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The Caspian Web of Problems in the Way of Nabucco
en.fondsk.ru
Ð?rbis Terrarum
14.09.2009
Aleksandr SHUSTOV
The Nabucco project is running into new roadblocks which make the
outlook for it dire, even though the decision to construct the gas
pipeline seemed irreversible after the signing of the corresponding
intergovernmental agreement by Turkey, Romania, Bulgaria, Hungary, and
Austria on July 13, 2009. The relations between Azerbaijan and
Turkmenistan unexpectedly turned sour in August ` early September. The
former country is supposed to be an important transiter and supplier
in the framework of the project and the latter is actually assigned
the role of the key supplier of natural gas for Nabucco. Nabucco's
target throughput is bound to remain 50% undersupplied without the
cooperation of Iran, the country with which the West is unprepared to
fully rebuild relations so far, and of Turkmenistan. As a result, the
financial viability of the project which is aimed at constructing a
pipeline bypassing Russia comes into question.
The tensions between Azerbaijan and Turkmenistan followed the meeting
of Turkmenistan's National Security Council during which the country's
president G. Berdimuhamedow unveiled a plan to strengthen the Turkmen
military presence at the Caspian Sea, the stated objective being to
safeguard Turkmenistan's marine border against `alien
encroachments'. Turkmenistan intends to construct a permanent naval
base, to set up a system of radar and optical monitoring of the marine
zone, and to buy modern high-speed patrol boats and two missile ships
in the framework of the defense initiative. Besides, the Turkmen Navy
is going to carry out regular exercises in order to enhance its combat
readiness. According to President Berdymukhammedov, the measures will
target smugglers, terrorists, and any other forces that might attempt
to illegally cross or destabilize Turkmenistan's marine border.
The main cause of tensions between Azerbaijan and Turkmenistan is the
territorial dispute over Caspian Sea's ex ch oil and gas
reserves. Despite many rounds of negotiations, it remains unsettled
since the disintegration of the USSR. For both countries the export of
oil and natural gas is the backbone of the economy and the main source
of revenues, which explains the intensity of the conflict between
them. The main bone of contention is the Serdar field (referred to as
Kyapaz in Azerbaijan) estimated to hold up to 50 mln tons of
oil. Turkmenistan also contests the Osman and Omar (Azeri and Chirag)
fields which are already being developed by an international
consortium including BP, ExxonMobil, and Statoil and currently account
for most of Azerbaijan's oil output. Another disputed field is the
Araz-Alov-Sharg which ` as an additional complication - is also
claimed by Iran.
So far Azerbaijan whose appetites are backed by its relatively
impressive regional navy is prevailing in the protracted dispute over
the Caspian Sea's oil and gas fields. For example, it started
developing the Chirag and Azeri fields openly ignoring the position of
Ashgabat which regards the former partially and the latter entirely as
its own. Subsequently Baku broadened its list of claims to include
Kyapaz which is located 80 km closer to Turkmenistan and even invited
foreign companies to compete over the admission to develop it. The
race was won by Russia's Lukoil and Rosneft, but eventually Russia
withdrew from the Kapyaz project under pressure exerted by
Ashgabat. Turkmenistan also attempted to attract foreign companies to
the Kyapaz field, but in a similar development Mobil which won the
corresponding tender was forced to back off due to the unresolved
ownership dispute.
Another major project ` the construction of a gas pipeline across the
Caspian seabed to link Turkmenistan and Azerbaijan ` failed to
materialize as a result of the disagreements between the two countries
in the late 1990ies ` early 2000ies. The Trans-Caspian pipeline
project which at the time was more or less an analog of Nabucco was
supposed to ensure the transit of 30 natural gas annually from
Turkmenistan to Europe via Azerbaijan, Georgia, and Turkey. However,
when gas reserves were discovered in the Azerbaijani sector of the
Caspian Sea Baku demanded a 50% share of the pipeline's
throughput. Turkmen President S. Niyazov consented to at most 5 bn cu
m, which was roughly 1/6 of the pipeline capacity. Eventually the
whole project remained on paper, and since 2007 the Azerbaijani gas is
pumped to Turkey via the Baku-Tbilisi-Erzerum pipeline.
Even if Turkmenistan and Azerbaijan manage to overcome their
disagreements, the region will still face the problem of uncertainty
of the Caspian Sea's legal status. Until 1991 the Caspian Sea was
bound by only two countries ` the USSR and Iran and, in accord with
the treaties between them, the Sea had the status of an enclosed body
of water to which third-party countries had no access. The Soviet
disunion bred four new independent littoral countries ` Russia,
Kazakhstan, Azerbaijan, and Turkmenistan ` bordering the Caspian Sea,
and its legal status has to be synchronized with the new
configuration. Currently there exist two basic positions on the
issue. Russia suggests not dividing the area of water of the Caspian
Sea into national sectors for ease of navigation and dividing the
seabed based on the median line. The approach meets with opposition
from Iran which ` having just 14% of the Caspian coastline - wants it
divided into five equal shares, one for every littoral country. Under
the arrangement, Turkmenistan and Azerbaijan would have to transfer
parts of their national sectors to Iran, and predictably they do not
favor the idea. In 2003 Russia, Kazakhstan, and Azerbaijan did sign an
agreement on partially dividing the Caspian Sea on the median line
basis, but a question mark continues to hang over its overall status.
