The world and energy, energy and the politics, carriers of energy as a lever of political pressure, the relations between the states of Southern Caucasus and Russia – these and much more are being discussed in the exclusive interview on newcaucasus.com with Mikhail Gonchar, the Director of the Centre of Energy Programmes Nomos, Ukraine.
-Ukraine has always been referred to as the transit state for prospective energy supply to Europe from the countries of Caspian Regions and Central Asia. What has changed after Victor Yanukovich’s team took an office in the Government of Ukraine? And do they still possess their importance?
– Personally, I would not give up for lost on this kind of projects. However, at the time of Yanukovich’s office as the Prime Minister in 2002 – 2004 and 2006 – 2007 the progress of their realization was, so to say, a very modest one and/or was not present at all. The success was not seen throughout the power of the ‘orange’ ones lead by Yushchenko. No practical results besides powerful speeches and politically correct declarations.
Therefore, I would say in the contrary to, rather than thanks to the governmental politics, the first supply of Azeri oil was performed in 2009. It was supplied to the Oil Refinery Factory in Kremenchug, the central part of Ukraine, which, in its turn, happened to be a sign of the future possibility or realization of the project on Caspian oil supply to Ukraine and, further, to Europe. The pipe-line Odessa – Brody remains non-operative. The supply of Azeri oil was short-lived and was a fruit of lots of difficulties, which cropped up by means of corporate relations between “Private” group, controlling the factory in Kremenchug, and the Russian company “Tatneft”, which was the main oil supplier to the previously mentioned oil refinery. It was all due to the cancellation of supplies, and, as a result, an alternative was launched – supply of Azeri oil instead of Tatar one.
But the question of utilizing in the European direction of the Odessa – Brody pipe-line remains unanswered. The organized band of political oligarchs, which took over the Government of Ukraine in February 2010, has never been distinguished by the trend of implementing diversified projects in practice. And now, figuratively speaking, some of their representatives eat their hearts out since all this minimizes their abilities of running talks with official Moscow. The project Odessa – Brody will eventually be paid attention to, yet, by means of enforcement. It is well-known that Russia is realizing the project of Baltic pipe-line system (BPS-2). It is planned to be accomplished and started in 2 years’ time. To make matters worse, this will lead to an end of the “Friendship”. Yet, it is quite obvious that the friendship (without quotation marks) has been coming to an end throughout the past few years…
In case BPS – 2 starts being exploited, then the transit oil traffic, which runs through the territories of Ukraine and Byelorussia, will be considerably transferred onto BPS-2, which has already been done with the northern branches of the “Friendship” pipe-line – through Lithuania and Latvia. The oil transportation was suspended through the Latvian sea port of Ventspils on January 1, 2003, which, traditionally, even since the Soviet times, was the biggest transshipment point of exported oil. Another rhetorical question arises – What will happen to the Central – European oil refinery factories, which, as a rule, have been receiving oil by means of the “Friendship” pipe-line?
And only then will they remember the existence of pipe-line route Odessa – Brody – the Southern Friendship. Since it was launched in 2002 there have been all technical commodities to use it in the European direction. Moscow has seen a threat of Central Europe and Ukraine getting alternative Caspian oil, without any dependency on Russia.
– In your opinion, the ideas of realization of Nabucco and White Stream projects have already vanished? Some experts believe that the negative component of theirs is not the political, but economical one. However, Baku – Tbilisi – Jeikhan pipe-line can be seen as a good example which was originally supposed to be as purely political project, and, yet, managed to be profitable for its participant countries…
– BTJ – is an example of politically motivated project which, eventually, has proved itself to be economically attractive and financially profitable. Why did it all happen? Because the USA was the driving force of the project which set both ideology and strategy to fulfill the project. Without energy policies of the USA this project would not exist now. Turkey, Georgia and Azerbaijan would have never come to an agreement in spite of having two- and multi-side negotiations. The success of BTJ is due to the implementation of American energy policies in the region which were not only reflecting American interests but also in synergy with the interests of Azerbaijan, Turkey and Georgia. That is why, despite many contradictions, they were overcome. The Nabucco, White Stream and Southern Stream projects should be considered in the light of competition of various routes of supplying gas and oil from Caspian Regions and Central Asia to Europe. In fact, the Southern Stream, being the most science-fictional one, seems to have the most preference now. I would like to highlight the fact that it seems to be. Expansive politics of Russia gives a hand in integrating of this illusion both onto the pages of the press and into the brains of the politicians.
