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Nabucco more about markets than geopolitics
by Daniel Graeber
Washington DC (UPI) Jan 03, 2012

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Though Europe is working to diminish Russia's influence in the region, the planned Nabucco pipeline is more about the commodity market than geopolitical dynamics, a project director said.

Planners of projects involved in Europe's so-called Southern Corridor of gas transit networks -- the Interconnector Turkey-Greece-Italy, Trans Adriatic Pipeline and Nabucco -- are waiting for developers in Azerbaijan to select which project gets supplied from the Shah Deniz natural gas field in the Caspian Sea.

Nabucco is the most ambitious of the three, with a planned 1 trillion cubic feet of natural gas per year. There's not yet enough natural gas available in the Azeri waters of the Caspian Sea to feed Nabucco, though project directors note the pipeline's development is based on a multi-sourcing concept.

The planned route for Nabucco stretches from Turkey to Austria, crossing Romania, Bulgaria and Hungary. In December, Russian natural gas company Gazprom signed a deal with Turkish pipeline company BOTAS to move forward with the South Stream natural gas pipeline through its territory for European markets.

Reinhard Mitschek, managing director of Nabucco Pipeline International, told United Press International that while South Stream does provide a new way to move natural gas to Europe through Turkey, it does little to add diversity to the regional energy market.

South Stream, he said, hasn't even passed the feasibility stage and relies only on Russian natural gas.

"Nabucco would link directly to suppliers in Central Asia while other programs outlined in the Southern Corridor don't," he added.

Paul Sullivan, an energy and Middle East analyst at Georgetown University, told UPI the Nabucco story is about making a pipeline system laden with geopolitical consequences work even though it might not make sense otherwise. He said there's a regional battle under way in the energy market, where an economic edge over natural resources is necessary for political influence.

"The Cold War with Russia never really ended," he said. "It just changed character."

Nabucco could rely on so-called feeder lines from Iraq as well as resources from Turkmenistan and elsewhere. The Kremlin, however, is eager to maintain good relations with former Soviet satellites, where natural resources are abundant. Russia's Lukoil, meanwhile, is already a major player in post-war Iraq.

Most of Russia's natural gas for European markets runs through Soviet-era pipelines in Ukraine. The bloc in 2009 faced a cold winter after Gazprom cut natural gas supplies to Ukraine following disputes over contracts and debt. Ukraine's pro-Kremlin government last year sent Yulia Tymoshenko, a former prime minister and leader of the country's Orange Revolution, to a penal colony following a conviction on corruption charges in relation to the deal that eventually returned gas supplies to Ukraine.

That dispute put renewed impetus behind efforts to diversify the regional energy market. Mitschek acknowledged the close link between energy policies and geopolitical dynamics given the global nature of oil and natural gas markets. With the U.S. government following Southern Corridor developments closely, the West, he said, was eager to advance Nabucco to promote regional sustainability, particularly in Central Asia.

Russia's Gazprom said there was an estimated 52 trillion cubic feet of natural gas available in the Shah Deniz field. The company, following meetings with Azeri officials last month, said there was a "unanimous opinion" that a stronger relationship between Moscow and the former Soviet republic made good strategic sense.

China, with its growing energy appetite, is considering tapping into some of the natural gas available in Turkmenistan, where Nabucco expects to get its supplies.

"Not today, not in 2017, but once the project enters into full service and suppliers are at full capacity," said Mitschek when asked about the project's diversity.

Sullivan noted there are many factors at play in the regional energy sector. The Kremlin rattled sabers at NATO in 2011 over geopolitical pressure along its western borders, where much of the Nabucco story begins. Western allies engaged in Afghanistan, meanwhile, note a planned pipeline through the region from Turkmenistan could finally help Kabul build a sustainable economy. Shale gas developments, the fallout from the meltdown at Japan's Fukushima Daiichi nuclear power plant and newly-discovered gas fields off the coast of Israel could all redefine Europe's energy sector by the time 2017 rolls around for Nabucco.

"The geopolitics and geoeconomics of gas pipelines are not simple," notes Sullivan.

But Mitschek maintained the matter is more about liquidity and diversification. Europe isn't quite ready for unconventional resources like shale gas and European leaders are looking at 2050 before they completely decarbonize their energy sector, he maintained.

Meanwhile, he said, with regional natural gas demand expected to increase substantially by 2025, Nabucco is something European leaders and their allies can throw their support behind now.

"While geopolitical issues are certainly at play, the primary goal of Nabucco is to increase liquidity and diversification in the European energy market," he said.

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