The influence of the Russia-Georgia war on transportation of the Caspian hydrocarbons

Z. Garakanidze, Ph.D (Economics), Tbilisi, Georgia

Issues on the EU Energy Security and the exclusive role of Georgia is very important in realization of the Eastern Partnership.

Namely, this problem’s determination is necessarry in three directions: 1)The overall situation and developing conditions for new opportunities in the region after Russia-Georgia war; 2)Particular cooperation areas, mechanisms and initiatives in Energy Security; 3)Security and stability in the region as one of key factors to further of the EU’s energy diversification.
Proved reserves of the Caspian hydrocarbons
Energy is one of the parts of national Economic Security that must be fostered and protected by the state. The Copenhagen Constructivist approach to sectoral security analysis is pertinent here. It extends the analysis of national security from the traditional military-political sector to the political, economic/energy, environmental and socio-cultural sectors.
Importantly, this sectoral approach also facilitates a regional approach to security analysis. Regional security (sub)complexes are created based on the sectoral security interdependencies of states who are geographically bound to one another. Their patterns of amity and enmity create the foundations for regional or sub-regional security analysis. This clustering states into security complexes based on shared security interdependencies, common histories, geography, and patterns of amity/enmity facilitates the analysis and resolution of their common, transborder security threats.
What happens in the countries of geographically bound Eastern Europe and Southern Caucasus affects the EU. Successive EU enlargements have brought these countries closer to the EU and their security, stability and prosperity increasingly impact on the EU. The potential these interdependent countries offer for diversifying the EU’s energy supplies is one example. Moreover, the Black Sea Region countries appear more interesting and attractive for the EU as Bulgaria, Romania and Greece are the members of the EU, Turkey is a member of European Customs Union, Georgia, Ukraine, Azerbaijan, Armenia and Moldova are involved in the Eastern Partnership as well and are further deepening relations with the EU in the energy supply diversification.
Therefore, it is natural that EU is becoming more visible and is increasing its involvement in the region. From our view the Black Sea Region countries create an important area where political and economic relations are intensively developing and where a global player – the EU, has its vital interests. Being part of the Black Sea Region, Georgia is influenced by coincidence and conflict of interests of different power centers. In such an environment Georgia faces various challenges and threats, and considerable efforts and resources are required to neutralize or reduce them.
The conflict in Georgia in August 2008 confirmed how vulnerable they can be, and how the EU’s security begins outside our borders. During the Russia-Georgia war Baku-Supsa, Baku-Tbilisi-Ceihan Oil and Black Sea Region Gas pipelines were attacked by the Russian tactic missiles. At the same time, even after signing the cease-fire agreement on August 12, 2008, Russia has his own, monopolistic targets in this particular Region. Russia wants to block the competitive South Caucasian Gas Corridor, i.e. stop so-called Century Projects – NABUCCO, White Stream, Odessa-Brody-Gdansk, etc.
Gazprom is a good example in this regard. After the colored revolutions, the use of Gazprom as a political instrument increased dramatically. The provision of “free” energy to these territories and the construction of pipelines to feed them create lifelines for the breakaway territories (Example: Dzaurikau-Tskhinvali gas pipeline). However, the legality of the agreements, how and between whom they are made is unclear. Interestingly, a number of governments have even connected Gazprom to transnationally organized criminals. The Black Sea Region countries is critical to the diversification of energy supply and insurance of sustainability of transportation from Caspian and Central Asian regions to the European markets. The geo-political importance of Georgia to the EU is grooving in terms of energy security and we believe that Georgia’s role as an energy transit country is to support the development of diversified infrastructures connected to the Central Asian and Caspian energy resources and facilitate their transit to Europe.
How could contradict possible new war on the transit
The European Commission puts forward concrete ideas for enhancing relationship with post-soviet countries, on the territories of which was planned construction of above mentioned projects, in the Eastern Partnership. This would imply new association agreements including deep and comprehensive free trade agreements with those countries willing and able to enter into a deeper engagement, gradual integration in the EU economy and allow for easier travel to the EU through gradual visa liberalisation, accompanied by measures to tackle illegal immigration. The Partnership would also promote democracy and good governance; strengthen energy security; promote sector reform and environment protection; encourage people to people contacts; support economic and social development; offer additional funding for projects to reduce socio-economic imbalances and increase stability. Cooperation in Energy field propose a dialogue on energy security involving the EC, energy producers, transit countries and consumers, promoting legal and regulatory harmonization.
To our mind one of the directions to extand mutual cooperation can be to further development in order to prevent the discrimination of transit countries by suppliers and consumers aiming at receiving unilateral advantages within energy dialog, so far as the appearance of different conception options on hydrocarbons transit were achieved during last years only due to constructive position of current as well as future transit countries. One of the best examples of above mentioned cooperation showed Baku IV Energy-summit in November 14th, 2008, demonstrated EU willingness to develop the new oil transportation route through the Eastern European countries, – Odessa-Brody-Gdansk, from the Black Sea to the Baltic.
