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BAKU BECOMES A QUESTION MARK FOR NABUCCO PROJECT
Jessica Powley Hayden
EurasiaNet
July 16 2009
NY
The Nabucco pipeline project took a major step forward when five
transit countries recently signed an agreement after years of
hesitation. But at least one wild card remains in the path of the
project's realization -- Azerbaijan. Although Baku has voiced strong
support for Nabucco, experts caution that the country's recent gas
deal with Gazprom could complicate Baku's ability to serve as a major
supplier for the long-planned pipeline.
Within Azerbaijan, reactions to the Nabucco agreement, signed July
13, have been outwardly warm. [For background see the Eurasia Insight
archive]. President Ilham Aliyev expressed hope for a gas transit deal
with Turkey "in the near future," the Turan news agency reported. On
hand for the signing ceremony, Minister of Industry and Energy Natig
Aliyev (no relation to President Aliyev) stressed that Baku remains
interested in all profitable export routes, including Nabucco.
No one disputes the importance of Azerbaijan in making Nabucco a
reality. With Iranian gas not an option, "if you [are] going to do
anything about Nabucco and start the project you have to be able to
rely on Azeri gas," Turkish international relations expert Soli Ozel
told Voice of America on July 13. [For background see the Eurasia
Insight archive].
In late June, however, Azerbaijan inked a deal with Russia's Gazprom
for gas from Stage 2 of the Shah Deniz field -- the same field that
Nabucco hopes to tap for its pipeline. The agreement stipulates that
other purchasers must outbid Gazprom. This provision could give Russia
another tool to stall -- or even to quash -- the Nabucco project,
which is intended to decrease Europe's reliance on Russia's gas. [For
details, see the Eurasia Insight archive].
Some analysts posit the Gazprom agreement could result in inflated --
and therefore unprofitable -- prices for Shah Deniz supplies. "This
[Gazprom] agreement with Azerbaijan is not the end of the Nabucco
project. But what will be the price?" Konstantin Simonov, general
director of the Russian National Energy Security Fund told New Europe
Magazine. "[President] Aliyev will try to blackmail Russia with Europe
and Europe with Russia. It's a very simple scenario."
According to some local media reports, Gazprom was willing to pay
a hefty price for Shah Deniz gas, as much as $350 per thousand cubic
meters. Such a high purchase price would seem to be rooted in political
considerations, rather than in sound business sense.
Some analysts speculated that the Gazprom deal signaled Azerbaijan's
reorientation towards Russia. But Baku's ongoing interest in
Nabucco casts doubt on the theory that Azerbaijan is moving back
into Moscow's orbit. "This is Azerbaijan being pragmatic, rather
than shifting its allegiances," said John Daly, a fellow with John
Hopkins University's Central Asia-Caucasus Institute in Washington,
DC. "I think that Azerbaijan has increasingly adopted an attitude
towards Western investors of 'show me the money,' rather than making
a full geopolitical realignment."
Other experts have pointed out that Baku can use its Shah Deniz gas
as leverage, particularly in its dealings with Moscow concerning
the Nagorno-Karabakh peace process. [For background see the Eurasia
Insight archive].
Still, Baku's deal with Gazprom has created uncertainty about the
availability of Shah Deniz gas for Nabucco. That, in fact, was part
of Gazprom's strategy, argued the Russian National Energy Security
Fund's Simonov. "Russia wants to react [to Nabucco] and that is why
we go to Azerbaijan and ask Azerbaijan to sell this gas from Shah
Deniz to us," he stated.
Azerbaijan must also take into account Russia's increasing
assertiveness in the region, underscored by last year's incursion of
Russian troops into Georgia. [For background see the Eurasia Insight
archive]. The war disrupted Baku's oil exports and resulted in an
estimated loss of over $1 billion in revenue. "The war . . . indicated
Moscow's interest in retaining influence in the southern Caucasus,"
Daly added. Now, Baku will want "hard and fast information (and
investment) from the West, before needlessly alienating Russia."
One way of accomplishing that goal is to frame the 7.9-billion-euro
(about $11.1 billion) Nabucco project in commercial, not political,
terms. This week, Azerbaijani leaders and commentators attempted to
do just that. "I believe Nabucco is a project that meets both the
commercial and geo-strategic interest of Azerbaijan," Fikrat Sadigov,
a Baku-based political scientist told Day.az. "The fact that the
project bypasses Russia does not mean that it is aimed against Russia."
President Aliyev and Energy Minister Aliyev have taken care of late
to emphasize that future pipeline deals will be based on commercial
factors. Few, however, believe that Nabucco can be separated from the
political goal of reducing Europe's reliance on Russian gas. (The name
of the project itself comes from an Italian opera about liberation
from bondage). Those hardest hit by last winter's Russian-Ukrainian
dispute and the cut-off of Russian gas to Europe have been candid about
Nabucco's aims. The outgoing Bulgarian prime minister Sergei Stanishev,
for example, called the July 13 Nabucco agreement "a strong message
both politically and economically" for "the Bulgarian government and
the Bulgarian citizens" caught in this year's gas crisis, the Voice
of America reported
But for all the high hopes expressed at the July 13 signing ceremony,
without a firm and clear commitment from Azerbaijan for gas supplies,
Nabucco will be no closer to becoming a reality, analysts believe.
