies controlled by Polonsky. Antonov planned to resell Saab and other assets. He negotiated with the Chinese about the deal, according to the inside information. In the end, Polonsky has moved his most profitable assets abroad and they are under control of Snoras’ shareholders and depositors, who lent money to Mirax Group on the security of the Mirax Moscow’s developments. If Moscow authorities, or Russian creditors of Nazvanie.net decide to take over the developments of Polonsky, they will have to infringe upon the reights of the EU citizens. After all, Mirax got loans at unpresidentally low rate – just 7% a year. In 2010 reliable lenders gave loans to Polonsky at the rate of 20-30%. If Mirax Group owner decided to bail out his objects in Moscow he would do it easily. Such option is a part of the agreement between Antonov and Polonsky.

In a nutshell, co-investors of Polonsky’s Mirax Group and Moscow authorities face a long struggle with the member of the EU, whereas Antonov and Polonsky are very happy with the success of their scheme.

Vladimir Antonov was arrested in the UK on 24 November 2011 after Lithuanian prosecutors issued extradition warrants against him. Antonov is accused of asset stripping of Snoras bank.

In recent times Antonov cooperated with Polonsky who helped him to cover the fraud up. Real estate tycoon Polonsky mortgaged his Moscow incomplete developments, transferring to Snoras the rights over the flats that belong to other people. At first Polonsky and Antonov thought they had orchestrated a perfect scam. A few years ago Antonov moved almost all Snoras’ liquid assets, $400-500 million worth, to foreign accounts. He disguised the fraud under a series of loans which the bank allocated to front companies with no real asset backing. For current banking operations Snoras solely used money from the deposits of legal and natural persons of Lithuania. The bank’s billion dollar worth assets existed only on paper. Snoras’ books stated the following assets as belonging to the bank:

– expensive securities (in fact worth nothing at all);

– money in the accounts of foreign banks (these banks are owned by Antonov and in truth have no money from Snoras in their accounts);

– money in the accounts of offshore companies to which Snoras gave loans (the companies are controlled by Antonov and have no assets).

When Lithuanian banking regulators got alarmed by Snoras’ activities, Vladimir Antonov’s father-in-law and former KGB officer Viktor Yampolsky introduced him to Moscow developer Sergei Polonsky. In Russia everyone knew that Polonsky was a bankrupt.

The talks between Polonsky and Antonov took place in England and Switzerland. The deal was mutually profitable. Polonsky pledged his Moscow developments, which are under constructions, to secure Snoras’ loans to offshore companies (i.e. to secure stripped assets). Antonov received more or less valuable assets for the banking operations, whereas Polonsky got rid of annoying co-investors in his developments and Moscow authorities who wanted the have the developments completed.

A source that took part in the negotiations told that Antonov and Polonsky had planned that Snoras would begin legal actions in Russia to seize Polonsky’s property. The process would be painful and take a long time, because the property was left as a pledge with the depositors of Snoras, citizens of Lithuania. According to the written commitments, if Snoras won the case, Polonsky would have a share from reselling the developments in Moscow and a share from selling Swedish car manufacturer Saab, which belongs to Antonov. Polonsky also had the option to get his property back if he cleared debt in time.

Polonsky and Antonov were happy. As he did it before, Polonsky dumped co-investors and partners and moved assets to Europe. Antonov filled in the financial hole in Snoras. But the plans of the couple of crooks were in tatters when the Lithuanian authorities decided to probe into the bank. Tired of Antonov’s scams, Lithuania put Snoras under involuntary state administration on 16 November.

Our source said that Polonsky was literally infuriated when he heard the news. He approached Antonov on the phone and told him that Antonov had “let him down” and “cheated” on him and urged Antonov to pay back.

The anger of Polonsky is quite understandable. Surely, he will get nothing from Snoras. What makes things worse he now faces legal prosecution.

On 22 November Polonsky met Antonov in London and demanded he give his money back, at least partially. But it was too late. On 23 November Scotland Yard arrested Antonov over Lithuanian extradition warrant. Lithuanian police began investigation into asset stripping of Snoras. The investigators have already seized paperwork concerning unsecured loans. They have also obtained documents pertaining to Polonsky. Their careful examination will show that Polonsky was paid by Antonov to cover up asset stripping scam. Polonsky deceived representatives of Snoras saying that the developments he left with the bank as a pledge were completed and not liable to any obligations from the third parties. In fact it was co-investors who funded the buildings works. The co-investors are true co-owners of the building.

