Pipeline deal is sweet music for Iran

By M K Bhadrakumar

How a trans-Caspian gas pipeline project came to be named after the 19th-century Italian Romantic composer Giuseppe Verdi's famous opera Nabucco remains obscure. The opera is based on a Biblical story about the tragic plight of persecuted Jews exiled from their homeland by the Babylonian King Nebuchadnezzar. Maybe, the opera's enchanting story of love and struggle or its tendency toward melodrama was considered an apt metaphor for the acute Caspian energy rivalry.

Moscow often poured scorn on the Nabucco project's dim prospects by drawing apt allusions from Verdi's opera. In the latest parody, an expert commentator in Moscow ridiculed that the "chaotic chanting" by Europeans in support of the project reminded him of the haunting chorus of Hebrew slaves from Verdi's opera - "beautiful, yet altogether gloomy and hopeless".

But he was mistaken, as on Monday a galaxy of European statesmen gathered under chandeliers in the banquet hall of the newly built Rixos Hotel in Ankara, Turkey, to sign an inter-governmental agreement formally launching the Nabucco project. United States President Barack Obama's special envoy on Eurasian energy issues, Richard Morningstar, was in attendance at the ceremony, affirming in unmistakable terms that Nabucco is every bit an American political venture.

With the Nabucco project finally taking off, Russia has suffered a huge setback in the geopolitics of energy in Eurasia. For the second time in a decade, Morningstar has outwitted the Kremlin. In 1999, he got the Baku-Tbilisi-Ceyhan oil pipeline project going through an inter-governmental agreement at a gala ceremony in Istanbul, despite similar Russian foreboding and prophecies that it was unviable and doomed to perish.

Turkey, Austria, Bulgaria, Romania and Hungary signed the document on Nabucco. The project, estimated at US$11 billion, will initially transport Central Asian gas by a new pipeline bypassing Russia, via Turkey to Austria and Germany through Bulgaria, Romania and Hungary.

The 3,300-kilometer pipeline, with four entry points into Turkey, will ultimately source from diverse places such as Egypt, Iraq, Iran and Turkmenistan and be able to pump 31 billion cubic meters (bcm) of gas per year, or roughly 5% to 10% of the total gas consumption in the European Union (EU) by 2020. Then, there are plans for Nabucco II and a Nabucco III in the fullness of time, as Europe's needs increase. Construction work is scheduled to commence in 2010 and the pipeline will be fully operational by 2014. Two-thirds of the pipeline will pass through Turkey.

Nabucco's viability critically depends on gas supplies from Turkmenistan and Iran. Therefore, it is more than a coincidence that the Turkmen Foreign Ministry announced on Sunday that Ashgabat had agreed to increase its sales of gas to Iran to 14 bcm annually from the current 8 bcm. The Turkmen statement said a new pipeline was being laid from the Doulatabad gas fields to the Iranian border by the end of the year and that the "two sides also discussed the possibilities of further increasing supplies ... to 20 bcm". President Kurbanguly Berdymukhamedov earlier said on Friday in Ashgabat that Turkmenistan hoped to supply gas to Nabucco.

Clearly, Iran is gearing up as the transit corridor for Turkmen gas that will go into Nabucco. Iran has a swap arrangement with Turkmenistan. Moscow had calculated that Nabucco wouldn't materialize since it would entail the construction of a pipeline from Turkmenistan along the bottom of the Caspian Sea, which, as a littoral state, it could easily veto in alliance with Iran.

Evidently, Turkmenistan and Tehran have another idea: transport Turkmen gas to Europe via existing Iranian pipelines to Turkey. No doubt, Tehran has decided that come what may, Nabucco offers a fantastic means of entering into a strategic partnership with Europe in a near-term scenario.

As United States-Iran engagement draws closer, it is no longer an issue of "whether" or "if", but of "when" it is that European companies can tap Iran's massive gas reserves. The current US position is that it will not support Iran's involvement in Nabucco until Tehran "changes its policies". Last month, Morningstar said Iran could only join Nabucco after the normalization of ties between Washington and Tehran.

On Thursday, while speaking to the media in Ankara, he merely said inviting Iran to the project without a resolution of the nuclear standoff "could have a negative effect". But Turkish Energy Minister Taner Yildiz swiftly clarified, "We can also easily see Iran in this project as a supplier in the future." (Iran has drawn several rounds of United Nations sanctions over its nuclear program, which it insists is for civilian purposes - others, notably the US, claim Tehran is developing a nuclear weapon.)

Yildiz pointed out that energy projects "may help improve the international environment". He added that "some European countries have already signed initial agreements with Iran" - though he wouldn't disclose their names.

All in all, Russia suffers a setback from several angles. Europe making headway in diversifying its energy supplies in any significant measure means reducing its dependence on Russian gas. Europe's success, therefore, becomes Russia's loss, which is why the latter keenly promotes the South Stream project as a rival to Nabucco. Secondly, Moscow assiduously wooed Balkan and Central European countries to opt for South Stream instead of Nabucco, which it has constantly derided as a hare-brained idea that made no economic sense. Thus, the participation by these countries in Nabucco signifies a signal success of US diplomacy in rallying the "New Europeans".

Third, Turkmenistan is definitely decamping from Russia's orbit and getting close to the US. This completely transforms the Caspian energy sweepstakes. With a dwindling Russian surplus of gas for export to the European market, state-run Russian giant Gazprom has depended heavily on Turkmen gas. Turkmenistan currently produces about 80 bcm annually, out of which about 50 bcm was sold to Russia in recent years. However, supplies to Russia have been almost entirely cut off since an explosion in April on the Soviet-era Central Asia-Center pipeline, which transports Turkmen gas to Russia.

