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PROGRESS IN TURKISH-AZERI TALKS ON GAS PRICES AND TRANSIT
Saban Kardas
Jamestown Foundation
Aug 10, 2009
Turkey's Secretary of State for Energy Taner Yildiz (L) and
Azerbaijan's State Petrol Company SOCAR's president, Rovnag Abdullayev,
give a press conference on Nabucco's gas supplies project in Istanbul
on July 10, 2009.
Following the signing of energy cooperation agreements between
Turkey and Russia, Turkish Energy Minister Taner Yildiz continued his
"energy diplomacy," by visiting Azerbaijan. Prior to departing for
the Nakhchivan Autonomous Republic, the Azerbaijani enclave between
Turkey and Armenia, on August 8 Yildiz stressed that his trip followed
the agreements Turkey recently signed on both the Nabucco project
and South Stream. He also added that as part of intensive energy
diplomacy, he will travel to Syria this week to sign an agreement
for the construction of a pipeline that will connect the Arab gas
pipeline with the Turkish grid (Anadolu Ajansi, August 8).
In Nakhchivan, Yildiz met with the President of Nakhchivan
Vasif Talibov and the head of the Azerbaijani oil company SOCAR,
Rovnag Abdullayev. Turkey and Nakhchivan signed a memorandum of
understanding on laying a pipeline from the East Anatolian city of
Igdir to Nakhchivan, which will carry half a billion cubic meters
(bcm) of Azeri gas annually to Nakhchivan (Cihan, August 8).
Another major part of Yildiz's agenda were talks between Turkey and
Azerbaijan concerning the gas trade and transportation. Although the
negotiations have been under way for some time, Ankara and Baku have
been unable to reach an agreement on three inter-related issues:
re-pricing the gas Turkey imports from Azerbaijan's Shah Deniz I
reserves, setting the price and volume for Turkey's imports from the
Shah Deniz II, and developing a regime for the transit of the gas
through the Turkish territory (www.cnnturk.com, August 8).
These issues have implications beyond bilateral relations between
Ankara and Baku. In the context of the discussions concerning the
construction of alternative pipelines carrying Caspian basin gas
to European markets, there is growing interest in tapping into
Azerbaijan's resources, particularly the Shah Deniz II field,
which is expected to be operational by 2016. Whereas the European
companies are interested in purchasing Azeri gas to feed Nabucco,
Russia has been trying to lock in the same resources through a
long-term contract to supply its alternative South Stream project
and to pre-empt Nabucco. Baku is looking to secure the best deal from
this competition, and diversify its export routes as much as possible,
which led it to export a symbolic volume of gas to Russia through a
non-binding agreement in June, which seems to have paid some tactical
dividends (EDM, July 17).
Azerbaijan's decision is considered as a "flexible tactical move"
on Baku's part (EDM, July 2). The agreement demonstrated to Ankara
and its Nabucco partners that Azerbaijan was not short of options
for the sale and transport of its gas. Indeed, the urgency induced by
the agreement served as a wake-up call for Turkey and other European
countries, which helped convince Ankara to end its stalling and open
the way to sign the Nabucco inter-governmental agreement (EDM, July 6).
Nonetheless, a second tactical goal of the Azeri-Russian agreement
has yet to bear concrete results: "the $350 price offer [which Russia
will pay for the Azeri gas] has set a benchmark that other importers
of Azerbaijani gas may have to bid against" (EDM, July 2). Indeed,
Baku's sudden move surprised many in Ankara at the time, leading to
speculation that Turkey might have to pay higher prices. Nonetheless,
when asked about the impact of the Azeri-Russian deal on the
Turkish-Azeri talks on re-pricing, Yildiz preferred to decouple the
two processes from each other. "How much does the [Azeri-Russian
agreement] affect the price? This question should be directed to
Abdullayev. We had submitted our offer before the agreement with
Russia, and we are still at the same position. Because, [we believe]
our price offer takes into account both sides' interests, and ensures
that the project remains feasible" (www.haberturk.com, July 10).