In banking terms Polonsky is an unscrupulous pledgee and, thus, legible to legal prosecution in almost all countries. In legal terms Polonsky’s actions can be classified as unsecured loan scam and fraud.

Our source said that Polonsky was afraid of legal prosecution. Should he travel to a European country he might face Antonov’s fate, i.e. arrest and extradition to Lithuania. Polonsky can not enter Germany after the appeals of defrauded co-investors in his projects. Now, after Antonov’s arrest, the USA might levy sanctions against him. Polonsky expected to receive his share from Antonov’s selling his stake in carmaker Saab to a Chinese company. But Saab’s controlling owner American GM corporation blocked the deal. The Americans did not want to see the Chinese get Saab’s smart technologies. Antonov was barred from entering the US and blacklisted by the US security services. As a person interested in the deal, Polonsky could face the same sanctions.

2012: The year of self-induced stagnation

When tomorrow’s historians write about the Great Stagnation that blighted the rich world’s economies in the early 21st century, 2012 is in danger of standing out as a depressing turning-point. It could be the year in which a weak recovery is walloped by avoidable policy errors—mistakes that send economies from Italy to Britain back into recession.

GPD 2012

GPD 2012

There will be parallels with 1937, when a wrong-headed tightening of fiscal and monetary policy dragged down America’s economy and extended the pain of the Depression. The details are different, but in 2012, too, avoidable errors will ensure that the Great Stagnation lasts far longer than it needs to.

The first, and biggest, of these errors will be Europe’s mishandling of the euro crisis. Despite the obvious failure of Europe’s “muddling through” strategy, there will be more of the same. The holes in the latest rescue plan, hammered out in October, will become ever more obvious in 2012, even if it survives political wobbles in Greece. In each of the three big areas where European politicians claim they acted boldly—creating a financial firewall to convince investors that solvent but illiquid economies such as Italy and Spain will not be forced to default, recapitalising banks and dealing once and for all with Greece’s unpayable debts—the plans will prove to be a timid middle course. Just enough will be done to fend off financial catastrophe; not enough to solve the underlying problems.

Under its new Italian president, Mario Draghi, the European Central Bank (ECB) will remain reluctant to be the lender of last resort to illiquid governments. Nor will Europe’s creditor governments add to the region’s rescue funds or introduce Eurobonds backed by the might of the euro area as a whole. Instead the firewall will be pieced together with a complicated mix of guarantees, special-purpose vehicles and creative borrowing. Europe’s main rescue fund, the European Financial Stability Facility, will issue partial guarantees for new sovereign debt. It will provide seed capital for new financial structures into which Europe hopes to tempt sovereign-wealth funds and private investors—hopes that will prove quixotic.

The complexity of a jerry-rigged firewall will undermine its effectiveness. A similar story will play out in Europe’s efforts to bolster its banks. Banks will be forced to increase their risk-weighted capital ratios by the middle of 2012. But they may do so by shrinking their assets, thus constricting credit and exacerbating the squeeze on Europe’s economies. And without a steely European bank regulator or a single finance minister to oversee the process, fears about banks’ health will not go away.

The fragility of Europe’s defences means the big debt write-down that Greece needs will be both less effective and unnecessarily dangerous. Greece’s private creditors will see a “voluntary” restructuring in 2012, with the nominal value of the debt reduced by 50%. That will be a big step forward, but still not enough to restore the country to solvency. Contortions to keep the debt deal “voluntary” (and so avoid triggering credit-default swaps) will do lasting damage to that market.

Avoidably austere

Just as in 2011, the uncertainty created by this muddle-through approach will weigh heavily on financial markets. The economic damage from it will become more evident, particularly as embattled banks curtail their lending. Worse, this uncertainty will be compounded by the second avoidable error of 2012: an excessive embrace of short-term budgetary austerity.

