The Budapest summit of January 26 and 27, where the stakeholders and institutional backers of the Nabucco gas transport project came together, has exposed indispensable problems such as high costs, lack of sufficient financial support, where gas would actually come from, reluctant suppliers, perceived Russian resistance, etc.
Rationale behind the fervor to Nabucco[1]
The Budapest conference opens in the wake of gas dispute between Russia and Ukraine that affected about 20 European countries. Although the Budapest meeting had been announced well before the Russian gas cutoff, the series of these events should dynamically spur realistic decisions at the meeting on the Nabucco project. Moscow’s unprecedented, two-week cutoff of gas supplies to Ukraine and Europe opened the window of opportunity for Nabucco project even wider. The suspension displayed Russia’s unreliability, the risk of dependence on Moscow, and the inevitability for Europe to diversify its supply sources by securing alternative routes like a direct access to Caspian gas through the Nabucco project. Hence, the goal of the summit was to demonstrate support for all players in terms of political backing, capital investment, supply commitments for Caspian gas to Europe.
EU Energy Commissioner Andris Piebalgs said that the European Union may propose in so far as 200 million Euros as initial funding. The European Investment Bank may finance some 25 percent of the 8-10 billion euro pipeline, Chairman Philippe Maystadt said. Czech Prime Minister Mirek Topolanek, whose country holds EU’s rotating presidency, said that the EU must seriously begin to act after a “deplorable lack of progress”: “Nabucco is of paramount importance for the freedom of the continent. … The more we are dependant on one source… the more susceptible we are to blackmail and the narrower our political options become”. Representatives from the supplier countries – Azerbaijan, Turkmenistan, Kazakhstan, who attended the summit, may determine the fate of Nabucco.
Meanwhile, Russia’s invasion of Georgia and world financial crisis spurred EU into some real action on Nabucco. The invasion made it evident that the South Caucasus Corridor is inevitable for energy delivery to Europe and it should be developed to prevent Russia’s control. Seemingly, investor confidence in this transit corridor got back following the invasion, against Russia’s estimations. Besides, the crisis on financial markets showed that leaving strategic energy security projects at the thorough pleasure of Russia is nothing than myth or erroneous belief. Additionally, Russia’s recent initiative to assemble a league of gas-exporting countries, possibly ‘to impose terms on Western consumer countries, pushed EU into taking tangible actions. Given that Central Asian and Caspian gas reserves are outside the reach of the proposed league, it is urgent for the West to open direct access to them. In the meantime, a prospective step forward for Nabucco and the Southern Corridor cropped up in Turkmenistan. The recent Gaffney Cline audit of Turkmen gas deposits reported immense reserves of 4 trillion cubic meters of gas at the low estimate, 6 trillion at the best estimate, and 14 trillion cubic meters at the high estimate at the South Yoloten-Osman fields alone (James Town, January 22, 2009).
Challenges for launching to Nabucco
1) Lack of sufficient financial support
However, the Budapest meeting made it pretty obvious that there are still causal challenges precluding the multilateral agreement to kick off the construction works. It is true that the Nabucco consortium has received a pledge of partial funding through the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). As EU Energy Commissioner (EC) Andris Piebalgs told, the EU may provide as much as 200 million Euros. But this is insufficient, according to Hungarian government’s project coordinator, Mihaly Bayer. In addition, the EBRD and EIB funding, the Nabucco’s consortium’s companies also need more substantial funding from the EC. At the present time, the need for such intervention is ever more understood in Brussels and elsewhere in Europe as regards infrastructure and energy projects. But that understanding has not yet translated into EU funding for Nabucco.
Meanwhile, the banks have doubts even more about the investment benefits if they agree to allot funding for Nabucco. According to delegates attending the Budapest summit, energy experts inside and outside the EC are suspicious of a project that could finish up being heavily subsidized by the tax payer. During the conference, big European banks made only nebulous commitments to finance Nabucco. The presidents of EBRD and the EIB said they would consider providing funds.
Several EU governments, including Germany, France and Italy, which have long-term gas contracts with Gasprom, are not persuaded about the need for such a pipeline. German chancellor, Angela Merkel has hardly ever told about Nabucco in her any energy-related speeches. Two weeks ago, when Vladimir Putin paid an official visit to Germany, Merkel emphasized the significance of the Russian-German Nord Stream pipeline for European security.
