
EVERYONE FOR THEMSELVES
Moscow is making no secret of its attitude towards the nabucco project, while the European countries cannot devise a unified strategy for energy security
Author: Nisa QAZIMOVA Baku
The Nabucco pipel-ine project was the subject of an international conference held at the end of January in Budapest. This intensified speculation about a conflict between Moscow and the EU over the competing Nabucco and South Stream projects.
The Hungarian government pushed the idea of the summit for several months and suggested holding it in January 2009. But no-one could have predicted that the summit would have coincided with the Russian-Ukrainian gas "war", which caused irreparable damage to the reputations of Moscow and Kiev as reliable partners in supplying gas to Europe. Represen-tatives of Austria, Hungary, Romania, Bulgaria, Turkey and Germany took part in the summit along with potential suppliers, Azerbaijan, Kazakhstan, Turk-menistan, Iraq and Egypt, and Georgia as a transit country. Of the five suppliers, only Azerbaijan was represented at the highest - presidential - level, which showed the EU and the whole of Europe once again the importance that Baku attaches to the project. Other speakers at the conference were the prime minister of the Czech Republic, which holds the rotating EU presidency, Mirek Topolanek, US Assistant Secretary of State Matthew Bryza (according to some reports he will soon leave his post for other diplomatic work), the president of the European Bank for Reconstruction and Develop-ment (EBRD), Thomas Mirow, and the president of the European Investment Bank (EIB), Philippe Maystadt.
The Nabucco gas pipeline, 3,300 km long and at a cost of $8 billion ($10bn to $12bn according to other estimates), was to have come into operation in 2015 and serve around 150 million European consumers. However, the project has come up against a range of serious financial, resource and political problems which were the subject of the discussions and negotiations in the Hungarian capital.
Two questions are of course key to the project today and to its competitors - who will finance it and who will provide the gas? On the eve of the summit, the Czech prime minister acknowledged another, political, problem which may be even more difficult to overcome. He thinks that the major EU member states are not showing the appropriate interest in the Nabucco project as they have other sources of gas supply and their own priorities in Russia, so they hold a very different position to the countries participating in the project. The Czech prime minister and EU president said that Germany, France, Italy and Great Britain were lukewarm about the project.
Another obstacle is the position of Turkey, which has recently been annoying the EU and European Commission leaders more and more. Ankara intends to secure for its own domestic consumption 15 per cent of the 30bn cubic metres expected to be pumped annually through the gas pipeline. Moreover, during his recent visit to Brussels in January Turkish Prime Minister Erdogan cast doubt on the economic viability of constructing the Nabucco pipeline and said his country would review its position on the project. Ankara traditionally plays the energy card at talks with the EU. Now it looks as though it is going to use it to influence Cyprus, which is blocking talks on Turkish EU membership, and to influence the whole of the EU which is also at present blocking the part of the negotiations on EU accession that concerns energy issues.
The recent gas conflict between the two Slavic capitals made the Budapest forum especially timely. Commentaries from news agencies and statements by representatives of the business and political elite say that it was the conflict that encouraged clarity on a number of problem issues concerning the project. Hungarian Prime Minister Ferenc Gyurcsany said at the end of the summit that its participants had agreed to make every effort to ensure that by mid-June the interested countries could sign an intergovernmental agreement.
More clarity emerged on the issue of financing. EIB President Philippe Maystadt said that "the bank will be pleased to support any country that is interested in Nabucco, but it is still too early to say what the final response will be", according to ITAR-TASS. He said that the EIB would take on 25 per cent of the $200-$300 million expenditure, necessary at the first stage, but only after the completion of its feasibility study and, as a minimum, the conclusion of an intergovernmental agreement. True, EBRD President Thomas Mirow took a harder line, saying that "we want to see contracts for the supply of gas, investment guarantees, technical specifications". Mirow said that the potential impact on ecology had to be assessed and public consultations held along the pipeline route. These requirements are wholly appropriate, as this is a major, intercontinental project.
The Nabucco project's main problem is a lack of gas, as Azerbaijan alone cannot provide the whole volume required for the project to get the go-ahead (at least 15bn cubic metres are required). However, the participants in the project should not be pessimistic - dialogue is continuing with Turkmenistan as one of the leading exporters and may produce the desired result. Be that as it may, the current Turkmen leader is displaying healthy pragmatism, great flexibility and an understanding of regional policy issues and European energy security. Iran, another potential supplier of gas for the project, should not be forgotten either. US President Barack Obama's new administration is already giving out signals that it is ready to begin dialogue with Tehran, and energy issues might well be part of that dialogue.
And it shouldn't be forgotten that everything is not going smoothly at present for Russia's competing South Stream project. In January 2008 Gazprom and Italian energy concern Eni agreed to draw up a feasibility study for the project by the start of 2009, but the deadline has been pushed back to the end of the year. The feasibility study is the basis on which the final investment decision is taken. The sides have not yet even chosen a head of the company. Bulgaria, which joined the project in 2007, has submitted several conditions which Gazprom considers unacceptable. The Bulgarian authorities want Sofia to have the controlling package of shares in the South Stream operating company on Bulgarian territory which would allow them to regulate transit income. A contradiction is inherent in this issue from the outset: the supplier will insist on minimum payment for transit and the transit country on maximum payment.
At first sight Moscow does not look to have any problems with the resource base for South Stream. Last week Uzbek President Islom Karimov promised to supply twice as much gas to Russia in 2009 as in 2008 and, as soon as transport capacity allows, to bring the export volume up to 30 billion cubic metres. Russian experts think that Uzbek gas alone will be enough to fill South Stream. Having received from Russia the long awaited payment of $300 for 1,000 cu.m. of gas in the first quarter of this year, Mr Karimov agreed to sell all their gas to Russia, having approved work on a feasibility study for a new branch of the Central Asia - Centre gas pipeline. However, things are not as watertight as they might seem - Uzbek foreign policy has often made U-turns, leaving Russian policy up a blind alley. And the heat of the unspoken interregional struggle for leadership between Astana, Tashkent and Ashgabat is so high that volumes and direction for gas exported from the region could fall victim to it.
In other words, the struggle between the two projects is continuing and it's far from clear who will be the victor. All that can be said with any certainty is that Azerbaijan will be at the epicentre of the struggle. And its independent, serious energy policy is today one of the few factors behind the viability of the Nabucco project.
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