EUROPE AND TURKEY WILL ONLY HAVE THEMSELVES TO BLAME IF EU LOSES ACCESS TO CASPIAN GAS
By Alexander Jackson

APA

Nov 24 2009
Azerbaijan

For all the talk of Turkey moving away from Europe, the real story
of a Western ally slowly turning East has been ignored. In recent
weeks Azerbaijan has undertaken a series of moves which could, in the
long term, lead to the loss of EU access to Caspian gas and a major
reorientation in the region’s geopolitics.

If this occurs then Europe and Turkey will only have themselves to
blame. Europe has repeatedly failed to make progress on the Nabucco
project, which would carry Caspian and Middle Eastern gas to the heart
of Europe and partially liberate it from reliance on Russian gas. This
hugely expensive and ambitious project required firm political and
financial commitments which Brussels has not delivered. Instead,
individual European governments have been successfully courted by
Russia’s Gazprom for its rival South Stream pipeline under the Black
Sea. Turkey’s obstructionism and failure to acknowledge the links
between energy and conflict-resolution in the region make it also
responsible.

The Nabucco problem has been one of demand – insufficient commitment
by the EU – but also one of supply. The only confirmed source of gas
is Azerbaijan. Other possible suppliers – Iran, Central Asia, Iraq,
and Egypt – have their own specific problems.

Now it looks as if even Azerbaijan is starting to slip away. In June,
Azerbaijan’s state energy company SOCAR signed a deal with Russia’s
Gazprom. The quantities involved (500 million cubic metres (mcm))
were insignificant, but this was a warning shot to Brussels and Ankara
to hurry up with Nabucco. In November Baku has upped the stakes by
making some serious overtures elsewhere.

Firstly, SOCAR signed a deal with Iran, promising over 500mcm a year
from 2010 (Press TV, November 12). Like the Gazprom deal, this is
another placeholder, since the amounts involved are negligible. The
significance is political: the agreement holds open the possibility
of increasing the contracted amount in years to come. Iran is also
a pariah in the West, and expanding energy ties with it is a clear
message from Baku. Secondly, Azerbaijan agreed to ship 7 to 8 billion
cubic meters (bcm) of its gas annually via tankers in a compressed form
to Bulgaria, bypassing Turkey (Eurasia Daily Monitor, November 16).

Shortly afterwards, Baku made its bluntest threat yet. "If Europe
takes too long putting together a solution, then all the gas in the
Caspian will go to Asia," said a SOCAR official. "It’s more serious
than it seems" (Bloomberg, November 19). China – which has been
hungrily expanding its energy presence in Central Asia recently –
is the obvious target market. Currently, the infrastructure to send
Azerbaijani gas to China does not exist. But SOCAR’s threat seems to
be genuine.

Ironically, the main obstacle to Azerbaijani gas heading east is also
the main obstacle to Nabucco. A Trans-Caspian Pipeline (TCP) between
Turkmenistan and Azerbaijan, long in the planning, is still far from
being built. Russian and Iranian objections are partly responsible;
so is a recent dispute between Ashgabat and Baku over the ownership
of disputed gas fields. Turkmenistan has even threatened to take
Azerbaijan before a court of international arbitration.

Alarmed at the prospect of losing Turkmen gas for the foreseeable
future, the US has taken the unusual step of offering to mediate in
the dispute (APA, November 18). If the dispute is resolved and a TCP
is built, it may ultimately be used to send Azerbaijani gas east,
not Turkmen gas west.

Why the sudden activity by Baku? Partly, the moves are designed to
call Europe’s bluff and provoke it into action on Nabucco.

Unfortunately, Brussels doesn’t seem to have heard the message. The
timing of the moves, however, indicates at a deeper and more alarming
reason: growing disenchantment with Azerbaijan’s longstanding ally,
Turkey.

For years Ankara has obstructed Nabucco by insisting on preferential
price tariffs and a share of the allocated gas for its own domestic
market. Negotiations have continued for some time, and Baku was
willing to politely discuss the issue – up to a point. This changed
when Turkey’s government decided to press on with normalising relations
with Armenia, before any progress has been made on the Nagorno-Karabakh
conflict between Armenia and Azerbaijan. Turkey’s decision has been
widely viewed in Azerbaijan as a betrayal of the fraternal relationship
between the two countries, and prompted Baku to take an increasingly
tough stance on gas negotiations. Ankara needs Nabucco to fulfill its
goal of being a regional energy hub, and appears unwilling to back
down. Whilst previously the disagreement was largely commercial,
Baku’s fury over the ‘Armenian thaw’ has made the pricing dispute
extremely political.

There is a very real risk that the sense of inertia created by these
obstacles will finally kill off Nabucco’s prospects. Although a deal
with Turkey will almost certainly be struck in the end, the long-term
damage will have been done.

The implication could well be Azerbaijan’s gradual shift away from
the West’s geopolitical orbit. The role of oil and gas pipelines in
tying states together is sometimes overstated but, in the long run,
Baku could find itself closely linked with Moscow and Tehran through
commercial relationships. Oil and gas underpin Azerbaijan’s economy:
its energy ties inevitably influence its foreign policy.

As always in the Caspian region, business is politics. The tension
over Nabucco has been building for some time, but the immediate
trigger of Azerbaijan’s energy shift was the Turkish decision to
negotiate with Armenia without progress on Karabakh. Unless Ankara
alters its position, there is no reason to doubt that Azerbaijan’s
long-term gas strategy will change.

Policymakers in Brussels and in Washington should acknowledge the
dangers involved and commit themselves to resolving this situation
through serious, frank dialogue with Ankara and Baku. Failure to act
now will have severe consequences for energy security, and geopolitics,
in the long term.