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Today's Zaman
May 7, 2009
The southern energy corridor in context (1)
A large-scale international conference in Budapest aimed at mobilizing
tangible support for Nabucco, a genuine southern corridor project,
despite the agonizing problems that have been stalling its progress,
in particular the ambiguities over Nabucco's potential gas sources and
financiers.
On May 8 the "Southern Corridor -- New Silk Road" conference in
Prague, launched by the European Union under the Czech presidency,
will round off a series of summits in Budapest, Ashgabat and Sofia
that started in January.
Their different agendas notwithstanding, all of these conferences
centered on future cooperation between producers, consumers and
transporters for the reliable supply of natural gas to Europe, or, in
other words, on which energy networks will deliver to Europe from
which sources and via which pathways. Ironically, the summit will take
place against the backdrop of European energy security and partnership
embracing Russian involvement, which it was previously intended to
balance. Whether the Turkish energy conduit will become a pivotal link
in the "new silk road" is highly questionable due to the chain of
developments this article aims to illuminate.
Paradigm shift in the context of recent politics
The first of its kind in the new year, the Budapest Summit (Jan.
26-27, 2009) brought together high-level representatives from the
Nabucco consortium (Turkey, Austria, Bulgaria, Germany, Hungary and
Romania), potential supplier countries (Azerbaijan, Egypt, Iraq,
Kazakhstan and Turkmenistan), of transit nation Georgia (in the
absence of the Iranian delegation), and the EU, as well as delegates
from Russia and the United States. The large-scale international
conference aimed at mobilizing tangible support for Nabucco, a genuine
southern corridor project, despite the agonizing problems that have
been stalling its progress, in particular the ambiguities over
Nabucco's potential gas sources and financiers ("Nabucco pipeline or
pipedream," Today's Zaman, Feb. 26, 2009). This, however, did not
transpire, as the conference remained under the shadow of several
events that reinforced the split among EU member states regarding
differing levels of Russian gas dependency and energy security
concepts.
In March Nabucco was removed from the list of priority projects to be
financed by a 5 billion euro EU stimulus plan. Instead, Nabucco was
put under a more inclusive common title, "southern gas corridor,"
which involves several other and partly more promising projects, such
as Russia's South Stream. Against the backdrop of groundbreaking
developments, the US proposed uniting Nabucco, South Stream and other
projects into a larger "southern energy corridor" plan in order to
create a friendly basis for Western-Russian cooperation on issues such
as Iran's controversial nuclear program and Afghanistan. Similarly,
key EU members such as Germany, France and Italy, backed off from
funding an alternative gas bridge excluding and, presumably,
antagonizing Russia. The new southern corridor concept is obviously
founded on this substantially different approach to European energy
affairs, and contradicts Turkey's plans to become an energy hub rather
than a mere energy transit point with fixed fees.
Russian foreign energy politics
Russian President Dmitry Medvedev made two calls during his visit to
Helsinki prior to the Sofia Energy Summit (April 24-25, 2009): first,
for a new global security order (Helsinki Plus) mirroring the
realities of a substantially changed and multi-polar international
political system in which Russia has reclaimed its place as a
re-emergent superpower; and secondly, for a "modern global energy
supply system" based on Russia's "Conceptual Approach to the New Legal
Framework for Energy Cooperation" that will appropriately reflect and
"unconditionally" accept the current conditions under which Russia is
and will try to remain the primary source, producer and exporter of
energy, most notably natural gas. However, these two forays also
reflect the powerful role that Russia's energy strategies will
continue to play in fostering its impressive comeback in the broader
regional political sphere, and Russian foreign policies will share in
advancing energy priorities by virtue of their geopolitical dividends.
The interdependence between Russian geopolitical engagement and energy
interests was most evident in the Russo-Georgian conflict way ahead of
the 2009 summits. Aside from its geopolitical implications, the
Russian invasion of Georgia exposed the vulnerability of the southern
energy corridor transporting gas from the Caspian region and the
Middle East into Europe via Turkey and helping producers, transporters
and consumers diversify their energy alternatives and improve their
resilience to export/import risks. Hence, the war triggered a chain of
intertwined developments further discrediting the viability of such a
concept, if it is to bypass Russia in the future. For Georgia, which
every once a while has been embroiled in gas supply and pricing
disputes with Russia's energy giant, Gazprom, the continuation of
alternative gas transfers into and through its territory is vital.