2) Russia’s resistance
Meanwhile, pipeline backers may face another problem: perceived Russian resistance. Formally Russia behaves as if it doesn’t oppose the project. Very recently, Russian Foreign Minister Lavrov announced that Russia would not oppose the construction of the Nabucco pipeline: “If there is gas to fill the pipeline, why not to sell it?” Besides, Deputy Prime Minsiter Zubkov said Russia has “no aversion” to the planned Nabucco pipeline from Central Asia to Europe, and the builders have yet to secure sources for the link: “Natural gas transport routes to Europe must be diversified. ... Without gas supplies Nabucco can be a great monument to giant ambitions and not thought-out action. Russia has vast reserves to serve all pipelines.”
Russia developed rival projects to Nabucco that are the planned Nord Stream link, which would run from Russia to Germany under the Baltic Sea, and the South Stream (which would ship about 30 billion cubic meters of the gas essentially the same route as Nabucco) pipeline from Russia to Italy and Austria. At the moment, Russia supplies Europe with about a quarter of its oil and gas needs. Russia’s share of EU gas imports is 40 percent.
“Europe cannot escape dependence on Russian or Iranian gas,” said Michael Klare, author of “Rising Powers, Shrinking Planet, the New Geopolitics of Energy.” “Between them they have something like 40 percent of the world’s gas supplies.”
3) Iran
Iran could play a key role to reduce the European Union’s energy dependence on Russia, a senior European parliamentary official told (EurasiaNet, January 26, 2009). According to Ona Jukneviciene, a top European official, the EU could not limit its options on Nabucco, if it hopes to achieve its long-standing aim of diversifying its sources of energy. However, EC Energy Commissioner Andris Piebalgs and EC President Jose Manuel Barroso told that Iran’s participation in the Nabucco project is a non-starter.
Even if EU officials demonstrated joint desire to have Iranian participation in Nabucco, several important barriers remain in the way of energy cooperation between Brussels and Tehran. Firstly, the EU and US are locked in a stand-off with Iran over Tehran’s nuclear program. In addition, existing U.S. economic sanctions against Iran ensure that Washington would remain strong opposed to Iranian participation in Nabucco.
Notably Iranian officials were absent from Budapest, who did not receive an invitation to attend the summit even though Mohammed-Reza Ne’matzadeh, the managing director of Iran’s national oil company, has identified the Islamic Republic as Europe’s “sole option” for filling the Nabucco line. Erdogan also urged the EU to work with Iran to secure Nabucco’s economic viability.
4) Turkey
In Budapest summit, the Turkey reiterated its support to Nabucco. Turkey’s Energy and Natural Resources Minister Hilmi Güler said that Turkey has long been a supporter of the project as a partner country: “Turkey’s stance is quite clear. Turkey can work very fast in the project as long as other partners get a move on it.” However, there was a dispute with Turkey over Ankara’s demand to get a net 15 percent of the gas that would be shipped through the pipeline. Other consortium members want Turkey to serve as a transit country. Besides, Ankara as a member of Nabucco consortium continues to seek arduous concessions - like accession negotiations with EU - for allowing Azerbaijani gas to move westward to Europe. Turkish energy official said Ankara expected to settle this and other outstanding issues in Budapest this week.
5) Reluctant suppliers (Azerbaijan)
Nabucco faces other problems. Even its supporters recognize that it will be hard to reach its annual transport capacity of 31 billion cubic meters that amounts to only 5 percent of EU’s annual gas consumption. Besides, the potential suppliers are reluctant to sign up until the pipeline has been built. Turkmenistan and its neighbors ‘are courted by Gazprom’. Negotiations with Ashgabat are ongoing at both diplomatic and commercial level.
Azerbaijan’s participation in the project is not clear. It has several options like selling gas to Russia’s OAO Gazprom. In the summit, president Ilham ALiyev said that Azerbaijan would decide on joining in Nabucco based on the prices it will get. Aliyev further said that Azerbaijan would to commit gas resources to Nabucco once the questions over financing, transit fees, and the timetable for the construction of the pipeline are resolved: “Today, when the transit issues are not resolved, when the construction of Nabucco or any other transportation routes is not resolved and we do not know when it will happen or whether it will happen, to talk about Azerbaijani commitment is premature”.
