PIPELINES BETWEEN THE TURKIC AND ORTHODOX WORLD

The striving to assure energy security in Europe could lead to an intensification of the competitive struggle between energy and transport projects. This is the unexpected conclusion that can be drawn by analysing the possible consequences of an intergovernmental agreement signed on 15 March in Athens between Bulgaria, Greece and Russia on the construction of a pipeline from Burgas to Alexandroupolis. 

The Burgas-Alexandroupolis pipeline has been on the drawing board for almost 14 years. Back in 1994, Greece proposed the idea of constructing a pipeline on this route, but the countries participating in the project were long in dispute over the ownership structure. Bulgaria and Greece thought that the members of the consortium managing the pipeline should each own a third of the shares; Russia was demanding a controlling stake for itself and tax breaks for Russian companies taking part in the project. It was only in autumn 2006 that the deadlock was broken. That was to a considerable extent under pressure from the Russians, observing the successful implementation of the Baku-Tbilisi-Ceyhan (BTC) project with envy and apprehension: officials from the three countries signed a declaration on energy cooperation in Athens, and then the Greeks and Bulgarians agreed to leave Russia with a controlling stake.

Some experts think that the Burgas-Alexandroupolis pipeline has advantages over the BTC: it is shorter, it is more conveniently located to supply Western Europe and it passes through politically stable countries. The BA project also offers the advantage that Alexandroupolis is a deep-water port and can thus receive supertankers (with a 300,000 tonne displacement), assuring the effectiveness of supplies to any markets, including the USA and China. However, this project also has its downsides - the tariffs to pump oil through the new pipeline are not yet known, and two extra transhipments - from the tanker into the pipeline at Burgas and from the pipeline into the tanker at Alexandroupolis - will undoubtedly increase the price of transporting the oil.

Experts think that the implementation of the BA project could allow Russia to resolve at least three important priorities - boosting its position in the Balkan region, seizing the initiative in the energy and political standoff with states involved in the BTC project, and strengthening its position in energy dialogue with the EU.

The BA project also offers obvious advantages to its other members, Bulgaria and Greece. Both of these countries will receive guaranteed volumes of oil supplies and significant revenues from oil transit. Bulgaria, for example, as Russian President Vladimir Putin noted at a joint press conference in Athens, will receive revenues from the transit of oil through the pipeline to the tune of 2.5 billion dollars. When the Trans-Balkan pipeline is put into operation, Bulgaria and Greece could basically turn into major regional transit centres for Russian energy producers sending oil to European and international markets. It was no accident that Greek Premier Karamanlis noted with satisfaction at the press conference that the project would "allow our role on the international energy map to be boosted".

However, all these hopes can only come to fruition when the Trans-Balkan project is provided with a solid basis of resources. The leaders of the countries involved in this project also realise this. It is worth citing the Russian president, who said that the project "makes it possible to think about expanding supplies from the Caspian region". This means, Putin said, that "those extracting oil in the Caspian region have an interest in this - American and Kazakh companies, Azerbaijan".

According to an analyst from the Troyka Dialog investment company, Valeriy Nesterov, the pipeline can only be filled by Kazakh oil, which is now transported via the CPC. It is thus possible to conclude that the most important factor in support for the BA project lies far beyond the Balkans. The Russian president noted meaningfully at the press conference that implementing this project would assist in "reaching agreement on other quite significant projects, which many have an interest in implementing".

What did he have in mind? This was evidently about a potential settlement of a lengthy conflict between the Russian government and CPC investors over expanding the capacity of this pipeline. (CPC is the owner of the only private pipeline in Russia, linking oilfields in Kazakhstan to Novorossiysk. The main state investors are Russia (24 per cent), Kazakhstan (19 per cent) and Oman (7 per cent); the non-state investors are Chevron (15 per cent) a LUKoil and BP joint venture (12.5 per cent) and a Rosneft and Shell joint venture (7.5 per cent)). Kazakhstan currently extracts over 60m tonnes of oil annually, but by 2015 it plans to have increased the volume of extraction to 150m tonnes. Experts think that 20-30m tonnes of this volume could be sent through the Trans-Balkan pipeline, but for that there would have to be an increase in the CPC's capacity, which the Russian government is currently resisting. 

