TANAP agreement between Azerbaijan and Turkey dated 26 June, and after two days selection of Nabucco-West project by Shah-Deniz consortium as potential continuation of TANAP from the Turkey-Bulgaria border – those two significant steps will remain in the memories for a long time. So, next year, Shah-Deniz II is expected to decide on the entire route for its gas, whether it wants as a last stage of the transportation to take a southern route (via Trans-Adriatic Pipeline) or a northern route (via Nabucco-West).
Strategic importance of TANAP is to provide Turkey with cheaper natural gas. The gas intended to pump to Turkey will be 12% cheaper than the Russian gas. According to this, Turkey will pay 88% of the price paid to Russia to Azerbaijan for natural gas from TANAP.
One of the main disputed points in TANAP scenario is the sharing of TANAP Consortium. In the early April, Turkey expressed its interest to buy more share in TANAP Consortium. However, this interest blew without any noise. Because, Turkish Government wanted to regulate the agreement according to Turkish legislation, but State Oil Company of the Azerbaijani Republic (SOCAR) cannot agree to that. EU also did not want to depend on Turkish law when transporting gas. Today participation of BP and Total in TANAP Consortium is on agenda, as they are leading shareholders in Shah-Deniz Consortium. Recently, Ukrainian Minister of Foreign Affairs, K.Grishenko and Prime-Minister N.Azarov also expressed their willingness and interest to participate in the construction of TANAP. But, given Russian company LUKoil also owns relevant share in Shah-Deniz Consortium, it’s very noteworthy why they did not expressed their intention to participate in TANAP consortium so far.
However, not all reaction on the governmental and political level, were so positive like others. From the very beginning, original Nabucco and potential the $7 bln pipeline (TANAP) are the main rivals to the Russian-backed and same-oriented South Stream pipeline and its construction will reduce European dependence on Russian gas exports by creating a direct export route from the Caspian basin. However, SOCAR Vice-president, Elshad Nassirov stated that, “the Southern Gas Corridor is not competing with Russia’s South Stream project. The difference between South Stream and Southern Gas Corridor is that Southern Gas Corridor brings additional volumes. South Stream is aimed at avoiding the Ukrainian transit and all the problems of Gazprom relating to that transit”.
South Stream is Gazprom’s answer and plans to deliver Russian gas across the Black Sea to Bulgaria, with a southern route running to Greece and Italy, and a northern pipeline via Serbia to Austria and Hungary. Construction of South Stream is planned to start at the end of this year.
The crucial point of the TANAP and Nabucco-West is that it bypasses Russia entirely, while EU tries to reduce energy dependence on Moscow. But, if gas demand will increase in Europe, Azeri gas will not be enough to decrease the dependence of Europe on Russia. According to Gulmira Rzayeva (SAM Expert) “With 10 bcm Azerbaijan can cover a great deal of the needs of the Balkans and Southern Eastern Europe and accessing Baumgarten, the gas hub in Austria we can expand into Germany, Czech Rapublic and Hungary with bigger volume of gas coming from Shah-Deniz-2 as well as newly discovered gas fields in Azerbaijan in the mid and long-run”.
As soon as TANAP agreement signed, BP-suggested Southern Eastern Europe Pipeline concept (SEEP) disappeared from the negotiation table. Shah-Deniz officially declared the Nabucco-West and TAP as a potential gas transporter to Europe, while non-officially refused SEEP concept. Because SEEP concept did not meet strategic interests of Azerbaijan, since, BP wanted to use Turkey’s state-owned BOTAŞ’s pipelines, as part of BP’s SEEP project. So, Azerbaijani gas had to flow through Baku-Tiflis-Erzurum to Turkey, then across Turkey through Turkish state-owned BOTAŞ’s pipelines, before reaching to Europe. In this situation, BP’s country manager for Turkey, Bud Fackrell, said that BP would use BOTAŞ’s pipelines in Turkey, if the Trans-Anatolia pipeline is delayed. SOCAR has expressed its disagreement with BP after such statements. Because, successful implementation of SEEP meant break of SOCAR’s energy monopoly and enhancing of BP’s monopoly in Turkey.
Shortly after the signing of TANAP agreement and in response to Turkish request for additional gas supplies following an explosion on the main Iran-Turkey gas pipeline, severe statement came from Russian National Champion – Gasprom: “if TANAP completed as planned in 2018, Turkey could then apply for help to Baku”. This statement was not in vain. Russia wanted again to remind Turkey that, you are still Gazprom’s second largest customer and dependent on gas exports of Russia. Since Turkey also reduces its oil and gas imports from Iran, following international sanctions toward Iran because of its nuclear program, Russia’s role in the Turkish energy sector likely will grow up.
During the signing ceremony of TANAP agreement, Turkish Prime Minister, Racab Tayyip Erdogan stated that, “TANAP will also enable to transport Turkmen natural gas through this pipeline, via Trans-Caspian Gas Pipeline, which cannot be realized because of unresolved status of Caspian Sea and which constitutes the integral part of original Nabucco. As, Russia and Iran also insist that, construction of Trans-Caspian Gas Pipeline needs the common agreement of five littoral states according to the Convention on Legal Status of Caspian Sea. From the juridical point of view, project will lay across the risky zone. However, Azerbaijan and Turkmenistan claims that construction of pipeline is the question of two states, but not all five littoral states. SOCAR’s Vice-president Vitaly Baylarbayov says that “possible negotiations on the construction of the Trans-Caspian gas pipeline will not be conducted with the participation of Russia”.
One must ask Russia, if you insist that, “in order to launch construction of Trans-Caspian pipeline, legal status of the Caspian Sea needs to be solved and common agreement must be concluded”, so why Russia signed an agreement in 1999 with Azerbaijan, in 2001 with Kazakhstan and in 2003 with both countries in order to resolve delimitation problem between three countries for their own water space. If Russia demands solidarity in decision-making process for Caspian Sea, so it needs to proceed this initiative same as it states now. And “if Russian alleges that, construction of Trans-Caspian Gas Pipeline is risky in terms of ecology, so, why they built Blue Stream (under the Black Sea) and North Stream (under the Baltic Sea)”.
However, situation in TANAP case is absolutely different from Trans-Caspian Pipeline case, because, TANAP will pass only from Turkish territories, and it is not a matter of territorial disputes. In this context, Russia has no right to interfere to the implementation of TANAP.
Even if it’s fragile, but there is still peace in Caspian Basin. U.S. and Europe do not believe to Iran because of nuclear program; Russia and Iran do not have warm feeling toward U.S because of its intentions to settle in Caspian Basin; Azerbaijan and Turkmenistan still cannot resolved their problem for gas fields; and Kazakhstan still remain its neutrality. What does it mean? Does it mean that Russia loses it empire in post-soviet space?
Analyst of Strategic Outlook
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