Most rich countries will begin 2012 feebly, with GDP growth well below its trend rate. Yet virtually all plan to step up the pace of austerity. As a group, the big economies of the rich world will see budget cuts worth more than 1% of GDP in 2012, twice as much as in 2011 and one of the biggest collective tightenings on record.

Some countries, particularly the embattled economies on the periphery of the euro zone, have no choice. They have lost the confidence of financial markets and are being pushed by their rescuers to slash deficits. Britain’s government refuses to adjust its course for fear of losing markets’ confidence. Policymakers in Germany and the Netherlands are fiscal hawks by faith, believing austerity is the only appropriate remedy for the rich world’s ills. In America the tightening will come by default, as Republicans in Congress refuse to pass Barack Obama’s latest stimulus plan and as temporary tax cuts expire.

This fiscal contraction will weigh heavily on the rich world’s growth. Fortunately, central banks—in contrast to 1937—will try to counter, rather than compound, the problem. The ecb will cut short-term interest rates close to zero; the Bank of England will add to the quantitative easing (QE) it restarted in October 2011; America’s Federal Reserve will also do more QE and may set an explicit target for long-term interest rates. Such monetary easing will prevent a severe downturn, but it will not stop the recovery from stalling. Some countries will be pushed back into recession: certainly Italy, probably Britain, possibly America.

That pain would be worth enduring if it led to a better medium-term budget outcome. Unfortunately, in far too many places it won’t. In some cases that is because of another set of budget mistakes. In America, for instance, political gridlock will prevent any progress in dealing with the country’s medium-term deficit problem, even as it enshrines short-term tightening. Elsewhere, such as in Europe’s periphery, the scale of budget tightening will cause such economic damage that the countries’ debt outlook will darken rather than brighten. Instead of a virtuous cycle where fiscal austerity leads to greater confidence and better prospects, the opposite dynamic will take hold.

Might booming emerging markets help? Not as much as you might think. China’s own growth is slowing, as it must if inflation is to be checked. And with less room now to respond with another spending binge, China and other emerging economies will be more vulnerable to damage from a new downturn in the West.

How grim 2012 becomes will depend on how far, and for how long, politicians persist with their misguided policies. In many countries the election cycle bodes ill. America is unlikely to see big political compromises in a presidential-election year. On both sides of the Atlantic a deep recession or a serious financial crash would probably induce bolder solutions. But the most likely outcome is an economy not quite weak enough and a crisis not quite large enough to galvanise spineless politicians. That’s why 2012 will be the year of self-induced stagnation.


The Southeastern Europe Pipeline Race

by Ioannis Michaletos

The geo-economic landscape in Southeastern Europe, as in other regions in the world presently, is being shaped to a great extent by the competition between numerous energy-producing states, large consumers and multinational corporations all vying to control the bulk of the energy-transport systems, most importantly pipelines. The European Union has formed a strategy called Southern Corridor, relating to the formation of a pipeline that will diversify the supplies of natural gas for E.U. states that currently rely on Russia and Algeria. The plan attracts the attention of all global energy corporations that aim for long-term lucrative contracts, and at the same time countries that have vital interests in the global energy sector are involved in the plannings, by backing up projects that they can influence. The target is to control the energy flow so as to gain political and diplomatic clout.

New players

Recently, the company British Petroleum entered the game by announcing its planning for the Southern Corridor, which it names South East Europe Pipeline (SEEP). According to press announcements and statements from officials, the pipeline will transfer gas from the Caspian region through Turkey, Bulgaria and Romania, onwards to the energy-thirsty industrialized nations of central and northern Europe, where some 150 million consumers are located and major global companies such as BMW, Daimler, Siemens, Airbus, Thyssen and others have their production facilities.

BP’s planning is directly competitive with the Nabucco pipeline, which aims to follow the same route and exploit the same energy resources, although its shareholders are mostly German, Turkish and Austrian companies. Apart from the obvious economic competition, the two pipelines share an antagonism that is reminiscent of the Belle Époque era, when the energy-seeking British and German Empires contested ferociously over oil reserves from the Danube to the Middle East. The victory of the Brits secured global economic predominance for the Anglo-Saxon companies up to date.

