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Floating Alternative to Nabucco Natural Gas Pipeline Materializes, Stabilizing European Energy Supplies

Politics / GeoPolitics Sep 30, 2010 - 01:48 PM GMT

By: OilPrice_Com

Politics Best Financial Markets Analysis ArticleThe “floating alternative to the US-sponsored Nabucco” pipeline network to bring Central Asian gas supplies to Europe and the Mediterranean has begun to materialize, further transforming or limiting the prospects for the Nabucco project which has been emerging as an expensive option led by the US strategy to bring Turkey into the European mainstream.


See: Defense & Foreign Affairs Special Analysis, April 6, 2010: A Floating Alternative to Nabucco Undercuts Potential Disruptions to EU Energy Supplies and Reduces Turkish Leverage Potential Against the EU.

The EU website Euractive reported on September 20, 2010: “Two EU members, Romania and Hungary, have joined forces with Azerbaijan and Georgia around a project to ship liquefied Azeri gas to their region. Supporters argue that the project could be implemented quickly, but critics point to high costs and vulnerability.”

Defense & Foreign Affairs, in an April 6, 2010, report entitled “A Floating Alternative to Nabucco Undercuts Potential Disruptions to EU Energy Supplies and Reduces Turkish Leverage Potential Against the EU,” noted: “In late February 2010, Romania, Azerbaijan, and Georgia finalized an agreement on the direct export of Azerbaijani natural gas to Romania. This has profound ramifications for halting Turkey’s ability to hold the EU hostage to energy supplies via Turkey, and offers far more rapid easing of European energy pressures.”

The September 20, 2010, report highlighted the fact that the new network had, indeed, been implemented rapidly. The state-owned energy companies from Azerbaijan, Georgia and Romania on September 14, 2010, signed a memorandum of understanding in Baku, Azerbaijan, to launch the Azerbaijan-Georgia-Romania Interconnector (AGRI) project, and a new company was created with the initial task of undertaking a feasibility study and raising funds. This was followed by what was called “the AGRI Summit” in which Azerbaijan Pres. Ilham Aliyev, Georgian Pres. Mikhail Saakashvili, Romanian Pres. Traian Basescu, and Hungarian Prime Minister Viktor Orban participated.

On September 20, 2010, Hungary announced it could become a shareholder in AGRI, giving each country would hold a 25 percent stake in the project. As the April 6, 2010, Defense & Foreign Affairs report noted, AGRI was designed to transport Azerbaijani gas by pipeline to the SOCAR-owned Kulevi terminal on the Georgian coast of the Black Sea, where a liquefaction plant has been planned to be built. From there, liquefied gas will be shipped across the Black Sea by tankers to new terminals in the Romanian port of Constanta.

From Constanta, the gas will be distributed through the Romanian pipeline system. From there, the gas will be pumped to Hungary and on to the rest of the European market.

The new system maximizes, insofar as possible, the independence of Azerbaijan and Georgia from both Russian and Turkish (and also US) pressures, giving both states a modicum of recovery from the position they faced in August 2008. The US-backed Georgian bid to militarily seize control of the enclaves of Abkhazia and South Ossetia failed, and, with that, the US ability to support and influence the region — particularly Turkey, Azerbaijan, Georgia, and Ukraine — essentially disappeared.

See: Defense & Foreign Affairs Special Analysis, September 23, 2008: “A New Strategic Framework Emerges Gradually, Post-Georgia, in European, Russian, and Central Asian Energy, Marginalizing the US.”

The AGRI option also allows Azerbaijan, a Turkic state, to build a slight measure of independence from its historically key regional partner, Turkey, given that the Islamist leadership of Turkey has now opened a significant — albeit rocky — dialog, at Russia’s insistence, with Iran, which works with Armenia to present as Azerbaijan’s major potential security threat.

Moreover, although Azerbaijan and Georgia need to have options for the transportation and sale of gas (in particular) which are not directly controlled by Moscow, both states have begun developing a more stable modus vivendi directly with Russia. The European Union, too, gains from having a new delivery route for Central Asian energy.

The only losers are Turkey, and the last remnants of US influence in the region.

