Pipeline deal is sweet music for Iran
By M K Bhadrakumar
How a trans-Caspian gas pipeline project came to be named after the
19th-century Italian Romantic composer Giuseppe Verdi's famous opera Nabucco
remains obscure. The opera is based on a Biblical story about the tragic plight
of persecuted Jews exiled from their homeland by the Babylonian King
Nebuchadnezzar. Maybe, the opera's enchanting story of love and struggle or its
tendency toward melodrama was considered an apt metaphor for the acute Caspian
energy rivalry.
Moscow often poured scorn on the Nabucco project's dim prospects by drawing apt
allusions from Verdi's opera. In the latest parody, an expert commentator in
Moscow ridiculed that the "chaotic chanting" by Europeans in support of the
project reminded him of the haunting chorus of Hebrew slaves from
Verdi's opera - "beautiful, yet altogether gloomy and hopeless".
But he was mistaken, as on Monday a galaxy of European statesmen gathered under
chandeliers in the banquet hall of the newly built Rixos Hotel in Ankara,
Turkey, to sign an inter-governmental agreement formally launching the Nabucco
project. United States President Barack Obama's special envoy on Eurasian
energy issues, Richard Morningstar, was in attendance at the ceremony,
affirming in unmistakable terms that Nabucco is every bit an American political
venture.
With the Nabucco project finally taking off, Russia has suffered a huge setback
in the geopolitics of energy in Eurasia. For the second time in a decade,
Morningstar has outwitted the Kremlin. In 1999, he got the Baku-Tbilisi-Ceyhan
oil pipeline project going through an inter-governmental agreement at a gala
ceremony in Istanbul, despite similar Russian foreboding and prophecies that it
was unviable and doomed to perish.
Turkey, Austria, Bulgaria, Romania and Hungary signed the document on Nabucco.
The project, estimated at US$11 billion, will initially transport Central Asian
gas by a new pipeline bypassing Russia, via Turkey to Austria and Germany
through Bulgaria, Romania and Hungary.
The 3,300-kilometer pipeline, with four entry points into Turkey, will
ultimately source from diverse places such as Egypt, Iraq, Iran and
Turkmenistan and be able to pump 31 billion cubic meters (bcm) of gas per year,
or roughly 5% to 10% of the total gas consumption in the European Union (EU) by
2020. Then, there are plans for Nabucco II and a Nabucco III in the fullness of
time, as Europe's needs increase. Construction work is scheduled to commence in
2010 and the pipeline will be fully operational by 2014. Two-thirds of the
pipeline will pass through Turkey.
Nabucco's viability critically depends on gas supplies from Turkmenistan and
Iran. Therefore, it is more than a coincidence that the Turkmen Foreign
Ministry announced on Sunday that Ashgabat had agreed to increase its sales of
gas to Iran to 14 bcm annually from the current 8 bcm. The Turkmen statement
said a new pipeline was being laid from the Doulatabad gas fields to the
Iranian border by the end of the year and that the "two sides also discussed
the possibilities of further increasing supplies ... to 20 bcm". President
Kurbanguly Berdymukhamedov earlier said on Friday in Ashgabat that Turkmenistan
hoped to supply gas to Nabucco.
Clearly, Iran is gearing up as the transit corridor for Turkmen gas that will
go into Nabucco. Iran has a swap arrangement with Turkmenistan. Moscow had
calculated that Nabucco wouldn't materialize since it would entail the
construction of a pipeline from Turkmenistan along the bottom of the Caspian
Sea, which, as a littoral state, it could easily veto in alliance with Iran.
Evidently, Turkmenistan and Tehran have another idea: transport Turkmen gas to
Europe via existing Iranian pipelines to Turkey. No doubt, Tehran has decided
that come what may, Nabucco offers a fantastic means of entering into a
strategic partnership with Europe in a near-term scenario.
As United States-Iran engagement draws closer, it is no longer an issue of
"whether" or "if", but of "when" it is that European companies can tap Iran's
massive gas reserves. The current US position is that it will not support
Iran's involvement in Nabucco until Tehran "changes its policies". Last month,
Morningstar said Iran could only join Nabucco after the normalization of ties
between Washington and Tehran.
On Thursday, while speaking to the media in Ankara, he merely said inviting
Iran to the project without a resolution of the nuclear standoff "could have a
negative effect". But Turkish Energy Minister Taner Yildiz swiftly clarified,
"We can also easily see Iran in this project as a supplier in the future."
(Iran has drawn several rounds of United Nations sanctions over its nuclear
program, which it insists is for civilian purposes - others, notably the US,
claim Tehran is developing a nuclear weapon.)
Yildiz pointed out that energy projects "may help improve the international
environment". He added that "some European countries have already signed
initial agreements with Iran" - though he wouldn't disclose their names.
All in all, Russia suffers a setback from several angles. Europe making headway
in diversifying its energy supplies in any significant measure means reducing
its dependence on Russian gas. Europe's success, therefore, becomes Russia's
loss, which is why the latter keenly promotes the South Stream project as a
rival to Nabucco. Secondly, Moscow assiduously wooed Balkan and Central
European countries to opt for South Stream instead of Nabucco, which it has
constantly derided as a hare-brained idea that made no economic sense. Thus,
the participation by these countries in Nabucco signifies a signal success of
US diplomacy in rallying the "New Europeans".
Third, Turkmenistan is definitely decamping from Russia's orbit and getting
close to the US. This completely transforms the Caspian energy sweepstakes.
With a dwindling Russian surplus of gas for export to the European market,
state-run Russian giant Gazprom has depended heavily on Turkmen gas.
