It was just last week that I put in a column that the EU’s chances of diversifying their gas supplies were extremely poor. Even though the Georgia-Russian war and even more recent Ukraine-EU gas pipeline was shut off by Moscow, seemingly bringing Europe to their energy knees once again, I pretty much agreed with expert John Daly that the EU did not have the stomach or ‘the goods’ to diversify their energy supplies through a Southern Corridor near the Caspian Sea and Central Asia already dominated by Russia. Has anything changed?
A high-level meeting of active and potential participants in the Nabucco gas transport project being held in Budapest, Hungary yesterday and today may, I repeat ‘may,’ lead to an answer. The meeting which will be attended by officials of supplier, transit, and consumer countries (Azerbaijan, Turkmenistan, Kazakhstan, Turkey, Bulgaria, Romania, Hungary, Austria; international financial institutions; the European Union, will explore the remaining issues holding up the giant project which would bring a fair amount of gas reserves from the Caspian Sea and possibly Kazakhstan through a corridor avoiding Russian authority (but not influence).
The goal of the Budapest meeting is to demonstrate support for the project from all players in terms of ‘political backing, capital investment, and supply commitments’ for Caspian gas to Europe. The pipeline system would be centered around the Nabucco line, but also be complimented by many other smaller lines, and would first be supplied by Azerbaijan with hopefully and crucially, Turkmenistan following suit.
There are many hang ups to such a deal occurring as Moscow is and will continue to put huge pressure on the the supplying states, especially Turkmenistan and Kazakhstan, to avoid such a deal unless it desires to worsen its relations with the Mother Bear. Another major stop sign for the project, and one that is very connected to Russia’s strong influence in the Caspian, is that financial investors from Europe and beyond needed to get this project off the ground and convince the supplying states that it would be worthwhile, have been difficult to find. It is hoped that in this meeting, enough will be convinced that the project is viable. Countries like Azerbaijan, Turkmenistan, and Kazakhstan would really have to stick their necks out to make this EU Southern Corridor plan come to fruition, and their leaders will need to see it as worth the costs of alienating Moscow.
“All those countries that would contribute to Nabucco would have to jeopardise their relationship with Russia,” said Tanya Costello, a director at Eurasia Group in London. ”I don’t think Turkmenistan has enough commitment from the EU that it’s really going to happen, that you can really consider taking that risk.”
Another problem is transition fees and demands as the gas has to go through several states before reaching Austria, Germany. This prickly matter has already become a political football regarding Turkey’s demand for keeping 15% of the gas that moves through its territory and in its connection to the deal’s follow-through and its own ascension to the EU. Turkey is playing power politics here and it is moves like these that may further delay/cancel the project. Lastly, another major concern, voiced by John Daly and many others, is that the supplying states, especially Turkmenistan, just don’t have enough gas to make this whole process worthwhile. Moscow has done whatever it can to buy all of the oil and gas reserves in its ‘near abroad’ with great success. However, Vladimir Socor at Georgian Daily, asserts that Turkmenistan does in fact have plenty of untapped gas reserves:
A potential breakthrough occurred in Turkmenistan for Nabucco and the Southern Corridor. The recent Gaffney Cline audit of Turkmen gas deposits reported immense reserves of 4 trillion cubic meters of gas at the low estimate, 6 trillion at the best estimate, and 14 trillion cubic meters at the high estimate at the South Yoloten-Osman gas fields alone. Other Turkmen onshore and offshore fields have yet to be audited.
So this Budapest meeting may have a chance after all, but it will take an amazing amount of will for all of these parties to work together for communal interests. Will they be able to put together a package so enticing for Azerbaijan, Turkmenistan, and Kazakhstan to jump on the Nabucco pipeline for what will surely be a wild ride? We’ll see.