Nabucci IGA Strengthens Europe’s Energy Security

By Gustavo Coronel l July 20, 2009

The weakest link in the Nabucco natural gas pipeline project, which received the go ahead from five countries: Austria, Bulgaria, Romania, Hungary and Turkey on July 13 in Ankara, Turkey, has been the guarantee of gas supply to the pipeline in the strategic 50-year Inter-Governmental Agreement (IGA). Construction on the 2,050 mile pipeline is scheduled to start in 2011 with completion in 2014. A $12 billion investment in a pipeline to deliver 31 billion cubic meters of natural gas per year to Europe would not be able to get started, however, without the assurances that the gas to fill the pipeline will be available.

So far, the possible sources: Iran and Azerbaijan, both exhibited significant uncertainties. In the case of Iran, the problem is not of insufficient gas, since Iran has plenty of gas reserves but, rather, the risk of dependence on a potential politically hostile supplier. In the case of Azerbaijan, the doubts had more to do with the access to the gas from the Azeri gas field, given that the Russians have been very intent on acquiring the rights to the supply from the second stage of development of that field.

Now there is a third source of potential supply to the pipeline, coming at a very timely moment to support the go ahead for the project. Iraq’s Prime Minister Nouri al-Maliki, who was also in attendance at Ankara, has offered to supply roughly half of the pipeline gas requirements, some 15 billion cubic meters per year. Obviously, this offer by Iraq gives the Nabucco project a major boost, at a time in which strategic moves by Russia have been aimed at eroding the conditions of gas availability without which the pipeline cannot go forward.

The reaction to this new component in the Nabucco equation came immediately, both from Iran and from Russia. Iranian Oil Minister Gholam Hossein Nozari said only hours after the agreement for Nabucco had been signed that the pipeline cannot become operational unless Iranian gas is involved. Moscow, a strong ally of Tehran, has been maneuvering on several fronts to undermine this project for European energy security, not only in the area of overall gas supplies but also in promoting increasing friction with Georgia, a transit country for the pipeline. Some eight thousand Russian troops have engaged in unnerving “military exercises” near the Georgian border, in what has been called a provocation by Tbilisi. Behind this show of force there is a not so subtle Russian message that, if push comes to shove, Georgia might not be allowed to provide a transit route for the Nabacco gas pipeline.

On the diplomatic front, delegations from some 30 countries appeared in Ankara to witness the event including President Mikheil Saakashvili of Georgia. Addressing the summit, the U.S. educated Saakashvili said, “There has never been such an important project in this region.” In a reference to the Russian-Georgian conflict of 2008, Saakashvili declared, “Last year’s war and aggression against Georgia, as well as cutting off the gas for a number of European countries are very tightly connected issues. This was an expression of classical domination and aggressive separation. Gas has become the weapon of 21st Century.” To Moscow’s consternation, Georgia, a former Soviet republic, seeks EU and NATO membership. Moreover, among the seven pipeline transit countries participating in the IGA, Georgia and Azerbaijan were not signatories on July 13th.

The U.S. State Department issued a statement congratulating Turkey and the four EU participating governments attending the signing ceremonies in Ankara calling the event “a significant milestone in achieving our shared vision of opening a new energy corridor that will bring Caspian gas to Europe.” Special Envoy for Eurasian Energy Richard Morningstar and Ranking Republican Member of the Senate Foreign Relations Committee Richard Lugar represented the United States.

The Nabucco gas pipeline project is fast becoming a classic example of the dangerous game being played out today in Central Asia; a game that represents just a 21st Century version of the Cold War, where Moscow seeks to control energy supplies in the region as well as regain hegemony over its Soviet-era sphere of influence referred to as its near abroad. Specifically, Moscow opposes Caspian region energy supply routes that bypass Russia, and in the case of Nabucco, potentially could be controlled at the source from Azerbaijan’s Shah Deniz Caspian gas field transiting through Azerbaijan and Georgia to Turkey.

Gustavo Coronel, who served on the board of directors of Petróleos de Venezuela (PdVSA), has had a long and distinguished career in the international petroleum industry, including in the USA, Europe, Venezuela and Indonesia. He is an author, public policy expert and contributor to

SFPPR News & Analysis.