Wednesday, 06 May 2009


Published in Analytical Articles

By Alman Mir Ismail (5/6/2009 issue of the CACI Analyst)

The EU and U.S.

The EU and U.S. have been extremely slow in making the Nabucco pipeline come true, while Turkey is the main obstacle for the transit of Caspian gas to European markets. Gazprom, on the other hand, has been successful in starting negotiations with Azerbaijani officials to buy all of Azerbaijan’s gas and thus, blocking its independent supply to the EU. Time is running against the EU and U.S. interests in the region. Unless radical and urgent steps are taken, Russia could deal a mortal blow to the East-West corridor, so well designed in the 1990s to diversify regional pipelines and energy transportation.

BACKGROUND: The construction of the Baku-Tbilisi-Ceyhan pipeline in 2005 successfully cemented the East-West corridor idea for the transportation of Caspian oil to European and Asian markets. This pipeline, the first major pipeline to break Russia’s monopoly on the regional pipeline infrastructure, is currently exporting 1 million barrels of Azerbaijani oil and is the driving force behind the economic development of Azerbaijan, Georgia and Turkey. The BTC pipeline also became the driver for other regional transport projects, such as the South Caucasus gas pipeline and the Baku-Akhalkalaki-Kars railroad, among others.

BTC did not happen easily. Intense political lobbying, coordination and negotiation by the U.S., Turkish, Azerbaijani and Georgian governments helped to overcome the obstacles and objections to the project, created by Russia and other regional powers. At the end, BTC was a real success story, which completed the first phase of the East-West corridor and opened doors for other projects, more specifically for the transport of Central Asian gas and oil to the Western markets.

Since the completion of BTC, however, the West has been loosing the game vis-à-vis Russia for the further development of the East-West energy corridor. This became apparent last year, as Russia openly showed it interest in purchasing all of Azerbaijan’s gas at world market prices. President Dmitry Medvedev’s visit to Baku in summer 2008 highlighted the peak of Russia’s interest in Azerbaijani gas. Political pressures followed the commercial proposal. The Kremlin is doing everything in its powers to prevent the construction of the Nabucco pipeline, with a planned capacity of 30 billion cubic meters, and more generally the emergence of alternative supply of gas to EU markets. This way, political pressures from the Kremlin on European states can continue and the gas blackmail, similar to that which happened in January 2009 between Russia and Ukraine, can be repeated without a proper European reaction.

While Russian efforts are somewhat to be expected, Turkey’s stubbornness in negotiations to allow Azerbaijani gas to transit through its territory towards Europe are raising eyebrows in the Azerbaijani capital. Officials in Baku are keen to export gas directly to Europe, hoping to reap some political benefits from it. Turkey, on the other hand, wants to buy Azerbaijani gas at a very cheap rate and then sell it onward to the EU in its own name. Since 2007, Turkey is already buying Azerbaijani gas from the Shah-Deniz field’s phase I, but this transaction constitutes only a small portion of the field’s full capacity. When agreeing to the terms of this first agreement, Azerbaijan hoped that future volumes of gas would be allowed to cross Turkish territory on transit terms. Turkey, however, keeps insisting on its own rules of the game.

Recent negotiations between Armenia and Turkey and the Turkish government’s desire to normalize relations with Armenia have further worsened relations between Ankara and Baku and led to further distrust and tensions between the two nations. In that respect, the fate of Nabucco is further put on hold.

The cold attitude to Nabucco from U.S. and European capitals is another source of concern. In April, the EU Commission voted to exclude Nabucco from the list of its priority projects, a move coming after intense pressures from Germany, Russia’s main energy partner in EU. Although this step was corrected in the following weeks due mainly to Romanian diplomacy, the signal sent by Brussels to Azerbaijan was one leading to distrust and exasperation.

IMPLICATIONS: The lack of genuine interest for Nabucco from the U.S., EU and Turkey is making this project almost impossible to realize. Unless they receive strong political support from major geopolitical centers of the world, such grand regional projects are doomed to failure or stagnation – especially given Russia’s active and often coercive energy diplomacy. While such support and coordination was evident in the case of BTC, it is extremely weak in the case of Nabucco.

