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‘Nabucco project is in danger because of the Georgia crisis’

14 Oct
Written by Marc Guillet
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The Georgia crisis was bad news for the EU’s Nabucco pipeline project. The initiative could become a victim of the power struggle between Russia and the West, but it is not dead yet. Iran should be allowed to join and Armenia could provide an alternative route.

by Marc Guillet

With the armed intervention in tiny but strategically located Georgia the Russians showed the West how vulnerable Georgia is. The safety of pipelines – existing and planned – using Georgia as a transit route for oil and gas from the Caspian region and Central Asia to Europe, is in doubt. It is now clear to everybody that no one else but Russia controls this energy corridor. The armed conflict with Georgia created new realities in the new Great Game of pipeline politics.
The Kremlin is trying to lure the former Soviet republic Azerbaijan back into its own sphere of influence by promising Baku that Moscow will actively help to solve the Nagorno-Karabakh issue as long as Azerbaijan does not exclude Russia from its energy projects. The US and the EU reacted swiftly with a countermove and suggested to Turkey and Azerbaijan that Armenia could be an attractive alternative route for the EU’s Nabucco pipeline project. There is no doubt an unprecedented convergence of national interests of the three countries – Turkey, Armenia and Azerbaijan – and a promising new atmosphere between Ankara and Yerevan inching forward to a possible “rapprochement” between these two neighbours, who are at odds for nearly 100 years.
But how realistic is the Armenia option as an alternative route for Nabucco? And what will be the impact of the Georgia conflict on energy supplies or energy investments in the region? We spoke about these and other issues with Sevak Sarukhanyan, an Armenian energy expert and deputy director of the Armenian think tank Noravank Foundation, during my recent visit to Yerevan.

‘If the conflict between Russia and Georgia becomes a permanent one it will have influence the energy supplies and investments in the region. But if we see in the coming months or years some normalization in the relations between Russia and Georgia about South Ossetia and Abkhazia than the changes will be less dramatic. The war between Russia and Georgia has already changed the situation in the region and beyond in many ways. Georgia is not the most stable country and that will have an impact on the attitude of the Central Asian countries. They will change their thinking about the South Caucasus as one of their transit routes for the export of their oil and gas to the world market. Kazakhstan and Turkmenistan have now second thoughts about joining the Baku-Tblisi-Ceyhan pipeline and the Baku-Tblisi-Erzerum pipeline. I don’t think that during the next one or two years Turkmenistan will join the project of the trans-Caspian pipeline or the Nabucco project. The most important thing is what will happen during the coming months in Georgia; the internal political process, the question if president Shakashvili will keep his power, what additional steps Russia will take to enhance its influence, and if their will be more military confrontations.’

Faced with an unstable neighbour Georgia, Azerbaijan is said to be considering other routes for its oil and gas too; mainly through Russia. How serious is this?
‘There was a proposal from the Russian president that Moscow is willing to buy Azerbaijani natural gas for a good European prize. That proposal was done last July. In that sense Azerbaijan has a very good alternative to sell its gas to Europe through Russia. They can also do that with their oil, because they have a pipeline from Baku to Novorossiysk. But you know the pipelines from Azerbaijan through Turkey are not only economical projects but also political projects between two countries which have deep and long historical roots and heritage. From that point of view I think that Azerbaijan will try to keep the projects it has created in the South Caucasus during the last decade. They want to keep Georgia the main transit route to Turkey and the international market for their oil and gas. It will of course depend on the situation in Georgia. If the destabilization of the situation continues for some months or years maybe the Russian suggestion to buy oil and gas from Azerbaijan will become more comfortable and attractive for Baku. From this point of view Azerbaijan is not in a bad situation: it has an alternative now that its main exports routes through Georgia have become in danger. I cannot say anything concretely yet, because a lot depends on the conflict between Russia and Georgia. In Turkey and Azerbaijan the politicians and the people who are involved in energy projects will keep monitoring the situation. What we can say at the moment is that if Azerbaijan decides to use its pipelines to Russia it will signal that Baku is changing its foreign policy as well, because pipelines are part of foreign policy. So if they decide to orient their oil and gas to Russian ports it means that they will also orient their foreign policy towards Moscow and we cannot say anymore that Azerbaijan is a country that wants to join Nato and has a pro western policy. From that point of view the interdependence between energy and politics is a huge one in the region.’

