Nabucco gives Turkey leverage

ISTANBUL — Turkey this week celebrated the signing of a major deal on the Nabucco pipeline project as a step toward European Union membership and becoming a Eurasian energy hub.

Nabucco is expected to pump 31 billion cubic meters of natural gas from the Caspian Sea to Europe by 2014, bypassing Russia and thereby decreasing the dependence of the EU on Russian gas. Turkey is a Nabucco transit country, along with Hungary, Bulgaria, Romania and Austria.

Despite the agreement, Russia’s continued attempts to control the region’s energy resources, the lack of unified political action in the EU, and Turkey’s indecisiveness, threaten Nabucco, energy experts say.

Russia, which sits atop about 25 percent of the world’s natural gas reserves, dominates regional energy markets. To strengthen its near monopoly, Moscow buys almost all the gas produced by Turkmenistan and Kazakhstan. As a result, countries including Austria, Bulgaria and Hungary have no choice but to import most of their gas from Russia.

Turkey depends on Russia for 65 percent of its domestic gas use and is also desperate to diversify its sources: “There are gas cuts every winter,” said Necdet Pamir, a former high-level official with Turkey’s state-owned oil company and a board member of the World Energy Council.

While Moscow blames the interruptions on Ukraine, “the result is that, for whatever reason, technical or geopolitical, every winter we suffer,” Pamir added.

Russia’s remarkable reach complicates diversification efforts via Nabucco. Azerbaijan — the only supplier committed to feed gas into the pipeline — recently signed a Memorandum of Understanding with Gazprom to export its gas to Russia for at least a year.

“But Azerbaijan cannot provide both Gazprom and Nabucco with natural gas. It’s either one of them,” said Vugar Baymarov, chairman of the Center for Economic and Social Development, an Azeri think tank.

The Azerbaijan-Russia MOU comes at a difficult time for Baku’s ties to Ankara: “Our recent move to normalize relations with Armenia has complicated Azerbaijani attitudes toward Turkey and thereby Nabucco,” said Suat Kiniklioglu, spokesman of the Foreign Affairs Committee of the Turkish Parliament.

Since no other supplier has yet been signed up, the Nabucco pipeline faces a major supply hurdle.

Further, in phase two of the project Turkmenistan is scheduled to supply extra gas into Nabucco via a trans-Caspian pipeline. Considering that Turkmenistan’s economy is primarily dependent on Russia, it is unlikely that Ashgabat will sell its gas to any country but Russia, at least not without Moscow’s permission.

Meantime, the two remaining options — Iraq and Iran — are effectively off the table.

Northern Iraq is thought to have large gas reserves, but it will take years to develop them, and, said Sinan Ulgen, chairman of the Istanbul-based Center for Economic and Foreign Policy Studies, “Political instability during the past decade made it impossible to estimate how much capacity there is and how it can be channeled to Nabucco.”

While it has the world’s second largest reserves of natural gas after Russia, Iran is, according to Stanislav Tkachenko of St. Petersburg State University, a “politically impossible alternative,” because it would require “radically improved relationship between Iran and the United States.”

U.S. sanctions have crippled Iran’s energy sector and Washington continues to oppose any use of Iranian gas for Nabucco, as U.S. energy envoy Richard Morningstar reiterated Sunday.

Turkey says it will press ahead despite U.S. objections. “Turkey is an independent country and can buy its gas wherever it wants so long as conditions are right. If there is gas in Iraq, Turkey will buy it. The same with Iran,” said Kiniklioglu, the Turkish Foreign Affairs Committee spokesman, pointing to the fact that Turkey already imports Iranian gas for its domestic market.

But Turkey might not have to go behind the U.S.: “There are signals that the U.S. is changing its Iran policy toward a more accommodating approach,” said Tkachenko, noting President Barack Obama’s reaction to the aftermath of Iran’s contested elections.

In any case, Turkey’s own energy issues might complicate things further. While insisting that Ankara can maneuver independently of Moscow, Kiniklioglu admitted that Turkey has to “get along well with a country that provides you with over 60 percent of natural gas.”

Moscow is taking advantage of its position to offer Ankara alternatives to Nabucco. The two parties are discussing the construction of Blue Stream 2, an extension of the Blue Stream 1 pipeline that brings gas from Russia to Turkey. Talks are also underway for the South Stream pipeline, a direct competitor to Nabucco that would transport Russian gas via the Black Sea to Bulgaria, Austria and Italy. By joining South Stream, Turkey could become an energy hub without endangering relations with Russia.

The fact that a central dispute between Turkey and the EU over Nabucco was pushed aside with Monday’s agreement but not solved casts doubts on Turkey’s commitment to the implementation of the deal. Ankara has been asking to divert 15 percent of gas flowing through Nabucco toward its domestic grid, but the EU opposed the request.

Since Ankara’s number one priority is Turkey’s energy security and independence, it will probably try to use Nabucco as a bargaining chip in negotiations with Russia, and its relations with Gazprom as a lever in talks with the EU.

“Turkey will remain on the agenda with Nabucco, South Stream or some other projects,” Turkey’s Energy Minister Taner Yıldız told the press Tuesday. The Turkish newspaper Hurriyet reported that Ankara and Moscow will negotiate energy projects during the visit of Russian Prime Minister Vladimir Putin to Turkey on Aug. 6.

According to Yurdakul Yigitguden, Turkey’s former undersecretary of energy, Russia shouldn’t be blamed for pursuing its own interests. “The problem is that there is a lack of leadership in support of gas companies. They can’t go at it alone,” Yigitguden added, calling for stronger political support for Nabucco across the EU and Turkey.

The agreement signed Monday might be a sign of political commitment towards Nabucco. At the same time, in the last several months the Nabucco Consortium began mentioning Russia as a potential supplier of gas for the pipeline, defying the sole reason for Nabucco’s existence.

More on natural gas supplies:

Thoughts of winter cold distract EU leaders

A chilly visit to Moscow

Europe looks for other options