Publication: Eurasia Daily Monitor Volume: 3 Issue: 38

The deputy energy and foreign ministers of Georgia, Ukraine, Azerbaijan, and Moldova will meet in Baku February 24-25 to discuss regional cooperation in the field of energy security.

Senior energy officials from Bulgaria, Greece, Italy, Iran, Kazakhstan, Poland, Romania, Turkey, Turkmenistan, the United States, and the European Commission were also invited to join the two-day meeting (Zerkalo, February 23).

The talks will focus on security issues related to the ongoing energy pipelines in the South Caucasus and potential projects that could increase the transport of Caspian oil and gas to European markets. The parties are expected to sign memorandums of understanding and agreements during the meeting (AzerNews.Net, February 23).

The recent Russian-Ukrainian gas crisis that left many European states worried about their future gas supplies led the European Union to take drastic actions to diversify its energy supply routes. The EU views the Caspian region and trans-Caspian projects as one of the major components of Europe’s diversification policy.

The EU’s need for alternative energy import routes was highlighted in recent comments by the spokesperson for EU Energy Commissioner Andris Piebalgs, Ferran Tarradellas Espuny, who stated, “We are working at full speed, but it’s not a panic reaction that we have had. It’s an ongoing process that started a long time ago” (Doha Times, February 16).

On February 16, during her visit to Baku, European Commissioner for Foreign Affairs Benita Ferrero-Waldner underlined the importance of energy cooperation between the EU and Azerbaijan and stated that Azerbaijan’s access to European markets “will give new impetus to the country’s European integration process” (Trend, February 16).

Michael Emerson, Senior Research Fellow at the Brussels-based Center for European Policy Studies, believes that the EU should “take a lead over the whole of the diversification business” and while doing so it “needs to push ahead with the Nabucco natural gas pipeline project” that will link Caspian and Middle East gas with southeast Europe through Turkey. He also urged “Turkmenistan and Azerbaijan to return to negotiations with EU oil and gas companies to “unfreeze” a Trans-Caspian pipeline project” (Doha Times, February 16).

The two potential trans-Caspian projects that the EU and international energy companies have been interested in are the Aktau (Kazakhstan) – Baku sub-sea oil and Turkmenistan-Azerbaijan sub-sea gas pipelines.

These projects have been on and off the negotiating table for years, but only regained significance after the Russian-Ukrainian gas dispute and the completion of the Baku-Tbilisi-Ceyhan oil pipeline in 2005. The Baku-Tbilisi-Erzurum natural gas pipeline, which is currently under construction, will be concluded this year, thus laying a foundation for potential natural gas shipments from Turkmenistan to Azerbaijan and onward to Europe.

Even if both pipelines are built, it will take some years before the relevant agreements are signed and the actual work begins. For example, the trans-Caspian oil pipeline from Kazakhstan to Azerbaijan may not start before 2012-2013 (when Azerbaijan’s oil production will start to decline). Instead, the early Kazakh oil will be delivered to the Baku-Tbilisi-Ceyhan pipeline using oil tankers.

Azerbaijan Energy Minister Natig Aliyev recently told local journalists that the Aktau-Baku system will be used to ship crude oil from Kashagan, a newly discovered oil filed in Kazakhstan that may hold up to 13 billion barrels of oil.

Natig Aliyev noted, “The first oil in Kashagan will be produced in 2008 and the shipment through Aktau-Baku energy corridor (500,000 barrels a day) will not begin until 2010” (Zerkalo, February 24). International energy companies involved in Azerbaijan and Kazakhstan have stated that five oil tankers with a capacity of 60,000 tons will be needed for this purpose (Zerkalo, February 24).

While the EU is more interested in the Turkmenistan-Azerbaijan natural gas pipeline, the United States and international energy companies are keen on developing the Aktau-Baku system. But the fate of both pipelines, however, depends on foreign investment and the resolution of outstanding disputes between the coastal states, especially the legal status of the Caspian Sea.

While Russian President Vladimir Putin paid a visit to Azerbaijan on February 21-22, Russian Minister of Industry and Energy Viktor Khristenko stressed the need to resolve the legal status of the Caspian Sea before building sub-sea pipelines.

Referring to trilateral agreement signed among Azerbaijan, Kazakhstan, and Russia that defined only the seabed boundaries of the Caspian Sea between the three coastal states and left the water surface for common use, Khristenko said, “We have so far only agreed upon [seabed] border lines for the purpose of subsoil use” (Interfax, February 22).

Khristenko stated that the trans-Caspian pipelines should not “be viewed as purely political” projects and should be pursued only if they make economic sense (Interfax, February 22).

While this statement seems to suggest Russia’s softening position on the issue, it does not mean that the trans-Caspian sub-sea pipelines will be realized without opposition from either Russia or Iran. On the contrary, Moscow and Tehran will oppose these projects as long as their interests are not taken into account.