Tuesday, January 18, 2011

No Green Light for NABUCCO

On January 13, 2011 the President of the European Commission, Jose Manuel Barroso, and the President of the Republic of Azerbaijan, Ilham Aliyev, signed the "Joint Declaration on the Establishment of the Southern Corridor." In it, Azerbaijan committed to supplying "substantial volumes" of natural gas to the European Union once the Southern Corridor is built. It is the first time that Azerbaijan has committed in writing to supply natural gas to Europe.
The declaration is being hailed as a major step toward the construction of the Nabucco pipeline. Commission President Barroso declared "This is a major breakthrough. This agreement confirms Europe's direct access to gas from the Caspian Basin, thus enabling the realization of the Southern Corridor. This new supply route will enhance the energy security of European consumers and businesses."http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/30 Separately, he said "From a political perspective, it's clear that the European Commission supports Nabucco and from the discussions with the President of Azerbaijan, I understood that Azerbaijan also supports the project." http://www.google.com/hostednews/afp/article/ALeqM5grhOEEWBY8lkzY5BsKck3_uxLc0Q?docId=CNG.cf47aa2fba1edb73982e4c0e962bed14.721
Alexander Rahr, the director of the German Council on Foreign Relations' Russia-Eurasia Center, commented "Despite all the risks, today we can say that Nabucco has passed from the stage of mythical conversations to the stage of realization. This is a clear signal to investors that the project will be realized." http://en.trend.az/1811752.html
Reinhard Mitschek, managing director of the Nabucco pipeline consortium, issued a statement from his office in Vienna, calling the agreement a milestone for his project. The declaration "serves to pave the way to the full implementation of Nabucco by providing a firm political basis for gas supply from Azerbaijan." http://www.upi.com/Science_News/Resource-Wars/2011/01/14/Nabucco-welcomes-EU-Azeri-gas-declaration/UPI-66251295023380/
Such optimism would appear warranted, as both European and Azerbaijani officials see the benefits of the project. Alexander Rahr said the EU considers the implementtion of Nabucco as its most important foreign-policy priority. Not only is it a new supply of gas for the continent, but Rahr cites a political context, as well. "This is a way to reduce Russia's influence in the South Caucasus and Central Asia, and weaken the influence of China in this region," he said. http://en.trend.az/1811752.html
Azerbaijani parliamentarian Ali Masimi, a member of the committee of economic policy, said that Nabucco is forming a new stage in political, economic and humantiarian cooperation between Azerbaijan, Turkey and Georgia, strengthening stability and a strategic alliance among the three countries. He said Nabucco must be built, and alluded to Caspian energy sources as a strategic asset: "Oil and gas are attributed not only to economy. These energy sources have no less geopolitical meaning...(C)old wars in the 21st century will differ from the cold wars of the 20th century. Cold wars in our century will be characterized with combat for oil and gas routes." http://www.news.az/articles/29741 Recognizing the strategic importance of Nabucco, Armenian political scientist Levon Shirinyan said his government must declare the Nabucco gas pipeline an Armenian priority, to overcome Armenia's estrangement from Europe. http://news.am/eng/44948.html
Despite all the hype, however, the Joint Declaration does NOT guarantee gas deliveries to Nabucco. Baku has the choice of any number of pipelines to use: Nabucco, South Stream, AGRI, TAP, and ITGI. All of them can be considered a part of the Southern Corridor, and all of them are counting on the gas coming from the Shah Deniz 2 project. The problem is that, as prolific as Shah Deniz is hoped to be, there are no estimates that there is enough gas to fill multiple pipelines. This is compounded by present Azerbaijani commitments, including a promise to the Russians to sell them two billion cubic meters of natural gas in 2011, and eventually doubling that amount thereafter.
Nabucco has a major problem: lack of financial commitments."Sluggishness is observed in the implementation of the Nabucco project. Therefore, Azerbaijan synchronizes its steps with these processes," said the otherwise hopeful Parliamentarian Masimli. http://www.news/az/articles/29741.
Russian Director of the National Energy Institute Sergei Pravosudov was dismissive of the Joint Declaration: "Mr. Barroso's visit did not actually add anything significant to the Nabucco project. Azerbaijan was initially prepared to supply gas to any consuming country for an adequate sum of money. The sides also did not sign any breakthrough agreements binding upon Azerbaijan in terms of prices and volumes of gas supplies. That visit resulted in just another memorandum of intent." http://english/ruvr.ru/39936848.html.
As reported in this blog earlier, the strength of support for Nabucco among Europeans and the US appears to be wavering. We previously reported on Ambassador Morningstar's comment that while a Southern Corridor was necessary, that did not necessarily mean Nabucco. These thoughts were echoed by Marlene Holzner, spokeswoman for the EU Energy Commissioner Guenther Oettinger: "For the EU it's decisive that a European project and a European firm gets awarded this contract," she said, omitting any mention of which pipeline would receive the business. http://www.today.az/news/business/79403.html
Azerbaijan promises to make its decision this year.
Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at jimcoyle@verizon.net.