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Diplomatic Standoff Threatens Black Sea Gas Project

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A Black Sea gas project has been ensnared in tensions arising from Austria’s objection to Romania’s bid to join the Schengen area, Europe’s border-free zone. OMV, an Austrian energy company, holds a stake in the Neptun Deep gasfield off Romania’s coast, which has the potential to produce 10 billion cubic meters of gas annually starting in 2027. Romania’s Prime Minister, Marcel Ciolacu, recently declared that his government would not amend a law governing offshore gas sales, a change that OMV opposes, as long as Austria continues to veto Romania’s Schengen membership.

Ciolacu made it clear that Romania would proceed with the current form of offshore law, while advocating for Romania’s Schengen entry in various forums, including European courts if necessary, should Austria maintain its stance. OMV had previously taken Romania to international arbitration after Bucharest modified the law regarding offshore gas sales, granting the government the power to veto private contracts in “emergency situations.” The Neptun Deep project is jointly controlled, with the Romanian state holding a 50% share and the remaining half owned by OMV Petrom.

Ciolacu had earlier threatened legal action against Vienna, seeking damages of up to 2% of Romania’s economic output, citing Romania’s exclusion from Schengen for over a decade past its initial accession date.

Romanian Energy Minister Sebastian Burduja emphasized that the dispute should not be oversimplified as a mere exchange of favors, stating that it’s not a matter of “you give us Schengen, we give you gas from the Black Sea.” The gas law, according to Burduja, allows government intervention in commercial dealings with private customers in specific emergency situations, a provision that OMV found ambiguous.

Nevertheless, Burduja acknowledged the disappointment among Romanians regarding their exclusion from the Schengen area. Austria’s veto appeared to be a political decision, unrelated to Romania’s preparedness.

OMV refrained from commenting on “political decisions” but expressed hope that Romania would soon gain entry to the Schengen zone, highlighting the freedom to travel across borders as a key strength of the European Union.

The company has privately advocated for the Austrian government to support Romania’s and Bulgaria’s Schengen accession. OMV is a significant contributor to the Romanian economy, employing approximately 8,000 people in the country. Its joint venture, OMV Petrom, is the largest taxpayer in Romania, accounting for roughly 7% of tax revenues in 2022, underscoring the company’s importance to the nation.

A senior executive at OMV indicated that they remain undeterred by recent threats from Bucharest. They believe the Neptun Deep gas venture in the Black Sea is secure due to its critical role in ensuring energy security for Romania and the European Union.

Austria is gearing up for elections in 2024, and the hard-right nationalist Freedom Party has consistently led in the polls. This has placed pressure on the center-right government of Karl Nehammer to adopt an even more stringent stance on immigration. Nehammer has repeatedly asserted that Romania lacks the capability to secure its borders against illegal migration.

Romania is also heading for elections next year, making it challenging for either side to backtrack on their positions. Burduja stressed the adverse impact of Romania’s exclusion from Schengen, including long lines at airports and border crossings, which has imposed an economic cost on the nation.

Disputes surrounding gas legislation are not the sole factors potentially delaying the Neptun Deep exploration, which may still be years away. As tensions escalate in the Black Sea, with Ukrainian actions in Crimea and Russian activities affecting ports along the Danube River, the security situation for the planned construction phase, set to commence next year, could become increasingly challenging. The target date for the gas field’s exploitation is 2027.

Nonetheless, Burduja asserted Romania’s commitment to safeguarding the Neptun Deep project and pointed out that companies had made a final investment decision in June. He emphasized that the gas production would enhance regional security, benefiting not only Romania but the entire region, including Austria. Furthermore, he noted that this €4 billion investment would reduce European dependence on Russian gas, a development that Russia would likely closely monitor, potentially seeking to delay or impede the project.

The diplomatic standoff surrounding Romania’s Schengen entry has cast a shadow over the Black Sea gas project, raising concerns about its progress. The Neptun Deep project, although vital for regional energy security and European gas diversification, faces challenges not only from political disputes but also from an increasingly complex security landscape in the Black Sea region.

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