The legal uncertainty of the Caspian Sea status hampers the
construction of underwater pipelines across its seabed as it is
unclear to which countries various parts of the seabed actually
belong. Alexander Rar, an expert from the German Council on Foreign
Politics, told Regnum that Russia and Iran are able to altogether
prevent the construction of pipelines across the Caspian Sea as the
international law affords implementing such projects only provided
that the consent of all countries owning segments of the coastline is
available. In the context, Ashgabat's recent initiative is an
indication that Turkmenistan is eager to divide as soon as possible
not only the water area but also the seabed of the Caspian Sea and
thus to meet the whole range of necessary legal and political
requirements for the construction of a new gas pipeline to Europe.
Naturally, the conflicts over the overall status of the Caspian Sea
and the ownership of the Caspian oil and gas fields makes it less
likely that Nabucco will ever be realized but boosts the chances of
the Caspian pipeline project promoted by Moscow. According to Wolfgang
Ruttenstorfer, CEO of Austria's OMV which is a Nabucco partner, at the
initial phase it is planned to source gas for the pipeline from
Azerbaijan, Iraq, and Egypt ` the tree countries should be able to
contribute it in the amount of 15-16 bn cu m by 2015. Azerbaijan and
Iraq will supply 7-8 bn cu m each, plus 1-2 bn cu m will be added by
Egypt. Tapping into Iran's enormous gas reserves to feed Nabucco is
not seen as an option by the West because of Tehran's controversial
nuclear program. Consequently, in practice Nabucco's workl ss the
Trans-Caspian pipeline is constructed.
Considering that the upgrade of Turkmenistan's navy is a plan for a
relatively distant future and that anyhow the move will not tilt the
balance of forces in the Caspian region seriously, what we should
expect in the short term is another round of diplomatic arm-wrestling
over the legal status of the Caspian Sea.
en.fondsk.ru
Ð?rbis Terrarum
14.09.2009
Aleksandr SHUSTOV
The Nabucco project is running into new roadblocks which make the
outlook for it dire, even though the decision to construct the gas
pipeline seemed irreversible after the signing of the corresponding
intergovernmental agreement by Turkey, Romania, Bulgaria, Hungary, and
Austria on July 13, 2009. The relations between Azerbaijan and
Turkmenistan unexpectedly turned sour in August ` early September. The
former country is supposed to be an important transiter and supplier
in the framework of the project and the latter is actually assigned
the role of the key supplier of natural gas for Nabucco. Nabucco's
target throughput is bound to remain 50% undersupplied without the
cooperation of Iran, the country with which the West is unprepared to
fully rebuild relations so far, and of Turkmenistan. As a result, the
financial viability of the project which is aimed at constructing a
pipeline bypassing Russia comes into question.
The tensions between Azerbaijan and Turkmenistan followed the meeting
of Turkmenistan's National Security Council during which the country's
president G. Berdimuhamedow unveiled a plan to strengthen the Turkmen
military presence at the Caspian Sea, the stated objective being to
safeguard Turkmenistan's marine border against `alien
encroachments'. Turkmenistan intends to construct a permanent naval
base, to set up a system of radar and optical monitoring of the marine
zone, and to buy modern high-speed patrol boats and two missile ships
in the framework of the defense initiative. Besides, the Turkmen Navy
is going to carry out regular exercises in order to enhance its combat
readiness. According to President Berdymukhammedov, the measures will
target smugglers, terrorists, and any other forces that might attempt
to illegally cross or destabilize Turkmenistan's marine border.
The main cause of tensions between Azerbaijan and Turkmenistan is the
territorial dispute over Caspian Sea's ex ch oil and gas
reserves. Despite many rounds of negotiations, it remains unsettled
since the disintegration of the USSR. For both countries the export of
oil and natural gas is the backbone of the economy and the main source
of revenues, which explains the intensity of the conflict between
them. The main bone of contention is the Serdar field (referred to as
Kyapaz in Azerbaijan) estimated to hold up to 50 mln tons of
oil. Turkmenistan also contests the Osman and Omar (Azeri and Chirag)
fields which are already being developed by an international
consortium including BP, ExxonMobil, and Statoil and currently account
for most of Azerbaijan's oil output. Another disputed field is the
Araz-Alov-Sharg which ` as an additional complication - is also
claimed by Iran.
