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08 May 2009, Friday
The southern energy corridor in context (2)
by Bala Celebi Senturk
The Georgia crisis ruined the idea of a secure alternative gas route
via Georgia, and thus Turkey, which does not have any other operable
gateways to energy sources
Complementing Russia’s foreign policy is Gazprom’s strategy of buying
into various energy markets and perpetuating its "divide and conquer"
maxim. The gas row between Russia and Ukraine, which escalated into
the "New Year’s crisis," exposed European disunion along differing
levels of Russian gas dependency and clashing concepts of energy
security. Russia, on the other hand, has been able to capitalize on
this.
Europe’s lack of unity over which energy policies to pursue stalled
legislation for preventing third parties such as Gazprom from
expanding control over strategic energy assets. Although the EU tends
to downplay this deficiency, it decreases the chances that a genuinely
European common strategy will come to fruition any time soon.
The Nabucco consortium includes several leading energy companies: the
state-run Turkish Pipeline Corporation (BOTAS), Bulgaria’s Bulgargaz,
Romania’s Transgaz, Hungary’s MOL, Austria’s OMV Gas and Power GmbH
and Germany’s RWE Supply and Trading GmbH. As projected, Nabucco would
run through Georgia (or any other alternative transit route, such as
Iran), Turkey, Bulgaria, Romania and Hungary, and would terminate in
Baumgarten, Austria. On Jan. 25, 2008 OMV sealed a deal for a joint
venture with Gazprom for extending Baumgarten’s storage and
distribution capacity. Accordingly, Gazprom holds a 50 percent stake
there. Initially OMV insisted that this project had nothing to do with
Nabucco, although some took it as a sign that the Austrians were
secretly hoping that Russian gas could fill the pipeline if other
supplies did not. Yet a different train of thought seems to be more
plausible.
The Baumgarten facility, led by OMV, was planned to store Nabucco gas
and distribute it to other European consumers. Gazprom, in which the
Russian state has a 51 percent stake and which intends to sell its own
gas through its own pipelines, now shares control over the OMV
network, and thus is a stakeholder in its decision-making. As a
result, Gazprom, on the one hand, can decide which natural gas artery
(Nabucco or South Stream) should flow into the major European
terminal, and Russia, on the other, can steer decisions over which
role transit countries such as Turkey will play in the future supply
chain. With Gazprom’s participation in this venture, Russia has
improved access to information regarding price offers the EU is
extending to Azerbaijan, allowing Russia to trump the offers each
time.
Moreover, OMV has been buying into Hungary’s MOL. Considering Russia’s
significant share in OMV, any amount of OMV ownership of MOL again
translates into stakes for Russia’s energy giant. Even further
challenging the Nabucco project is the fact that OMV and MOL, together
with yet a third consortium member, Bulgargaz, have already signed up
to Gazprom’s South Stream project. If, under the current
circumstances, Nabucco were to materialize at all, Russia’s increasing
control over its planned supply chain would, first of all, diminish
the security-enhancing aspect of Nabucco, which is the reason it was
planned in the first place, and ultimately obstruct any Turkish plans
to assume a hub position in the planned supply route.
Prospects for Turkey
Summits prior to the upcoming "southern corridor" conference have
taken place against the backdrop of a range of partly correlated
developments, which have obscured prospects for a secure southern gas
corridor balancing Russian involvement, a prerequisite for a strong
Turkish posture in the future European energy structure. Russia’s
assertive politics against the crumbling facade of unity and
cooperation among Western opponents has been able to induce a shift in
the southern energy corridor concept for European energy security and
independence, which ultimately evolved to include Russia for strategic
reasons. The Georgia crisis ruined the idea of a secure alternative
gas route via Georgia, and thus Turkey, which does not have any other
operable gateways to energy sources. Inevitably, it accelerated the
pace of Turkish-Armenian rapprochement, yet alienated Azerbaijan, and
seemingly pulled it closer to Russia.
Energy triangle?
