Nabucco: A Pipe Dream Closer To Reality?

Via The New York Times, an update on Austria, Bulgaria, Hungary, Romania, and Turkey’s decision to sign a transit agreement on the Nabucco pipeline, which would stretch 2,000 miles from the Caspian Sea to Austria through Turkey.  This project would reduce Europe’s dependence on Russian gas but, despite this latest agreement, the project’s completion remained a distant goal, with no suppliers formally committed.  As the article notes:

“…The project has long been delayed, bogged down in disagreements between Turkey and Europe over terms and by maneuvers from Russia, which is pushing a competing pipeline, South Stream. Most significantly, the pipeline has no committed suppliers, the most important element in getting the project moving.

The agreement signed Monday, which Turkey’s prime minister, Recep Tayyip Erdogan, was present for, was just one small step, experts said.

“It does very little to remove obstacles from the pipeline,” said Ana Jelenkovic, an analyst at Eurasia Group in London. “We have no map. There are no committed supplies, and no committed financing.”

The project was proposed in 2002 by executives of European energy companies wanting to reduce their reliance on Russian gas, which dominates Europe’s energy market. It took on new urgency in 2006 and again last winter, when pricing disputes between Ukraine and Russia shut down supplies to Europe.

Azerbaijan, an oil-rich American ally on the Caspian Sea, was seen as a potential principal supplier, though countries like Egypt and Iraq— as well as Iran, despite American objections — had also been discussed.

But geopolitics intervened last year, when Russia fought a short war with Georgia, giving other former Soviet satellites like Azerbaijan pause. In an indication of that concern, Azerbaijan last week signed an agreement to supply small amounts of natural gas to Russia, a promise that Ms. Jelenkovic said would not threaten the Nabucco pipeline.

Azerbaijan has also hit a rough spot in relations with Turkey, which is trying to reconcile with its neighbor, Armenia. Azerbaijan and Armenia fought a bitter war in the 1990s.

And Moscow has continued to push its project. Just last week, Russia’s deputy prime minister, Igor Sechin, was quoted by the Interfax news agency as saying that Russia had “offered Turkey cooperation with the South Stream.”

Monday’s agreement does not address the sticking point between Turkey and Europe, Ms. Jelenkovic said. Turkey wants to keep 15 percent of the pipeline’s potential supply for its own markets or for resale, and European countries have balked at that.

Borit Grgoc, an expert on Caspian energy issues who has worked as a consultant to the Azeri government, said that European nations were unlikely to have an interest in allowing Turkey to “sell gas back to them.”

However, reports in the Turkish news media said that Turkey had agreed to lower its demand after partners in the consortium, along with RWE of Germany, offered a 50 to 60 percent share in tax revenues from the project, which could be worth up to $650 million.

One unambiguous result of the gathering was to demonstrate Turkey’s regional ambitions. Turkey has been pursuing an aggressive foreign policy, courting Muslim countries to its east while seeking a greater role in the politics of the Caspian and Caucasus regions. It is also trying to join the European Union. Iraq’s prime minister, Nuri Kamal al-Maliki, was present at the ceremony, as was José Manuel Barroso, the president of the European Commission, the European Union’s executive branch.

Turkey is in lingering membership talks with the union and considers such energy deals a way to strengthen ties. Indeed, Mr. Barroso praised Turkey’s role in building safe energy routes and called Nabucco a sign of improving relations.”

This entry was posted on Monday, July 13th, 2009 at 12:53 pm and is filed under Azerbaijan, Gazprom, Russia, Turkey.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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