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Tangled Pipelines in the Caspian

GordianKnot060508.jpgI realize that I have a lot of catch up to do with a number of interesting energy developments in Europe, not least what Spanish Prime Minister Jose Luis Zapatero has been saying, but also the Nord Stream discussions during Medvedev’s visit to Berlin, as well as Gazprom’s moves to lock down Azeri gas supplies and the lone wolf U.S. government critic Matthew Bryza. My hands have been quite full preparing a couple of speeches and writing three new book reviews, so for the time being, I point you all to this interesting article on RFE/RL entitled “Energy: Caspian Pipeline Projects Resemble Gordian Knot.

Rovnag Abdullayev, the head of SOCAR (the State Oil Company of the Azerbaijan Republic), has indicated that he is talking with many different parties about exporting Azerbaijani gas. “It’s not only Russia. Iran, Turkey, Israel, and European countries have expressed their willingness to buy Azerbaijani gas,” Abdullayev said. “We are looking for the most commercially profitable proposals and the best ways to launch the sale of gas from Phase 2 of the Shahdeniz [Caspian] field. Now we are analyzing [various offers] and talks with all parties continue. We will try to sell it for the best price possible.”

Azerbaijani President Ilham Aliyev, for his part, has said multiple export routes would be beneficial for the international community. “The issue of energy security will remain on the world’s agenda,” Aliyev said. “We feel the concerns of other countries regarding energy security…. We are ready to contribute to ensuring the energy security of these countries within acceptable terms.”Aliyev also indicated the EU would be involved in future gas exports. “About two years ago we signed an energy cooperation agreement with the EU,” he said. “The document outlines the framework of our partnership in this field. We continue to have talks on energy cooperation with EU countries and their neighbors. Azerbaijan exports its gas to two countries; in the future we will export to more countries.”The EU is working on its own export route for natural gas from the Caspian — the Nabucco pipeline project — which runs from Azerbaijan through the Caucasus to Turkey and on through southeastern Europe to Austria.Azerbaijani officials see Nabucco as helping to balance Gazprom’s influence over Caspian natural gas. SOCAR Vice President Khoshbakht Yusifzade said the Nabucco pipeline will allow Azerbaijan to leverage higher prices from partners seeking to buy gas. “When Nabucco starts operating we will tell other partners, you were buying gas for this price, but now [the situation] is different,” he said. “This all will be dictated by the economic situation.” (….)American InterestsThe United States supports Nabucco as a means of avoiding Russian participation in the European gas supply chain, and has backed the participation of Azerbaijan, Kazakhstan, and especially Turkmenistan in the project. Bordonaro said that ultimately the competition for Caspian gas is a battle for the gas on the eastern side of the Caspian Sea, from Kazakhstan and Turkmenistan.Brussels and Washington are supporting the construction of a trans-Caspian, natural-gas pipeline to run from either Kazakhstan, or more likely from Turkmenistan, along the seabed to Azerbaijan where the gas would be pumped into pipelines leading to Nabucco.On June 3, U.S. Deputy Assistant Secretary of State Matthew Bryza told RFE/RL’s Azerbaijani Service that while the United States backs a larger effort, including the possible export of Iraqi gas through Nabucco, it does not back the inclusion of Iran in the pipeline plans. “We support Nabucco as a route to diversify shipments of gas to Europe. Concerning Iran, our policy is clear,” he said.Peter Semneby, the EU special representative on the South Caucasus, confirmed on June 3 that the EU will work to boost relations between Azerbaijan and Turkmenistan, something the EU and United States have been working hard on — successfully — for a year.Once again, the EU is competing with Gazprom. On June 3, Gazprom chairman Miller was in Turkmenistan attempting to convince Turkmen Deputy Cabinet Chairman Tachberdy Tagaev that, as Russia’s Interfax news agency wrote, “cooperation with Gazprom is more advantageous [for Turkmenistan].”The Gazprom chief reminded his hosts that his company already purchases 50 billion cubic meters (bcm) annually and plans to increase that to 70-80 bcm soon. Additionally, Gazprom already has a gas pipeline leading to Turkmenistan and is building another one.An arguably easier route from the east Caspian would be through Iran but, as Bryza said, that is not an option for the United States. Washington’s foreign policy specifically precludes business deals with Iran, so the U.S. would prefer to keep both Russia and Iran out of the equation.But the EU is the party seeking the gas and European relations with Iran are different than the antagonistic situation that exists between Tehran and Washington.EU Ambassador Waddams denied the EU was talking directly to Iran about participating in Nabucco, but he did note the potential of Tehran joining the project.”There are no specific talks, but…when the Nabucco organization talks with Iran, they are talking about possible supplies [of natural gas], not only Iranian supplies but also [Turkmen] supplies being routed through Iran,” Waddams said. “But the Iran option is not that easy either, because Iran doesn’t actually have much gas in the northern part of the country, at this stage, available for Nabucco…although it has vast quantities of gas in the south of the country. I think as a potential medium-term supplier of gas, Iran is undoubtedly a country with enormous potential for the European market.”