Could the conflict between Russia and Georgia derail the Nabucco project – because of safety concerns in Georgia – or could it be a boost for Nabucco and for Turkey’s position as a transit country for energy?
‘It is bad news for Nabucco. Azerbaijan and other energy producers in the Caspian region could turn their backs on Georgia as a route for exporting oil and gas to the West. Furthermore I don’t think that the Central Asian countries are going to join the Nabucco project. They have a lot of other options. They can export their gas to China, to India, to Russia. In this very dangerous situation in the south Caucasus I am very suspicious about the willingness of Kazakhstan and Turkmenistan to join the trans-Caspian or the Nabucco pipeline project. That will add to the supply problem of the EU-backed future pipeline. Azerbaijan has warned the EU that it has not enough gas resources of its own to ensure the project. The plan is intended to bring gas to Europe from the Caspian Sea region, bypassing Russian territory. But it can only be viable if Iran, which has one of the biggest gas reserves in the world, will join. And as long as the Iranians are not part of the project, Nabucco will never materialise.
The conflict between Russia and Georgia could on the other hand be a boost for Turkey. It has a very strategic and natural position as an energy transit route. Turkey is a neighbour of major energy producers in the Middle East – Iran and Iraq – it is a neighbour of the South Caucasus, it is a neighbour of Russia just across the Black Sea. Russians and Turks have big opportunities for common energy projects; think about the Blue Stream, the major trans-Black Sea gas pipeline that carries natural gas from Russia into Turkey. Even if the Nabucco project will not be realised it will not bring a lot of harms to Turkey. If Azerbaijan is going to export its gas through Russia it means that Azeri gas can enter Turkey through the Blue Stream pipeline. From this point of view Turkey can keep its positions as a main transit route for Caspian oil and gas. We should not forget about Iran. It has the second largest reserves of gas in the world and it has only one possibility of export of its gas to Europe and that is through the territory of Turkey. If Turkey will win the competition for Iranian gas export it will become a very important energy transit route for the supply of gas to Europe, comparable to the position of Ukraine for the export of Russian gas to Europe at the moment.’

But the EU is unwilling to make contracts with Iran about gas until the nuclear dispute is resolved.
‘I have discussed this with many Europeans. They are really willing to buy Iranian gas, and they need gas from Iran to diversify its sources of energy supply. It is more the political pressure from Washington not to do business in this field until Iran stops its uranium enrichment project. The main problem here is the Iranian behaviour. Tehran has not decided yet which route it will choose for the export of its gas. President Ahmadinejad declared two years ago that Iranian gas is Asian gas and that’s why it would be exported to Asian countries. That is obviously propaganda, because the Iranians understand that Europeans are going to pay a price that cannot be paid by India or China. I don’t think that the Europeans, with their demands for gas increasing in the future, will continue to insist that they will not buy from Iran until the nuclear dispute is resolved. Ultimately they will buy Iranian gas because they don’t have another option. Of course it may take one year, two years or three years of negotiations with Iran over the gas issue but they end with a positive result for the Iranians and Europeans and in this case Turkey is a natural gate for the export of Iranian gas. If Iran decides to join the Nabucco project it will mean that this EU-pipeline can be realised. On the other hand if Iran doesn’t join the project I don’t think that the central-Asian countries like Kazakhstan and Turkmenistan will be the alternative suppliers. They will take into consideration the Russian position. They will take into consideration the unstable security situation in Georgia. And I don’t think they are going to run a risk exporting their gas through Georgia. Although I am an energy specialist and a citizen of a neighbouring country of Georgia I have no idea what is going to happen in Georgia in one year or two years. Can you imagine what the people of Kazakhstan and Turkmenistan, who are not neighbours, will think about Georgia. They are only convinced that something is going wrong in this region. For this reason they don’t have enough trust in the security situation to join the pipelines through the south-Caucasus. That’s why Turkey energy transit future is mostly connected with Iran and Azerbaijan.’

