© Palgrave Macmillan
Written by George Gamkrelidze
The Energy security of Europe requires long-term conceptual visions which should be discussed in the global security contexts. Global security challenges demand a constantly renewed policy, which adequately will respond to changing realities in order to guarantee sustainability of economic development of the Euro-Atlantic area. It is necessary that new generation leaders in elaboration of energy security strategy actively participate in policy review and analysis.
Energy security is one of the most important dilemmas in the world, as it ensures the sustainable development of each state. Sustainable development demands that stakeholders compete with each other, in order to find solutions to this difficult puzzle. Struggle for energy sources is taking place not only between particular states, but between regions, and economic and political unions.
Rivalry and groupings can surface, for example between developed vs. developing and democratic vs. authoritarian systems. It is necessary to understand specifically which factors determine the complexity of the dilemma. First and foremost we have to say that energy resources like other minerals are not equally distributed among the world states. Such inequality forms either cooperation or confrontation between states and regions.
The energy security of Europe greatly depends on future energy projects, which should balance cost and supply. The catastrophe that hit the Fukushima I Nuclear Power Plant in 2011 forced Europeans to think more about the importance of producing electricity through alternative resources. Europe should diversify energy in order to satisfy demand and stabilize consumption and procurement. The dilemma is quite complicated as it demands from different stakeholders to revise their policy – but which countries can be considered stakeholders?
First of all Russia has had a dominant role in exporting energy resources to Europe, as it is always focused on increasing its share of the European market and strengthening its position. For this reason, Russia proposes new projects, in order to provide direct export and undermine any alternative route; The Kremlin tries to gain control and utilize energy resources of neighboring countries; it also streams to buy existing pipelines, in order to make its policy of “Liberal Imperialism” functional.
“Asian Tigers” such as China and India are coming out from the shadow and actively working on initiatives to gain Caspian resources. Economic growth causes their interest to increase energy security in regards of new energy projects. Close geographic proximity to Central Asian countries combined with the West’s tense relations with Iran gives them an opportunity to rationalize their energy security policy. Moreover, strong financial conditions strengthen their positions, as it allows them to be competitive and organize multibillion dollar projects without Western aid.
The Caspian basin countries direct their policy to diversify energy supplies. In parallel to the cautions policy, they express desire to join different projects, in order to increase their level of independence and to regulate supplying cost. They conduct policies which stabilize the interest of Russia, the West and the “Asian Tigers”. Furthermore, the unclear status of the Caspian Sea blocks Western interest in regards to energy projects, as it is banned to build any pipeline on the sea bed until its status will be determined by the Caspian basin countries. There is a real threat that Europe will become more and more dependent on Russian energy resources. The Russian initiated projects North and South Streams are clear examples of this. These projects will significantly increase Russia’s role and influence the energy supply to Europe.
The Nabucco project is one of the opportunities for Europe to get natural gas bypassing Russia. Its accomplishment depend on the development of solutions to various political, technical and financial obstacles. Nabucco is one of the most costly and complex projects in the world - its length will stretch approximately over 3900 km and the total investment officially will reach €8 billion. The pipeline is expected to deliver up to 31 billion cubic meters of gas annually. The Nabucco Gas Pipeline GmbH is the owner and operator of the pipeline and its shares are equally (16,67%) distributed among the following six companies: OMV Gas & GmbH (Austria), MOL Hungarian Oil & Gas plc (Hungary), SNTGN Transgaz SA (Romania), Bulgaria Energy Holding EAD (Bulgaria), BOTAS (Turkey) and RWE (Germany). It will start at the Georgian/Turkish and Iraqi/Turkish borders and will pass through five partner countries: Turkey (2581km), Bulgaria (412km), Romania (469km), Hungary (384km) and Austria (47km).
There are several political factors which impede the Nabucco pipeline’s implementation. Russia opposes the Nabucco pipeline and the Kremlin creates alternative projects and makes efforts to convince and attract European partners, as well as uses political pressure in order to monopolize the energy sector. In the South corridor, the Russian initiated South Stream pipeline project is seen as a rival to the planned Nabucco pipeline. Some experts believe that there is a competition between these two pipelines, but sides urge not to politicize the subject and try to highlight cost-effectiveness of the projects. Vitaly Kulik, the director of the Center for Civil Society Studies (Ukraine) believes that competition between the Nabucco and South Stream is on the rise, which is also aggravated by the lack of a common energy strategy in the EU.