Significantly, quite apart from the Nabucco network through Turkey (which, as yet, has no firm commitments of product to deliver through its pipeline), Turkey is now also not expanding the oil and gas transit business it had hoped for from Baku. The AGRI development signified that Azerbaijan had options other than through the 1,768 kilometer (1,099 mile) Baku-Tblisi-Ceyhan (BTC) pipeline, which delivers oil from the Azeri-Chirag-Guneshli oilfield in the Caspian Sea shores through to the Turkish Mediterranean port of Ceyhan.

Oil from the 1,070mm/42-inch BTC pipeline was also to have been transported to eastern Asia — particularly India and the People’s Republic of China (PRC) — via the Israeli oil terminals at Ashkelon (Mediterranean) and Eilat (Red Sea), the overland trans-Israel sector being bridged by the Eilat-Ashkelon Pipeline owned by the Eilat Ashkelon Pipeline Company (EAPC).

The breakdown in Turkish-Israeli relations has jeopardized that trade.

On September 23, 2010, the Azerbaijan Government indicated that Azerbaijan had, to September 20, 2010, transported 133.4-million tons of oil via the BTC pipeline, and 15.4-billion cubic meters (bcm) of gas via Baku-Tbilisi-Erzurum pipeline. The BTC began operations in 2006, and its annual capacity is 50-million tons a year. The Baku-Tbilisi-Erzurum gas pipeline has been in operation since 2007 with an annual capacity is 20-bcm. Turkey, then, has seen the promise of the BTC being fulfilled, but the gas pipeline has yet to live up to capacity. However, the great hope for growth in this field has not been fulfilled, and the undermining of the viability of the Nabucco option, championed by the US, is now visible.

Azerbaijan, then, is not neglecting Turkey — or even, for that matter, sales to Iran — but it has hedged its bets, with AGRI. This indicates, as much as anything, that the post-US era of control of energy flow in and through the Caucasus has settled down, largely in favor of Moscow, but certainly continuing to edge away from Washington.

US Pres. Barack Obama has clearly been briefed on the strategic importance of Azerbaijan to the US, particularly with regard to US support for its ongoing engagement in Afghanistan, quite separately from the fact that Baku is the entry point for any real US diplomacy into Central Asia.

Pres. Obama and Pres. Aliyev met in New York during the United Nations General Assembly session on September 24, 2010, and it was clear that Pres. Obama was keen to repair the bilateral relationship. Some 25 percent of the non-lethal logistical support for the US-led Coalition in Afghanistan, including fuel and food, is transported via Azerbaijan. Moreover, the US has been less than helpful to Azerbaijan in the dispute with Armenia over the fate of the ethnically-Armenian enclave of Nagorno-Karabakh, in Azerbaijan. The US has a lot at stake in Azerbaijan, and Azerbaijan has some strong bargaining chips to win a change in Washington’s approach to Nagorno-Karabakh.

Even so, while Pres. Obama was wooing Pres. Aliyev in New York, the US Government-controlled broadcaster, Radio Free Europe/Radio Liberty was still pushing an anti-Aliyev line.

Significantly, in a move which would not win approval in Moscow, the Obama Administration also nominated Matthew Bryza as candidate for US Ambassador to Azerbaijan. The US Senate Committee on Foreign Relations voted 17 to two in favor of supporting the nomination to fill the post which has been vacant for more than a year. Bryza, who has a Turkish wife, has been regarded as a committed advocate for Turkish interests in Washington, but nonetheless had been regarded by Baku as “unhelpful” in resolving the Nagorno-Karabakh dispute when he was the US co-chair of the Organization for Security and Cooperation in Europe's (OSCE) Minsk Group.

In any event, two US Senators, Barbara Boxer and Robert Menendez (both Democrats) voted against Bryza’s nomination for the Ambassadorship, and have placed a hold on the nomination being voted in the full Senate.

Ironically, however, the Senators’ opposition to him was not based on Bryza’s negative position on Nagorno-Karabakh, but on the fact that his pro-Turkish leanings were not appreciated by the Armenian-American constituency, particularly those of Sen. Boxer (California).

From Baku’s standpoint, Bryza is at least not pro-Armenian, but neither is he pro-Azerbaijani.

Source: http://www.globalintelligencereport.com/...

By www.GlobalintelligenceReport.com. For Breaking Geopolitical Intelligence, economic forecasting, trends and World News visit the Global Intelligence Report.

© 2010 Copyright Global Intelligence Report - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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