||European Commision President Jose Manuel Barroso (L) and Turkish President Abdullah Gul at a May 8 energy summit in PragueSummary
The European Union and Turkey have signed a deal at a Prague energy summit to move forward with the proposed Nabucco pipeline, in order to diversify energy supplies away from Russia. But many logistical and political challenges remain that will likely hamper any progress on the pipeline for years to come.
The European Union is widely touting an agreement that the bloc signed with Turkey at an energy summit in Prague on May 8. The summit brought together a number of major energy representatives from Azerbaijan, Georgia, Kazakhstan, Uzbekistan, Turkmenistan, Turkey, Egypt, and Iraq (known as the â€œSouthern Corridorâ€ countries) with the goal of securing supplies for the Nabucco pipeline, a European-led project intended to circumvent and diversify away from Russian natural gas supplies. The deal calls for Turkey to serve as the transit point connecting natural gas supplies from the Caspian Sea area to European consumers at the Continentâ€™s major gas hub in Vienna via the proposed pipeline.
The Nabucco pipeline has been a point of discussion amongst the Europeans for nearly a decade. This prospective pipeline, however, has been gaining traction in recent months, as Russia has demonstrated that it is more than willing to use its energy supplies, on which Europe is highly dependent, to its political advantage. Turkeyâ€™s international resurgence has also raised the stakes for Nabucco, highlighted by the fact that a more active Ankara is ready to raise its profile in the region by becoming a major energy transit state to Europe. Despite the signing of the deal between the European Union and Turkey, there are numerous obstacles (both logistically and politically) that will keep Nabucco from materializing anytime in the foreseeable future.
To build a pipeline on the scale of Nabucco, two things are needed: financing and a source of natural gas. Assuming that the Europeans are able and willing to put up the necessary cash (an estimated $12.2 billion is needed to develop the infrastructure), the most important aspect then becomes securing a steady and reliable source of natural gas to feed the pipeline and meet the demand of European consumers. That is where the real complications arise.
The only plausible countries that could serve as suppliers to the Nabucco pipeline are Azerbaijan, the Central Asian energy-producing states, Iran (which did not have representatives present at the meeting and is hampered by international sanctions) and Iraq. However, the Prague energy summit, despite producing an agreement between Turkey and the European Union, left Azerbaijan and the Central Asian states unwilling to reach a deal.
According to STRATFOR sources in Moscow, Azerbaijan instead asked to hold a private meeting with EU representatives after the conference to discuss the matter further, which has yet to happen. Presently, the mood in Baku is very tense, especially as Turkey (its most trusted ally) and Armenia (its traditional enemy) are in the process of normalizing relations, leaving the entire Caucasus region in flux. Azerbaijan is worried such a deal would leave them out in the cold, and has already threatened to divert energy supplies it sends to Turkey to Russia instead. Although this natural gas would still ultimately reach Europe, the fact that it would traverse Russian territory defeats EU diversification plans. The political situation aside, Azerbaijan does not produce nearly enough natural gas to be able to meet European demand on its own. Nonetheless, Azerbaijan is desperate for a reliable ally against Armenia, and will use its potential role in Nabucco as leverage with the Europeans in its upcoming meeting.
And though the Turks signed the deal with the European Union, Ankara is walking a very fine line right now between Russia and the West. The Turks are not looking to push the Russians too far on the Nabucco issue, but are willing to entertain talks with the Europeans to buy time and attach conditions on EU accession to the project.
The Central Asian countries, meanwhile, outright refused to sign any agreements at the energy summit. Though they have more than enough supplies for Nabucco, it would be extremely challenging to build the pipelines because of the vast distance from their sources to Europe. Developing infrastructure across the Caspian Sea is a difficult technological undertaking, and would take billions of dollars and at least five years to complete. Due to these realities, the Central Asia states are not willing to risk their relations with Russia for a project they see as highly prospective at best and unrealistic at worst. Put simply, they want to see the pipelines built and the infrastructure developed before they begin to make any moves to upset their former Soviet master, whom they have only moved closer toward in recent months.
As for Iran, its poor political relations with the United States serve as a wall to developing energy relations. There can be no movement until U.S. economic sanctions (which include energy deals) are lifted, and that is a decision to be made by Washington and beyond Europeâ€™s control. But even if there were to be a rapprochement between Tehran and the West, Iranâ€™s natural gas resources need to be developed essentially from scratch, as years of isolation have left their significant supply of reserves underdeveloped. Also, as most of these resources lie offshore in the Persian gulf, it would be enormously expensive to build pipelines across Iranâ€™s mountainous terrain to reach Turkey and finally Europe. Iraq faces similar obstacles as Iran, with a political landscape that is far from stable and infrastructure that would need to be developed after being neglected for so long.
So while Europe is praising the progress it has made by signing the agreement with Turkey on Nabucco, all of the uncertainties of the proposed pipeline still remain. The numerous and overlapping political obstacles that define the possible energy-producing countries that would supply the pipeline would need to be settled. Even then, the logistical hurdles are no less daunting and would take years to complete. Russia, in the meantime, will do what it can to undermine these deals and stall any progress.
© Copyright 2009 STRATFOR