Thursday, 05 April 2007

THE BURGAS-ALEXANDROUPOLIS PIPELINE AND ITS IMPLICATIONS

Published in Analytical Articles

By Stephen Blank (4/5/2007 issue of the CACI Analyst)

The Black Sea has emerged as a primary area for the transport of energy to Europe and thence to the world market. Yet Turkey has insisted, partly for ecological and environmental reasons, on restricting the flow of energy through the Bosporus. This ruling has forced every energy producer in Russia and Central Asia to search for alternatives such as the Baku-Tbilisi-Ceyhan pipeline, various schemes to transport oil across the Black Sea, and more recently the new Burgas-Alexandroupolis pipeline which will take oil from Kazakhstan through Russian pipelines and tankers to the Bulgarian port of Burgas and from there through Bulgaria and Greece to the port of Alexandroupolis.

The Black Sea has emerged as a primary area for the transport of energy to Europe and thence to the world market. Yet Turkey has insisted, partly for ecological and environmental reasons, on restricting the flow of energy through the Bosporus. This ruling has forced every energy producer in Russia and Central Asia to search for alternatives such as the Baku-Tbilisi-Ceyhan pipeline, various schemes to transport oil across the Black Sea, and more recently the new Burgas-Alexandroupolis pipeline which will take oil from Kazakhstan through Russian pipelines and tankers to the Bulgarian port of Burgas and from there through Bulgaria and Greece to the port of Alexandroupolis. But beyond ecological and environmental restrictions on energy transport through the Black Sea Straits, these ventures each have considerable economic and political significance.

BACKGROUND: This new Russo-Bulgarian-Greek project underscores the complex economic and political rivalries that dot the region and Russia’s aim of using energy to establish its hegemony in the CIS. Russia controls 51 percent of the project and the other two partners 24.5 percent each. The motives for Bulgaria and Greece are obvious: becoming major players in the energy field and gaining regular oil supplies, large transit fees, and opportunities for jobs and investments. But Moscow’s agenda is broader and more strategic.

Russia recently intensified the pressure to bring the 13 year long discussion of this project to fruition because of Turkey’s continuing restrictions on tanker trade in the Bosporus through which one-third of Russia’s oil exports flow. While the reasons given for this Turkish policy are environmental security, this trend has had the consequence of forcing more shipments through the Baku-Tbilisi-Ceyhan pipeline that does not cross Russian territory and which Moscow therefore does not support. The new project will relieve pressure on the Bosporus and bypass Turkey as well as the BTC pipeline. And since it uses Kazakh oil, Moscow will keep the pressure on to ensure that this oil only reaches markets through routes it controls in order to keep Kazakhstan dependent upon it, just as it is trying to do with Turkmen gas to Ukraine.

Third, Washington is sponsoring a huge competing infrastructural plan for the Black Sea that would tie together Central Asian producers like Kazakhstan and Turkmenistan; Turkey, which has made clear its ambition to be a key regional distributor and pivot in the global energy trade; and the Balkans, while bypassing Russia. In other words, the Burgas-Alexandroupolis pipeline is the latest Russian move in an increasingly complex trans-continental rivalry over oil and gas pipelines from Russia, Central Asia, and the Caucasus to Europe and then to global markets. It also represents a Russian effort to outflank the recent moves by Kazakhstan to join the BTC pipeline and ship its oil through a projected Trans-Caspian pipeline under the Caspian Sea that Moscow opposes. Russia opposes this pipeline allegedly because of the ecological damage to the Caspian Sea. But one suspects its real reasons are economic – namely to prevent the loss of revenue that would accrue to it from shipping Kazakh oil through its pipelines to Europe – and political, keeping Kazakhstan under its pipeline thumb, so to speak.

Undoubtedly, Russia figured out that Kazakhstan was increasingly attracted to the American and European sponsored BTC project and the developing gas pipeline from Baku to Erzurum in Turkey, and has moved to minimize the damage to its interests by getting its pipeline in first. Since Greece and Bulgaria benefit greatly from the new pipeline and the possibilities for economic stimulation that it offers them, it is not surprising that they finally accepted this program. But the reasons for the new urgency behind Moscow’s advocacy undoubtedly are connected to the linkages between Kazakhstan and Central Asia on the one hand and pipelines to Europe that bypass Russia, e.g. the BTC pipeline, on the other.