Meanwhile, Turkmenistan has agreed to increase its contracted gas supplies to China to 40 bcm via a pipeline nearing completion by end-2009. In addition to that, Turkmenistan has agreed to step up its gas supplies to Iran and is now hoping to supply Nabucco.

Turkmenistan clearly intends to cut back its dependence on Russia for marketing its gas and is instead tying up alternate arrangements to access the world market. The Turkmen stratagem could have a domino effect on other Central Asian energy producers. Such a trend could only lead to an overall weakening of Russian influence in Central Asia and put strains on the overall Moscow-led regional integration processes.

Ashgabat's "defection" holds other implications. Turkmen Foreign Minister Rashid Meredov undertook a high-profile visit to Washington in June. Soon after, reports began appearing that Turkmenistan aspired to becoming a transport hub for US supplies going to Afghanistan. The Pentagon confirmed that a small contingent of US military personnel presently operated in Ashgabat for servicing American aircraft that landed and refueled in the Turkmen capital. Ashgabat may allow a transit route by road or rail for the US to ferry supplies to Afghanistan, thus bypassing the "Russian route". Washington has included Turkmenistan lately in the list of countries from where it intends to procure goods and services for Afghanistan.

From Moscow's perspective, it is equally worrisome that Turkey and Iran have identified with Nabucco. Moscow did everything it could to attract Turkey with counter-offers, such as a lucrative role in the South Stream project. True to form, Turkey showed acute bazaar instincts and finally cut a handsome deal by playing Russia against the EU. Turkey will earn a handsome amount out of Nabucco - US$63 million in transit fees annually and "up to 50% of the total gas set aside in a pool" which can be purchased at a discount.

Turkey is surely playing a high-stakes game and is fast becoming an energy hub for Europe. The EU is one of the world's largest markets, with an estimated added requirement of 200 bcm by 2030 in addition to its current annual consumption of 600 bcm. Turkey is the ideal transit country to carry non-Russian gas - from Egypt, Iraq, Iran, Turkmenistan, Azerbaijan or Kazakhstan - to Europe.

On the one hand, Ankara anchors itself to the EU. Turkish Prime Minister Recep Tayyip Erdogan said on Monday, "Even if you make an assessment only from the perspective of energy, it is clear that Turkey should be a member of the EU." But this may be a false hope. As recently as May, German Chancellor Angela Merkel said, "We cannot take everyone in Europe as a full member ... our [EU] common position is: a privileged partnership for Turkey, but no full membership." French President Nicolas Sarkozy, who was present at the occasion, promptly added, "When Angela Merkel says Europe must have borders, she is right - because a Europe without borders would be a Europe without a will, without identity, without values."

Sarkozy subsequently turned the knife in an interview with Germany's Bild am Sonntag newspaper, saying. "Let us stop making vain promises to Turkey." Ankara is aware of these harsh realities, but for the moment, Nabucco imparts an exhilarating feeling that Turkey has almost become a part of Europe.

On the other hand, Turkey hopes that Nabucco catapults it into a leadership role in integrating the Caucasus and Central Asia into the Western economy. The US has been actively encouraging Turkey to assume such a role. This was a talking point for Obama when he visited Turkey in April. Ankara perceives that the Obama administration is much more focused on Central Asia than the George W Bush era was and that US diplomacy is stepping up efforts to balance the clout of China and Russia in the region.

Turkey is indeed bidding to become a regional actor in Central Asia. Erdogan's rhetoric regarding unrest in China's Xinjiang region between Uighurs and Han Chinese was partly at least intended to project Ankara's self-styled "Turkic" profile into Central Asia. Turkey usually fights shy of articulating on political separatism or ethnicity. Erdogan said that genocide was being committed in Xinjiang, where recent rioting left at least 184 people dead. The toll included 46 Uighurs, a Turkic people who are mostly Muslim and share linguistic and cultural bonds with Central Asia.

Again, Turkey has become active in stabilizing Afghanistan. Turkish Foreign Minister Ahmet Davutoglu visited Afghanistan and Pakistan in early June. Turkey has participated in three "trilateral summits" with Pakistan and Afghanistan in the recent period. Meanwhile, Turkey is doubling its troop deployment in Afghanistan to a force level of 1,600 and will head the International Security Assistance Force in November. Turkey also plans to convene a summit of Afghanistan's neighboring countries. Curiously, Ankara is betting on President Hamid Karzai's victory in Afghan elections scheduled for August 20, after having lined up the backing of its proxy, Rashid Dostum, for the Afghan president's candidacy.

In the final analysis, however, it is not Turkish pretensions as a regional power or the Turkmen snub to Moscow that arrests attention. More than anything, it is Iran's likely participation in Nabucco that will be keenly watched in the weeks and months to come. Russia's best hope has been that Iran stays away from the European gas market and instead concentrates on the Asian market in countries such as India and China. But the contrary is happening - Iran is seeking out both the Asian and European markets.

An Iranian hand in reducing Europe's energy dependence on Russia, thanks to a project which is a blatant American political venture - this was the last thing that Russia would have liked to see happen. But it seems to be happening.

Verdi once remarked, "This is the opera with which my artistic career really begins. And though I had many difficulties to fight against it, it is certain that Nabucco was born under a lucky star." Tehran will happily agree - especially as it is a Morningstar.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

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