>From the European perspective, Georgia represents the only non-Russian
energy outlet for existing Caucasian and possible Central Asian
natural gas exports, and thus is considered pivotal for supply
diversification. Likewise, Turkey attaches great importance to the
Georgian conduit for several reasons.
First of all, the Georgian conduit helps Turkey diversify own its gas
import routes and foreign sources. Blue Stream is the only Russian
pipeline delivering gas to Turkey. But considering its capacity for
supplying 64 percent of Turkey's total annual gas demand (BP
Statistical Review of World Energy, 2008) the Russian pipeline plays
an immense role in tying Turkey to Russian influence. The utility of
decreasing Russia's involvement in Turkey's energy equation, and
easing Turkey's vulnerability to possible far-reaching repercussions
that its over-dependency could imply, is just one aspect of the
significance of the Georgian transit route. Other than that, Georgia
is the only viable passage for potential Central Asian gas to feed the
planned Nabucco pipeline, and other projects on the way to
establishing a secure southern energy network. A non-Russian gas
conduit would inevitably traverse Turkish networks, rendering it an
indispensable ring in the future European energy supply chain. A
Georgia subject to the coercive policies of a resurgent Russia
complicates future energy transfer plans for Turkey, which does not
border Azerbaijan or any of its other resource-rich Central Asian
kinsmen. It also annuls the chances for establishing a secure and
stable gas corridor without Russia's blessings.
Iran is an economically and geographically viable option, as a future
source and transit route for a non-Russian Southern Corridor, but not
politically. Iranian populist rhetoric, at least until the general
elections in June this year, will hamper Western rapprochement
efforts, and thus possible solutions to the unsolved Iranian nuclear
issue. In its most recent report the International Atomic Energy
Agency (IAEA) could not provide credible assurance about the absence
of possible military dimensions to Iran's program. Additionally, the
US State Department released its 2008 report on state sponsors of
terrorism, which identifies Iran as "the most active state sponsor of
terrorism" and a major destabilizing factor in the Middle East and
Afghanistan. Without a mutually convincing solution for these
important matters, it is unlikely that the US and the EU would want to
equip Iran with vital leverage over Europe's energy security.
By virtue of bordering Azerbaijan and Turkey, landlocked and
impoverished Armenia would be an alternative to Georgia. Supply routes
via Armenia would be shorter, and thus would pull down pipeline costs,
which have been a huge barrier to Nabucco's realization. But bilateral
relations had come to a deadlock when Turkey, on its own initiative,
closed its borders with Armenia in 1993 in support of Azerbaijan and
in retaliation against Armenian atrocities in and occupation of
Nagorno-Karabakh. Azerbaijan's borders with Armenia remain closed as
well.
Turkish President Abdullah Gül's visit to Armenia last year was the
product of cautious preparations for rapprochement that started last
June. However, intentions for normalization of strained relations and
partial reopening of borders for trade must also be considered in the
light of the Russian-Georgian conflict, and the urgency it created on
the part of Turkey to seek alternative energy lines to landlocked
Caucasian gas. But sensibilities on all sides concerned cut off
prospects of restoring full diplomatic ties quickly. Turkey's
announcement in October that improved bilateral relations with Armenia
would give conflict resolution efforts a new impetus, fueled
Azerbaijan's concerns, since thawed relations and open borders would
neutralize Azerbaijan's leverage over Armenia on the Nagorno-Karabakh
issue. The blurry Armenian-Turkish Roadmap toward the gradual
normalization of strained relations was certainly a move to preempt
any US acceptance of Armenian genocide claims on April 24, when
Armenians mark the 1915 events they believe constituted genocide.
Despite Turkey's recent overtures toward Azerbaijan to tie
Armenian-Turkish rapprochement to Azerbaijani sensibilities and to a
separate Armenian-Azerbaijani détente, prospects of entering into a
win-win trilateral energy dialogue are quite bleak for the medium
term. Russia's involvement as mediator is more of a setback than a
step forward in the standoff.
Divide et impera
The spat between Iran and the West has mainly helped expand and foster
Russian energy hegemony over gas supply and pricing, its monopoly over
European markets and monopsony in the broader resource-rich region.