There are incentives on the Azerbaijani and Armenian sides for
exploring the pragmatic aspects of a potential trilateral
relationship. Its dependency on Russian energy forecloses any future
chances for Armenia to play an independent and significant role in the
region. But rapprochement with Turkey and Azerbaijan would change this
in several ways. It would free Armenia from its landlocked position,
as an effect of which its foreign policies remain myopic and based on
a limited worst-case-scenario perspective. It could elevate Armenia’s
role to an energy transit route for future pipeline projects, with
prospects for foreign investment in the modernization and expansion of
its infrastructure as in the case of Georgia. Turkey is already
working out arrangements for the US and the EU to extend financial aid
to Armenia. As of April 1 this year, Armenia’s natural gas prices will
rise gradually to European levels until 2010, in accordance with an
energy accord signed between Gazprom and ArmRosGazprom. Yet the
availability of Azerbaijani gas in the Armenian gas market would fuel
competition and would arguably keep Russian gas prices down at
reasonable levels in the future.
Reportedly Azerbaijan’s proven gas reserves have been revised up from
approximately 2 trillion cubic meters to 5 trillion cubic meters,
which makes it even more attractive. Azerbaijan would lose its
strategic importance for the West and, ironically, for Russia if it
moved closer to the latter, particularly in the energy sphere. The
Russian offensive in Georgia has forced Azerbaijan to rethink its
relations and priorities with the West. But Azerbaijan needs a Western
prospect as well, particularly because only this promises a more equal
footing in relations with Russia and on the Nagorno-Karabakh issue.
Azerbaijan will continue to press ahead with its choices only by
balancing Russia and the West, particularly regarding the energy
dimension of relations.
In the swiftly changing global system, Turkey is a regional power on
the rise. Over the last couple of years it has been able to shake off
the remains of a rigid foreign policy, previously enforced by the Cold
War paradigm. With its far-sighted, highly diversified and
multi-dimensional foreign policy based on the synthesis of others’
sensibilities, preferences and possibilities and its own interests,
necessities, priorities and capabilities, Turkey has evolved from a
highly functional Western military bulwark to a highly strategic
state, now able to balance various roles and power poles. However, if
Turkey is to consolidate itself as a pivotal energy bridge in the
region and wants to extend its influence among its Central Asian
kinsmen, it needs to have direct access to Azerbaijan. The shortest
route is through Armenia. Russia will profit from the normalization of
ties between Armenia and Turkey only if it does not involve a
comprehensive approach to disputes, which could tie Azerbaijan closer
to the two.
Rapprochement with Armenia must go hand-in-hand with a diplomatic
foray into Azerbaijan with a view to assuaging its concerns. Turkey
has to understand that a hasty rapprochement with Armenia without
consultations with its Azerbaijani counterparts will not only lift
Azerbaijan’s dual leverage on Armenia in the Nagorno-Karabakh issue,
but will turn this dual pressure toward Azerbaijan, as two recent
statements reflect. On the one hand, the Azerbaijani Defense Ministry
expressed concerns over Russian arms transfers to Armenia in January
this year. Russia’s motive for transferring arms to Armenia appears to
have been threefold. First, after the Georgia crisis Russia sped up
the implementation of its ambitious military modernization plans,
which include upgrading aging arsenals and acquisition of precision
"smart" weapons and modern communication gear. While rising oil prices
have enabled Moscow to almost quadruple its defense spending over the
last decade, modernization plans allowed Russia to sell older arms to
Armenia at domestic prices. Secondly, Russia presumably anticipates
the future possibility of NATO training camps and troop bases in
Georgia, which gives it incentive to beef up its Armenian outpost.
Based on an agreement for military cooperation signed in 1997, Russia
is Armenia’s military ally. Thirdly, Russia had seen Azerbaijan
channeling energy export revenues toward boosting its armed forces and
increasingly determining the balance of power with Armenia. Russian
arms sales tilt the military balance in the Caucasus in favor of
Armenia, Russia’s ally.
