EurasiaNet Business & Economics - Nabucco Gets A Boost In Baku

BUSINESS & ECONOMICS

NABUCCO GETS A BOOST IN BAKU
9/10/08
By Bruce Pannier
A EurasiaNet Partner Post from RFE/RL

It looks like Europe is going to receive Caspian gas and it won’t be arriving via Russia.

The future of the Nabucco natural-gas pipeline project appeared to be in jeopardy following the Russia-Georgia conflict. Some export routes leading to the pipeline would run through Georgia and Nabucco also depends, to some extent, on gas supplies from Caspian countries Azerbaijan, Turkmenistan, and Kazakhstan, all of whom have been courted by Russia’s Gazprom, which recently offered to purchase all of the three countries’ gas.

But at what was called a "strategic-cooperation conference" in Baku on September 9, there was broad support for participation in the Nabucco project. Azerbaijani Industry and Energy Minister Natiq Aliyev said: "Azerbaijan is not giving up on the Nabucco project. This is a project that has a future."

Also at the conference, Turkish Energy Minister Hilmi Guler said his country also supports Nabucco. "Nabucco will work. We will implement it," he said. "The Nabucco project will strengthen not only Turkey’s energy security, but Europe’s too. No one should doubt it."

The Nabucco pipeline will be 3,300 kilometers long and when fully operational will transport 31 billion cubic meters of gas to Europe annually. Nabucco’s route avoids both Russian and Iranian territory entirely. The project is supported by the European Union and also has the backing of the United States.

Importance Of Diversity

"The cooperation between these two countries [Azerbaijan and Turkmenistan] and others such as Kazakhstan to create a diversity of export possibilities helps ensure each country’s independence and economic strength," says U.S. special representative to the EU Boyden Gray, who was at the Baku conference.

"In addition, there is strength in numbers and in cooperation. These countries in this region are stronger and more influential acting in concert than individually," he adds. "This is especially the case given the closed nature of the Caspian. If they are united on energy issues, these countries can better promote diversification and competition for their exports and, also, over the long haul promote the diversification of their economies through expanded regional and world trade."

Gray notes that the United States will not benefit directly from Nabucco but that Washington hoped "that the [Caspian] region and Europe both benefit and that we, as a trading nation, will also indirectly benefit and we very much want for [Europe] to have a strong independent existence to promote your own economies to their fullest potential."

Despite having no "direct" interest in the Nabucco project, the United States has been engaged in substantial lobbying for the project in the Caspian region. U.S. Vice President Dick Cheney was in Azerbaijan last week to promote diversification of energy export routes.

The Nabucco pipeline itself would start from the Georgian-Turkish and/or Turkish-Iranian borders and run to Austria. Nabucco project head Reinhard Mitschek told RFE/RL earlier this year that Nabucco does not contract for gas supplies, it is only an energy import route for Europe. It is up to shareholders in the project and other companies to arrange the purchase of gas and feed it into the Nabucco pipeline.

But without gas from Caspian countries such as Azerbaijan, Kazakhstan, and Turkmenistan it could be difficult to fill the pipeline, so the participation of those countries in Nabucco is vital.

Enough Gas?

The progress in Baku does not yet mean that Nabucco’s problems are all settled. Charles Esser, an energy analyst with the Brussels-based International Crisis Group, points out that Azerbaijan’s participation alone does not remove all the obstacles to Nabucco.

"The Azeri minister was tentative in his support because he said certainly Nabucco is still on track, he said, though, that ’we in Azerbaijan don’t have enough gas to, by ourselves, supply [Nabucco] so it will require other sources.’ [Without other sources] he was doubtful that [Nabucco] would happen," Esser says.

Turkmen officials at the Baku conference have not yet said what level of participation, if any, Turkmenistan would have in Nabucco. Furthermore, Turkmenistan has committed itself to pumping more gas to Russia and China in recent weeks. And Esser notes that the Russia-Georgia conflict is still fresh in the minds of many and will play a role in how Nabucco fares in the coming weeks.

"I think there’s a renewed political push for Nabucco; however, at the same time I think commercial risk has increased," Esser says. "There is no way around it and because of that risk investors will want guarantees. I think we’ll have to see whether the increased political will for Nabucco translates into guarantees and perhaps subsidies."

Nabucco is planning to hold a meeting of shareholders, potential investors, and potential suppliers in Budapest next month to discuss the pipeline project’s future.

Editor's Note: RFE/RL Azerbaijani Service Director Kenan Aliyev contributed to this report.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

The views expressed in this publication do not necessarily represent the position of the Open Society Institute and are the sole responsibility of the author or authors.