Atlantic Community:Open Think Tank Article "Turkey is Key to Europe's Energy Diversification"

November 20, 2009 | 4 comments | Print this Article | E-Mail Your Opinion

Turkey is Key to Europe's Energy Diversification

Sonja Davidovic: Turkey can play a key role in overcoming existing hurdles to the realization of the Nabucco pipeline project, which will augment Europe’s energy security. In return the EU should assist Turkey on its path to EU membership.

The Nabucco gas pipeline is one of the central infrastructure projects for the diversification of Europe's natural gas supplies that would decrease EU dependence on Russian gas imports. By demonstrating a more flexible and constructive approach towards Turkey's EU accession efforts, Brussels would honor the country's geo-strategic importance and enhance European energy security overall.

The 3300-km Nabucco pipeline will carry natural gas from Caspian and Middle Eastern sources as well as Egypt via Turkey and the Balkans to a major gas hub in Austria. The Nabucco partners will provide about 30 percent of the total 8 billion Euros project cost in equity. The European Investment Bank and the European Bank for Reconstruction and Development have already approved their funding, while the World Bank has expressed interest in contributing additional loans to the project.

For international lenders and investors, there are several important questions that need to be addressed in order to ensure the financial viability of the project. Well aware of its pivotal position for the gas pipeline, Turkey made special demands such as the procurement of Azeri gas from Nabucco at a price lower than the European netback prices and the imposition of high taxes and transit fees. Although the issue of macro-economic transit terms has been removed with the signing of an intergovernmental agreement in July this year, the risk of a potential disaccord still remains. If the participating countries' oil and gas companies prove that cooperation within Nabucco is possible, the EU might be one step closer to a common energy policy.

Another challenge for Nabucco comes from the political risk associated with the unresolved conflict of Nagorno-Karabakh. Turkey plays a central role for the peaceful settlement of the conflict, since only the normalization of its relations with neighboring Armenia could help the Armenian government make politically acceptable concessions with regard to the liberation of Azeri provinces surrounding the disputed territory. By signing the protocol on the establishment of diplomatic relations with Armenia in August this year, Turkey risked the deterioration of its bilateral relations to Azerbaijan - one of its closest allies.

From the lenders' perspective, the most vital issue relates to the question of gas availability. Most of the 31 bcm of gas will come from Azerbaijan's Shah Deniz Field. Turkmenistan and Kazakhstan would deliver their gas through the Trans-Caspian pipeline, while Egypt and Iraq would supply their share through the Arab Gas Pipeline. According to Nabucco's Managing Director these sources will provide enough gas to feed the pipeline. Given that Iran disposes of the world's second largest gas reserves , it would be only logical to include the country into this supply scheme. Yet, under the current political constellation, especially in light of the disputed uranium enrichment program and its stance towards Israel, the international community will be reluctant to see Iran participate in Nabucco. Turkey has been leading lobbying efforts for the supply of Iranian gas to Nabucco. These efforts certainly relate to the presence of Turkish firms in Iran's gas sector, particularly in the South Pars field. Yet, more interestingly, Turkey offered to have Iran's enriched uranium to be sent to Turkey for processing into reactor fuel. Thus, Turkey could not only contribute to enhancing available gas supplies to Europe, but also help alleviate the strained relations between Iran and the West.

It is not hard to see that Turkey is part of the solution to the main challenges facing Nabucco or the more general question of Europe's energy diversification strategy. Nabucco and the other pipelines of the Southern Corridor, except for White Stream, will pass through Turkey. Given Turkey's strategic importance for Europe, it appears only natural that the country asks for something in return - progress in Turkey's EU accession process.

While the EU should not disregard the fulfillment of the Copenhagen criteria, it can certainly help Turkey remove the stumbling blocks on the European path. Although the Cyprus solution process cannot go forever, the Turkish and Greek party should not be confronted with strict deadlines. There is no way to reach an agreement if there is not a high degree of trust between two parties. But, trust is not built over night and it requires both parties reaching out to each other in a frank and courageous manner. This conflict asks for sustainable conceptual solutions that are implemented in incremental steps, not populist short-lived actions. Furthermore, the EU should make efforts to convince Azerbaijan that the normalization of Turkish-Armenian relations is in its own interest. The opening of the border between Armenia and Turkey will not only facilitate pipeline projects such as Nabucco, but unleash great potential for economic growth and development that would benefit all the regional actors. Finally, the EU should offer more support for Turkey's strategy to resolve the Kurdish question by increasing funding for reconciliation and mediation initiatives and designing long-term constitutional and legal provisions for the Kurdish minority.

Turkey and the EU need each other. Turkey's accession would not only augment Europe's energy security, but facilitate European and American outreach strategies to Muslim countries in the region. Also, Turkey's EU membership would stabilize the world's most delicate region and be a source of motivation for neighboring countries.

Sonja Davidovic is a graduate from Georgetown University's School of Foreign Service. She is currently working as an Independent Consultant for Castalia - Strategic Advisors in Washington, DC.