With a view to preempting future Iranian involvement in Europe's
energy projects as an alternative to Russia, Moscow suggested that
Iran and Qatar form a "gas troika" in October of last year. The main
beneficiary, however, would be Russia's state-steered Gazprom, the
world's third-largest energy company, with an already overwhelming
amount of control over the production, marketing and transportation of
gas beyond Russia's traditional sphere of influence. From this
perspective, trilateral talks on a Russian initiative involving
Armenia and Azerbaijan since November 2008 cannot be interpreted as an
effort to contribute to the restoration of good neighborly relations
between Turkey, Azerbaijan and Armenia. This would not be in the
interest of Russia, since Russia has more to gain from their division.
The November talks are based on an Armenian-Russian cooperation
agreement for the settlement of the Nagorno-Karabakh issue in June
2008, on the sidelines of which a more significant bilateral deal had
been inked to extend the scope of military and energy cooperation. The
same deal was extended to Azerbaijan in September 2008.
Since 2003 Gazprom has been the only gas supplier for Armenia, the
power generation sector of which is totally dependent on gas
purchases. The company previously had a 45 percent stake in Armenia's
major energy concern, ArmRosGazprom, and controlled the distribution,
transportation and marketing of gas in Armenia together with Armenia's
Energy Ministry (45 percent) and yet another Russian energy group,
Itera (10 percent). Upon the implementation of an energy cooperation
deal from March 2006, which stipulated ArmRosGazprom's acquisition of
a series of important gas facilities and its planned investments in
Armenia's power sector, Gazprom expanded its share in the internal
energy market at the expense of the Armenian share. By buying off
Itera's ownership in the joint venture (March 2009), Gazprom now owns
80 percent of ArmRosGazprom, leaving a mere 20 percent under Armenian
control. In April 2006 Armenia sold its section of the
Armenian-Iranian gas pipeline to Russia, locking in prices for cheap
Russian fuel ($100 per 1,000 cubic centimeters) until this year, but
more importantly, locking itself out of the only alternative gas
supply route. Russia's response to the recent Turkish-Armenian thaw
came immediately after Turkey and Armenia announced their roadmap plan
on April 22. ArmRosGazprom spokeswoman Shushan Sardaryan announced
last week that Russian gas supply to fully dependent Armenia would be
halted from April 23 to 26 for "maintenance work."
Russia had been the sole gas supplier to Azerbaijan until 2007. Today
Azerbaijan is referred to as the most likely first supplier for the
controversial Nabucco project. A milestone in breaking off
Azerbaijan's reliance on Russian exports and realizing the southern
corridor concept had been the Baku-Tbilisi-Ceyhan oil pipeline (BTC),
and the Baku-Tbilisi-Erzurum gas pipeline (BTE), which currently
supply Azeri oil and gas to Turkey and on to Europe. However, British
Petroleum (BP) was forced to completely shut down the oil pipeline as
Russian jets targeted it during a bombing raid near Tbilisi in August
2008.
Already in June, prior to Russia's Georgia offensive and Turkey's
Armenian venture, Gazprom had made its plans public to buy off
Azerbaijan's gas from Shah Deniz's second development phase paying
market prices ($400 per 1,000 cubic meters). Russia had been able to
win over Kazakhstan, Uzbekistan and Turkmenistan in March to trade off
their strategic assets at European prices. Azerbaijan had resisted
Russian persuasion efforts, while explicitly arguing that it would
consider selling its second phase Shah Deniz gas to Russia if it
continued to trump other offers and, implicitly, if Europe lacked the
political will to push ahead with alternative plans. Finally, Russia
has been able to clinch a crucial deal with Azerbaijan, which
stipulates negotiations on long-term gas supplies to Russia at market
prices beginning in 2010. The deal can be traced back to the Russia's
Georgia offensive, which produced a substantial shift in the European
southern corridor concept, embracing Russian projects as well, and
which inevitably accelerated the pace of Turkish-Armenian
rapprochement at Azerbaijan's understandable dismay.
* Bala Çelebi Þentürk is an energy strategy analyst who can be reached
at [email protected].