Ilya Zaslavsky, an independent expert from Russia believes that the main factor of competition is that both projects target the same country to supply gas. EU officials openly declare their intention to reduce their reliance on imported Russian gas, but in spite of it they are not going to neglect the Russian initiated projects. They see the importance of cooperation with the Caspian basin countries in order to gain an alternative supply and avoid an energy crisis which can be caused by transit dispute as it happened in 2009 between Russia and Ukraine. Guenther Oettiger, the EU energy commissioner stated that the EU does not want to block the South Stream pipeline and that new partnerships with energy-rich Central Asian countries do not threaten Russian gas sales to Europe. Moscow also streams to depoliticize the issue and their statements are mostly related to the cost-effectiveness of the projects. In an interview, Russian Prime Minister Vladimir Putin said that he has nothing against the construction of the Nabucco pipeline.
The political obstacles are also reflected in the lack of signed supply contracts which are essential meant to fill the Nabucco pipeline with gas. There are doubts among experts that the Nabucco consortium can ensure adequate supplies of gas to fill the pipeline. It’s obvious that the project will not start until shareholders can find sufficient guarantees and resources for the pipeline. Such conditions delay the completion of the Nabucco project and automatically place the South Stream in winning position. Nowadays, Azerbaijan and Iraq are seen as the main potential suppliers of the Nabucco pipeline. Azerbaijan can supply the pipeline with 16 billion cubic meters of gas from the Shah Deniz II field and can add extra 5 billion cubic meters of gas from the Umid field. Six billion cubic meters of gas from Shah Deniz II will stay in Turkey which has been agreed through an intergovernmental agreement. Azerbaijan’s total contribution to the Nabucco pipeline will be around 15 billion cubic meters of gas, almost the half of its capacity.
The Kurdish-ruled northern region of Iraq has also signed a memorandum of understanding to provide up to 20 billion cubic meters of gas to the pipeline. According to some estimations Turkmenistan will be able to supply at least 10 billion cubic meters of gas via the Trans-Caspian pipeline. But a number of experts are skeptical to Turkmenistan’s participation in the Nabucco project due to the unclear status of the Caspian Sea and doubtful data on Turkmenistan’s gas reserves. For this reason the EU has made an effort to sign robust contracts with potential suppliers in order to guarantee the security of supply for the long term. These aspects raise the question of whether Nabucco or South Stream is best for European energy security?
Technically, the South Stream’s capacity is planned to be two times more than the Nabucco pipeline’s. According to the project, the South Stream will annually pump up 63 billion cubic meters of gas. Politically, the South Stream will further worsen the energy security of Europe, as it will increase Europe’s energy reliance on Russia. Nowadays the EU imports 25 percent of its gas from Russia; moreover, seven EU member states are almost totally dependent on Russian exports. As a majority of experts note, the South Stream is a political project, which will increase Russia’s geopolitical energy influence on the EU and excludes the oil and gas rich Caspian basin countries from the political process. Some experts believe that the Nabucco pipeline is more political than economic. The EU acknowledges the negative reputation of Russia and has made efforts to engage the Caspian basin countries in the Nabucco project in order to expand its sphere of influence on them. The Nabucco pipeline is tailored for new geopolitical realities rather than to reduce gas dependence on Russia.
The cost of the project is one of the most important obstacles, as there are some controversial opinions about it. It should be financed through a combination of investment from shareholders (30%) and European financial institutions (70%). According to figures from 2005, the total cost of the Nabucco pipeline was estimated to be € 7.9 billion, nevertheless there are a number of opinions regarding the issue. As BP-led research has shown, the presumed cost of the pipeline could reach up to €14 billion, which takes delay into account. The delay of the pipeline increases the implementation cost, which gives Russia the possibility to sign contracts with partners and carry out the South Stream project.
European energy security significantly depends on existing and future projects, which should ensure stable supply of energy resources at a non-fluctuating price. For the time being, Russia has a dominant role in exporting energy resources in Europe and its position will further improve dramatically if it completes its planned projects. Russia itself strives to avoid being dependent on transit countries aiming to strengthen its position with the new projects. The problems with post-Soviet transit countries made Russia aware of the importance of building new gas-pipelines as well as the importance of owning their own pipelines. Europe should realize the threat which can be stirred by the exploitation of energy resources for political ends and the problems related to the instability of transit countries. For this reason Europe needs to diversify exporters and increase its own participation in the projects. Europe should replace its cautious policy with big-thinking behavior. It is necessary to balance the growing hegemony of Russia and to reinforce new partnerships in the region which will help to advance the democratic transition in the former Soviet states. Additionally, it will support a fair distribution of wealth and guarantee the long-term energy security of the Euro-Atlantic area.