It is noteworthy that on the very day the BA project was signed the CPC's private investors declared their interest in joining the construction of the Burgas-Alexandroupolis pipeline. However, Chevron and Kazakhstan's KazMunayGaz plan to link their participation in the Burgas-Alexandroupolis project with an agreement by Russia to expand the CPC's capacity (a project to expand the consortium's capacity from 27m tonnes of oil pumped annually to 65m tonnes was proposed to Russia back in 2006). Chevron welcomed the signing of an agreement on the project, and Interfax reported that KazMunayGaz was examining the possibility of obtaining a share in it. The conditions for joining the BA and CPC projects are quite favourable. It is known that Russian companies will receive 51 per cent in the BA project, shared by Rosneft, Transneft and Gazpromneft. Greece and Bulgaria will receive 24.5 per cent each. Both countries can cede their shares, but only to oil-extracting companies. One of the candidates is TNK-BP and another is America's Chevron, which manages the leading oil producer in Kazakhstan, Tengizchevroil. Chevron, as noted above, is ready to take part in the project, but only if the CPC is expanded.

The Russian government in its turn proposes expanding the CPC on the principle "pump and pay": it proposes carrying out the expansion on the basis of borrowed funding rather than investors' funds, and sharing the management of the CPC between private and state investors on a parity basis (50 per cent of management for representatives of Kazakhstan and Russia and 50 per cent for extracting companies). The Russian government thinks that eventually the rate for credits awarded by the CPC's private investors to build the first phase of the pipeline should be reduced from the current 12.7 per cent to 10.5 per cent, and CPC tariffs should be increased to 38 dollars per tonne. In exchange for agreeing to Russia's demands, the CPC's private investors are demanding firstly approval for expansion from their Russian partner in the project, and secondly that the Federal Tax Service, which considers the current manner in which the consortium works to be a means of tax evasion, should stop pursuing the CPC.

If demands to expand the CPC's capacity are met, it could lead to extra volumes of Kazakh oil passing through the Trans-Balkan pipeline, which would assure its financial effectiveness and lend it political weight. For the CPC's private investors, which are developing the Kashagan and Tengiz oilfields in Kazakhstan, expansion is a question of economic and financial profitability and effectiveness. For the Kremlin, luring Kazakhstan and its oil into the BA project would allow the Greek-Bulgarian pipeline to be turned into a real competitor to the BTC. 

In this connection the US position is interesting - they are not opposing the Russian project: US State Department official Matthew Bryza, who was also in Athens, even supported it. It is obvious that Washington is concerned not by oil but by gas, and more precisely by the prospects of an increase in the dependence of European economies on Russian gas. Its policy will be forged taking precisely this factor into account.

As for Azerbaijan, it faces a serious struggle to assure the competitiveness of the BTC project and retain its leading position on Europe's energy map. This task must be resolved both in the Central Asian direction (primarily with Kazakhstan and Turkmenistan) and in the European direction, by stepping up Baku's political and economic cooperation with EU member states.

External influence has yielded results - on 26 March, as the deadline imposed by the British government expired, the DUP (Democratic Unionist Party) and Sinn Fein agreed at a historic meeting in Belfast to form a power-sharing Executive on 8 May. Gerry Adams stressed that the decision to resume the activity of political institutions in Ulster meant the beginning of a new stage in the political development of the region. One cannot but agree with Adams. Sinn Fein and the DUP, which have never before agreed to a dialogue, have managed to overcome mutual enmity and open a window of hope for the peaceful development of the region. 

Sinn Fein and the DUP, which have never before a dialogue, on 26 March overcame mutual enmity. They agreed to form a power-sharing Executive, thus opening a window of hope for the peaceful development of the region.