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Jumpin' Jack Verdi, it's a gas, gas, gas
By Pepe Escobar
BRUSSELS - Oil and natural gas prices may be relatively low right now, but
don't be fooled. The new great game of the 21st century is always over energy
and it's taking place on an immense chessboard called Eurasia. Its squares are
defined by the networks of pipelines being laid across the oil heartlands of
the planet. Call it Pipelineistan. If, in Asia, the stakes in this game are
already impossibly high, the same applies to the "Euro" part of the great
Eurasian landmass - the richest industrial area on the planet. Think of this as
the real political thriller of our time.
The movie of the week in Brussels is: When NATO Meets Pipelineistan.
Though you won't find it in any headlines, at virtually every recent summit of
the North Atlantic Treaty Organization, Washington has been maneuvering to
involve reluctant Europeans
ever more deeply in the business of protecting Pipelineistan. This is already
happening, of course, in Afghanistan, where a promised pipeline from
Turkmenistan to Pakistan and India, the TAPI pipeline, has not even been built.
And it's about to happen at the borders of Europe, again around pipelines that
have not yet been built.
If you had to put that Euro part of Pipelineistan into a formula, you might do
so this way: Nabucco (pushed by the US) versus South Stream (pushed by Russia).
Be patient. You'll understand in a moment.
At the most basic level, it's a matter of the West yet again trying, in the
energy sphere, to bypass Russia. For this to happen, however - and it wouldn't
hurt if you opened the nearest atlas for a moment - Europe desperately needs to
get a handle on Central Asian energy resources, which is easy to say but has
proven surprisingly hard to do. No wonder the NATO secretary general's special
representative, Robert Simmons, has been logging massive frequent-flyer miles
to Central Asia over these last few years.
Just under the surface of an edgy entente cordiale between the European
Union and Russia lurks the possibility of a no-holds-barred energy war - liquid
war, as I call it. The EU and the US are pinning their hopes on a prospective
3,300-kilometer-long, US$10.7 billion pipeline dubbed Nabucco. Planning for it
began way back in 2004 and construction is finally expected to start, if all
goes well (and it may not), in 2010. So if you're a NATO optimist, you hope
that natural gas from the Caspian Sea, maybe even from Iran (barring the usual
American blockade), will begin flowing through it by 2015. The gas will be
delivered to Erzurum in Turkey and then transported to Austria via Bulgaria,
Romania, and Hungary.
Why, you might ask, is the pipeline meant to save Europe named for a Verdi
opera? Well, Austrian and Turkish energy executives happened to see the opera
together in Vienna in 2002 while discussing their energy dilemmas, and the
biblical plight of the Jews exiled by King Nabucco (Nebuchadnezzar), a love
story set amid a ferocious struggle for freedom and power, swept them away.
Still, it's a stretch to turn aluminum tubes into dramatic characters.
Of course, the operatic theater here isn't really in the tubing, it's in the
politics and strategic implications that surround the pipeline. In Eastern
Europe, for instance, Nabucco is seen not as a European economic or energy
project, but as a creature of Washington, just like the Baku-Tblisi-Ceyhan
(BTC) pipeline from Azerbaijan to Turkey that president Bill Clinton and his
crew backed so vigorously in the 1990s and which was finally finished in 2005.
For those who have never believed the Cold War is over, the Eastern Europeans
among them, once again it's the good guys (the West) against the commies ...
sorry, the Russians ... at an energy-rich OK Corral.
The great borderless gas bazaar
Russia's answer to Nabucco is the 1,200-kilometer-long, $15 billion South
Stream pipeline, also scheduled to be finished in 2015; it is slated to carry
Siberian natural gas under the Black Sea from Russia to Bulgaria. From
Bulgaria, one branch of the pipeline would then run south through Greece to
southern Italy while the other would run north through Serbia and Hungary
towards northern Italy.
Now, add another pipeline to the picture, the $9.1 billion Nord Stream that
will soon enough snake from Western Russia under the Baltic Sea to Germany,
which already imports 41.5% of its natural gas from Russia. The giant Russian
energy firm Gazprom holds a controlling 51% of Nord Stream stock; the rest
belongs to German and Dutch companies. The chairman of the board is none other
than former German chancellor Gerhard Schroeder.