Most recently, on the other side, Azerbaijan warned that Turkey’s
Armenia venture may increase tensions in the region. Given the shift
in the balance of military power, in addition to dynamics exacerbating
Azerbaijan’s security dilemma, this is quite probable. Russia’s
military cooperation with Armenia indicates that the Nagorno-Karabakh
issue cannot be solved impartially. Turkey must reiterate its support
for Azerbaijan and communicate its incentives to restore ties with
Armenia on a bilateral basis. The coincidence of a meeting between
Armenian and Azerbaijani leaders and the "Southern Corridor — New
Silk Road" conference yesterday carries great symbolic value. A
positive outcome in the bilateral meeting will have an impact on the
future of the European southern corridor concept, and inevitably on
which role Turkey either must or can assume in the broader energy
structure. Without Azerbaijan, the second Turkish state, trilateral
energy dialogue is inconceivable.
The Turkmen window of opportunity
In early April, prior to the Ashgabat Energy Summit on Reliable and
Stable Transit of Energy, an explosion struck the Turkmen-Russian
Central Asian Center 4 (CAC-4) pipeline, temporarily suspending
Turkmen gas supply to Russia. The rupture, which Turkmenistan claims
happened due to GazpromExport’s sudden import cut (arguably because of
lower demand in Europe) and a sharp rise of pressure in the pipe,
curbed Russo-Turkmen dialogue for expanding energy relations. Russia
attributed the incident to worn-out infrastructure and Turkmen
negligence.
Previously Russia had expressed concerns over Turkmenistan’s failure
to set up a follow-up meeting with Russia after Turkmen President
Gurbanguli Berdimuhammedov’s visit to Moscow on March 25, 2009.
During the March visit the presidents had signed a dozen agreements on
enhancing cooperation at multiple levels, leaving aside the most
critical one, which called for the construction of a new "East-West
pipeline." From the Russian perspective this left the meeting
inconclusive. According to Russia’s plans, the new natural gas
corridor would run Turkmenistan’s gas to its Caspian coast, plugging
it into the existing, but old Caspian Pipeline, which already carries
Turkmen gas to Russia via Kazakhstan. Together, the East-West pipeline
and Caspian coastal conduit, once fully reconstructed and revamped,
would add at least another 20 billion cubic meters to the annual 45
billion cubic meters of Turkmen gas flow into Russia. From the Russian
perspective, these outlets would deliver the gas needed to feed
Russia’s ambitious pipeline projects, Nord Stream and South Stream,
which are to boost the vast volumes of gas exported to the major
European market. A day after the Nabucco Budapest Summit, Gazprom
deputy chief Alexander Medvedev had announced plans to enhance the
projected capacity of its South Stream by 50 percent from 31 billion
cubic meters annually to 47 billion. Securing Turkmen gas for its own
purposes would strengthen Russia’s project against any southern gas
corridors excluding its involvement. Thus, Turkmenistan’s attitude is
a serious blow to Russia.
Citing the lack of alternatives to Russia and the recent pipeline
explosion, the Turkmen president used the Ashgabat conference to
communicate Turkmenistan’s "sovereign right" to diversify export
routes and markets for its vast 75 billion cubic meters of produced
gas per year. In order to benefit from this outburst, Turkey will have
to boost its ties with Turkmenistan. Operable pipelines theoretically
exist linking Turkmenistan to Turkey via Iran. Such projects have to
be given a new impetus. Turkey’s foreign policy must consider the
recent developments as opportunities, rather than challenges, and must
integrate them to consolidate Turkey as a major regional player
politically and in the new great game for energy security. Turkey’s
own energy security is of the utmost importance by virtue of being an
underpinning of national security. At the domestic level privatization
policies must, therefore, be executed to a degree that allows Turkey
to maintain its sovereignty over its strategic energy assets and
energy companies, such as BOTAª.
* Bala Celebi Senturk is an energy strategy analyst who can be reached
at [email protected].
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