Ankara claimed that it offered a "fair" price to Baku, and it expected
this to be accepted (EDM, June 4). Apparently Turkey proved unable to
satisfy the expectations of the Azeri side, and Yildiz and Abdullayev
have held several meetings to discuss this issue. Ankara's reluctance
to revise the price for Azeri gas raises suspicions that, using its
geographic position as leverage, Ankara is resorting to "tactics of
extortion" to maximize its benefits at Azerbaijan's expense, which
might eventually undermine the prospects for Nabucco (EDM, July 2).
Nonetheless, Azerbaijan's ongoing talks with Turkey demonstrate
its willingness to export its gas to European markets independent
of Russian-controlled pipelines and its treatment of Nabucco as an
overriding national interest. However, the conditions that Ankara will
attach to the use of its territory for exports, including transit fees
and re-export rights, are a major factor influencing Baku's decision,
which raises a larger question about the Turkish government's position
on pipeline diplomacy.
After signing agreements on both Nabucco and South Stream,
Ankara maintains that the two projects are not necessarily
exclusive. Moreover, in response to charges that Turkey's agreement
with Russia, which granted South Stream the right to conduct seismic
feasibility studies in the Turkish zone of the Black Sea, was a
serious blow to Nabucco, Turkish officials maintain that "Turkey is
not a partner in the South Stream project and only allowed the use
of its territorial waters in the Black Sea, while the country is a
partner state in Nabucco." They also added that Turkey still considers
Nabucco as a strategic priority (Hurriyet Daily News, August 7).
If Turkey indeed treats Nabucco as a priority project, one area where
it could tilt the balance in favor of Nabucco is to facilitate the
westward flow of Azeri gas. In this way, it could cement its ties to
Baku and reassure its Western partners of its commitment to Nabucco. No
agreement was signed during Yildiz's meeting, but the statements by
Azeri officials signaled a promising future. Abdullayev said that,
"we came close to concluding Turkey-Azerbaijan gas agreements. We can
soon finalize the issue of transit prices. Gas from Shah Deniz will
also come to Turkey, and will flow to Europe through Turkey. This
will support the two sister nations" (www.ntvturk.com, August 8).
From: Emil Lazarian | Ararat NewsPress
Saban Kardas
Jamestown Foundation
Aug 10, 2009
Turkey's Secretary of State for Energy Taner Yildiz (L) and
Azerbaijan's State Petrol Company SOCAR's president, Rovnag Abdullayev,
give a press conference on Nabucco's gas supplies project in Istanbul
on July 10, 2009.
Following the signing of energy cooperation agreements between
Turkey and Russia, Turkish Energy Minister Taner Yildiz continued his
"energy diplomacy," by visiting Azerbaijan. Prior to departing for
the Nakhchivan Autonomous Republic, the Azerbaijani enclave between
Turkey and Armenia, on August 8 Yildiz stressed that his trip followed
the agreements Turkey recently signed on both the Nabucco project
and South Stream. He also added that as part of intensive energy
diplomacy, he will travel to Syria this week to sign an agreement
for the construction of a pipeline that will connect the Arab gas
pipeline with the Turkish grid (Anadolu Ajansi, August 8).
In Nakhchivan, Yildiz met with the President of Nakhchivan
Vasif Talibov and the head of the Azerbaijani oil company SOCAR,
Rovnag Abdullayev. Turkey and Nakhchivan signed a memorandum of
understanding on laying a pipeline from the East Anatolian city of
Igdir to Nakhchivan, which will carry half a billion cubic meters
(bcm) of Azeri gas annually to Nakhchivan (Cihan, August 8).
Another major part of Yildiz's agenda were talks between Turkey and
Azerbaijan concerning the gas trade and transportation. Although the
negotiations have been under way for some time, Ankara and Baku have
been unable to reach an agreement on three inter-related issues:
re-pricing the gas Turkey imports from Azerbaijan's Shah Deniz I
reserves, setting the price and volume for Turkey's imports from the
Shah Deniz II, and developing a regime for the transit of the gas
through the Turkish territory (www.cnnturk.com, August 8).
