Geopolitical Implications of the Nabucco Defeat. The decision to select the Trans-Adriatic Pipeline as the export route for gas from Azerbaijan’s Shah Deniz field has opened the way for Azerbaijan to become a serious player in Europe’s gas market. Speculation has now turned towards the geopolitical implications of the choice – some of which are rather different from what’s being claimed. The choice of TAP was somewhat unexpected. Admittedly its rival, Nabucco West, had been looking less and less watertight over the past couple of years but its aim of taking gas through the Balkans and into central Europe, rather than to Italy like TAP, was still seen as a strategic asset. Both the EU and Azerbaijan itself had expressed support for a central European route, in order to diversify the region’s gas supply away from Russia and to diversify Azerbaijan’s customer base. However politics was trumped by economics. Nabucco West was simply not profitable enough compared to TAP, which marketed itself on being smaller and more flexible. It also insisted that it too could supply the strategic Balkan states through interconnecting infrastructure which will be built stretching north from Albania. The decision is undoubtedly good news for southern European countries, and for Azerbaijan – which will get good prices and integrate itself into the EU downstream market. But there has been speculation that the decision will be a blow for Turkmenistan, which had hoped to bring its gas west across the Caspian and plug it into the larger Nabucco pipeline. But this argument puts the cart before the horse. The problem is less that Turkmenistan can’t export gas to Europe now that Nabucco has failed; it’s more that Nabucco failed because Turkmenistan cannot export gas to Europe. The biggest problem with Nabucco’s original conception, and even (to a lesser extent) in Nabucco West, was the assumption of multiple supply sources. Although Azerbaijan will have sufficient gas to fill both TAP and Nabucco West, this will not be for at least a decade, and to avoid over-reliance on one supplier Nabucco’s backers had optimistically hoped for supplementary gas from Turkmenistan, northern Iraq, and even Iran. That plan was never realistic. Iran remains under US-led sanctions; northern Iraq is embroiled in disputes with Baghdad over its energy export rights; and Turkmenistan’s gas is stranded by the difficulty of building a Trans-Caspian Pipeline. Although under discussion for years, the pipeline has been blocked for a variety of political and commercial reasons. Russia and Iran have been staunchly opposed to it and have made occasional dark warnings about threats of military action. The commercial side of a TCP was also mishandled by the EU, which was one of its prime advocates. Turkmenistan was only interested in a pipeline which would supply huge quantities of gas, around 30bcm – there was no point in aggravating Russia and Iran for a small-scale pipeline. The EU has failed to invest enough energy in brokering a solution. Although this wasn’t the only thing that killed Nabucco, it was certainly a significant factor: so claiming that Nabucco’s loss will finish a TCP is looking through the wrong end of the telescope. Insofar as European officials still talk about new pipelines further down the road, the hope – small as it is – remains unchanged. The ‘Russian factor’ has also come under scrutiny in the choice of TAP. There has been speculation that Azerbaijan deliberately avoided picking Nabucco West so as to avoid competition with Gazprom’s huge South Stream pipeline which will enter the Balkans from the Black Sea. And it is understandable that two pipelines through the Balkans could seem excessive given demand limitations in the region. The result is therefore being seen as a triumph for Moscow. But as Steve LeVine notes, this isn’t much of a victory for Gazprom. South Stream is a costly white elephant and it’s not even clear when it will be finished. Meanwhile growing gas exploration in Romania and Bulgaria may also reduce their reliance on Russian gas in the future. Nabucco would have been significantly less profitable if it had been forced to compete against domestic gas and (one day) cheap Russian gas too. Given the impressive list of deals which Moscow has already signed with regional countries, committing them to South Stream, it’s likely – contrary to some analysts – that Balkan states would have continued buying Russian gas even if Nabucco had been built. So why not let Gazprom spend billions on what is already a captive market, a gas bridge to nowhere? The project is now underway and for domestic political reasons it is unlikely that Vladimir Putin will simply give it up now. Meanwhile Azerbaijan will focus on other, more profitable (and just as strategic, from the EU’s perspective) markets. The choice of TAP is undoubtedly significant: it will open the way for Caspian gas to come to Europe, will enhance Azerbaijan’s position within the European market, will be a much-needed boost for Greece and Italy, and will encourage much greater cooperation between Europe and the Caspian region. But its worth remembering that it hasn’t changed anything. Both Turkmenistan and Russia – supposedly the big loser and winner of the result – are in much the same position as they were before. Caspian Research Institute
Posted on: Wed, 17 Jul 2013 08:39:12 +0000
Trending Topics
Recently Viewed Topics
© 2015