Russia clings tightly to European energy

Two new reactors are to be built at the Czech Republic's Temelin nuclear power plant. The US is bidding for the tender, but a Russian consortium is favourite.

Revitalising the Temelin nuclear power plant is a big part of the Czech agenda to radically boost its nuclear power production. David Veis / CTK via AP Images
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Within the perimeter fence of the Temelin nuclear power plant in the Czech Republic, an undeveloped area of land sits incongruously beside the towering reactor buildings and cooling towers.

Left largely unchanged for decades, there are just a few trees in this otherwise featureless piece of southern Bohemia, an area earmarked long ago for Temelin's yet-to-be-built reactors three and four.

Despite its nondescript character and apparent insignificance, this small tract of land, and the question of who ends up building upon it, is engaging the interest of some of the biggest names in global diplomacy.

None other than Hillary Clinton, the United States secretary of state, was in the Czech capital this month to argue in favour of Westinghouse Electric Company in its bid to win a tender to construct two reactors on the area.

Westinghouse, the US-based branch of Japan's Toshiba, is up against a Russian consortium that includes the Moscow-based engineering company Atomstroyexport and Skoda, headquarted in the Czech Republic but Russian-owned.

France's Areva, unsuccessful when it bid to build the UAE's nuclear power plants, has already been excluded from the tender by CEZ, the Czech Republic's all-powerful energy company.

While the US$10 billion (Dh36.73bn) Temelin deal is important in itself, not least because it will create thousands of jobs for whichever country wins, it has a wider significance that helps explain why a political heavyweight such as Mrs Clinton was drafted in.

For Westinghouse, winning Temelin would mean the first European contract win for its AP1000 reactor, potentially helping the US company secure further orders on the continent. A loss could result in the AP1000 being shut out of the continent completely.

Temelin also demonstrates the continued economic and political shadow Russia casts over Central and Eastern Europe, more than two decades after Soviet-backed communists were driven out as revolution swept the continent.

Just as the communists have recently enjoyed a mini-resurgence in parts of the region - this time thanks to the ballot box - so, in a faint echo of old times, Moscow has shown in recent years that it will still flex its muscles to show who is boss.

Although technical factors were officially to blame, the sharp drop in oil supplies from Russia that the Czech Republic suffered four years ago, after Prague signed an agreement with the United States on missile defence, indicated to some that energy supplies may be used to try to influence policy.

As Mrs Clinton's aides pointed out to media, the Czech Republic relies on Russia for the fuel for its two nuclear plants, for 70 per cent of its gas and for 60 per cent of its oil. Asking a Russian consortium to build the new power plant would, they implied, further put Prague at the mercy of Moscow.

"We are encouraging the Czech Republic to diversify its energy source and suppliers in ways that are economically sustainable and environmentally sound," Mrs Clinton said at a press conference in Prague's baroque Czernin Palace, home to the Czech foreign ministry.

While a Russian-built reactor could potentially be supplied with American nuclear fuel, the selection of Atomstroyexport would nonetheless seem to go against the grain of recent efforts to stem Russia's energy influence in Central Europe.

In October, Poland finalised financing for its first liquefied natural gas terminal, which in two years' time is set to start importing gas from Qatar, reducing the European country's dependence on Gazprom, the company that holds a monopoly on gas exports from Russia. The need to diversify supplies was illustrated in 2009 when Gazprom cut supplies to Ukraine in a pricing dispute, affecting several other European nations.

In a further effort to cut the company down to size, the European Commission this year launched an antitrust probe over Gazprom's pricing policies in more than half a dozen EU countries.

While strengthening its position by recently starting construction of its new South Stream pipeline, which will supply Greece, Italy and Austria with gas, Gazprom has also been forced this year to renegotiate prices in several European nations as improved gas supplies globally reduce its bargaining power.

The Czech Republic has, like its neighbours, been trying to stem Russian influence on gas supplies, its domestic gas distributor having recently won a court case against Gazprom over restrictive contracts.

Continuing the theme, Mero, a Czech oil company, recently moved to limit dependence on Russian oil by investing 5 per cent in the Transalpine pipeline, which brings Middle Eastern oil into Europe from the Mediterranean.

Despite these initiatives, many feel Atomstroyexport is the favourite to win the Temelin tender.

The Russian consortium's members are said to have closer ties to Czech companies, and the Czech president, Vaclav Klaus, has publicly welcomed the Russian bid.

So for all Gazprom's legal struggles in Europe, and in the face of efforts in Central Europe to diversify oil supplies, Russia's energy hold over Central Europe shows few signs of loosening.