– As well as resources and finances of Russia…
– There are problems with the resources and finances, except those ones which are endowed for the corruptive aims in Europe. There is a clear decline in the amounts of produced gas in Russia. Besides, it is not as easy as it seems to transfer produced resources to the coast of the Black Sea – the construction of the pipe-lines is vital on the territories of Russia herself. According to the official statement of 63 billion cubic meters, needed for the Southern Stream, produced in Russia are absolutely impossible to transport to the coastal zone by means of existing infrastructure. Either the construction of pipe-lines is absolutely vital for expansion of the existing capabilities (See scheme 1) or we talk about a mere bluffing and the real capacity will not exceed 30 billion cubic meters. And, I am not talking about the necessity of building a 900-km-long pipe-line on the bottom of the Black Sea, with the average depth of which is approximately one and one and a half kilometers, unlike the Baltic Sea with the average depth of about 150 metres (See scheme 2). These are two absolutely different ways of performing the works. The White Stream is not less complicated, especially in the Romanian direction, having the length more than this of the Southern one.
– And, yet, Nabucco demands no less expenditures?
– Not exactly. Nabucco does not contain such a long sea part. But, the Southern Stream seems more preferable than Nabucco since the latter one does not have such a consolidated political support of Washington as BTJ and Baku-Tbilisi-Erzurum had. There supporters of all projects, there ones who support both Nabucco and the Southern Stream which is clearly nonsense. Nonetheless, the companies which support both are having close cooperation with Gazprom and have to maneuver. Speaking of the White Stream project, it is no worse than the Southern Stream and it should not be considered the competitor of Nabucco. I would say that is more likely a northern branch of Nabucco and it should be revised in the same pact as Nabucco. The European Commission has supported this project. And even more, the grant has been issued to assist the development of technological and economical basis, which is taking place now, which means that this project was included into the context of interest of the EU. But, still, the absence of what is called the ‘unified call’ in the energy politics of the EU means vague prosperity of the projects such as Nabucco and the White Stream. And, I am not talking about the Turkey’s position on the subject of Nabucco.
In the conditions of the present-day processes of ‘tectonic’ kind on the European and World gas markets the prospects of new gas shipping projects seem more and more dim. And the reason is not that they are any worse then their Russian analogs. I would say, that they are more thought – over in technological terms and could be more financially profitable, but the reason is that the game is played according to different rules. It’s just as if you played pool and your opponent hit you with a cue on your head, and while you recover he would score all the balls and announce his victory. The mercantile interests of European companies see up to Russian projects, who, naturally, want to get as profitable offers as they can as well as subcontracts. They are not really interested in the way the Northern Stream is going to be built – along or across the Black Sea. They have certain technological devices that Russians do not have. Moscow offers money, the part of which can legally flow from project budget to private incomes of certain people during the realization of the project, thus, building a so called ‘back up’. Neither Nabucco nor the White Stream use this kind of rules of the game. And, those changes which are taking place at the moment on the market of liquefied natural gas and dramatic increase of shale gas production in the USA, and, therefore, an increase in offers of gas supply to the European market, put the pipe-line projects under a huge question. In this relation, the perspectives of the White Stream pipe-line are very vague and close to null considering the fact that there is no political support.