A possible second motive for the Burgas-Alexandroupolis pipeline is that Russia is concerned about becoming too dependent upon Turkey as a passageway or middleman for the export of its energy products to Europe. As noted above, one-third of Russian exports already go through the Bosporus and a large amount of gas goes from Russia to Europe through the Blue Stream pipeline. Just as other suppliers know, their security rests in diversification of export markets and consumers know that their security rests in diversifying the number of their suppliers. Russia understands the need for not becoming too dependent upon any one export route. This issue is driving Russia’s energy strategy ever since it was published in 2003. Moscow is determined to deny foreign governments the ability to interfere with its ability to export to whomever it chooses, and this is a major drive behind the energy crises in Belarus and Ukraine in 2006-07. Therefore it makes sense to suspect that Russia does not wish to become too dependent upon Turkey as a route to markets, especially since its ability to close the Bosporus could cripple Russian exports in general, not just in terms of energy, or force Russia to accept the BTC. The Burgas-Alexandroupolis pipeline meets this requirement for Russia, giving it a viable alternative to the Bosporus and Turkey and expanding its options in the Balkans, which it is clearly trying to dominate insofar as energy is concerned.

IMPLICATIONS: As this and other similar deals suggests, pipeline deals are major political ventures as well as economic projects. This particular project has important ramifications for the Balkans, Turkey, Russia, the Caucasus (by virtue of its implications for the BTC pipeline) and Central Asian producers. But beyond that fact, this project has several other implications attached to it. First of all, it shows that the destinies of Europe, the Caucasus, and Central Asia are increasingly intertwined because what is at stake here is not just the future ability of Kazakhstan to conduct an independent energy policy, but also Europe’s ability to rely upon diverse suppliers. It also remains to be seen to what degree Bulgaria’s and Greece’s participation in this project could lead to their falling into a position of dependence upon Russia that would be an impediment to further European integration and democratization.

Secondly, this project implicitly suggests that Turkey’s desire to play a major role in the international energy economy as a transfer point and thus pivotal actor in that system. This project suggests that Russia will try to set a limit upon Turkey’s ability to play that role even if it does so subtly as is the case here. Nonetheless Turkey will continue trying to be a major transfer point for energy as its participation in the Blue Stream, BTC and Baku-Erzurum pipeline as well as its major role in the export of Russian energy suggests. Inasmuch as Turkey and the EU are engaged in very delicate negotiations over Turkey’s entry into the EU, Ankara’s ability to play a key role in supporting the infrastructure of the global energy trade enhances its importance to the EU and the desirability of reaching a solution that allows for its membership there.

At the same time, Turkey’s ability to play this positive role can and will support its aspirations to be a major actor in the Caucasus if not Central Asia, and could clearly lead to tensions with Russia despite the recent Turco-Russian rapprochement. Indeed, this project indicates that the Turkish-Russian romance may have reached its height.

CONCLUSIONS: The Burgas-Alexandroupolis pipeline project is clearly part of a broader Russo-Western struggle over energy policy and foreign influence in the CIS. Washington is supporting a series of infrastructure and energy projects in Eurasia whose explicit objective is to deny the possibilities for Russia to monopolize every kind of energy source in Central Asia and the Caucasus and Russia seeks to advance its monopolistic agenda with regard to Central Asia by its own projects like this one. Europe, likewise, has woken up to the need of diversifying energy supplies. Only coherent and unified efforts by Washington and the EU can advance projects to counter this Russian trend. This includes strengthening resolve to complete the EU’s Nabucco pipeline or to help develop the Baku-Erzurum pipelines. But it remains to be seen where this struggle goes and who will prevail in the struggle over infrastructure and pipelines in Eurasia. While the outcome of this rivalry cannot be foreseen now, it can be predicted that this struggle is likely to intensify and spread into ever wider economic and geographic zones.

AUTHOR’S BIO: Professor Stephen Blank, Strategic Studies Institute, US Army War College.The views expressed here do not represent the views of the U.S. Army, Defense Department, or the U.S. Government.
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