07 May 2009, Thursday
BALA ÇELEBÝ ÞENTÜRK*
From: Emil Lazarian | Ararat NewsPress
Today's Zaman
May 7, 2009
The southern energy corridor in context (1)
A large-scale international conference in Budapest aimed at mobilizing
tangible support for Nabucco, a genuine southern corridor project,
despite the agonizing problems that have been stalling its progress,
in particular the ambiguities over Nabucco's potential gas sources and
financiers.
On May 8 the "Southern Corridor -- New Silk Road" conference in
Prague, launched by the European Union under the Czech presidency,
will round off a series of summits in Budapest, Ashgabat and Sofia
that started in January.
Their different agendas notwithstanding, all of these conferences
centered on future cooperation between producers, consumers and
transporters for the reliable supply of natural gas to Europe, or, in
other words, on which energy networks will deliver to Europe from
which sources and via which pathways. Ironically, the summit will take
place against the backdrop of European energy security and partnership
embracing Russian involvement, which it was previously intended to
balance. Whether the Turkish energy conduit will become a pivotal link
in the "new silk road" is highly questionable due to the chain of
developments this article aims to illuminate.
Paradigm shift in the context of recent politics
The first of its kind in the new year, the Budapest Summit (Jan.
26-27, 2009) brought together high-level representatives from the
Nabucco consortium (Turkey, Austria, Bulgaria, Germany, Hungary and
Romania), potential supplier countries (Azerbaijan, Egypt, Iraq,
Kazakhstan and Turkmenistan), of transit nation Georgia (in the
absence of the Iranian delegation), and the EU, as well as delegates
from Russia and the United States. The large-scale international
conference aimed at mobilizing tangible support for Nabucco, a genuine
southern corridor project, despite the agonizing problems that have
been stalling its progress, in particular the ambiguities over
Nabucco's potential gas sources and financiers ("Nabucco pipeline or
pipedream," Today's Zaman, Feb. 26, 2009). This, however, did not
transpire, as the conference remained under the shadow of several
events that reinforced the split among EU member states regarding
differing levels of Russian gas dependency and energy security
concepts.
In March Nabucco was removed from the list of priority projects to be
financed by a 5 billion euro EU stimulus plan. Instead, Nabucco was
put under a more inclusive common title, "southern gas corridor,"
which involves several other and partly more promising projects, such
as Russia's South Stream. Against the backdrop of groundbreaking
developments, the US proposed uniting Nabucco, South Stream and other
projects into a larger "southern energy corridor" plan in order to
create a friendly basis for Western-Russian cooperation on issues such
as Iran's controversial nuclear program and Afghanistan. Similarly,
key EU members such as Germany, France and Italy, backed off from
funding an alternative gas bridge excluding and, presumably,
antagonizing Russia. The new southern corridor concept is obviously
founded on this substantially different approach to European energy
affairs, and contradicts Turkey's plans to become an energy hub rather
than a mere energy transit point with fixed fees.
Russian foreign energy politics
Russian President Dmitry Medvedev made two calls during his visit to
Helsinki prior to the Sofia Energy Summit (April 24-25, 2009): first,
for a new global security order (Helsinki Plus) mirroring the
realities of a substantially changed and multi-polar international
political system in which Russia has reclaimed its place as a
re-emergent superpower; and secondly, for a "modern global energy
supply system" based on Russia's "Conceptual Approach to the New Legal
Framework for Energy Cooperation" that will appropriately reflect and
"unconditionally" accept the current conditions under which Russia is
and will try to remain the primary source, producer and exporter of
energy, most notably natural gas. However, these two forays also
reflect the powerful role that Russia's energy strategies will
continue to play in fostering its impressive comeback in the broader
regional political sphere, and Russian foreign policies will share in
advancing energy priorities by virtue of their geopolitical dividends.
The interdependence between Russian geopolitical engagement and energy
interests was most evident in the Russo-Georgian conflict way ahead of
the 2009 summits. Aside from its geopolitical implications, the
Russian invasion of Georgia exposed the vulnerability of the southern
energy corridor transporting gas from the Caspian region and the
Middle East into Europe via Turkey and helping producers, transporters
and consumers diversify their energy alternatives and improve their
resilience to export/import risks. Hence, the war triggered a chain of
intertwined developments further discrediting the viability of such a
concept, if it is to bypass Russia in the future. For Georgia, which
every once a while has been embroiled in gas supply and pricing
disputes with Russia's energy giant, Gazprom, the continuation of
alternative gas transfers into and through its territory is vital.