Talking of Nabucco perspectives, I think, that they will remain. We should also bear in mind, that BTJ seemed quite problematic for a long period of time. There is a chance of political changes in the EU concerning the reconsideration of this project provoking its realization on rather different from present grounds. Nowadays it is being fulfilled on the basis of simple commercial projects. An, of course, this sort of projects need to be considered and looked at through a commercial prism – and this is an axiom. Nevertheless, EU could use several billion euros, out of the hundreds of other billions used annually for a variety of other programs, for the realization of the project which is meant to be an energetic security for the whole of Europe. In these terms, the amount of 200 million for the Nabucco project seems really ridiculous and would make no difference to the whole project. Therefore, there is a huge risk of Nabucco project becoming a fiasco symbol, unlike BTJ and BTE which are indicators of success and effectiveness of American energy policies. This can become a fiasco symbol not of the European energy policy only, but the EU as a whole…
That is why, if we talk about dying out of the pipe-line projects, this process will take place in course of cardinal changes on the world gas market, especially when liquefied natural gas becomes so demanded, and trades of it has got stock exchange characteristics.
– There is definitely room for discussions of the potential of huge pipe-lines, but recently there has been an interest in South Caucasus not from European Union as a whole, but from certain countries such as Romania, Azerbaijan and Georgia. They have also signed a pact on building terminals for containing and embarking of liquefied gas in Romania and Georgia. The Energetic Minister of Romania, Tudor Scherban, was quoted saying that upon completion of this project, Romania will become the European centre for energy. The president of Byelorussia, Lukashenko, has also been noted showing a genuine interest in his country taking part in the energy project in South Caucasus. In you opinion, is there a chance that the lack of unified European policy on energy will provoke Western Countries and former USSR Countries in making two-side agreements with the states of South Caucasus, which is being done by Russia already? How effective is the two-side energy cooperation, in general? Is there a possibility of future participation of Ukraine in the direct projects with the states of South Caucasus?
– This is a purely adequate approach. It is not the first time Romania shows such a great interest in South Caucasus. Even since the mid 90s Romania was one of the first Central European countries, along with Ukraine, which designated their interest towards Caspian energy carriers. When on September 20, 1994 the so called ‘The Century Agreement’ was signed in Baku, Romania immediately showed interest in the development of oil production of Azeri-Chirag-Guneshli, and, thus, not only in South Caucasus but in Caspian coastal zone as well. Bucharest has established more or less stable cooperation with Kazakhstan. Rompetrol was purchased by Kazakh ‘Kazmunaigas’ and operates quite successfully in Georgia. And it is not accidental that now Romania is looking forward the cooperation with Azerbaijan.
Of course, all transit ways from Caspian region to Europe run through the territory of Georgia. The State Oil Company of Azerbaijan Republic (SOCAR) has strengthened its positions on the European market, by means of realizing the Kulevi Terminal Project in Georgia. This aided in creating their own oil-trader in Switzerland, and opening several representatives abroad. SOCAR is attempting to copy modest success of Kazmunaigas and perform their expansion on the European market. Naturally, taking into consideration the Shakh-Deniz Project, problems in negotiating with Turkey, tense relations with Gazprom, SOCAR is obliged to search for the new partnerships. Undoubtedly, the success of the relations between Romania and Azerbaijan in the gas sphere will considerably define the perspective of Ukraine in realizing the projects of constructing a liquefied gas sea uploading terminal. This would have had a positive effect, if Ukrainian party had shown an interest in building a gas liquefying terminal in Kulevi, which, in its turn, would have increased Azeri commitment. Another problem, which should be born in mind, is Romanian demand on the liquefied gas, which might be insufficient to cover the expenditures of the project. Romania, just like Ukraine, produces its own gas, and the balance is maintained due to own natural resources, however, a part of it is imported from Russia through Ukraine and Moldova. It is obvious, that Romania would like to minimize its dependency and shows concernment in virtually all regional projects, such as Nabucco, the White Stream, and the Southern Stream. Romania uses an ‘all welcome’ approach, while perfectly understanding, that sea projects, with the specific features of the Black Sea, are very complicated to be fulfilled. The project of constructing the liquefied gas re-gasification terminal is also tough, but the techniques are already well thought over. It is understandable that building of such a terminal would mean shipping of liquefied gas, for instance, from Arab countries. But, if there is an opportunity of shipping the gas without exceeding the Black Sea areas, then the problem of Bosporus and Dardanelle step aside, which are already overloaded with oil traffic. The position of Ukrainian Government could be more dynamic and flexible in this respect. We do need four-party talks between Ukraine, Romania, Azerbaijan and Georgia in order to accelerate the realization of these projects. Actually, we’ve been talking about synchronization of several projects at once. Firstly, it is growth of gas production at the Shakh-Deniz deposits, which is run mostly by BP and StatOil and not by Azerbaijan. Secondly, we need the construction of the gas liquefying terminal in Kulevi, and the construction of re-gasificating terminals in Romania and Ukraine. E.i., all mentioned above should be synchronized and combined in one thing. What will be Ukrainian steps – a tough question to be answered. There is only one priority so far – obtain cheap Russian gas by all possible means. However, the Ministry of Energy and Fuel is making an effort to reanimate the project of building re-gasificating terminal, which is not new – it is 6 years old already. Frankly, then the prices of liquefied gas would be much higher than those of pipe-line shipping. The situation has changed completely now. That is why, I think, there is a chance for synergy, only in case all parties work closely and cooperatively, and not separately.