These issues have implications beyond bilateral relations between
Ankara and Baku. In the context of the discussions concerning the
construction of alternative pipelines carrying Caspian basin gas
to European markets, there is growing interest in tapping into
Azerbaijan's resources, particularly the Shah Deniz II field,
which is expected to be operational by 2016. Whereas the European
companies are interested in purchasing Azeri gas to feed Nabucco,
Russia has been trying to lock in the same resources through a
long-term contract to supply its alternative South Stream project
and to pre-empt Nabucco. Baku is looking to secure the best deal from
this competition, and diversify its export routes as much as possible,
which led it to export a symbolic volume of gas to Russia through a
non-binding agreement in June, which seems to have paid some tactical
dividends (EDM, July 17).
Azerbaijan's decision is considered as a "flexible tactical move"
on Baku's part (EDM, July 2). The agreement demonstrated to Ankara
and its Nabucco partners that Azerbaijan was not short of options
for the sale and transport of its gas. Indeed, the urgency induced by
the agreement served as a wake-up call for Turkey and other European
countries, which helped convince Ankara to end its stalling and open
the way to sign the Nabucco inter-governmental agreement (EDM, July 6).
Nonetheless, a second tactical goal of the Azeri-Russian agreement
has yet to bear concrete results: "the $350 price offer [which Russia
will pay for the Azeri gas] has set a benchmark that other importers
of Azerbaijani gas may have to bid against" (EDM, July 2). Indeed,
Baku's sudden move surprised many in Ankara at the time, leading to
speculation that Turkey might have to pay higher prices. Nonetheless,
when asked about the impact of the Azeri-Russian deal on the
Turkish-Azeri talks on re-pricing, Yildiz preferred to decouple the
two processes from each other. "How much does the [Azeri-Russian
agreement] affect the price? This question should be directed to
Abdullayev. We had submitted our offer before the agreement with
Russia, and we are still at the same position. Because, [we believe]
our price offer takes into account both sides' interests, and ensures
that the project remains feasible" (www.haberturk.com, July 10).
Ankara claimed that it offered a "fair" price to Baku, and it expected
this to be accepted (EDM, June 4). Apparently Turkey proved unable to
satisfy the expectations of the Azeri side, and Yildiz and Abdullayev
have held several meetings to discuss this issue. Ankara's reluctance
to revise the price for Azeri gas raises suspicions that, using its
geographic position as leverage, Ankara is resorting to "tactics of
extortion" to maximize its benefits at Azerbaijan's expense, which
might eventually undermine the prospects for Nabucco (EDM, July 2).
Nonetheless, Azerbaijan's ongoing talks with Turkey demonstrate
its willingness to export its gas to European markets independent
of Russian-controlled pipelines and its treatment of Nabucco as an
overriding national interest. However, the conditions that Ankara will
attach to the use of its territory for exports, including transit fees
and re-export rights, are a major factor influencing Baku's decision,
which raises a larger question about the Turkish government's position
on pipeline diplomacy.
After signing agreements on both Nabucco and South Stream,
Ankara maintains that the two projects are not necessarily
exclusive. Moreover, in response to charges that Turkey's agreement
with Russia, which granted South Stream the right to conduct seismic
feasibility studies in the Turkish zone of the Black Sea, was a
serious blow to Nabucco, Turkish officials maintain that "Turkey is
not a partner in the South Stream project and only allowed the use
of its territorial waters in the Black Sea, while the country is a
partner state in Nabucco." They also added that Turkey still considers
Nabucco as a strategic priority (Hurriyet Daily News, August 7).
If Turkey indeed treats Nabucco as a priority project, one area where
it could tilt the balance in favor of Nabucco is to facilitate the
westward flow of Azeri gas. In this way, it could cement its ties to
Baku and reassure its Western partners of its commitment to Nabucco. No
agreement was signed during Yildiz's meeting, but the statements by
Azeri officials signaled a promising future. Abdullayev said that,
"we came close to concluding Turkey-Azerbaijan gas agreements. We can
soon finalize the issue of transit prices. Gas from Shah Deniz will
also come to Turkey, and will flow to Europe through Turkey. This
will support the two sister nations" (www.ntvturk.com, August 8).
From: Emil Lazarian | Ararat NewsPress