In 2005, a gas pipeline, running from Russia through Ukraine, supplying 25% of European energy markets, has been shut down. It seems like Europe felt a horrifying chill of the Russian winter coming from the remote prairies of merciless Siberia, flowing through the empty gas pipes.
Apparently the West got finally convinced that an increasingly assertive, anti-western and authoritarian Russia is a dangerously unpredictable energy (and political) partner. After these events, western capitals started to talk even more enthusiastically about diversifying European energy supplies.
Specifically, the West considers transporting abundant Caspian gas and oil resources from Kazakhstan, Turkmenistan and Azerbaijan via the Caucasus and Turkey to Europe, bypassing Russia. This relatively new project is called Nabucco Project. It has been circulating in Western political and business circles for quiet sometime already, with more or less intensity. While the West is still contemplating, the Kremlin has scored a couple more significant victories, thus tightening its grip on European energy markets. On March 15th, President Putin signed a deal in Athens with Bulgaria and Greece to transport Russian oil to the European Union via pipeline bypassing the strait of Bosphorus in Turkey.
The 178 mile long pipeline will go above land from the Black Sea port Burgas (Bulgaria) to Alexandroupolis (Greece) on the Aegean Sea and from there will be shipped to the rest of Europe by oil tankers. The estimated cost of the pipeline will be $1.2 billion. A Russian consortium will hold 51% of the stakes. Bulgaria and Greece will have 24.5% of the stakes each.Religious and historical factors definitely played their roles in reaching the deal. Despite of their membership in NATO and EU, both Bulgaria and Greece are seen as the most pro-Russian nations in European Union by the Russian political-economic establishment, based on their historical and religious ties with Russia.
First, these countries always allied themselves with Russian Empire in their wars against Turkey in the 18th, 19th and 20th centuries. Second, all of these three countries belong to the same, Eastern Orthodox Christian religious denomination, the fact that ideologically bankrupt Russia wrongfully started to play out in international politics to such an extent that Russian state media even called the new project “Orthodox Christian Pipeline” (“Pravoslavni Trubaprovod”).This new energy deal resembles an earlier huge gas deal reached between Russia and Germany under Chancellor Gerhard Schroeder in September 2005. Named as The Northern European Gas Pipeline, it entirely bypasses the westward-looking and Russia-wary Poland and Baltic states of Estonia, Latvia and Lithuania.
The 744 mile long pipeline will cost $5 billion and run on the floor of Baltic Sea from the Russian coastal city Wyborg to the north-eastern German city Greisfwald. Russian gas giant Gasprom holds 51% of the shares in the project. German E-ON and BASF taking 24.5% each.Mr. Schroeder had signed this deal on his way out from the office, just before he was defeated in the German elections in September 2005 by current Chancellor Angela Merkel. Mr. Schroeder now happily works for a Russian Gazprom controlled consortium which appointed him as a Chairman of the Board of The Northern European Gas Pipeline Project. Many in Germany are outraged by former chancellor for leaving Germany and the rest of northern Europe even more dependent on Russian gas.
On March 15th, President Putin and Italian Prime Minister Prodi signed a deal in Italian city of Bari allowing Russian gas giant Gazprom to sell 3 billion cubic meters of gas to main Italian gas company ENI, thus immensely increasing Italian dependence on Russian gas in the future.However, contrary to expectations, this deal doesn’t give ENI access to Russian energy reserves, the fact that prompted further criticism and reservations in Italian business and political circles. Besides, Russia still refuses to ratify the European Energy Charter, denying European energy companies fair competition and access to Russia’s energy sources.
The sudden death of Turkmenistan’s authoritarian ruler Safarmurat Niazov (or as he was known at home and abroad “Turkmenbashi” - “Father of the Turkmens”) brings with it a possibility to alter the overall picture of European energy policy. Under Niazov’s rule Russia remained Turkmenistan’s main energy customer, buying cheap Turkmen gas ($66 per thousand cubic meter) and selling it in Europe for a four times higher price.
As of 2006, the price for Turkmen gas rose, reaching $100 per thousand cubic meter. However, the Kremlin still makes almost threefold profit on cheap Turkmen gas, while at the same time having an easy access to the country’s abundant gas recourses.