There are some concerns if Turkey can guarantee the security of pipelines as well, as the Baku Tiblisi Ceyhan pipeline was sabotaged by Kurdish rebels of the PKK in August, just before the war started between Russian and Georgian troops.
‘Security is an issue in Turkey as well. Unfortunately I am not a specialist on the PKK, so I don’t know if this organisation will be more powerful or less powerful and if they will be able to stage more such acts of sabotage. It is obvious that Turkey has a problem in the eastern regions of the country. There are some risks for the pipelines, but they are not of the same magnitude of the security risks in the territory of Georgia. Turkey has much more resources to secure the pipelines; the enormous numbers of Turkish soldiers and police are of course not comparable to the very small number in Georgia. Maybe there could be an act of sabotage once a year or once in two years, but that risk is not life threatening for the pipelines.’

Just after the war between Russia and Georgia the US vice-President Dick Cheney visited the region. One of the purposes of his visit was to explore alternative, more secure routes for the export of oil and gas from the Caspian region to Europe. Armenia has been mentioned as one option.
‘There are some discussions of Armenia becoming a transit route for Azerbaijani and Caspian oil and gas to Turkey but for the moment it is more talk than a real option. Our borders with Azerbaijan and Turkey are closed since the war about Nagorno-Karabakh since 2003. I really hope they will be opened again in the coming year because of the new friendly atmosphere between Ankara and Yerevan that started with the football diplomacy when the Turkish President Abdullah Gul visited the football match in Yerevan between the national teams of Turkey en Armenia. I read a lot in the Russian press that Dick Cheney wanted Armenia to become an alternative energy route, but I see this at the moment as anti-American propaganda. First there should be a solution of the Nagorno-Karabakh conflict before there can be any realistic talks about Armenia being a future transit route for oil and gas from the Caspian Sea region. Karabakh is the biggest obstacle for economic cooperation between Azerbaijan and Armenia.’

The historic visit of the Turkish president to Armenia went very smoothly. There are all kinds of positive signs and possible projects in which Turkey en Armenia could work together, from the export of electricity, a connection to the new Iron Silk Road railway, to sharing wine producing. Is Armenia willing to compromise on Nagorno-Karabakh – a partial withdrawal of Armenian troops from the surrounding area for example – to have a share in the development of regional projects like Nabucco?
‘Armenia is interested in the normalisation of relations with its neighbour Turkey, because we need open borders and cooperation. Many Russian analysts expect that Armenia is going to make compromises on Nagorno-Karabakh to get the Turks to open the border. But I don’t think that Armenia is willing to develop its relations with Turkey through making moves to Azerbaijan. Of course if Armenia is going to cooperate with Turkey on things like the export of electricity it will influence the relations between Armenia and Azerbaijan in a positive as well. But I don’t see any signal that Armenia wants to sit down with Turkey to talk about the Nagorno-Karabakh issue in relation to opening the border with Turkey. These are two unrelated questions. Armenian troops can only be withdrawn from Karabakh as part of an agreement between Armenia and Azerbaijan.’

Who is Sevak Sarukhanyan?

Sevak Sarukhanyan is an energy expert and the deputy director of the Armenian think tank Noravank Foundation in the capital Yerevan.
Sarukhanyan studied political science in the Russian-Armenian State University. He got his PHD in Russian-Iranian nuclear relations at the Russian State University of Humanities in Moscow.

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