BP manages the vast and Azeri gas field of Shakh Deniz together with the Norwegian Statoil, a company that has its own plans for the Southern Corridor by participating in the Trans-Adriatic Pipeline project, known as TAP. BP’s move indicates that these two companies, since they have a joint venture in a field that can potentially secure gas supplies to Europe, may decide to merge their respective plans in the near future.

Moreover, BP as a corporate entity has been seriously battered due to the Mexican Gulf offshore drilling disaster in 2010 and the failure of negotiations with the Russian government relating to acquiring rights to the Arctic Sea reserves. These two failures have cost the company dearly in terms of shareholder value. Thus the London-based energy giant is playing perhaps a last grand move in order to stay on top of a highly volatile and changing market and at the same time secure a mega energy project of direct geopolitical implications that may well lead into a renewed antagonism between the ailing British corporate power and that of the European Union, which is based upon German and French companies.

BP, in order to antagonize Nabucco, promises to offer a project costing a third of that of the other pipeline, since it will transfer initially much smaller quantities. Purely financially speaking, that plan seems promising; nevertheless there are other antagonizing routes to be considered that are also gathering pace.

The rest of the plans

The Interconnector Turkey-Italy-Greece is another project that is backed by companies of the respective countries and aims at the same target, meaning the exportation of Azeri gas to Europe of approximately 12 billion cubic meters per year. The Azeri state energy company SOCAR stated recently that is in negotiations with Turkey in order to finish up details for that project, the most important one being the agreement upon the transit fees of the latter. Should these negotiations prove to be fruitful, ITGI can be put into action by 2013, thus surpassing all of its competitors. In short, the Azeri government is being seen as a precious bride by all interested parties who rely on their future plans.

Within the last three months of 2011, SOCAR will review all plans by Nabucco, ITGI, TAP and SEEP, and it is estimated that it will then decide which will be given the green light to move on. That makes Azerbaijan presently the most focal country for geo-energy affairs in the world, because all interested parties know very well that the winner takes (almost) all and will leave precious little quantity of gas for its competitors to export. The estimation by many independent energy analysts is that a final decision will be ultimately postponed for 2012 or even further in the future and that mergers will take place between those four pipeline projects, depending on the national interests of the four countries with high stakes in that field, namely the United States, Germany, the United Kingdom and France.

The Russian factor

A crucial aspect of the pipeline discussion is the role of the Russian-Italian-backed plan of the South Stream pipeline, which recently admitted new shareholders from Germany and France. It is the only project that is not related to Azerbaijan or Turkmenistan and other Caspian states, and aims to deliver gas to Europe via a different avenue and coming from the Russian and possibly Kazakh reserves. Estimations to date, along with various reliable data, point out that Azerbaijan is not able to provide a full load of the gas needed for the Southern Corridor. Moreover, insoluble legal barriers on the status of the Caspian Sea and current disagreements between all neighboring states for the offshore gas fields are major obstacle for a long-term pipeline-related decision. The obstacles may prohibit any future plans to connect Turkmenistan reserves for export with those of Azerbaijan, since any pipeline will have to trespass the bottom of the Caspian Sea.

It seems that the South Stream, since it is backed by 50 percent shares by Gazprom, which is essentially a state-owned and -run Russian company, can secure the capital needed for a long-term massive investment of up to 16 billion euros, whereas other plans such as Nabucco, where quite a few mid-sized private companies participate, will find difficulty raising capital and making a profit. In any case, the existence of a Russian plan backed by several big European energy players reveals that there is a long way before any pipeline is being constructed amid a ferocious interstate and corporate antagonism.


The gas share in the European Union’s energy balance will continue to grow in the coming decades against the background of the negative attitudes of Europeans against nuclear energy, as was manifested in Germany and Switzerland, and the desire to reduce carbon emissions. For the moment, the only important project aiming for the above strategy is the North Stream, a joint German-Russian venture, which begins commercial operations the last weeks of 2011, manages to secure stable gas deliveries in Europe, and solves to an extent the issue of energy supply in the European Union in anticipation of winter.

