Publication: Eurasia Daily Monitor Volume: 4 Issue: 106

Insofar as they existed since 2001 (on the part of the United States) or since 2006 (on the part of a come-lately EU), Western energy policies in Eurasia collapsed in May 2007. During this month, Russia seems to have conclusively defeated all Western-backed projects to bring oil and gas from Central Asia directly to Europe (see EDM, May 10, 14, 16, 17, 29).

At their May 11-13 summits in Central Asia, the presidents of Russia, Turkmenistan, Uzbekistan, and Kazakhstan agreed to modernize and enlarge the capacity of gas pipelines that run from the three Central Asian countries to Russia; send growing volumes of gas extracted in those three countries for export to or transit via Russia; and task Gazprom and other Russian companies with developing Turkmenistan’s vast reserves, so as to ensure that future output would also go Russia’s way.

Thus, the May agreements almost certainly seal the demise of the trans-Caspian gas pipeline project for Europe. Concurrently, Kazakhstan agreed to a substantial, long-term increase of its oil exports northward to and via Russia, as opposed to westward routes to Europe via Baku-Tbilisi-Ceyhan or via Odessa-Brody-Poland. And on May 23-24 in Vienna, Russian President Vladimir Putin’s visit resulted in agreements that integrate Austria into Gazprom’s expanding commercial and transit network, almost certainly dooming the Nabucco project for Caspian gas to central Europe.

These agreements not only reinforce Russia’s existing quasi-monopoly on the transit and use of Central Asian oil and gas, they also seem to commit a lion’s share of future output to Russian destinations or Russian-controlled transit routes.

Cumulatively, the May agreements signify a strategic defeat of the decade-old U.S. policy to open direct access to Central Asia’s oil and gas reserves. By the same token they have nipped in the bud the EU’s belated attempts since 2006 to institute such a policy.

Judging from public statements, U.S. and EU officials seem disinclined to conduct a what-went-wrong, lessons-learned analysis of these cascading setbacks. Undertaking a critical analysis could, however, signal a willingness to develop more effective energy policies in Eurasia that might yet lead to reversing the strategic defeat of May 2007.

In retrospect, Washington’s retreat from leadership on Central Asia-Europe energy transit projects in 2001-2005, along with a policy vacuum in Brussels, set the stage for the debacle just seen. Even after the January 2006 “wake-up call” (triggered by Kremlin manipulations with Turkmen gas supplies to Ukraine and beyond), the U.S. and EU relegated Caspian energy policy mainly to mid-level officialdom, with only episodic top-level involvement.

In Washington, for example, a deputy assistant secretary of state was tasked to promote these energy projects in the relevant countries, in a direct match against Putin, who (along with his energy executives) was personally interacting with the same countries and leaders to pull his incomparably greater political weight for the Russia-favored projects. The United States and the EU did not seriously attempt to offset Kremlin pressures on the Kazakh and Turkmen presidents. Nor did they develop timely and convincingly resourced alternatives to the ready-made Russian projects.

Active involvement by the White House and the creation of a coordinating apparatus in the U.S. government had been crucial ingredients in the Clinton administration’s coherent policy on Caspian energy. In the Bush administration, occasional involvement by Vice-President Richard Cheney made a difference each time it happened. Thus, Cheney prevailed on Ukrainian Prime Minister Viktor Yanukovych in 2003 (during Yanukovych’s first term) to postpone by one year the decision on Russian reverse-use of the Odessa-Brody oil pipeline. In May 2006, Cheney’s visit to Kazakhstan persuaded that country’s President Nursultan Nazarbayev to enter into serious negotiations on trans-Caspian oil and gas transport projects, resulting in agreements of intent signed soon thereafter. These infrequent episodes illustrated the effectiveness of top-level involvement in energy policy — an instrument that the United States largely gave up while Russia used it to the hilt.

Some officials in Brussels seem to have given up on trans-Caspian pipelines altogether. Thus, high-level EU energy policymaker Fawzi Bensarsa told an international conference in Warsaw this week that the trans-Caspian gas pipeline project was an “explosive issue,” a “political bomb” that antagonized Russia and that the EU could not support such a project. Ostensibly because of the unresolved legal status of the Caspian Sea, the EU would only support trans-Caspian pipelines upon a joint appeal from all five Caspian countries — the diplomatic language of surrender to Russia’s (and Iran’s) self-arrogated veto. Whether such remarks are in line with EU policy — or whether there is an EU policy beyond such self-denial — will remain unclear until the EU conducts an assessment of the new situation.