So far Azerbaijan whose appetites are backed by its relatively
impressive regional navy is prevailing in the protracted dispute over
the Caspian Sea's oil and gas fields. For example, it started
developing the Chirag and Azeri fields openly ignoring the position of
Ashgabat which regards the former partially and the latter entirely as
its own. Subsequently Baku broadened its list of claims to include
Kyapaz which is located 80 km closer to Turkmenistan and even invited
foreign companies to compete over the admission to develop it. The
race was won by Russia's Lukoil and Rosneft, but eventually Russia
withdrew from the Kapyaz project under pressure exerted by
Ashgabat. Turkmenistan also attempted to attract foreign companies to
the Kyapaz field, but in a similar development Mobil which won the
corresponding tender was forced to back off due to the unresolved
ownership dispute.
Another major project ` the construction of a gas pipeline across the
Caspian seabed to link Turkmenistan and Azerbaijan ` failed to
materialize as a result of the disagreements between the two countries
in the late 1990ies ` early 2000ies. The Trans-Caspian pipeline
project which at the time was more or less an analog of Nabucco was
supposed to ensure the transit of 30 natural gas annually from
Turkmenistan to Europe via Azerbaijan, Georgia, and Turkey. However,
when gas reserves were discovered in the Azerbaijani sector of the
Caspian Sea Baku demanded a 50% share of the pipeline's
throughput. Turkmen President S. Niyazov consented to at most 5 bn cu
m, which was roughly 1/6 of the pipeline capacity. Eventually the
whole project remained on paper, and since 2007 the Azerbaijani gas is
pumped to Turkey via the Baku-Tbilisi-Erzerum pipeline.
Even if Turkmenistan and Azerbaijan manage to overcome their
disagreements, the region will still face the problem of uncertainty
of the Caspian Sea's legal status. Until 1991 the Caspian Sea was
bound by only two countries ` the USSR and Iran and, in accord with
the treaties between them, the Sea had the status of an enclosed body
of water to which third-party countries had no access. The Soviet
disunion bred four new independent littoral countries ` Russia,
Kazakhstan, Azerbaijan, and Turkmenistan ` bordering the Caspian Sea,
and its legal status has to be synchronized with the new
configuration. Currently there exist two basic positions on the
issue. Russia suggests not dividing the area of water of the Caspian
Sea into national sectors for ease of navigation and dividing the
seabed based on the median line. The approach meets with opposition
from Iran which ` having just 14% of the Caspian coastline - wants it
divided into five equal shares, one for every littoral country. Under
the arrangement, Turkmenistan and Azerbaijan would have to transfer
parts of their national sectors to Iran, and predictably they do not
favor the idea. In 2003 Russia, Kazakhstan, and Azerbaijan did sign an
agreement on partially dividing the Caspian Sea on the median line
basis, but a question mark continues to hang over its overall status.
The legal uncertainty of the Caspian Sea status hampers the
construction of underwater pipelines across its seabed as it is
unclear to which countries various parts of the seabed actually
belong. Alexander Rar, an expert from the German Council on Foreign
Politics, told Regnum that Russia and Iran are able to altogether
prevent the construction of pipelines across the Caspian Sea as the
international law affords implementing such projects only provided
that the consent of all countries owning segments of the coastline is
available. In the context, Ashgabat's recent initiative is an
indication that Turkmenistan is eager to divide as soon as possible
not only the water area but also the seabed of the Caspian Sea and
thus to meet the whole range of necessary legal and political
requirements for the construction of a new gas pipeline to Europe.
Naturally, the conflicts over the overall status of the Caspian Sea
and the ownership of the Caspian oil and gas fields makes it less
likely that Nabucco will ever be realized but boosts the chances of
the Caspian pipeline project promoted by Moscow. According to Wolfgang
Ruttenstorfer, CEO of Austria's OMV which is a Nabucco partner, at the
initial phase it is planned to source gas for the pipeline from
Azerbaijan, Iraq, and Egypt ` the tree countries should be able to
contribute it in the amount of 15-16 bn cu m by 2015. Azerbaijan and
Iraq will supply 7-8 bn cu m each, plus 1-2 bn cu m will be added by
Egypt. Tapping into Iran's enormous gas reserves to feed Nabucco is
not seen as an option by the West because of Tehran's controversial
nuclear program. Consequently, in practice Nabucco's workl ss the
Trans-Caspian pipeline is constructed.
Considering that the upgrade of Turkmenistan's navy is a plan for a
relatively distant future and that anyhow the move will not tilt the
balance of forces in the Caspian region seriously, what we should
expect in the short term is another round of diplomatic arm-wrestling
over the legal status of the Caspian Sea.