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Nabucco gives Turkey leverage

A pipeline deal with Turkey was taken as a step toward EU energy security, but Russia looms large.

ISTANBUL — Turkey this week celebrated the signing of a major deal on the Nabucco pipeline project as a step toward European Union membership and becoming a Eurasian energy hub.

Nabucco is expected to pump 31 billion cubic meters of natural gas from the Caspian Sea to Europe by 2014, bypassing Russia and thereby decreasing the dependence of the EU on Russian gas. Turkey is a Nabucco transit country, along with Hungary, Bulgaria, Romania and Austria.

Despite the agreement, Russia’s continued attempts to control the region's energy resources, the lack of unified political action in the EU, and Turkey’s indecisiveness, threaten Nabucco, energy experts say.

Russia, which sits atop about 25 percent of the world’s natural gas reserves, dominates regional energy markets. To strengthen its near monopoly, Moscow buys almost all the gas produced by Turkmenistan and Kazakhstan. As a result, countries including Austria, Bulgaria and Hungary have no choice but to import most of their gas from Russia.

Turkey depends on Russia for 65 percent of its domestic gas use and is also desperate to diversify its sources: “There are gas cuts every winter,” said Necdet Pamir, a former high-level official with Turkey’s state-owned oil company and a board member of the World Energy Council.

While Moscow blames the interruptions on Ukraine, “the result is that, for whatever reason, technical or geopolitical, every winter we suffer,” Pamir added.

Russia’s remarkable reach complicates diversification efforts via Nabucco. Azerbaijan — the only supplier committed to feed gas into the pipeline — recently signed a Memorandum of Understanding with Gazprom to export its gas to Russia for at least a year.

“But Azerbaijan cannot provide both Gazprom and Nabucco with natural gas. It’s either one of them,” said Vugar Baymarov, chairman of the Center for Economic and Social Development, an Azeri think tank.

The Azerbaijan-Russia MOU comes at a difficult time for Baku’s ties to Ankara: “Our recent move to normalize relations with Armenia has complicated Azerbaijani attitudes toward Turkey and thereby Nabucco,” said Suat Kiniklioglu, spokesman of the Foreign Affairs Committee of the Turkish Parliament.

Since no other supplier has yet been signed up, the Nabucco pipeline faces a major supply hurdle.

Further, in phase two of the project Turkmenistan is scheduled to supply extra gas into Nabucco via a trans-Caspian pipeline. Considering that Turkmenistan’s economy is primarily dependent on Russia, it is unlikely that Ashgabat will sell its gas to any country but Russia, at least not without Moscow's permission.

Meantime, the two remaining options — Iraq and Iran — are effectively off the table.

Northern Iraq is thought to have large gas reserves, but it will take years to develop them, and, said Sinan Ulgen, chairman of the Istanbul-based Center for Economic and Foreign Policy Studies, “Political instability during the past decade made it impossible to estimate how much capacity there is and how it can be channeled to Nabucco.”

While it has the world’s second largest reserves of natural gas after Russia, Iran is, according to Stanislav Tkachenko of St. Petersburg State University, a “politically impossible alternative,” because it would require “radically improved relationship between Iran and the United States.”

http://www.globalpost.com/dispatch/turkey/090714/nabucco-pipeline-deal