– The Russian party has always been protesting against realization of the projects, in spite of the states on territories of which the pipe-lines will run, and, if they do not have any connection with Russian territories. The Russian aviation made several strikes in the deserted areas in the immediate proximity to the Baku-Tbilisi-Jeikhan pipe-line during the Russia – Georgian conflict. To say the truth, some of the bombs did not explode… According to Azeri expert Russia – Georgian conflict was a warning addressed to Azerbaijan and a strike to Nabucco. How do you think, why didn’t Russia bomb the enemy pipe-line which it had been objecting for so long?
– When in August of 2008 I had to comment on the warfare activities in Georgia, I noted, that one of the main purposes of Russian military penetration to Georgia was a message to the EU and the USA, saying that pipe-lines and energy carrying corridor established in the 90s through South Caucasus in reality has been under Russian control. And, if they assume that there is a necessity of taking it over, they will do so by conducting military operations in the region. In this sense it is not so surprising that the bombs did not explode and that the premises were attacked… It was a sort of non-verbal message. The aim was not to damage the pipe-line itself, since if the damage had happened, then Moscow would have been legally prosecuted. And the prosecution would have been not only legal, but also would have dealt with financial compensation of the caused damages. In this case Moscow would have dealt not only with the Government of Georgia but also with a certain number of European Governments and the Government of the USA, whose companies indirectly are shareholders of the pipe-line. This would have added an unnecessary internalization of the war and would have brought more problems. But having acted like that everyone got the Russian message clearly.
Of course, if we presume that the situation with Russian export of energy becomes too problematic and the alternative suppliers become more competitive, we should not exclude the Russian enforcement scenario. And it is not only applicable to Georgia. There is another frozen conflict in South Caucasus – Nagorno-Karabakh, and the aspiration to regulate it is another worrying symptom. Another words, when someone tries to solve something very quickly, it all leads to very unexpected and unpleasant consequences. The situation in Nagorno-Karabakh is even more favorable for force implementation in the South Caucasus corridor, since there will be no direct invasion of the Russian Militaries and the Armenian Armed Forces of Nagorno-Karabakh will be the ones to blame. And the boarder is several tens of kilometers away from the South Caucasus corridor. Russia lets the USA and the EU know, that they ‘can build whatever they feel like, but should keep in mind, that all this is under Russian control’. That is, even if the pipe-line is not under the physical control of Russia, Moscow lets everyone know that it would take several hours to change the transit map of the region. We can imagine the possible map based on Russian strategic plan of energy till 2030 (see scheme 3).
Russian energy politics gradually is coming to a dead end as a result of its aggression and expansionism. Russia has estimated that because of artificially created gas crisis Europe would get frightened and would unwillingly play by Russia’s rules. It did happen to some extent. We can observe it by the position of France, Germany, Italy and Austria because of whom the EU cannot claim anything in ‘one voice’.
