Wednesday, 01 August 2001

THE "BLUE STREAM" GAS PROJECT: NOT A PIPE-DREAM ANYMORE

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By Robert M. Cutler (8/1/2001 issue of the CACI Analyst)

BACKGROUND: In mid-December 1997 the Turkish prime minister then in office, Mesut Yilmaz, signed an agreement with the erstwhile Russian prime minister Viktor Chernomyrdin to build the so-called "Blue Stream" natural gas pipeline. Turkish press reports this spring led state prosecutors to examine the process by which the contract for construction of the Turkish segment was awarded, allegedly without tender. Political pressure forced the resignation, on April 26, of Cumhur Ersumer, the energy minister and a member of the Motherland Party, two days after the indictment on charges of corruption of fifteen government officials who, according to press reports, named Ersumer in connection with the probe.

BACKGROUND: In mid-December 1997 the Turkish prime minister then in office, Mesut Yilmaz, signed an agreement with the erstwhile Russian prime minister Viktor Chernomyrdin to build the so-called "Blue Stream" natural gas pipeline. Turkish press reports this spring led state prosecutors to examine the process by which the contract for construction of the Turkish segment was awarded, allegedly without tender. Political pressure forced the resignation, on April 26, of Cumhur Ersumer, the energy minister and a member of the Motherland Party, two days after the indictment on charges of corruption of fifteen government officials who, according to press reports, named Ersumer in connection with the probe. On May 22, however, the parliament rejected by a 264-164 vote, an opposition motion to strip Ersumer of his immunity, thus blocking the possibility of him being indicted. The Turkish company BOTAS and the Russian company Gazprom have completed large parts of the onshore pipeline. Of the entire 750-mile route, there mainly remains the 170-mile section under the sea itself, to be built by Italy's ENI and the Russian firm Stroitransgaz with the participation of the Japanese engineering firm Saipem. The undersea section is the most problematic and has accounted for delays in completion. Descending to 1.3 miles under the sea's surface, it will be half again as deep as the deepest pipeline ever laid. The highly specialized "Saipem 7000" vessel, which will lay the pipe in the deeper Black Sea sections, is scheduled to enter the sea through the Turkish Straits in August and to begin its work in September, with completion planned before the end of the year. The whole pipeline will then be ready for testing and verification sometime in early 2002.

IMPLICATIONS: Recent doubts about the completion of the Blue Stream project have been fueled, first by the continuing crisis in Turkey's economy, and second by delays in Blue Stream construction. As to the first, however, both the IMF and the World Bank just this month released the latest tranches in their stabilization package for the Turkish economy, and this might be the last chance for the country to set its economic house in order, first and foremost through a genuine restructuring of the banking sector. To be sure, Turkey has never been able really to construct a post-Cold War national energy strategy. This accounts for the multiplication of projects and sometimes vague and contradictory statistical projections emanating from different sources. And also, the imminent success of the Blue Stream project is due more to a transnational amalgamation of industrial and business interests between Turkey and Russia than to any strategic design by Ankara. Proponents of the long-stalled Trans-Caspian Gas Pipeline (TCGP) suggest that delays in Blue Stream construction give Ashgabat one more chance to find a hard-currency export market. But in fact the TCGP project is effectively dead, because continuing short-term concerns with payments crises and the short-sighted thrill of playing possible investors and foreign consumers against one another have left Ashgabat wholly unable to fashion a constructive strategy for energy development. It now becomes conceivable, indeed likely, that Russia will sell gas from Turkmenistan via Blue Stream to Turkey and southern Europe. Later in the current decade, Kazakhstani natural gas could also come on line through the Russian system, even displacing somewhat Turkmenistan's gas since the latter must cross Kazakhstan to reach Russia in the first place. Even if the TCGP project were accelerated as from today, it is an open question whether it could be completed before Russian, Azerbaijani and Iranian supplies come on line to satisfy Turkish demand by the middle of the decade. Meanwhile, gas exploration and development will continue in Kazakhstan and Uzbekistan, with progress likely to make inroads into historically Turkmenistani markets. But it is also necessary to note an early June meeting between Turkish foreign minister Ismail Cem and his Russian counterpart Igor Ivanov, where the two agreed to set up a working group to develop a framework for cooperation between the two countries. In the framework of economic cooperation, this working group will also examine possibilities of weapons co-production for export to third countries. Russia recently struck a similar co-production deal with India. Then towards the end of the current year, President Vladimir Putin is expected to make a visit to Ankara. All this indicates that Russian influence in Turkey now has the chance to become so well institutionalized, particularly if significant military production cooperation proceeds, that it would be unaffected even by an eventual constitutional reform of the political system to accommodate EU demands.

CONCLUSIONS: The Turkish state's attempt as from the early 1990s, motivated by then-President Turgut Ozal (whose strategic geopolitical thinking has proven irreplaceable), to extend influence into Central Asia was stymied by Turkey's inability to provide the really large economic assistance that countries in the region sought. Yet paradoxically, Washington's difficulty during the crucial post-Cold War decade of the 1990s, in engaging Central Asia strategically outside the energy sector, has now left the field open to Turkey to pursue its own interests. It is projected that the Blue Stream pipeline will increase Turkey's dependence on Russian sources of natural gas from the current two-thirds level to about four-fifths. For this reason, the United States has reportedly raised hesitations to Ankara over the past several years. But the notion that Turkey was the new American "sub-hegemon" in the region -- and particularly the canard of a U.S.-Turkey-Israel cabal -- was always a gross over-simplification.

AUTHOR BIO: Dr. This email address is being protected from spambots. You need JavaScript enabled to view it. (http://www.robertcutler.org) is Research Fellow, Institute of European and Russian Studies, Carleton University, Canada. He specializes in the interdisciplinary international affairs of Europe and Eurasia, with attention to the energy geo-economics and the organizational analysis of international security structures.

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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.

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