Nabucco: will it decrease gas dependency of Europe on Russia?

As a foreign policy tool, economy and hence, energy resources began to play an important role since 1970’s[1], when OPEC countries increased prices of oil fourfold as a protest against Arab-Israel war. It was the first time when economy was used as mean to reach political goal. Since then, energy appears to be crucial factor that impacts on foreign relation, even, sometimes triggering conflict between them. This happens due to factor, as Hadfield [2] indicates, resource’s ability to provide state with internal stability and external power to influence. Strategic resources such as oil and gas are crucial for industry in peace times and twofold grave for military during the wartime. Therefore, dependency of demander for resources on supplier raises security issues between these countries.

The recent example of this was 2006 Russia-Ukraine gas crisis, when state-dominated Gazprom and Ukraine disputed over gas prices and transit fee, which resulted in decrease of gas to Ukraine. The reason of that, actually, was Russian discontent for the change of Russian oriented authority in Ukraine by revolution. With this in mind, as, approximately 78 percent of gas deliveries to EU territory through the territory of Ukraine, that crisis inevitable influence the EU. The history of gas dependency began since the post cold war era; when Russia became the main gas supplier of European Countries, (Table 1)[3] that is delivered to Europe through twelve gas pipelines: three direct, four through Belarus, five through Ukraine. Therein, any dissatisfaction in Russian foreign policy vis-à-vis Europe affects the gas supply there. It poses EU to adopt common energy strategy in order to provide the increasing demand for gas, (as estimated to increase from 570 billion cub meter/y in 2007, to 630 billion cub meter/y in 2030[4]) and prevent future crisis like in 2006. One alternative way is to diversify the supplier of gas to Europe, which indicated as the most important issue of EU in Green Paper published on November 2000.[5] The most prominent project for that purpose is Nabucco.

The negotiations for Nabucco gas pipeline began in 2002 and an agreement was signed in 2009 between the representatives of five countries- Turkey, Romania, Bulgaria, Hungary and Austria. It planned to work on $ 11 billion project for seven years and completed by 2015.[6] The main purpose behind the construction of this pipeline is to reduce European gas dependency on Russia and diversify the routes for the gas supply. This paper is going to show that indeed, Nabucco is not able to decrease the gas dependency of Europe on Russia in the short-run, due to some obstacles, but it is promises valuable contribution to aim of reduction the gas dependency of Europe on Russia in the long-run, by diversifying the supply route.

The short-run impediments of Nabucco are the position of Russian Federation, uncertainty of suppliers and investors, and insecurity of the route where pipeline supposed to pass. First, Russia as the main supplier does not want to lose its monopoly and suggests another project that is a rival to Nabucco South Stream, which is more real to be implemented than Nabucco. Second, there is uncertainty to find enough capable suppliers who will provide gas for Nabucco. Since only options are Azerbaijan and Turkmenistan. Other options Iran, Iraq, Libya and Egypt are not considered regarding political situation. Third, 70 percent of investment should be financed by independent financial bank and institutions. To find such institutions required time and only in 2010 agreement can be reached between consortium and EIB, EBRD, and the International Finance Corporation. Last, the route of pipeline is not so secure. It is supposed to pass through Caucasus, Middle East and Turkey, which are among most of instable regions of the world with threaten of conflicts and terrorist attacks. All things considered, indicated delay the possibility of Nabucco to reduce European gas dependency on Russia in the short run.

However, there are advantages that promise possible outcomes in the long-run. First, it will open fourth route of supply to Europe and in this way diversify gas supplier and decrease gas dependency on Russia. Second, Turkmenistan (10 billion cub meters) and Azerbaijan (21 billion cub meters) have already committed to sell gas for Nabucco project. Third, as the main participant Turkey in favour of Nabucco project and sees it as one of the priorities of foreign policy. Last, in the long-run countries like Kazakhstan, Iran or if the common agreements reached within country Iraq, Egypt can be potential suppliers. After all, if political uncertainty over project decreases, many investors will be reluctant to take part in the project. To sum up, all this indicated promises positive outcome to reduce gas dependency in the long-run.

Although, the future of Nabucco is blurred in the short-run, because of Russian position, shortage of supply and investor, and security matters, it is valuable opportunity to make contribution to reduction of gas dependency of Europe on Russia in the long-run, due to acting as a way to diversify the gas supply, affirmative positions of Azerbaijan, Turkey and Turkmenistan, and possibility of attracting new investors and suppliers.

BIBLIOGRAPHY

1. Aalto, P. (editor) (2008). The EU-Russian Energy Dialogue. Europe’s Future Energy Security. Ashgate Publishing Company.

2. Cendrowicz, L. (13 July, 2009). Europe tries to break its Russian Gas Habit. Time. Brussels. Online in www.time.com

3. Hadfield, A. “Energy and foreign policy: EU-Russia energy dynamics” in Smith, S., Hadfield, A. and Dunne, T. (2008). Foreign Policy: Theories, Actors, Cases. Oxford University Press.

4. “Nabucco – Gas bridge from Asia to Europe” (2010) NABUCCO Gas Pipeline International GmbH. Status Report Q4. Online in www.nabucco-pipeline.com

5. Ravenhill, J, ed. (2008). Global Political Economy. Oxford: Oxford University Press.

[1]Ravenhill, J, ed. (2008). Global Political Economy. Oxford: Oxford University Press, p.19

[2]Hadfield, A. “Energy and foreign policy: EU-Russia energy dynamics” in Smith, S., Hadfield, A. and Dunne, T. (2008). Foreign Policy: Theories, Actors, Cases. Oxford University Press, p.322

[3]Aalto, P. (editor) (2008). The EU-Russian Energy Dialogue. Europe’s Future Energy Security. Ashgate Publishing Company, p. 1-8

[4]“Nabucco – Gas bridge from Asia to Europe” (2010) NABUCCO Gas Pipeline International GmbH. Status Report Q4. Online in www.nabucco-pipeline.com

[5]Aalto, P (editor) (2008) ibid., p. 46

[6]Cendrowicz, L. (13 July, 2009). Europe tries to break its Russian Gas Habit. Time. Brussels. Online in www.time.com