Put this all together and Russia, with its pipelines running in all directions
and firmly embedded in Europe, spells trouble for Nabucco's future and
frustration for Washington's New Great Game plans to contain the Russian energy
juggernaut. And that's without even mentioning Ukhta which, chances are, you've
never heard of. If you aren't in the energy business, why should you have?
After all, it's a backwater village in Russia's autonomous republic of Komi,
350 kilometers from the Arctic Circle. Built by forced labor, it was once part
of Alexander Solzhenitsyn's Gulag archipelago. By 2030, however, you'll know
its name. By then, a pipeline from remote Ukhta will be flooding Europe with
natural gas and the village will be one of Nord Stream's key transit nodes.
While Nabucco as well as South Stream remain virtual, Nord Stream is a
Terminator on the run. By 2010, it will be tunneling under the Baltic Sea
heading for Germany. By 2011, it should be delivering the goods and a second
pipe - 12 meters wide, 100,000 tubes long - will be under construction to
double its capacity by 2014. Gazprom CEO Alexei Miller pulls no punches: this,
he says, will be "the safest and most modern pipeline in the world."
How can Verdi lovers possibly compete? In the middle of a global recession,
Gazprom is spending at least $20 billion to conquer Europe via Nord and South
Stream. The strategy is a killer: pump gas under the sea directly to Europe,
avoiding messy transit routes across troublesome countries like Ukraine. No
wonder Gazprom, which today controls 26% of the European gas market, is
expected to have a 33% share by 2020.
In other words, in many ways, the Nabucco versus South Stream energy war
already looks settled. Nabucco is, at best, likely to be a secondary pipeline,
incapable, as Washington once hoped, of breaking the EU away from energy
dependence on Russia.
Brussels, predictably, is in its usual multilingual policy mess. Most
bureaucrats at its monster, directive-churning body, the European Commission,
publicly bemoan the "pipeline war". On the other hand, Ona Jukneviciene,
chairwoman of the committees at the European Parliament dealing with Central
Asia, admits that Nabucco cannot be the only option.
As for Reinhard Mitschek, managing director of the Nabucco consortium, he tries
to put a brave face on things when he stresses, "we will transport Russian gas,
Azeri gas, Iraqi gas". As for the top European official on energy matters,
Andris Piebalgs, he can't help being a pragmatist: "We'll continue to work with
Russia because Russia has energy resources."
From a business point of view, it's tough to argue with South Stream's selling
points. Unlike Nabucco, it will offer cheaper, all-Russian natural gas that
won't have to transit through potential war zones, and while Nabucco will
always deliver limited amounts of Caspian natural gas to market, South Stream,
given Russian resources, will have plenty of room to increase its output.
The fact is that, as of now, Nabucco still has no guaranteed sources of gas. In
order for the gas to come from energy-rich Turkmenistan, to take but one
example, the Turkmen leadership would have to break a deal they've already made
with Russia, which now buys all of that country's export gas. There's no way
that Moscow is likely to let one of the former Soviet Republics do that easily.
In addition, both Russia and Iran could well be capable of blocking any
pipeline straddling the floor of the Caspian Sea.
Gazprom will pay to build South Stream, and then distribute and sell gas it
already controls to Europe; Nabucco, on the other hand, has to rely on a messy
consortium of six countries (Austria, Hungary, Romania, Bulgaria, Turkey, and
Germany) simply to finance one-third of its prospective costs, and then
convince wary international bankers to shell out the rest.
The Pentagon does the Black Sea
So what does Washington want out of this mess? That's easy. Rewind to
then-prospective Secretary of State Hillary Clinton in her Senate confirmation
hearings on January 13, 2009. There, she decried Europe's dependence on Russian
natural gas and issued an urgent call for "investments in the Trans-Caspian
energy sector". Think of it as a signal: the new Obama administration would be
as committed to Nabucco as the Bush administration had been.
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