>From the European perspective, Georgia represents the only non-Russian
energy outlet for existing Caucasian and possible Central Asian
natural gas exports, and thus is considered pivotal for supply
diversification. Likewise, Turkey attaches great importance to the
Georgian conduit for several reasons.
First of all, the Georgian conduit helps Turkey diversify own its gas
import routes and foreign sources. Blue Stream is the only Russian
pipeline delivering gas to Turkey. But considering its capacity for
supplying 64 percent of Turkey's total annual gas demand (BP
Statistical Review of World Energy, 2008) the Russian pipeline plays
an immense role in tying Turkey to Russian influence. The utility of
decreasing Russia's involvement in Turkey's energy equation, and
easing Turkey's vulnerability to possible far-reaching repercussions
that its over-dependency could imply, is just one aspect of the
significance of the Georgian transit route. Other than that, Georgia
is the only viable passage for potential Central Asian gas to feed the
planned Nabucco pipeline, and other projects on the way to
establishing a secure southern energy network. A non-Russian gas
conduit would inevitably traverse Turkish networks, rendering it an
indispensable ring in the future European energy supply chain. A
Georgia subject to the coercive policies of a resurgent Russia
complicates future energy transfer plans for Turkey, which does not
border Azerbaijan or any of its other resource-rich Central Asian
kinsmen. It also annuls the chances for establishing a secure and
stable gas corridor without Russia's blessings.
Iran is an economically and geographically viable option, as a future
source and transit route for a non-Russian Southern Corridor, but not
politically. Iranian populist rhetoric, at least until the general
elections in June this year, will hamper Western rapprochement
efforts, and thus possible solutions to the unsolved Iranian nuclear
issue. In its most recent report the International Atomic Energy
Agency (IAEA) could not provide credible assurance about the absence
of possible military dimensions to Iran's program. Additionally, the
US State Department released its 2008 report on state sponsors of
terrorism, which identifies Iran as "the most active state sponsor of
terrorism" and a major destabilizing factor in the Middle East and
Afghanistan. Without a mutually convincing solution for these
important matters, it is unlikely that the US and the EU would want to
equip Iran with vital leverage over Europe's energy security.
By virtue of bordering Azerbaijan and Turkey, landlocked and
impoverished Armenia would be an alternative to Georgia. Supply routes
via Armenia would be shorter, and thus would pull down pipeline costs,
which have been a huge barrier to Nabucco's realization. But bilateral
relations had come to a deadlock when Turkey, on its own initiative,
closed its borders with Armenia in 1993 in support of Azerbaijan and
in retaliation against Armenian atrocities in and occupation of
Nagorno-Karabakh. Azerbaijan's borders with Armenia remain closed as
well.
Turkish President Abdullah Gül's visit to Armenia last year was the
product of cautious preparations for rapprochement that started last
June. However, intentions for normalization of strained relations and
partial reopening of borders for trade must also be considered in the
light of the Russian-Georgian conflict, and the urgency it created on
the part of Turkey to seek alternative energy lines to landlocked
Caucasian gas. But sensibilities on all sides concerned cut off
prospects of restoring full diplomatic ties quickly. Turkey's
announcement in October that improved bilateral relations with Armenia
would give conflict resolution efforts a new impetus, fueled
Azerbaijan's concerns, since thawed relations and open borders would
neutralize Azerbaijan's leverage over Armenia on the Nagorno-Karabakh
issue. The blurry Armenian-Turkish Roadmap toward the gradual
normalization of strained relations was certainly a move to preempt
any US acceptance of Armenian genocide claims on April 24, when
Armenians mark the 1915 events they believe constituted genocide.
Despite Turkey's recent overtures toward Azerbaijan to tie
Armenian-Turkish rapprochement to Azerbaijani sensibilities and to a
separate Armenian-Azerbaijani détente, prospects of entering into a
win-win trilateral energy dialogue are quite bleak for the medium
term. Russia's involvement as mediator is more of a setback than a
step forward in the standoff.
Divide et impera
The spat between Iran and the West has mainly helped expand and foster
Russian energy hegemony over gas supply and pricing, its monopoly over
European markets and monopsony in the broader resource-rich region.
