Turkey Is Optimistic About Nabucco as Budapest Summit Approaches

In the midst of the gas transit row between Russia and Ukraine and discussions on diversifying the continent’s energy supplies, Turkey is pleased to see an opportunity for itself.

Turkey is seeking a mediating role in the diplomatic standoff between Russia and Ukraine. Following his visit to Moscow, Turkish Energy Minister Hilmi Guler told reporters that Turkey’s talks with the two parties were continuing and it was ready to mediate, if necessary by hosting a meeting in Turkey. Noting that some Balkan countries that were hit by the crisis, such as Bulgaria, were demanding gas from Turkey, he announced that Ankara was holding talks for building alternative supply routes to them. It will be similar to Turkey’s exports to Greece and might help these countries weather future energy interruptions. Guler also was content that the importance of the Nabucco project for diversifying Europe’s energy supplies was appreciated. He told reporters that Turkey was determined to realize this project, and concrete steps to make it operational would be taken soon (Anadolu Ajansi, January 15).

Ahead of the Nabucco summit to be hosted by Hungary this month, it appears that Turkey’s hand has been strengthened. Despite calls for prioritizing energy security following a similar crisis in 2006, the EU has failed to reduce energy dependence, which has raised questions about the effectiveness of the EU’s energy policy (Hurriyet, January 15). The latest Russian-Ukrainian crisis prompted a debate on diversifying both sources and gas transportation routes through alternative pipelines. The EU and Russia now have incentives to support projects that bypass Ukraine. Gazprom’s Nord Stream and South Stream projects, under the Baltic Sea and the Black Sea, respectively, are in progress. Since South Stream is a rival to the Nabucco project and European countries have differing preferences, it will be interesting to observe how pipeline politics develop.

The Nabucco project, originally projected to open in 2013, will carry gas from the Caspian basin, the Middle East, and Egypt to Europe by routes stretching through Turkey, Bulgaria, Romania, and Hungary and terminating at the Baumgarten hub in Austria. The 3,300-km (1,980-mile) project is expected to cost approximately €7.9 billion ($10.5 billion) (www.nabucco-pipeline.com).

Nabucco has gained increasing favor because of efforts to open European access to the resources of the Caspian (EDM, January 6). The Czech Republic, which currently holds the EU’s rotating presidency, is intent on speeding up the preparations for Nabucco. Czech Prime Minister Mirek Topolanek proposed that the EU make the realization of the project a top priority (www.trt.net.tr, January 14). Nonetheless, other EU members such as Italy back South Stream (EDM, June 25, 2007).

One major obstacle to the project has been whether the consortium can secure enough gas to make the project feasible. Turkey, hoping to project itself as a major player in gas markets through Nabucco, has worked hard to find sufficient gas resources. Its efforts to bring Turkmenistan on board did not produce any results in mid-2008 (www.asam.org.tr, May 2, 2008), because of Turkmenistan’s contracts with Russia, and concerns about transporting the gas across the Caspian Sea. A trilateral summit between the presidents of Turkmenistan, Azerbaijan, and Turkey in late November 2008, however, was interpreted as “quiet support” for the Nabucco project (EDM, December 1). Since then, European leaders have also been encouraging Turkmenistan to join the project. Recently it was suggested that the prospects for realizing the Trans-Caspian Gas Pipeline (TCGP) had increased, particularly following the Russian-Ukrainian dispute. Although “the route and means for Turkmenistan’s gas to cross the Caspian Sea has not yet been decided,” it is claimed that the TCGP could be integrated into Nabucco (www.isn.ethz.ch, January 15). Nonetheless, Turkmenistan has yet to commit gas exports to Europe through Nabucco.

Currently, the only supplier that is committed to Nabucco is Azerbaijan. Turkey has been pushing for including Iranian gas in the project, but the diplomatic standoff between Iran and the West over the Iranian nuclear issue raises questions about the likelihood of connecting Iranian Tabriz-Erzurum gas pipeline to Nabucco. Moreover, the reliability of Iran is also unclear, given the problems Turkey has encountered in its imports from Iran in the past. Turkey also hopes to connect gas from Iraq and Egypt to the Nabucco line.

Turkey had even raised the possibility of Russia joining the Nabucco project. During his visit to Moscow in February 2008, Foreign Minister Ali Babacan invited his Russian counterpart to join the project (Turkish Daily News, February 21, 2008; EDM, February 28, 2008). Later, Guler argued that the South Stream and Nabucco projects could be combined (Today’s Zaman, March 21, 2008). Nonetheless, Russian officials continued to scorn Nabucco for being infeasible.

Another concern is whether this ambitious project could be completed, given the global economic crisis. Reinhard Mitschek, Managing Director of Nabucco Gas Pipeline International GmbH, maintained that “the actual situation of the markets is more or less a benefit for projects like Nabucco.” As positive developments, he referred to falling steel prices and the willingness of banks to support long-term infrastructure projects in times of crisis (www.nabucco-pipeline.com, January 9).

Turkey’s demands from other shareholders (Bulgaria, Romania, Hungary, Germany, and Austria), particularly those relating to the pricing mechanism, have been considered another obstacle by experts (EDM, December 12). Speaking after a working meeting in Istanbul on January 13, Mitschek maintained that the parties were close to signing the intergovernmental agreement, emphasizing consensus among countries involved in the construction project about how to “share the benefits and risks of the project equally, each owning a 16.6 percent stake in the project.” Mitschek argued that its flexibility in receiving gas from many sources and being open to different partners and commercial models was what gave Nabucco a competitive advantage over its rivals. He also counted the many benefits of the project to Turkey but said that “we should not mix the two issues. Our consortium is about the transmission of the gas, not about the trading of gas” (Today’s Zaman, Hurriyet Daily News, Milliyet, January 14).

Guler told reporters that Turkey had submitted its own draft of the intergovernmental agreement to its partners and was awaiting their response (Cihan Haber Ajansi, January 15). Nonetheless, Prime Minister Recep Tayyip Erdogan has not confirmed that he will take part in the Budapest summit. Disagreements over Turkey’s demands, as well intra-EU bargaining, are likely to continue until the leaders meet on January 27.