Concerning the Southern Corridor, the markets under which gas can be secured and exported are Azerbaijan, Turkmenistan, Russia-Kazakhstan, Iraq and Iran. It is not clear whether Azerbaijan has the necessary capability of delivering over 1 trillion cubic meters of the product for the next 35 years—a median life span of such a project. Turkmenistan faces the legal barrier of the Caspian Sea and the all-encompassing political-diplomatic influence of Moscow. Russia-Kazakhstan does have the necessary amounts, but as far as Russia is concerned, it will certainly face political opposition. Iraq is still in a state of flux and nobody can guarantee a safe passage of large amounts of gas through the Kurdish-controlled territories where, in the case of those in Turkey, a vicious guerrilla war is being fought. Iran, lastly, is marginalized by the international community due to its involvement in its nuclear program and its support to international terrorist groups.

The only certainty is that the pipeline competition in Southeastern Europe is far from over, and last-minute surprises, such as new players entering the game, remain a possibility. Most importantly, the issue far exceeds the little publicity it gets from mainstream international media, and it is at the top of the agenda of most global policymakers, making it of historic nature and of binding long-term political consequences for a significant part of the Southern Eurasian mass.

The South Stream project

The pipeline project named South Stream is planned to carry 63 billion cubic meters of natural gas per year from Southern Russia up to Italy. The pipeline is expected to cost 19 billion to 24 billion euros, and a significant section of the pipeline will be offshore, crossing the Black Sea from Novorossiysk and reaching to Burgas port in Bulgaria

The pipeline will be built and operated by several project companies. The offshore section of the pipeline will be built and operated by South Stream AG, a joint company of Gazprom and Eni.

The South Stream is an energy project aimed at merging the Russian Federation producers and most notably Gazprom with the E.U. consumers, especially Italy and Germany-Austria. It bypasses both Ukraine and Turkey, aiming at reducing dependency of Russia towards these two countries. Presently the bulk of the gas exports to the west of Russia traverses through Ukraine.

South Stream could be seen as a complementary route to that of North Stream, which already delivers gas from the Baltic shores of Russia to Northern Germany, and which bypasses Poland. In a few words, the South Stream is a political project first and foremost aiming at decreasing the dependency of the Russian energy exporters to countries of Western Europe, with which it has various frictions.

The head of Gazprom’s South Stream project, Sergey V. Korovin, commented regarding confrontation of this project with other ones, “The European gas consumption projections envisage a significant increase by 2020. Therefore, additional volumes of gas will be needed. South Stream, and Nabucco are by no means mutually exclusive projects. If both Nabucco and South Stream are built, Gazprom will cooperate closely with our European partners to optimize the gas flows of the different pipelines in order to guarantee a smooth functioning of the gas supply system.”

The Nabucco project

The Nabucco pipeline (also referred to as the Turkey-Austria gas pipeline) is a proposed natural gas pipeline from Erzurum in Turkey to Baumgarten an der March in Austria. The project is backed by several E.U. states and the United States and is often seen as rival to the Gazprom-led South Stream pipeline project

The project is developed by the Nabucco Gas Pipeline International GmbH. The shareholders of the company are OMV (Austria), MOL (Hungary), Transgaz (Romania), Bulgargaz (Bulgaria), BOTAS (Turkey), RWE (Germany). The pipeline is estimated to cost around 7.9 billion euros, and the company leading the project is OMV.

The final investment decision is scheduled to be made in 2011, and the pipeline is expected to be operational by 2015. In September 2010, the consortium signed an agreement with EIB, EBRD and the International Finance Corporation (IFC), according to which the banks will conduct due diligence for a financing package of 4 billion euros.

Nabucco is considered as a project with strong diplomatic backing by the United States, although no American companies participate. The reason is two-fold. First of all, it decreases Russian energy involvement in the European Union, since no Russian company participates. Secondly, the final aim of Nabucco is to export Iraqi gas to Europe, therefore increasing the indirect dependence of the European Union toward the United States, since Iraq is under direct American influence for obvious reasons.

According to the head of communications for the consortium, Christian Dolezal, regarding the competition or not of Nabucco with other pipelines, he said, “Nabucco and other pipeline projects as South Stream are not competitors since Nabucco has different objectives. Nabucco aims at providing secure and stable supplies of natural gas in the heart of Europe to meet the future demand and to boost industry. The key word is [providing] ‘secure’ supplies.”