Foremost, the relations between Turkey and the U.S. are of note in this respect. The two NATO allies were synchronizing their policies in the 1990s, and in fact, Turkey was often perceived as the promoter and agent of U.S. interests in the South Caucasus and Central Asia. But today, they are playing different games and experience substantial tensions in their bilateral relations. This has to do with many factors, including the election of the AKP in 2002, Ankara’s objections to Bush’s war in Iraq, American support to the Armenian cause in the U.S. Congress and Kurdish rebels in Iraq. Thus, America has not been able to lobby Turkey enough on concessions on the Nabucco project.

On the other hand, the EU itself is torn apart by internal disagreements and the absence of a proper vision for the Black Sea region. It has failed to provide solid, needed and adequate support for this vital regional project. Some members of the EU fear a strong Russian reaction, while others lack financial resources to support the pipeline.

As a result of these failed policies and hesitant actions, Azerbaijan finally had no choice but to sign a memorandum of understanding with Gazprom about the start of negotiations on the sale of Azerbaijani gas to Russia. Official Baku cannot wait indefinitely. The production of natural gas from phase two of the Shah Deniz field has already been postponed by the consortium due to the lack of certainty regarding buyers and transit routes for the gas. And although Azerbaijan has been conducting negotiations with Greece and Bulgaria for the sale of small volumes of gas to these EU member states, it is obvious that these agreements are not enough to satisfy the needs of the Shah Deniz field.

CONCLUSIONS: Should Turkey’s stubbornness and the lack of proper European and American support for the Nabucco project continue, Azerbaijan will have no choice but to sell its gas to Gazprom. In that case, Turkey and the EU will be the main losers. Turkey will have to buy the same Azerbaijani gas from Russia at a more expensive rate. In this respect, Turkey, looking for short-term benefits, will pay a high price for its inability to look at the situation strategically and for its unwillingness to invest into strategic projects which would further cement Ankara’s presence in the region.

With its close to 600 billion cubic meters of gas demand, the EU will continue to depend on Russia for gas deliveries. Russia is already supplying close to 40 percent of EU gas and is likely to further strengthen its control over European markets.

The saddest outcome of this conundrum would be the effect on the prospects for Trans-Caspian pipelines and for the export of Central Asian energy resources to European markets through the South Caucasus. Should Gazprom succeed, the prospects of an East-West energy corridor would be closed for good. The Caspian basin, with its proven 9 trillion cubic meters of gas (with much higher estimated reserves) would fall into a near-complete dependence on Russia. The political consequences of this policy will be very dangerous both for the region and for the West.

AUTHOR’S BIO: Alman Mir Ismail is a Baku-based freelance writer.
Read 3629 times

Visit also





Staff Publications

Screen Shot 2023-05-08 at 10.32.15 AMSilk Road Paper S. Frederick Starr, U.S. Policy in Central Asia through Central Asian Eyes, May 2023.

Analysis Svante E. Cornell, "Promise and Peril in the Caucasus," AFPC Insights, March 30, 2023.

Oped S. Frederick Starr, Putin's War In Ukraine and the Crimean War), 19fourtyfive, January 2, 2023

Oped S. Frederick Starr, Russia Needs Its Own Charles de Gaulle,  Foreign Policy, July 21, 2022.

2206-StarrSilk Road Paper S. Frederick Starr, Rethinking Greater Central Asia: American and Western Stakes in the Region and How to Advance Them, June 2022 

Oped Svante E. Cornell & Albert Barro, With referendum, Kazakh President pushes for reforms, Euractiv, June 3, 2022.

Oped Svante E. Cornell Russia's Southern Neighbors Take a Stand, The Hill, May 6, 2022.

Silk Road Paper Johan Engvall, Between Bandits and Bureaucrats: 30 Years of Parliamentary Development in Kyrgyzstan, January 2022.  

Oped Svante E. Cornell, No, The War in Ukraine is not about NATO, The Hill, March 9, 2022.

Analysis Svante E. Cornell, Kazakhstan’s Crisis Calls for a Central Asia Policy Reboot, The National Interest, January 34, 2022.

StronguniquecoverBook S. Frederick Starr and Svante E. Cornell, Strong and Unique: Three Decades of U.S.-Kazakhstan Partnership, Central Asia-Caucasus Institute, December 2021.  

Silk Road Paper Svante E. Cornell, S. Frederick Starr & Albert Barro, Political and Economic Reforms in Kazakhstan Under President Tokayev, November 2021.

The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.


Sign up for upcoming events, latest news and articles from the CACI Analyst