The obstacle from Turkey
A very important step forward is creation of a framework for dialogue amongst the EU and Eastern Partnership countries on the shared regional questions related to the issues that are vital to every player of the region – security, proper boarder management, struggle against illegal trade and migration, organized crime, good governance, economic performance, etc. However inter-profitable and mutually beneficial development maybe harmed by instability and insecurity in the Black Sea Region resulted by the tensions among countries and protracted conflicts within the countries.
Thus, main geo-political problem of the Black Sea Region is absence of common regional vision, i.e. different understanding of the security issues. For example, we would like to pay your attention and try to depicting of the forecast on two newly emmerged obstacles in further developments of the Century Projects:
First obstacle is against the pan-european global project NABUCCO. This problem appeared two years ago, but was increased after the signing of so-called “Swiss Protocols” between Turkey and Armenia on the topic of normalization of relations. Namely:
– We are interested in exporting our resources through different routes, – Azerbaijan’s President Ilham Aliyev stated during his visit to Bulgaria on November 13. On the same day, he paid a short working visit to Sofia to meet his counterpart Georgi Parvanov and to sign an inter-governmental agreement on the transit of Azeri gas to Europe though the Black Sea. This was the fourth agreement against NABUCCO signed with a foreign country during the year. Previous agreements were signed with Russia, Iran and Romania. Analysts believe that these latest developments hint at Baku’s plans to diversify its export options and reduce its dependence on the so-called Turkish route. Azerbaijan tied the export of its rich energy resources to the Turkish route by NABUCCO gas pipeline. Turkey, Azerbaijan’s strategic partner, was considered to be the most reliable transit country to the EU, and thus it could reduce Baku’s dependence on Russia. As a result of this strategic vision, such pipelines as the Baku-Supsa, Baku-Tbilisi-Ceyhan oil and Baku-Tbilisi-Erzurum gas pipelines were conceived. Subsequent steps were taken to further strengthen this route by launching the construction of the Baku-Tbilisi-Kars railroad and starting negotiations on the transit of Azeri gas from the newly explored Shah Deniz field to Europe via Turkey.
– Unfortunately, this is the point at which progress stopped. Despite two years of negotiations, Azerbaijan and Turkey have failed to agree on the transit terms for Azeri gas to European markets. This disagreement centers on the transit fees that Ankara demands as well as its proposed purchase price for Azeri gas. Ankara’s price offers have proven unsatisfactory to Baku. During his October 16 cabinet meeting, President Aliyev once again highlighted the remaining disagreements with Turkey and indicated that Azerbaijan would start looking for alternative (i.e. other then NABUCCO) options to export gas. Following the agreement with Gazprom to export 500 million cubic meters (mcm) of Azerbaijan gas to Russia on an annual basis, a similar agreement was signed with the Iranian National Gas company on November 11. According to that agreement, Azerbaijan will sell 500 mcm of gas to Iran annually starting from 2010. Both agreements do not exclude later increases in the volume if agreed by the contracting parties. As for Bulgaria, Azerbaijan plans to export its gas through the Black Sea in the form of liquefied natural gas (LNG). The agreement envisages exporting 1 billion cubic meters (bcm) of Azeri gas to Bulgaria and the same volume to Romania. According to Azerbaijan’s Energy Minister Natig Aliyev, special tankers will be needed for that purpose.
– Baku will also need to agree transit prices with Tbilisi and extend the existing Georgian gas pipeline network to the Black Sea coast. These latest developments send a strong signal from Baku to Ankara that Azerbaijan is unwilling to wait indefinitely for a breakthrough in Turkish-Azerbaijani negotiations on gas prices and NABUCCO transit fees. For Azerbaijan’s government, gas is principally a commercial deal. Those who offer the best price package will most likely receive Azeri gas. This disagreement with Turkey, however, casts doubt on the fate of the NABUCCO pipeline.
Azeri gas is essential for the successful implementation of NABUCCO. It will not be sufficient to offer only Azeri gas, but once the pipeline is built and operational with the help of Azeri gas, then other countries, such as Turkmenistan, Iran and Iraq could also join this pipeline. In same time Turkey and Iran signed a deal on the exploration of the Iranian gas field “South Pars” by the Turkish Petroleum Corporation (TPAO). If implemented, despite pressure from Washington, this project increases the chances for Turkey to become an energy hub for Iranian gas to EU.