The Trans-Adriatic project

The Trans-Adriatic Pipeline project, known as TAP, is a venture between Statoil, EGL and EON, and it is scheduled to transfer natural gas from the Caspian states to the European markets through Turkey, Greece and Albania. Statoil is already involved in Azerbaitzan through its 25 percent of the Shakh Deniz reserve, and full-time production is to begin by 2015.

The pipeline will be in most part a series of extensions in the existing pipeline connections between Greece and Turkey before moving on to Albania and Italy and possibly Montenegro.

TAP aims to find the middle ground between the two big competitors, namely South Stream and Nabucco. From one point of view it includes some of the biggest names in the European energy market, and on the other, strives to increase independence both from the Russian gas reserves and from the indirect American energy politics towards the European Union. All of course depends on the ability of the consortium to acquire the necessary and long-term quantities from Azerbaitzan and the Caspian region—a difficult task.

The head of communications of the TAP consortium, Michael Hoffmann, commented regarding the nature of the competition between TAP project and others, “The question is not about ‘if’ all projects can be realized; the question is more about ‘when.’ In the long term, the wider Caspian and Middle Eastern regions can provide enough gas to fill all the pipelines, allowing all projects to coexist. Really, the question is about which project will be built first and who will be the first to open the Southern Gas Corridor.”

The Poseidon project

The “Poseidon” natural gas pipeline is the Western part of the ITGI pipeline that is a Turkish-Greek-Italian energy project that will transfer 11.5 billion cubic meters of gas per year, from which 2.5 billion will be allocated for the Greek market and another 8 billion for the Italian one. Poseidon is a 203 km undersea link to Otranto-Italy, and the whole ITGI system will supply the aforementioned markets with Azeri natural gas.

ITGI already connects Turkey and Greece (since early 2008), and the Poseidon link will be fully operational by 2012 to 2014 with a total cost of around 500 million euros.

DEPA and the Italian company EDISON each own 50 percent of Poseidon. The European Union has characterized the ITGI project as an “absolute priority one.”

This project is a direct competitor to the TAP one, and again it strives to be the middle ground between the two gigantic projects of South Stream and Nabucco. Its eventual success—as in the case of TAP—depends on the ability to take hold of the Azeri gas reserves in long-term contracts.

The Greek alternate minister, Ioannis Maniatis, speaking on behalf of his government in a recent international energy conference, blamed Brussels for overly promoting Nabucco and claimed that the Southern gas corridor should be envisioned on purely financial and technical viability data and not on political criteria. In that sense he explained that the only sensible project that fits the aforementioned is the ITGI pipeline connecting Turkey-Greece and Italy and which is going to be filled mostly by Azeri gas, depending on the progress of the Shakh Deniz 2 gas field.

The pipeline game will be fierce

Overall, the plans as they have been laid by all major corporations are based on the assumption that Azerbaitzan has enough quantities through its Shakh Deniz 2 field to cover the supply for them. By excluding the South Stream, which seems to rely on the unified gas system of the Russian Federation, the rest of the projects will fiercely compete on one reserve basically, unless a conclusive agreement is being reached—something very difficult to be achieved, taking into account the actual reserves and the divergence of the existing business and political interests. It has also to be noted that Iran’s reserves are out of the game, due to the international sanctions of that country, and the Iraqi reserves have a ways to go before they can be securely exported to other markets.

In such a case, it is not unthinkable that pipeline projects will merge, or that some players will exit the race. Moreover, the geopolitical balance of the region along with the wider global energy politics will complicate even further the situation before any final decision is being made.

The only certainty so far, is that all entities involved in this pipeline game will compete for more political back up, both on a national level but also on a trans-national one, and especially on the E.U. level.

Lastly, the upheaval in North Africa and the Middle East adds another significant worry for energy policy makers in Europe who have to act fast before an energy security crisis becomes a reality due to the dependence of most E.U. states on producers from those regions. An estimation that can be reached for the moment is that by taking into account the business schedules of most companies involved in the projects, the series of elections in many participating countries and the situation in the Mediterranean Basin, most of the final decisions will take place between mid-2011 and mid-2012, and these actions will definitely shape the energy landscape of Europe for the coming decades, bringing about political repercussions as well.