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November 20, 2009

Member deleted

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From my point of the article looks forgetting the key issue related to gas pipes which is the supply. In my article “New Player in Caspian Sea Power Corridor” (http://arirusila.wordpress.com/2009/09/29/new-player-in-caspian-sea... ) I described how China has came to game to take big share of Turkmenistan gas.

For contest between EU’s Nabucco and Russia’s South Stream China’s actions favor later. Today’s arrangements are securing gas for South Stream while Nabucco still is searching supply. It is more clear that Nabucco should be filled with Iraqi and/or Iranian gas and political aspects related to this may delay finding(private) investors and the implementation of project as whole. In bottom line while Russia is taking its part from old gas fields and China from old and new gas fields the Nabucco pipe still is more than half empty.

More about issue e.g. in my post "The Nabucco-South Stream race intensifies" - ( http://arirusila.wordpress.com/2009/11/15/the-nabucco-south-stream-... )

November 21, 2009

Jakob Schirmer, Georg-August-Universität Göttingen, Gold Contributor (134)

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Thanks for this appraisal which is pointing to the right direction. I agree that the EU should promote a Turkish integration. Not only in order to secure its energy matters but also to gain an approach to the Muslim world. Nabucco's problem of the still lacking countries of supply is in my point of view a chance for the EU: A chance to link the economic incentives with the European basic values. However, a real diversification of European energy supply should not be based on Nabucco alone. Also South Stream and the development of LNG could be helpful for an economical and secure European energy supply. The more routes of energy supply we have, the better the Euroepan energy market will appear.

November 24, 2009

Sonja Davidovic, Castalia, Gold Contributor (116)

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Gentlemen,
I appreciate your comments.

Ari,
I do not understand your criticism regarding the question of supply. I spent one paragraph talking about Nabucco’s supply sources. Turkmenistan’s gas reserves are estimated at more than 38 tcm. I am certain that the country will have sufficient capacities to provide the pledged amounts of gas to both Nabucco (around 10bcm) and China (around 40bcm). Nonetheless, I agree that China’s energy demand is an important factor, not only in the European, but in the global energy equation.

The Editorial Team asked me to contribute a piece on Nabucco in the context of Turkey-EU relations. Given the limited size of these articles, I decided to omit China from my analysis. If you are interested in my view regarding China’s energy demand in the geopolitical context, including the impact of China’s gas imports from Central Asia on EU energy security, I would kindly refer you to my research paper “China’s Energy Policy in the Geopolitical Context” available at: http://www.atlantic-community.org/index/Open_Think_Tank_Article/Chi...

Jakob,
Thanks so much for bringing LNG into play. If I was to design a European energy strategy, I would make sure to allocate substantial resources for the construction of re-gasification terminals along the European coast. Although capital expenditure for re-gasification terminals is lower than for regular gas pipelines, the operating and maintenance costs for LNG supply schemes are higher. Moreover, in addition to the re-gasification terminals, Europe would still need pipelines for the transportation of gas to its end consumers. Still, LNG would avoid many risks and obstacles associated with conventional gas pipeline supply, especially with regard to gas availability. In the long-term, LNG would allow for greater flexibility in Europe’s energy supply. Instead of being limited to a few supply sources, Europe could import natural gas any exporting country in the world.

December 4, 2009

Deniz Sonalp, Maastricht University, (5)

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There is lack of EU involvement in the South Caucasus and the ENP, Action Plans are remainig as a frameworks. In the first part, there is a need for effective conflict resolution mechanism for the Nagorno-Karabakh conflict to ensure strategic security and energy supply. The conflict is not only affected by the different interests of actors within the region which are Armenia, Azerbaijan and unrecognized authorities of the Nagorno-Karabakh, and it is also affected by the interactions and interventions of other external powers, like US, Russia, Iran, and Turkey. The important question is that, “while each actor is trying to ensure its political, economic and military dominance in the region, how can the ENP effectivly realize its objectives within this environment?” So, as Sonja said, Turkey may play an important role for the European energy security because of Turkish role in the region.

Turkish tendency to normalize its relations with Armenia may create some tensions with Azerbaijan but, since the beginnig Azerbaijan had considerable political and economic ties with Turkey, and at the same time, Turkey is an important military ally of Azerbaijan. On the other hand, Iran’s relation with Azerbaijan remains very weak and Iran worries about the Azerbaijan relation with USA and Turkey. Armenia is trying to establish ties with Russia, Iran and the USA which creates high competition in the region. These complicated military and economic alliances within the region, create threats for the European security which can easyly cause to military confrontation with the intervention of powerful actors.

Within this environment, effective European involvement is not possible. At the same time the EU is not enthusiastic to involve deep conflicts and prefers to play its role as a financial donor. So, as Sonja said, if Turkey become more closer to the EU, the EU may have an opportunity to secure its energy supply and strategic security in the South Caucasus and in other regions. But of course this is only the good side of membership and there are another difficulties which are another issue..