Publication: Eurasia Daily Monitor Volume: 3 Issue: 62

Addressing an international energy conference in progress in Baku, Azerbaijan’s Industry and Energy Minister Natig Aliyev outlined the advantages of a trans-Caspian gas pipeline from Turkmenistan and Kazakhstan via the South Caucasus to European markets. Natig Aliyev underscored the project’s value for diversifying supplies and restraining prices as well as the favorable international context for this project, as Western interest rebounds in the wake of this winter’s disruption in supplies. Urging Turkmenistan and Kazakhstan to become part of the project without waiting for approval from other Caspian countries — an allusion to Russia and Tehran — Aliyev noted that any impediments to a seabed pipeline are political, not technical ones.

A trans-Caspian seabed pipeline “would ensure Europe’s energy security and protect it from Russian monopolism,” Aliyev remarked. “Europe has understood that it is naive to place all its hopes on Russian gas. The events of recent months, when Russia has in effect demonstrated its status as a monopolist, indicate that prices will rise further.” Thus, the timing is now ripe for starting the negotiations (AP, Turan, Trend, Ekho [Baku], March 29).

The preceding week, Russia opposed the trans-Caspian pipeline proposal during a routine meeting of the five riparian countries on defining the legal status of the Caspian Sea. Russia, which happens to be the leading industrial polluter of that sea, cited environmental risks in opposing a trans-Caspian pipeline and claimed that any such project requires approval from all five countries. Azerbaijan took the lead in refuting Russia’s position (RIA-Novosti, March 22). Azerbaijan, seconded by Kazakhstan, upholds the right of Caspian countries to make sovereign decisions about laying pipelines on their respective seabed sectors.

Baku estimates the construction costs at $5 billion for a pipeline with an annual capacity of 30 billion cubic meters that would run from the eastern Caspian shore, across the seabed to Azerbaijan, and further via Georgia into Turkey. With Turkey as a transit corridor, the gas could be piped to European Union member countries in southern and central Europe. The concept largely follows that promoted by the United States in 1996-2001, primarily in Europe’s interest, though amid European indifference at that stage. Azerbaijan and Georgia were firmly on board the U.S.-led project, Turkmenistan prevaricated, and Turkey mismanaged the negotiations.

The updated concept, now under exploratory discussion by the same countries with European participation for the first time, includes major novel elements, such as:

a) The opportunity for Kazakhstan to joint the project;

b) Turkey’s role as transit corridor to Europe, rather than consumer country as had earlier been envisaged;

c) Massive input from Azerbaijan’s Shah-Deniz gas field into the proposed pipeline via Turkey to Europe (the offshore field’s anticipated yield is 20 billion cubic meters annually, almost twice the earlier projection, and most of it available for delivery to Europe); and

d) Possibly integrating the Caspian gas pipeline with the Nabucco project (Turkey-Bulgaria-Romania-Hungary-Austria) by connecting the two planned lines near Erzurum in eastern Turkey.

Turkmen President Saparmurat Niyazov has signaled an intention to rejoin negotiations on the trans-Caspian pipelines. Receiving a Turkish delegation (unrelated to the energy sector) in Ashgabat, Niyazov offered on live television, “We can provide you with cheap gas … I had already made such an offer to you in the past, but your leadership was slow to act and failed to get the Turkmen gas in time. At present, you are purchasing expensive gas and it does not even match your demand” (Turkmen Television Channel One, March 19). Niyazov was alluding to Turkish government officials who made it possible for Gazprom’s pipeline across the Black Sea to defeat the U.S.-proposed trans-Caspian pipeline in the race for Turkey’s gas market in 2001. Those Turkish officials have since been investigated and indicted for having secretly agreed on onerous terms of purchase for Russian gas.

Turkey has recently been paying $243 per one thousand cubic meters of Russian gas, and Gazprom recently demanded a hike to $273, which Turkey finds unacceptable (Zaman, February 2). Meanwhile, the pipeline across the Black Sea is being underutilized while Turkey’s gas market is oversubscribed. The initial trans-Caspian project had targeted the Turkish market as main downstream destination. In the new circumstances, Turkey’s role can change from that of a potential consumer of Caspian gas to that of a transit country for Caspian gas to Europe.