19 February 2009
View by Rovshan Ibrahimov,
Editor of USAK Energy Review
The aftermath of the January energy crisis between Russia and Ukraine, which resulted in the interruption of the natural gas supply to some European countries, has once again made relevant the establishment of alternative energy routes from Russia to supply natural gas to Europe. Additionally, alternatives are also needed to Ukraine, through which Russia transported about 80% of Europe's gas. In this case, the actual construction of the natural gas pipelines `North Stream` and `South Stream` again rise. Both projects will guarantee the unimpeded transit of natural gas through pipelines which will be laid on the seabed (of the Baltic Sea and the Black Sea). But these pipelines do not provide an alternative to Russian gas, and so a possible alternative for Central and Eastern European countries could be the Nabucco gas pipeline project, which plans to export gas from the Caspian Sea basin states and perhaps from Iran, Iraq and Egypt in the future.
* Azerbaijan's Position
Despite the large number of potential gas suppliers to Europe, the reality is perhaps only Azerbaijan is. Once the offshore Shahdeniz fields were discovered to contain large deposits of natural gas, it was decided to begin construction of the Baku-Tbilisi-Erzurum gas pipeline, through which the gas would be exported from Azerbaijan to Turkey. Incidentally, this is considered a continuation of Nabucco pipeline. At present, Azerbaijan is exporting gas to Georgia, Turkey, and Greece, and it is expected that Azerbaijani gas will begin exporting to Italy and Bulgaria.
Azerbaijan is not particularly enthusiastic about participating in the Nabucco project. At the moment, the country possesses the transport infrastructure to export its own gas outside Russian territory, and the Nabucco pipeline would be just one of its additional transport corridors. Azerbaijan has implemented a prudent policy following August's five day war in Georgia. As the Western countries, led by the United States, did not support Georgia although the country developed in line with Western values following the Rose Revolution and zealously desired to integrate into Euro-Atlantic structures. In this case, Azerbaijan does not wish to risk and to spoil its relations with Russia, which has a strong influence on the Nagorno-Karabakh conflict.
In addition, Russia, which also knows that the only potential supplier for the Nabucco pipeline is Azerbaijan, invited this country to sell all its extra gas to Russia at European prices. In this case, to export gas in the Russian direction seems more favorable to Azerbaijan, not only politically but also economically.
As a result of all these events, Azerbaijan at the Fourth Summit on Energy Security in Baku refused to sign and required items relating to Nabucco to be removed from the final document. Then, President Aliyev at the Conference on Nabucco in Budapest in January 2009 declared that Azerbaijan hopes to advance Nabucco with the cooperation of his state, and is waiting for some concrete steps towards integration with the European Union, as well as for practical steps by the EU toward the realization of Nabucco.
As seen, Azerbaijan is not going to take concrete steps until the USA and EU do so first. Azerbaijan also hopes that the EU and the USA will be more determined to promote the implementation of the Trans-Caspian gas pipeline. It should be noted that the development of Azerbaijan's new energy strategy shows the country expects to become a transit state. In this case, Azerbaijan may be a transit country for energy supplies from Kazakhstan, Uzbekistan, and Turkmenistan, although this would require the construction of an underwater pipeline to the Azerbaijani coast. Azerbaijan has already taken practical steps to establish relations with Turkmenistan, but further steps are necessary to win the support of the USA and the EU. At the moment, concrete steps have not been taken.
* The European Union's Position
The EU as a structure should be interested in the realization of Nabucco, especially because this pipeline will reduce dependence on Russia. In addition, the project could be seen as a tool to strengthen the common EU energy policy. It is no secret that the EU member states prefer to act in accordance with their national interests in this area, thus adversely affecting the further integration process within the Union. However, as events show, the authorities of the EU are limited to only the expression of their support in this project. Even more confusing was the situation after some deputies of the European Parliament supported the proposal to invite Russia to participate in Nabucco. The mere suggestion is frivolous, and shows the attitude of the EU to the project, since the main purpose of Nabucco pipeline is to be an alternative to Russia, guaranteeing other sources of gas imports.
Perhaps one reason that the EU does not want to directly participate in this project lies in the fact that the members do not have enough coordination in foreign policy and hence energy. In addition, the project would relate only to certain countries in Central and Eastern Europe, not the EU as a whole, and may, therefore, not attract due attention from the EU. On the other hand, participation in Nabucco could contribute to the development of common policies on several fronts. Despite the high cost of the project, the political dividends would offset the cost of funding this project.
Azerbaijan and Turkmenistan's participation in this project depends on the strength of the EU's will to support their position.
* Turkmenistan's Position
After the death of the first President of Turkmenistan, Turkmenbashi, the new President Berdymuhamedov began an active policy in the energy field, due to the country's gas exports from Central Asia via Russia. As a monopolist in the transit of Turkmen gas, Russia has had an opportunity to adjust prices, which was not welcomed in Turkmenistan.
Turkmenistan has seen the establishment of alternative routes to export its own gas as a way out of this situation,. Besides the multi-year agreement signed with Russia, Turkmenistan has also entered into similar agreements with China and Iran. In addition, it has signed a Memorandum on the construction of the Trans-Afghan pipeline with Afghanistan and Pakistan, improving relations with Azerbaijan and reopening negotiations on the possible construction of a Trans-Caspian gas pipeline.
These developments have forced Russia to take drastic steps to guarantee the 50 billion cubic meters of imported Turkmen gas. The parties also came to a conclusion on the construction of the Caspian pipeline from Turkmenistan to Russia via Kazakhstan. Russia also guaranteed to pay for Turkmen gas at higher prices and kept its word.
Along with the fact that with this step Russia hampered Turkmenistan's ability to export its gas to European markets via an alternative corridor, the availability of gas in Turkmenistan is another issue, and it is uncertain if the country will fulfill the gas to its partners in accordance with its contracts. However, an independent auditor recently determined that the gas reserves in Turkmenistan have the necessary volume of gas to fulfill all agreements.
In this case, Turkmenistan may wish to join the Nabucco project. The country has already pledged 10 billion cubic meters of gas to the EU,, but, like Azerbaijan, Turkmenistan first wants clear guarantees and steps from its Western partners.