Romania threatens Black Sea gas project over Austria’s Schengen veto

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A gas project in the Black Sea is caught up in a diplomatic spat over Austria’s opposition to allowing Romania into Europe’s border-free Schengen area.

Austrian energy company OMV is a part owner of the Neptun Deep gasfield off Romania’s coast, which could pump 10bn cubic metres per year as of 2027. Romanian prime minister Marcel Ciolacu last month said his government was unwilling to modify a law governing offshore gas sales — which OMV has objected to — as long as Austria keeps vetoing his country’s Schengen entry.

“We will . . . move forward based on the current form of the offshore law, just as Romania will continue to support its arguments regarding the accession to the Schengen area, including in the European courts, if Austria does not change its position”, Ciolacu told journalists after meeting an OMV delegation in Bucharest on September 18.

OMV in June took Romania to an international arbitration court after Bucharest changed the law governing offshore gas sales to guarantee a government veto over private contracts in “emergency situations”. The Romanian state controls 50 per cent of Neptun Deep, the other half being owned by OMV Petrom.

Ciolacu previously had threatened to take Vienna to court and claim up to 2 per cent of his country’s economic output in damages stemming from Romania being kept outside Schengen for more than 10 years after its initial accession date.

Romanian energy minister Sebastian Burduja told the Financial Times that the dispute should not be reduced to a “tit for tat” in the sense that “you give us Schengen, we give you gas from the Black Sea”. He said the gas law allowed the government to “intervene” in commercial relations with private customers in “certain emergency situations”, which OMV claimed are not entirely clear.

But Burduja also said that Romanians “were extremely disappointed” about not joining Schengen. Vienna’s veto “seemed like a political decision . . . that had nothing to do with our country’s preparedness”.

OMV declined to comment on “political decisions”, adding it was “hopeful” that Romania would soon be welcomed into the Schengen zone. “A key strength of the EU today is the freedom to travel across borders.”

The company has quietly lobbied the Austrian government to allow Romanian and Bulgarian accession to Schengen. OMV employs about 8,000 people in Romania. Its joint venture in the country, OMV Petrom, in which it is the majority shareholder, is Romania’s largest taxpayer at about 7 per cent of tax revenues in 2022.

A senior executive at the company said they were relatively untroubled by the recent threats emanating from Bucharest. OMV’s gas venture in the Black Sea was safe, they felt, given its critical importance to Romanian and EU energy security.

Austria faces elections in 2024, and the hard-right nationalist Freedom party has led in the polls for a year, creating pressures on the centre-right government of Karl Nehammer to toughen his stance on immigration even further. Nehammer has repeatedly said that Romania is incapable of securing its borders to block the entry of illegal migrants.

Romania also faces elections next year and cannot easily back down either.

“Put yourself in our shoes and you’ll see it’s not right and not pleasant to stand in lines at airports, at border stops,” Burduja said. “And it imposes an economic cost on the country, no doubt.”

Squabbles over gas legislation are not the only reason Neptun Deep exploration may still be many years off. As the war has intensified in the Black Sea, with Ukrainian attacks on Crimea and Russia striking Odesa and ports up the Danube river, the construction phase that was supposed to start next year could face security challenges. The target date for the field’s exploitation is 2027.

Still, Burduja said Romania was prepared to help to defend the Neptun Deep project and felt vindicated by companies taking the final investment decision in June.

“That gas for sure will strengthen regional security,” he said. “It’s not just for Romania, it’s for the entire region, including Austria.”

“It’s a €4bn investment that will reduce European gas dependence on Russia,” Burduja said. “I would imagine Russia will look carefully on how this investment evolves, and if they can delay it, or stop it, they might try that . . . Romania will protect its territory.”