Editor's Note: Jessica Powley Hayden is a freelance writer based
in Baku.
Jessica Powley Hayden
EurasiaNet
July 16 2009
NY
The Nabucco pipeline project took a major step forward when five
transit countries recently signed an agreement after years of
hesitation. But at least one wild card remains in the path of the
project's realization -- Azerbaijan. Although Baku has voiced strong
support for Nabucco, experts caution that the country's recent gas
deal with Gazprom could complicate Baku's ability to serve as a major
supplier for the long-planned pipeline.
Within Azerbaijan, reactions to the Nabucco agreement, signed July
13, have been outwardly warm. [For background see the Eurasia Insight
archive]. President Ilham Aliyev expressed hope for a gas transit deal
with Turkey "in the near future," the Turan news agency reported. On
hand for the signing ceremony, Minister of Industry and Energy Natig
Aliyev (no relation to President Aliyev) stressed that Baku remains
interested in all profitable export routes, including Nabucco.
No one disputes the importance of Azerbaijan in making Nabucco a
reality. With Iranian gas not an option, "if you [are] going to do
anything about Nabucco and start the project you have to be able to
rely on Azeri gas," Turkish international relations expert Soli Ozel
told Voice of America on July 13. [For background see the Eurasia
Insight archive].
In late June, however, Azerbaijan inked a deal with Russia's Gazprom
for gas from Stage 2 of the Shah Deniz field -- the same field that
Nabucco hopes to tap for its pipeline. The agreement stipulates that
other purchasers must outbid Gazprom. This provision could give Russia
another tool to stall -- or even to quash -- the Nabucco project,
which is intended to decrease Europe's reliance on Russia's gas. [For
details, see the Eurasia Insight archive].
Some analysts posit the Gazprom agreement could result in inflated --
and therefore unprofitable -- prices for Shah Deniz supplies. "This
[Gazprom] agreement with Azerbaijan is not the end of the Nabucco
project. But what will be the price?" Konstantin Simonov, general
director of the Russian National Energy Security Fund told New Europe
Magazine. "[President] Aliyev will try to blackmail Russia with Europe
and Europe with Russia. It's a very simple scenario."
According to some local media reports, Gazprom was willing to pay
a hefty price for Shah Deniz gas, as much as $350 per thousand cubic
meters. Such a high purchase price would seem to be rooted in political
considerations, rather than in sound business sense.
Some analysts speculated that the Gazprom deal signaled Azerbaijan's
reorientation towards Russia. But Baku's ongoing interest in
Nabucco casts doubt on the theory that Azerbaijan is moving back
into Moscow's orbit. "This is Azerbaijan being pragmatic, rather
than shifting its allegiances," said John Daly, a fellow with John
Hopkins University's Central Asia-Caucasus Institute in Washington,
DC. "I think that Azerbaijan has increasingly adopted an attitude
towards Western investors of 'show me the money,' rather than making
a full geopolitical realignment."
Other experts have pointed out that Baku can use its Shah Deniz gas
as leverage, particularly in its dealings with Moscow concerning
the Nagorno-Karabakh peace process. [For background see the Eurasia
Insight archive].
Still, Baku's deal with Gazprom has created uncertainty about the
availability of Shah Deniz gas for Nabucco. That, in fact, was part
of Gazprom's strategy, argued the Russian National Energy Security
Fund's Simonov. "Russia wants to react [to Nabucco] and that is why
we go to Azerbaijan and ask Azerbaijan to sell this gas from Shah
Deniz to us," he stated.
Azerbaijan must also take into account Russia's increasing
assertiveness in the region, underscored by last year's incursion of
Russian troops into Georgia. [For background see the Eurasia Insight
archive]. The war disrupted Baku's oil exports and resulted in an
estimated loss of over $1 billion in revenue. "The war . . . indicated
Moscow's interest in retaining influence in the southern Caucasus,"
Daly added. Now, Baku will want "hard and fast information (and
investment) from the West, before needlessly alienating Russia."
One way of accomplishing that goal is to frame the 7.9-billion-euro
(about $11.1 billion) Nabucco project in commercial, not political,
terms. This week, Azerbaijani leaders and commentators attempted to
do just that. "I believe Nabucco is a project that meets both the
commercial and geo-strategic interest of Azerbaijan," Fikrat Sadigov,
a Baku-based political scientist told Day.az. "The fact that the
project bypasses Russia does not mean that it is aimed against Russia."
President Aliyev and Energy Minister Aliyev have taken care of late
to emphasize that future pipeline deals will be based on commercial
factors. Few, however, believe that Nabucco can be separated from the
political goal of reducing Europe's reliance on Russian gas. (The name
of the project itself comes from an Italian opera about liberation
from bondage). Those hardest hit by last winter's Russian-Ukrainian
dispute and the cut-off of Russian gas to Europe have been candid about
Nabucco's aims. The outgoing Bulgarian prime minister Sergei Stanishev,
for example, called the July 13 Nabucco agreement "a strong message
both politically and economically" for "the Bulgarian government and
the Bulgarian citizens" caught in this year's gas crisis, the Voice
of America reported
But for all the high hopes expressed at the July 13 signing ceremony,
without a firm and clear commitment from Azerbaijan for gas supplies,
Nabucco will be no closer to becoming a reality, analysts believe.
Editor's Note: Jessica Powley Hayden is a freelance writer based
in Baku.