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Central Asian Gas: An Opportunity Europe Seems Determined To Miss

  • Ahto Lobjakas

A newly built section of the pipeline that will ship Iranian natural gas to Armenia

A newly built section of the pipeline that will ship Iranian natural gas to Armenia

BRUSSELS -- If ever there was a time for the European Union to cut the Gordian knot of energy dependence on Russia -- or, more precisely, cut out the Russian middleman currently controlling supply routes from the Caspian Sea region -- it is now.

With gas prices down considerably from their 2008 peak, Russia and Gazprom are on the ropes. Producer countries from Central Asia to the Caucasus are meanwhile desperate for alternatives to Russian transit. In other words, it's a buyers' market.

Direct access to gas reserves in the Caspian Sea region and the Middle East would ensure substantial supplies to the EU for decades. After all, as European Commission officials often note, the region holds twice as much gas as Russia.

There are some encouraging signs. At a "Southern Corridor" energy summit in Prague on May 8, the EU pledged to commit all "necessary political, economic, and financial" resources to pipelines from the South Caucasus to Europe. Three have been singled out for special support: Nabucco, running from Turkey's eastern border to Austria; the Interconnector Turkey-Greece-Italy (ITGI); and White Stream, projected to run under the Black Sea from Georgia to Romania.

Gazprom map of existing gas fields and pipelines delivering natural gas to Europe
The EU also gave its first formal backing to trans-Caspian gas links, among them a possible new pipeline crossing the Caspian to Azerbaijan. A private enterprise, the Caspian Development Corporation (CDC), was also proposed to provide a commercial catalyst for gas production and transit-infrastructure development in the region.

Business Is Business

The EU still views reaching out to the Caspian region as, first and foremost, a commercial undertaking. The bloc's officials appear sincerely to believe that the free interplay of market forces will obviate the need for political intervention. At a Brussels seminar earlier this week, a senior EU official who spoke on condition of anonymity said that commercial laissez faire is the bloc's preferred approach in ensuring long-term gas supplies.

"It may confuse the political message sometimes, but it helps overall in the strength of the economy of the EU and is our policy prescription to all our nearest neighbors as well," the official said

That approach ignores a problem identified by Jozias Van Aartsen, an independent EU-appointed coordinator for the Southern Corridor project, in a report in February 2009. Van Aartsen noted that the West's partners and suppliers in Central Asia, Azerbaijan, and the transit countries are likely to be state-run, and not particularly liberal-minded. Consequently, Western investors and companies would face political and legal risks the EU must help mitigate.

But the EU is so far adamant that market forces -- or what counts as market forces in the Caspian Sea region -- must prevail, even if it is to the short- or medium-term detriment of the EU itself. The unnamed official quoted above said the EU wants no hand in determining the route of the western-bound pipeline from Baku, which is up to the CDC -- and inevitably other interested parties with influence. What matters, he explained, is that the gas reaches world markets.

Geopolitical Interests

These high-minded sentiments presuppose a level playing field -- which simply does not exist. If the EU avoids political involvement, it risks treating as abstractions very concrete geopolitical interests. Inevitably, the interests of the strong will prevail over those of the weak. The EU itself, as a player, is consigning itself to fighting for its interests with one hand tied behind its back.

All the EU currently has to offer Georgia and Azerbaijan is the embryonic, still untested Eastern Partnership; while Turkmenistan, Kazakhstan, and Uzbekistan will have to make do with the 2007 Central Asia Strategy. Neither program contains anything resembling commitments that could offer a counterbalance to the protracted and determined Russian pressure to which those countries are subjected.

Russia, for its part, views the planned Southern Corridor and other potential alternatives to its own supplies in a harshly political light. Gazprom CEO Aleksandr Medvedev told a high-powered EU-Russia meeting in Berlin on May 19 that the "real threat for Europe's gas security is not Gazprom, but the Russophobe politicians" in the EU.

The alarm with which Moscow now views the EU's moves toward supply and pipeline diversification is partly explained by its own economic difficulties. A May 16 report in "The New York Times" concludes that falling gas prices mean that "Gazprom is saddled with a glut of expensive Central Asian supplies that it is forced to sell at a loss." The article estimates the decline in EU demand this year at 60 billion cubic meters, which it says equals Gazprom's contractual obligations in Central Asia.

The May 23 issue of "The Wall Street Journal" also paints a gloomy picture of the future of European gas consumption, quoting a Cambridge Energy Research Associates estimate according to which total natural-gas consumption across the EU could drop by 16 percent by 2020 and 35 percent by 2030.

In the current buyers' market -- at least for the time being, as trends in the energy sector are notoriously fickle -- the EU holds most of the cards. Central Asian countries and Azerbaijan are keener than ever to sell their gas, and the EU's own strategists conclude Russia has been forced onto the defensive in the region.

The bloc must seize the opportunity and set out an unashamedly political external energy strategy which puts its own interests first -- preeminent among them reducing dependence on Russia as a supplier or transit country. Such a strategy would also permit it to exponentially increase its leverage in the region for the long-term good of the other countries involved.

Ahto Lobjakas is RFE/RL's correspondent in Brussels. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL

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