– However, without Azeri gas, NABUCCO is unlikely to start and thus the whole EU project on the Southern Corridor for gas supplies to Europe would be permanently shelved. In the 1990’s, diversification of export routes in the Black Sea Region meant building new pipelines that avoided Russia. Now, the reverse is true. Azerbaijan is looking for a Russian option as well as others to resolve its “export” problem for gas from Shah Deniz field. This field is planning to drastically increase its output in the next few years. According to experts, over the next decade, Baku plans to increase its gas production to the level of 50 bcm annually. Thus, an urgent export route is needed for Azerbaijan. The small-volume contracts signed with Iran and Russia are insufficient to solve Azerbaijan’s export route problems. But perhaps, they might send the necessary signal to Ankara that Baku does have other export options. It would sour relations between the two fraternal countries if eventually, as a result of the Turkish-Azeri disagreement, Azeri gas reaches Europe via Russia or more realistically via a Russian-Turkish pipeline (Blue Stream), but at a much higher price for Turkey than what Azerbaijan currently offers.
The obstacles from Ukraine, Iran, Russia
Second obstacle is Russia-Ukraine energy tentions started from 2006 and new Energy agreement between two countries. It may deteriorating both, NABUCCO and Odessa-Brody-Gdansk projects. Namely:
– The last contract, signed after Russian-Ukraine 2006-2009 energy wars, between Gazprom and Naftohaz Ukraine was signed On November 24th, 2009. Agreement adjusting the volume of gas purchases in 2010, and reasserting that Gazprom,would not charge contractual penalties for 2009. The new agreement, supports PM Yulia Tymoshenko in her campaign for president. It should , nevertheless be noted that the deal introduces less favourable provisions for the other conditions under which Ukraine will buy its gas in 2010. Gazprom has also formally confirmed that it would not require the payment of contractual penalties for uncollected gas in 2009. The value of the potential penalties was estimated at around US$8 billion, and it was obvious that neither Naftohaz nor the Ukrainian budget would have been able to pay them.
– However, Russia’s concession is a short-term one; in the remainder of the agreement’s term (to 2019), the take or pay principle will apply again, and Ukraine will be obliged to buy 52 billion m3 of gas a year. The deals signed have strengthened the position of the Ukrainian PM Yulia Tymoshenko, who will be able to use them to her advantage in her election campaign. However, under the contracts negotiated by Tymoshenko earlier this year, in 2010 Ukraine will lose its 20% discount on the price of gas, and will not be able to buy the so-called technical gas (8 billion m3) at preferential prices. The increase in the keep the right to supply 100% of the fuel for the Ukrainian nuclear power plants for the next twenty years.
– Thus, irrespective of who comes to power in Ukraine, he or she will have to address the consequences of the previous governments’ energy deals. But main thing is, that according to signed agreements, any new administration will be against the EU initiated, competitive to the Gazprom’s, Century Projects, – NABUCCO and Odessa-Brody-Gdansk. The possible variants of solutions are similar, and so the new head of state will have little freedom in choosing the measures to be taken. Similar undertakings are expected in either case, although they will be pursued with different levels of determination and efficacy. At this stage, it is impossible to estimate how effective they will be.
We acknowledge there are number of challenges demanding common efforts as well as directions for mutually beneficial co-operation in the framework of Eastern Partnership. We do believe that regional interests and Century Projects will lay down the basis for positive developments in the region. The modern reality is that region countries move toward the integration and economic cooperation that creates the hard basis for security building and conflict resolution.
Tel: 284191; 877-478226
List of the used literature
1. Lynne Rienner., Buzan B., and W?ver O., Regions and Powers: The structure of International Security Cambridge:
2. 2003.
6. Fried, Daniel. US-Russia Relations in the Aftermath of the Georgia Crisis. Testimony of Daniel Fried, Assistant Secretary of State for European and Eurasian Affairs, before the House Committee on Foreign Affairs, Washington DC, 9 September 2008.
7. Towards a Secure, Sustainable and Competitive European Energy Network, Green Paper, Commission of the European Communities, Brussels, November 2008. p.3
8. Energy Security and Solidarity Action Plan: Second Strategic Energy Review. European Commission, Directorate-General for Energy and Transport. Brussels, 2008.
9. Francis, David R. Petropolitics at heart of Russia-Georgia Clash. The Christian Science Monitor — 18 August 2008.
10. United States-Georgia Charter on Strategic Partnership, signed in Washington DC on 9 January 2009.
11. Foreign Policy Strategy 2006-2009, Ministry of Foreign Affairs, at, p. 15
12. Russian Minister of Foreign Affairs Sergei Lavrov, Commentary on the Speech of British Foreign Secretary David Milibandin Kyiv, 27August 2008 4b4001e8521?OpenDocument
13. Izvestiya, 31 March 2008,
14. Pritchin, Stanislav Georgia hits its transit potential. Nezavisimaya Gazeta — 15 August 2008.
15. C. German, Tracey. Pipeline politics: Georgia and energy security[* Internal error: Invalid file format. | In-line.WMF *] Small Wars & Insurgencies, Volume 20, Issue 2 June 2009, p. 361