With a view to preempting future Iranian involvement in Europe's
energy projects as an alternative to Russia, Moscow suggested that
Iran and Qatar form a "gas troika" in October of last year. The main
beneficiary, however, would be Russia's state-steered Gazprom, the
world's third-largest energy company, with an already overwhelming
amount of control over the production, marketing and transportation of
gas beyond Russia's traditional sphere of influence. From this
perspective, trilateral talks on a Russian initiative involving
Armenia and Azerbaijan since November 2008 cannot be interpreted as an
effort to contribute to the restoration of good neighborly relations
between Turkey, Azerbaijan and Armenia. This would not be in the
interest of Russia, since Russia has more to gain from their division.
The November talks are based on an Armenian-Russian cooperation
agreement for the settlement of the Nagorno-Karabakh issue in June
2008, on the sidelines of which a more significant bilateral deal had
been inked to extend the scope of military and energy cooperation. The
same deal was extended to Azerbaijan in September 2008.
Since 2003 Gazprom has been the only gas supplier for Armenia, the
power generation sector of which is totally dependent on gas
purchases. The company previously had a 45 percent stake in Armenia's
major energy concern, ArmRosGazprom, and controlled the distribution,
transportation and marketing of gas in Armenia together with Armenia's
Energy Ministry (45 percent) and yet another Russian energy group,
Itera (10 percent). Upon the implementation of an energy cooperation
deal from March 2006, which stipulated ArmRosGazprom's acquisition of
a series of important gas facilities and its planned investments in
Armenia's power sector, Gazprom expanded its share in the internal
energy market at the expense of the Armenian share. By buying off
Itera's ownership in the joint venture (March 2009), Gazprom now owns
80 percent of ArmRosGazprom, leaving a mere 20 percent under Armenian
control. In April 2006 Armenia sold its section of the
Armenian-Iranian gas pipeline to Russia, locking in prices for cheap
Russian fuel ($100 per 1,000 cubic centimeters) until this year, but
more importantly, locking itself out of the only alternative gas
supply route. Russia's response to the recent Turkish-Armenian thaw
came immediately after Turkey and Armenia announced their roadmap plan
on April 22. ArmRosGazprom spokeswoman Shushan Sardaryan announced
last week that Russian gas supply to fully dependent Armenia would be
halted from April 23 to 26 for "maintenance work."
Russia had been the sole gas supplier to Azerbaijan until 2007. Today
Azerbaijan is referred to as the most likely first supplier for the
controversial Nabucco project. A milestone in breaking off
Azerbaijan's reliance on Russian exports and realizing the southern
corridor concept had been the Baku-Tbilisi-Ceyhan oil pipeline (BTC),
and the Baku-Tbilisi-Erzurum gas pipeline (BTE), which currently
supply Azeri oil and gas to Turkey and on to Europe. However, British
Petroleum (BP) was forced to completely shut down the oil pipeline as
Russian jets targeted it during a bombing raid near Tbilisi in August
2008.
Already in June, prior to Russia's Georgia offensive and Turkey's
Armenian venture, Gazprom had made its plans public to buy off
Azerbaijan's gas from Shah Deniz's second development phase paying
market prices ($400 per 1,000 cubic meters). Russia had been able to
win over Kazakhstan, Uzbekistan and Turkmenistan in March to trade off
their strategic assets at European prices. Azerbaijan had resisted
Russian persuasion efforts, while explicitly arguing that it would
consider selling its second phase Shah Deniz gas to Russia if it
continued to trump other offers and, implicitly, if Europe lacked the
political will to push ahead with alternative plans. Finally, Russia
has been able to clinch a crucial deal with Azerbaijan, which
stipulates negotiations on long-term gas supplies to Russia at market
prices beginning in 2010. The deal can be traced back to the Russia's
Georgia offensive, which produced a substantial shift in the European
southern corridor concept, embracing Russian projects as well, and
which inevitably accelerated the pace of Turkish-Armenian
rapprochement at Azerbaijan's understandable dismay.
* Bala Çelebi Þentürk is an energy strategy analyst who can be reached
at [email protected].
07 May 2009, Thursday
BALA ÇELEBÝ ÞENTÜRK*
From: Emil Lazarian | Ararat NewsPress