Still a long way to go to turn Verdi’s opera into a pipeline
Posted by meb at February 5th, 2009
*Opinion by Mehmet Ogutcu
Still a long way to go to turn Verdi’s opera into a pipeline
Turkey’s Minister of Energy Hilmi Güler remarked, after a high-level Budapest summit on Jan. 27 on the Nabucco gas pipeline, that “if we do not want this project to remain in the history books only as Verdi’s opera piece, we need to move swiftly for its implementation. So much time has been wasted on mere rhetoric.”
Yet, the summit has not changed much about Nabucco’s prospects. Following hard on the heels of the Russia-Ukraine gas crisis — which knocked out Russian gas exports to Europe via Ukraine for two weeks, leaving a wide swath of European gas consumers in the cold and several countries in an energy-supply emergency situation — there were high hopes for a major breakthrough.
What the summit should be credited with is the fact it has brought around the table for the first time EU officials, together with representatives from European governments, the six member companies of the Nabucco consortium, and countries that are potential suppliers to the pipeline to push forward a plan to reduce reliance on Russian gas imports and open up a new supply corridor to the continent.
Securing political support in Europe has never been the Nabucco project’s problem; however, if anything, the pipeline has been overly politicized as a potential “alternative” to Russian gas imports, even though this would only deliver, at most, some 25 percent of the gas that is currently sent by Russia to Europe via Ukraine. The idea that Nabucco is some “silver bullet” to address Europe’s energy security concerns is clearly misguided, but what the project needed was political will backed by financial support.
On this front, there was some positive movement. The EU has pledged 250 million euros to jump-start the project. The European Investment Bank declared its willingness to provide financing for up to 25 percent of the construction costs in an effort to bring the project from idea to reality. The European Bank for Reconstruction and Development said it may also finance a significant chunk.
While the financial pledges may seem like good news, not one penny will be spent before a political consensus is reached, and the summit has offered little evidence that this will come any time soon, though a formal deadline has been set for the end of March to have a political intergovernmental treaty signed by all participating countries.
Following talks at the summit, countries such as Poland and Moldova are also likely to join in. While more partners should in principle mean more money for the project, in reality it is most likely to mean higher costs and fewer chances of political consensus.
The outcome of the summit will probably encourage optimists as it brings more promises but still little action at a time when the recent Russian gas crisis was the best imaginable time to push for a deal. Rather, the discussions pointed once again to the constraints surrounding this project, which include political disagreements, lack of financing and unclear sources of gas supply.
Most importantly, the question of where the gas would come from to fill the pipeline remains largely unanswered. While the Turkmen and Azeri presidents both indicated their countries could supply some of the gas, there is no deal in that respect yet, and existing infrastructure in these countries would need further upgrades in order to fill the pipeline. Other potential suppliers to Nabucco include Iraq, Iran, and Egypt (all of which have their own problems of dedicated supply and insufficient export infrastructure). Tellingly, Iran was not represented at the Nabucco summit, indicating some wariness on the part of European governments about importing Iranian gas supplies as tensions remain high over the country’s nuclear ambitions, not to mention questions about Iran’s ability to be a significant supplier to Nabucco considering its own gas needs. Even if the Iranian gates are to be opened for gas, Tehran would prefer to negotiate a separate, tough deal to maximize benefits for itself.
Furthermore, the political and legal hurdles with Russia as well as transit issues with Turkey are yet to be ironed out. Russia was not represented at the summit; while the country could be a supplier, the fact that Russia was not invited to attend signals the political intention of the pipeline to source non-Russian supplies and thus diversify Europe’s suppliers. It was interesting to hear Dmitry Peskov, Putin’s press secretary, stating that Russia does not object to the Nabucco gas pipeline project for political considerations, yet it does see technical, economic and Caspian legal status problems in it.
In fact, Gazprom announced, just after the Budapest summit, that it may expand the capacity of its planned South Stream gas pipeline across the Black Sea by 16 billion cubic meters per year from the currently planned 31 billion cubic meters per year due to growing demand. The South Stream project, developed by Gazprom with Eni, will carry Russian gas across the Black Sea to Bulgaria, from where it will split into two paths. One line will run southwest to Greece and on to southern Italy. The other will go northwest via Bulgaria, Serbia, Hungary and Slovenia to northern Italy, with an offshoot to Austria. Gazprom’s Medvedev dismissed speculation that South Stream is an expensive project compared with rival Nabucco and that Russia needs it only to preserve its gas monopoly.
It remains to be seen what progress will be made by late March, when an intergovernmental agreement is scheduled for signature in İstanbul, while at the same time seeking convincing answers to Turkey’s legitimate concerns and interests.
[*] Mehmet Öğütçü is a former Turkish diplomat and Organization for Economic Cooperation and Development (OECD) executive.
source: Today’s Zaman
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