Turkmenistan currently produces about 80 bcm annually, out of which about 50
bcm was sold to Russia in recent years. However, supplies to Russia have been
almost entirely cut off since an explosion in April on the Soviet-era Central
Asia-Center pipeline, which transports Turkmen gas to Russia.
Meanwhile, Turkmenistan has agreed to increase its contracted gas supplies to
China to 40 bcm via a pipeline nearing completion by end-2009. In addition to
that, Turkmenistan has agreed to step up its gas supplies to Iran and is now
hoping to supply Nabucco.
Turkmenistan clearly intends to cut back its dependence on Russia for marketing
its gas and is instead tying up alternate arrangements to access the world
market. The Turkmen stratagem could have a domino effect on other Central Asian
energy producers. Such a trend could only lead to an overall weakening of
Russian influence in Central Asia and put strains on the overall Moscow-led
regional integration processes.
Ashgabat's "defection" holds other implications. Turkmen Foreign Minister
Rashid Meredov undertook a high-profile visit to Washington in June. Soon
after, reports began appearing that Turkmenistan aspired to becoming a
transport hub for US supplies going to Afghanistan. The Pentagon confirmed that
a small contingent of US military personnel presently operated in Ashgabat for
servicing American aircraft that landed and refueled in the Turkmen capital.
Ashgabat may allow a transit route by road or rail for the US to ferry supplies
to Afghanistan, thus bypassing the "Russian route". Washington has included
Turkmenistan lately in the list of countries from where it intends to procure
goods and services for Afghanistan.
From Moscow's perspective, it is equally worrisome that Turkey and Iran have
identified with Nabucco. Moscow did everything it could to attract Turkey with
counter-offers, such as a lucrative role in the South Stream project. True to
form, Turkey showed acute bazaar instincts and finally cut a handsome deal by
playing Russia against the EU. Turkey will earn a handsome amount out of
Nabucco - US$630 million in transit fees annually and "up to 50% of the total
gas set aside in a pool" which can be purchased at a discount.
Turkey is surely playing a high-stakes game and is fast becoming an energy hub
for Europe. The EU is one of the world's largest markets, with an estimated
added requirement of 200 bcm by 2030 in addition to its current annual
consumption of 600 bcm. Turkey is the ideal transit country to carry
non-Russian gas - from Egypt, Iraq, Iran, Turkmenistan, Azerbaijan or
Kazakhstan - to Europe.
On the one hand, Ankara anchors itself to the EU. Turkish Prime Minister Recep
Tayyip Erdogan said on Monday, "Even if you make an assessment only from the
perspective of energy, it is clear that Turkey should be a member of the EU."
But this may be a false hope. As recently as May, German Chancellor Angela
Merkel said, "We cannot take everyone in Europe as a full member ... our [EU]
common position is: a privileged partnership for Turkey, but no full
membership." French President Nicolas Sarkozy, who was present at the occasion,
promptly added, "When Angela Merkel says Europe must have borders, she is right
- because a Europe without borders would be a Europe without a will, without
identity, without values."
Sarkozy subsequently turned the knife in an interview with Germany's Bild am
Sonntag newspaper, saying. "Let us stop making vain promises to Turkey." Ankara
is aware of these harsh realities, but for the moment, Nabucco imparts an
exhilarating feeling that Turkey has almost become a part of Europe.
On the other hand, Turkey hopes that Nabucco catapults it into a leadership
role in integrating the Caucasus and Central Asia into the Western economy. The
US has been actively encouraging Turkey to assume such a role. This was a
talking point for Obama when he visited Turkey in April. Ankara perceives that
the Obama administration is much more focused on Central Asia than the George W
Bush era was and that US diplomacy is stepping up efforts to balance the clout
of China and Russia in the region.
Turkey is indeed bidding to become a regional actor in Central Asia. Erdogan's
rhetoric regarding unrest in China's Xinjiang region between Uighurs and Han
Chinese was partly at least intended to project Ankara's self-styled "Turkic"
profile into Central Asia. Turkey usually fights shy of articulating on
political separatism or ethnicity. Erdogan said that genocide was being
committed in Xinjiang, where recent rioting left at least 184 people dead. The
toll included 46 Uighurs, a Turkic people who are mostly Muslim and share
linguistic and cultural bonds with Central Asia.
Again, Turkey has become active in stabilizing Afghanistan. Turkish Foreign
Minister Ahmet Davutoglu visited Afghanistan and Pakistan in early June. Turkey
has participated in three "trilateral summits" with Pakistan and Afghanistan in
the recent period. Meanwhile, Turkey is doubling its troop deployment in
Afghanistan to a force level of 1,600 and will head the International Security
Assistance Force in November. Turkey also plans to convene a summit of
Afghanistan's neighboring countries. Curiously, Ankara is betting on President
Hamid Karzai's victory in Afghan elections scheduled for August 20, after
having lined up the backing of its proxy, Rashid Dostum, for the Afghan
president's candidacy.
In the final analysis, however, it is not Turkish pretensions as a regional
power or the Turkmen snub to Moscow that arrests attention. More than anything,
it is Iran's likely participation in Nabucco that will be keenly watched in the
weeks and months to come. Russia's best hope has been that Iran stays away from
the European gas market and instead concentrates on the Asian market in
countries such as India and China. But the contrary is happening - Iran is
seeking out both the Asian and European markets.
An Iranian hand in reducing Europe's energy dependence on Russia, thanks to a
project which is a blatant American political venture - this was the last thing
that Russia would have liked to see happen. But it seems to be happening.
Verdi once remarked, "This is the opera with which my artistic career really
begins. And though I had many difficulties to fight against it, it is certain
that Nabucco was born under a lucky star." Tehran will happily agree -
especially as it is a Morningstar.
Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign
Service. His assignments included the Soviet Union, South Korea, Sri Lanka,
Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.
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