European backers of the project have have not induced Azerbaijan making any commercial proposal to Baku, unlike Russia’s Gazprom offered in June 2008 to buy all Azerbaijan’s gas export volumes at European netback prices be produced during the second stage of the Shakh-Deniz project. With regard to Gazprom’s offer the Azerbaijani president said Baku has been “considering” Gazprom’s offer. “Price is an important issue here.” He said adding that stronger competition for gas benefits the supplier.
Azerbaijan is firmly committed to Nabucco in line with the Western orientation of the country. However, in case of insufficient EU support, Turkish obstruction, or some other reasons, Azerbaijan may find it difficult to resist Russian incentives and pressures. For pressures, Russia is currently arming Armenian military while playing the Karabakh card with Azerbaijan. Loyalty to Nabucco may mean that Azerbaijan loses short-term commercial opportunities to sell gas to Russia while irritating Moscow politically. The EU needs to resolve this dilemma soon.
[1] Nabucco involves laying a 3,300 km pipeline from Turkey to Baumgarten of Austria, transiting Bulgaria, Romania and Hungary, to carry 31 billion cubic meters of natural gas. The project cost is estimated at 8-10 billion Euros. Construction has been tentatively scheduled to begin in 2010. The planned pipeline, Turkey-Bulgaria-Romania-Hungary-Austria, is to be supplied mainly from Azerbaijan (first phase) and Turkmenistan (follow-up phase) via Georgia and would connect with Germany.
Monday, March 30, 2009
The Gagauz Diary
When the plane was about to land at the Chisinau Airport, I have been feeling like returning back to Baku after 2 years European tour. These feelings grew stronger once I was entering into the city, watching typical “Chrushovka” or other Soviet style blocks of Chisinau. However, the last several years’ construction boom in Baku was not being observed here.
After 3 months assignment in the Conflict Prevention Centre of the OSCE, the first task assigned me in the Mission to Moldova was to support Political Advisor in dealing with Gagauz issue. It was within my responsibility to observe the pre-election situation in Gagauz Autonomous Unit of the Republic of Moldova and come up with regular updated information and findings from observation of the situation.
Gagauzia has ever been an uncommon and atypical place to us. This is not because of its far-off location, but because it has hardly ever been mentioned in both scholastic literature and public media in Azerbaijan. Honestly, I have never felt like searching out something about this beyond recall Turkic nation even from boundless internet. Within the second assignment period of the JPO Programme, in the Mission to Moldova I had this incredible chance.
Gagauz is the fourth largest ethnic group in Moldova, however, this minority group doesn’t insist on independence unlike the remaining ethnic population – Russians, Ukrainians. Gagauz, a total of 153.000, resided in the southern Moldova. They are the descendants of Turkic Oğuz tribes converted to the Orthodox Christianity. The rural Gagauz were largely russified nation during the Soviet reign and still Russian language is mostly used in the enclave. This small Turkic ethic group has been affected by “Russification” policy much more than Azeri Turks and other Central Asian Turkish Countries. Language at the universities, schools, state and private institutions are Russian. I found it amazing that 70-80 percent of Gagauz reported Russian as their second language, while very few – 4 percent of Gagauz said they were fluent in Moldovan.[1]
Cultural and language problems are supposed to be partially linked to the social troubles as well. Gagauz is assumed to be one of the most indigent ethnic populations of Moldova. Small trip from the north to the south is enough to behold the wretched living of the Gagauz people. The roads taking to different villages of Gagauzia seem to be repaired last time in Soviet period. One faces here locals using still horses and carriage as ubiquitous transport. Not only common people, but also local authorities suffer from the lack of financial resources. A good proper example I discovered during the elections to the People’s Assembly of Gagauzia. Because of financial problems, the Gagauz Central Election Commission was able to print out ballot papers only in Russian, although they had to be published in Gagauz and Moldovan languages. Probably, it is a result of low social condition that the prices here are pretty cheap. If you want to visit Gagauz History Museum you need to spend just 2 Lei (about 0.12 EUR). The local leadership sees the reason of poverty in the negligence of Chisinau to the sufferings of autonomy. Some Gagauz newspapers write that even international assistance is not usually equally distributed among all Moldovan citizens. Recently, local newspapers were questioning why Rumania’s aid has not been delivered to disadvantaged Gagauz people. International community lacks to render direct assistance to the region as well. Turkish Government is a single country having realized some assistance projects, inter alia, water pipe construction, road network repair, etc. Most recently, Russian Federation delivered humanitarian aid to Gagauzia, to help out poor locals suffered from last year’s draught. Nonetheless, the Moldovan government imposed a ban on the Russian aid arguing that delivery of external aid during pre-election period would have fortified the image of Gagauz leadership.