The coming to power of a new Turkmen administration under the leadership of President Gurbanguly Berdymukhammedov creates a momentum for change on Central Asian and European energy markets. The new government is giving hopeful signs that the country, so long isolated from the world, might be opening up, willing to attract western investments for its sluggish economy.
The Western interest for Turkmen gas is ever increasing, promising the country that it can export its gas to western markets at fair, world market prices, benefiting Turkmenistan’s inefficient and struggling economy. EU, American, Georgian, Turkish and Azerbaijani officials and diplomats are intensifying their work with new Turkmen government in Ashgabat over the possibility of the new project for the transportation of Turkmen gas to Europe through the Caspian Sea and the Caucasus.
The prospects of directing Central Asian energy resources to Europe opens a new chapter for the Caucasian states of Georgia and Azerbaijan, promising them with increased status and security on the international stage.
The International Oil, Gas, Infrastructures and Energy conference (GIOGIE) that opened in the Georgian capital Tbilisi on March 22 focused exactly on this issue. US Ambassador to Georgia John Tefft underlined the US government’s desire to diversify western energy supplies and suppliers and to promote the project of building new pipelines to transport Turkmen gas and Kazakh oil from the Caspian Sea, via Azerbaijan, Georgia and Turkey towards western energy markets.
The Caucasus, specifically Georgia and Azerbaijan, already host three western supported, sponsored and built pipelines of regional importance.
The first one, called Baku-Supsa pipeline, is of lesser scale. Its length is 550 miles, transporting about 125,000 barrels of crude oil a day from the Azerbaijani capital Baku to the Georgian oil terminal Supsa on the Black Sea coast before being shipped to western Europe.
The second one is of much larger scale, known as Baku-Batumi-Ceyhan pipeline. This 1,100 mile long pipeline transports 800, 000 barrels a day of Azerbaijani oil from the Caspian Sea to the Turkish port Ceyhan via the Georgian port Batumi.
The third one is a gas pipeline, named Baku-Tbilisi-Erzurum pipeline (also known as Shah-Deniz pipeline). It pumps gas from Azerbaijan’s giant offshore gas fields, crossing Azerbaijan and Georgia before reaching the Turkish city Erzurum. The pipeline’s output reaches 19 million cubic meters of gas per day.
The above mentioned Nabucco Project, along with already existing projects, is of great significance in several ways. It further increases the role of the Caucasus, particularly of Georgia and Azerbaijan, as an energy corridor for Western energy supplies flowing from Central Asia and eastern Azerbaijan.
It strengthens national independence of both Georgia and Azerbaijan and counterbalances the overwhelming political and economic influence of Russia in the south Caucasus. It creates one long, solid axis of economic, political and security cooperation stretching from Kazakhstan to the Mediterranean Sea (including Turkey) and brings this whole region even closer to Western political-economic sphere.
If the Nabucco Project is fully realized, it will be even more difficult for an increasingly aggressive Russia to try to regain its influence over any of the countries involved in the project, since it would break the chain of energy supply, jeopardize western energy security and provoke a swift reaction from the western world in defense of a victim country.
The Nabucco Project can break the Russian monopoly over the transportation of Central Asian energy resources to the West and thus weaken Russia’s political and economic clout as a main energy supplier in its dealings with Europe and ex-Soviet republics.
At the same time, the Nabucco Project enables Kazakhstan and Turkmenistan to divert their energy routes from Russia, strengthening their independence and benefitting their economies and populations from fair international prices for their energy commodities.
Western governments must fully understand the future potential of the Nabucco Project and more actively engage the Central Asian governments of Kazakhstan and especially of Turkmenistan to make this project come true. This is a project that creates an unique chance for peace, security, prosperity and further democratization of the Caucasus and Central Asia.
For Europe it is a unique possibility to establish alternative energy supplies. Needless to say, the project is equally significant for those that will receive supplies (Europe) and those who will supply and transport (Central Asia and Caucasus). It creates a fertile ground for short and long-term cooperation and partnership among the regions and this chance simply can not be missed.
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