Outside View: Azerbaijan decides Europe's energy security

By ALEXANDROS PETERSEN, UPI Outside View Commentator   |   June 27, 2013 at 12:04 PM

WASHINGTON, June 27 (UPI) -- Azerbaijan on Wednesday decide the fate of energy security in Central and Southern Europe.

After more than a decade of diplomatic and commercial wrangling, the so-called Southern Gas Corridor from the Caspian Sea to EU markets was determined by the holders of the gas: Azerbaijan's state energy company SOCAR, which has emerged as a major regional energy player.

The company chose Trans-Adriatic Pipeline over its rival Nabucco West. TAP will move Caspian natural gas through Greece and Albania to Italy while Nabucco West would have snaked through Central Europe to Austria's distribution hub at Baumgarten.

While the corridor is now only in its opening stages, European Commission President Jose Manuel Barroso says, it could eventually provide 10 percent of EU natural gas needs.

It is notable that the decision of choosing between the two pipelines wasn't made by Washington, which since the Clinton administration has had a special envoy for Eurasian Energy (or comparable position) coordinating energy diplomacy among Brussels, Baku, Ankara and a host of other producers and consumers, from far-flung Turkmenistan to desperate Bulgaria.

The latter suffered devastating gas cutoffs due to its dependence on Russian exports. The primary purpose of the corridor would be to bring some diversification of sources so that Moscow cannot divide and conquer within the European Union's energy market.

The decision was also not made in Brussels where the European Commission has a lackluster record of herding the various cats to achieve its own stated energy security goals.

Turkey, once the greater Black Sea region's energy decision-maker, has yielded to SOCAR, which is the largest outside investor in the Turkish economy due to its construction of the largest section of the Southern Gas Corridor: the Trans-Anatolian Pipeline, across Turkey to the Bulgarian border. TANAP will connect TAP to Azerbaijani gas flowing to eastern Turkey through Georgia.

Why does all this matter? Because for years it was unclear that EU markets would get any gas from the Caspian. The various Central European governments and companies charged with realizing the Southern Gas Corridor were as disorganized as they were lacking in financing to make it happen.

The United States played a crucial role as the main broker of the corridor's main oil route, the Baku-Tbilisi-Ceyhan pipeline, considered by both Democratic and Republican administrations as crucial for trans-Atlantic energy security and providing a non-Russian-dominated outlet for post-Soviet Caspian producers. That was completed in 2005 but by that time American priorities had shifted away from Europe and the post-Soviet space.

U.S. diplomats hoped that the European Union and perhaps NATO would pick up the slack. Both proved lead-footed for reasons that are now abundantly clear. Ankara also had its own objectives, negotiating hard with Azerbaijan to keep as much of the gas in Turkey instead of shepherding it on to the European Union.

All parties involved were about to throw their hands up in frustration when Azerbaijan's SOCAR stepped into the breach two years ago announcing that the small post-Soviet country that had been very much acted upon in the 1990s was now going to tell its downstream partners what's what.

Not only did it take charge of the corridor but also announced far-flung retail and refining plans in Turkey and the European market. Earlier this month, SOCAR bought Greece's gas grid operator, beating out a company supported by Russia's Gazprom.

And, SOCAR was already one of Israel's largest providers of oil when it announced plans for cooperation on offshore gas development in Israeli waters.

All of this was aided by the false start of unconventional, or shale, gas development in Europe. The fracking technology and extraction requirements that have revolutionized gas production in North America weren't readily accepted in the protectionist, environmentally conscious European Union. So, conventional gas from the Caspian remained relevant, in fact, vital for European energy diversification.

A decade ago it would have been unthinkable that Baku would be dictating the terms of European energy security but in a fast-changing global energy landscape, yesterday's small actors are increasingly today's dynamic players and possibly tomorrow's major decision-makers.

The SOCAR experience provides a lesson for U.S. and European energy diplomats, such as those at the U.S. State Department's new Bureau of Energy Resources. They should be watching today's pygmy energy players such as Cyprus and Israel, which recently found gargantuan gas reserves and are about to announce plans for pipelines and liquefied natural gas facilities. Now is the time to court tomorrow's SOCAR.


(Alexandros Petersen is adviser to the European Energy Security Initiative at the Wilson Center in Washington and author of "The World Island: Eurasian Geopolitics and the Fate of the West."



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