After the downfall of Soviet Union, the Gagauzia proclaimed their independence from Moldova, which resulted with an outbreak of conflict in the late 1980s. The dispute in Gagauzia and Transnistria are fully at odds, at least, in terms of their duration, political importance and the level of external support. While Transistrian conflict has linguistic roots, Gagauz conflict was a typical ethno-territorial conflict. Interestingly, despite its ethnic trait conflict in Gagauzia has not lasted long and been settled with granting the region a special autonomous status in the late 1994, whereas Transistrian conflict still keeps going. The other difference between them is that in Transnistria’s case, demand to remain under Soviet (later Russian) administration broke out the conflict. In Gagauz’s case, the dispute was caused mainly by the concerns about the future of Gagauz culture after the ruin of Soviet Union and the alleged neglect of Chisinau to Gagauz problems.
The political atmosphere in Gagauzia is pretty difficult to grasp although it is a small ethnic group. Gagauz nationalism flourished in 1980s was basically, intellectual movement. This movement strengthened when Moldova voiced wishes to reunite with Romania. The question is why so-called Gagauz nationalism was worried about “Romanization” policy of Moldovan nationalists, while having displayed more loyalty to Russia, the country which practically pursued terrible “russification” policy in Gagauzia. There can be quite different approaches: a) having suffered from “russification” policy Gagauz intellectuals was concerned about its replacement with the new wave of “romanization” movement; b) global changes in the world political map, including national liberation movements in other Turkish countries motivated Gagauz intellectuals to be concerned about the future of Gagauz people; c) neighbouring Transnistrian experience played a good inspiring role. The Gagauz nationality has positive (constructive) and challenging facets. The most prominent aspect of Gagauz nationalism is that it isn’t eager for any sort of separatist paradigm, rather reflects on the very considerable conception of “strong autonomy – strong republic”. The challenging moment of the Gagauz nationalism is the likelihood of abuse of those national values or ideas by certain groups for own purposes. For instance, two political “clans” in Gagauzia, presenting them as if they were fighting for the strong Gagauz autonomy, were in fact in conflict with each other.
It is already high time for Gagauz to solve their long-lasted problems. Surely, they need support to solve them as quickly as possible. While the first support should come from Chisinau, the second but the most important one should come from all Gagauz people. If they want strong autonomy having wide-ranging powers, they should drift away from fighting each other. The external assistance (Russian or Turkish) to Gagauzia is very appreciable moment, but it should keep Gagauz away from thinking about its determinative role in resolving internal problems.
[1] King, Charles: „The Moldovans“, Hoover Institution Press, 2000, p. 213
After 3 months assignment in the Conflict Prevention Centre of the OSCE, the first task assigned me in the Mission to Moldova was to support Political Advisor in dealing with Gagauz issue. It was within my responsibility to observe the pre-election situation in Gagauz Autonomous Unit of the Republic of Moldova and come up with regular updated information and findings from observation of the situation.
Gagauzia has ever been an uncommon and atypical place to us. This is not because of its far-off location, but because it has hardly ever been mentioned in both scholastic literature and public media in Azerbaijan. Honestly, I have never felt like searching out something about this beyond recall Turkic nation even from boundless internet. Within the second assignment period of the JPO Programme, in the Mission to Moldova I had this incredible chance.
