Azerbaijan Quietly Lending Impetus to Nabucco Project

Presidents Ilham Aliyev of Azerbaijan, Gurbanguly Berdimukhamedov of Turkmenistan, and Abdullah Gul of Turkey met on November 28 and 29 in Turkmenistan to discuss trilateral cooperation with a focus on natural gas deliveries. The presidents held bilateral talks in Ashgabat before meeting in the trilateral format in the Caspian port of Turkmenbashi (www.day.az, Anatolia news agency, Turkmen Television, November 28, 29).

Azerbaijan had initiated this meeting as part of its efforts to support the Nabucco pipeline project for Caspian gas to Europe. To avoid irritating Moscow, however, none of the participants mentioned Nabucco at in public level in connection with this trilateral event. “The goal is not to discuss specific projects,” according to the cautious official line (Turan, November 27).

Berdimukhamedov alluded to the trans-Caspian project by declaring after the summit that the Caspian basin could provide an energy bridge from Asia to Europe; that a “partnership based on the three countries’ huge economic and geopolitical potential” in a new cooperation format had been discussed; and that Turkmenistan shared the view that it was necessary to diversify the partners and routes for gas development and export (Turkmen Television, November 29; Turkmen government website, November 30).

Russia continues to have a near-monopoly of Turkmen gas exports, but this situation could change as a result of two recently converging factors. First, the European Union and parts of the U.S. government finally seem to realize that energy infrastructure projects of strategic scope make subsidies from Western governments and institutions necessary. And, second, vast reserves of Turkmen gas have been confirmed by the most recent audit and open the prospect of full-capacity supply to Nabucco (and not only that) from Turkmenistan from the second half of the next decade onward (see EDM, October 15).

This will, however, additionally it will be necessary shielding Turkmenistan from Russian intimidation (something the West failed to work out with the former Turkmen president), as well as forming a consortium for field development in Turkmenistan. The current Turkmen president displays great caution toward Russia. The issue of gas deliveries to Europe was barely mentioned publicly during Berdimukhamedov’s recent visit to Germany and Austria, the latter having initiated the Nabucco consortium (Turkmen TV, Turkmen government website, November 14-17; Handelsblatt, November 14, 16; Die Presse, November 18). The Turkmens showed similar caution during the discussions at the Baku energy summit on November 14, which helped paved the way for Azerbaijan to promote the trilateral summit in Turkmenistan.

While Brussels and Washington have backed Nabucco mainly at the rhetorical level until now, Azerbaijan supports the project through deeds rather than words. Azerbaijan’s role is crucial as the designated supplier of gas for Nabucco’s first stage and as a transit country for Turkmen gas in the project’s second stage. The latter will require a trans-Caspian pipeline from Turkmenistan to Baku and link-up with the existing Baku-Tbilisi (Georgia)-Erzurum (Turkey) pipeline.

Baku’s quiet, unpublicized support is keeping the Nabucco project afloat until the European Union and the United States step in with the necessary investments and political clout. Meanwhile, Azerbaijan is resisting Russia’s offer to buy preemptively all of Azerbaijan’s available export volumes of gas from 2009 onward. The Kremlin and Gazprom have made that offer repeatedly to Baku during this year.

The proposal looks tempting to Azerbaijan on three counts: a) Russia would pay European netback prices (European market price minus cost of transportation) for Azerbaijan’s gas; b) with Nabucco unable to start construction and Turkey seeking extra profit from the project at Azerbaijan ’s expense, Russia can immediately provide a northward outlet for Azerbaijan ’s gas exports through an existing pipeline; and c) Moscow is hinting at possible concessions (at least on paper) to Baku’s position on the Karabakh conflict, if Azerbaijan modifies the Western orientation of its foreign policy and energy exports.

Nabucco would be dealt the terminal blow, if Azerbaijan were to accept Moscow’s offer of a preemptive wholesale purchase of its gas. Baku is aware, however, that acceptance would compromise its energy partnership with the West and mortgage its national independence. During the energy summit he hosted on November 14 in Baku, President Aliyev commented informally on this issue: “From a business point of view, the [Moscow-proposed gas trade] agreement should be signed and everything be given to Russia. But there are other goals and values that override a good business proposal” (as cited by his Lithuanian counterpart, Valdas Adamkus, BNS, November 14).

Azerbaijan’s leadership has reaffirmed its strategic choice in favor of supplying Nabucco and the Turkey-Greece-Italy pipeline with gas. Moreover, this month Azerbaijan signed a five-year agreement to supply Georgia with gas (see EDM, November 17), thus in effect turning down Moscow’s proposal to buy all of Azerbaijan’s available export volumes. The same resolve is clearly seen in Azerbaijan’s efforts to connect Turkmenistan with the Nabucco project through a trans-Caspian pipeline.

The Turkey-Greece-Italy Interconnector (TGI), which went into operation earlier this year reaching Greece, fully relies on Azerbaijani gas. TGI is slated to reach a throughput capacity of 8 billion cubic meters annually, far more modest than Nabucco’s planned second-stage capacity of 31 billion cubic meters per year. President Aliyev and Industry and Energy Minister Natiq Aliyev discussed the Greece-Italy link of TGI during their visit to Italy on November 26 and 27. Italy’s Edison company is involved in building that link across the Adriatic seabed and using the gas in Italy for generating electricity (www.day.az, Turan, November 26, 27).