Gagauz is the fourth largest ethnic group in Moldova, however, this minority group doesn’t insist on independence unlike the remaining ethnic population – Russians, Ukrainians. Gagauz, a total of 153.000, resided in the southern Moldova. They are the descendants of Turkic Oğuz tribes converted to the Orthodox Christianity. The rural Gagauz were largely russified nation during the Soviet reign and still Russian language is mostly used in the enclave. This small Turkic ethic group has been affected by “Russification” policy much more than Azeri Turks and other Central Asian Turkish Countries. Language at the universities, schools, state and private institutions are Russian. I found it amazing that 70-80 percent of Gagauz reported Russian as their second language, while very few – 4 percent of Gagauz said they were fluent in Moldovan.[1]
Cultural and language problems are supposed to be partially linked to the social troubles as well. Gagauz is assumed to be one of the most indigent ethnic populations of Moldova. Small trip from the north to the south is enough to behold the wretched living of the Gagauz people. The roads taking to different villages of Gagauzia seem to be repaired last time in Soviet period. One faces here locals using still horses and carriage as ubiquitous transport. Not only common people, but also local authorities suffer from the lack of financial resources. A good proper example I discovered during the elections to the People’s Assembly of Gagauzia. Because of financial problems, the Gagauz Central Election Commission was able to print out ballot papers only in Russian, although they had to be published in Gagauz and Moldovan languages. Probably, it is a result of low social condition that the prices here are pretty cheap. If you want to visit Gagauz History Museum you need to spend just 2 Lei (about 0.12 EUR). The local leadership sees the reason of poverty in the negligence of Chisinau to the sufferings of autonomy. Some Gagauz newspapers write that even international assistance is not usually equally distributed among all Moldovan citizens. Recently, local newspapers were questioning why Rumania’s aid has not been delivered to disadvantaged Gagauz people. International community lacks to render direct assistance to the region as well. Turkish Government is a single country having realized some assistance projects, inter alia, water pipe construction, road network repair, etc. Most recently, Russian Federation delivered humanitarian aid to Gagauzia, to help out poor locals suffered from last year’s draught. Nonetheless, the Moldovan government imposed a ban on the Russian aid arguing that delivery of external aid during pre-election period would have fortified the image of Gagauz leadership.
After the downfall of Soviet Union, the Gagauzia proclaimed their independence from Moldova, which resulted with an outbreak of conflict in the late 1980s. The dispute in Gagauzia and Transnistria are fully at odds, at least, in terms of their duration, political importance and the level of external support. While Transistrian conflict has linguistic roots, Gagauz conflict was a typical ethno-territorial conflict. Interestingly, despite its ethnic trait conflict in Gagauzia has not lasted long and been settled with granting the region a special autonomous status in the late 1994, whereas Transistrian conflict still keeps going. The other difference between them is that in Transnistria’s case, demand to remain under Soviet (later Russian) administration broke out the conflict. In Gagauz’s case, the dispute was caused mainly by the concerns about the future of Gagauz culture after the ruin of Soviet Union and the alleged neglect of Chisinau to Gagauz problems.
The political atmosphere in Gagauzia is pretty difficult to grasp although it is a small ethnic group. Gagauz nationalism flourished in 1980s was basically, intellectual movement. This movement strengthened when Moldova voiced wishes to reunite with Romania. The question is why so-called Gagauz nationalism was worried about “Romanization” policy of Moldovan nationalists, while having displayed more loyalty to Russia, the country which practically pursued terrible “russification” policy in Gagauzia. There can be quite different approaches: a) having suffered from “russification” policy Gagauz intellectuals was concerned about its replacement with the new wave of “romanization” movement; b) global changes in the world political map, including national liberation movements in other Turkish countries motivated Gagauz intellectuals to be concerned about the future of Gagauz people; c) neighbouring Transnistrian experience played a good inspiring role. The Gagauz nationality has positive (constructive) and challenging facets. The most prominent aspect of Gagauz nationalism is that it isn’t eager for any sort of separatist paradigm, rather reflects on the very considerable conception of “strong autonomy – strong republic”. The challenging moment of the Gagauz nationalism is the likelihood of abuse of those national values or ideas by certain groups for own purposes. For instance, two political “clans” in Gagauzia, presenting them as if they were fighting for the strong Gagauz autonomy, were in fact in conflict with each other.
It is already high time for Gagauz to solve their long-lasted problems. Surely, they need support to solve them as quickly as possible. While the first support should come from Chisinau, the second but the most important one should come from all Gagauz people. If they want strong autonomy having wide-ranging powers, they should drift away from fighting each other. The external assistance (Russian or Turkish) to Gagauzia is very appreciable moment, but it should keep Gagauz away from thinking about its determinative role in resolving internal problems.
[1] King, Charles: „The Moldovans“, Hoover Institution Press, 2000, p. 213
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