Moscow does understand that August of 2008 was excused, thus, giving ‘carte blanche’ to move forward. (It was predicted in the same way – the Western countries would object, scold, threaten with reconsidering diplomatic relations, but that would be it. Actually, the Kremlin forecast happened to be correct.) And the further moves of Russia are not dictated by military expansion, but by energy expansion. However, when needed, it can always transform into military one.
– You have mentioned that Russia considers South Caucasus the zone of its traditional interests. Could you possible make some predictions concerning development of situations in South Caucasus in the nearest future?
– The present situation promises more or less optimistic forecast for the South Caucasus, however, it is difficult to predict its longevity. On one hand, Russia has other things to do and does not really care about the region. A lot of serious problems (may be not critical) are going to arise in Russia. There is a risk that Russia might use the mechanism of escalating outer problems to in order to distract the Russian society from the domestic problems. So, the old method can be applied – ‘the enemies are all around’. Naturally, the enemies must get repulse since they put a threat on the existence of Russia herself. Therefore, any problem may be used to distract Russian citizens and big states from the inner problems of Russia.
Moscow does want the instability in basic oil and gas producing regions of the world, since that would lead to the rise in prices of energy carriers. The Caspian and the Central Asian states, of course not the Persian Gulf ones, are becoming Russia’s main competitors in extraction of hydrocarbon resources and they try to force Russia out of the world market. That is why Russia will make an effort to weaken them from inside.
Speaking of Georgian territories of Abkhazia and South Ossetia, I think, that no one is able to change the status quo. There are no seen premises of Russia changing her attitude towards these regions. Even so more, the EU position has proved itself to be too soft and unprincipled. The United States are now keeping distance from European issues and not only from Georgian and Ukrainian ones. They have headed in on reduction of nuclear weapons, problems within Iraq and Afghanistan, the issues where they need, may be not the Russian support, but at least loyalty. In this respect, the problems of many countries including the South Caucasus have been shifted not even to the second place. We may dispute this sort of American politics, we may treat it as defeated one, which can lead to unpleasant consequences for the States themselves. But, alas, this is reality. And of course, Russia will take advantage of this. It is not for sure if Russia will start taking severe measure in the nearest future. I think, in case with Georgia, Russia does not have marionette leaders or social groups, which can be manipulated.
– There is an opposition in Georgia with a clearly defined pro-Russian orientation…
– The fact that Russia tries and will always try to create similar forces still remains. But on the other hand, there is a strongly consolidated position of not accepting what took place in 2008. I believe that Moscow’s efforts to make any changes in Georgia will all be in vain. Assuming a certain figure is brought to power by means of any way, this figure will be overthrown by the society or will transform into inconvenient figure. Georgia has shown that, it still has not lost its national dignity, honor and there is a clear understanding of national interests. This, to some extent, keeps Russia from taking up further tricks.
The situation in Azerbaijan differs radically. They realize a certain soft politics of compromises and balances between Baku and Moscow. Russia is not willing to take any sever measures there as well, since it is very well understood that they may lead to contrary results. Taking into consideration the fact that the States have reduced their political presence in the South Caucasus, I think, Russia will try to keep a certain status quo, hence not only the USA needs Russia’s loyal positions in the spheres of Iraq, Afghanistan and nuclear disarmament, but Russia also needs good relations with the USA due to her economical problems. Even this year Russia expects serious international loans. It can be a preventive factor in some way.
To make matters worse, in spite of Russia criticizing Washington’s politics towards Afghanistan, they also are very interested in NATO pursuing Afghan campaign. The withdrawal of American troops and NATO from Afghanistan would mean a serious problem of Islamic expansion up north for Moscow. Let’s say in five to seven years’ time, after the Yankees have gone, Taliban, figuratively speaking, will have already settled in Ural. Under their expansion the flabby regimes of Uzbek and Kazakh leaders may come to an end.
The relations with Byelorussia also distract Moscow’s attention. Byelorussia may be called the most successful integrative project throughout post-Soviet area. However, it has recently started showing flaws. So called the Customs Union of the three countries, which was launched on January 1 this year does not work. And this breeds a lot of arguments between the country-participants of this Union. That is why Russia has to concentrate on these problems, especially when the presidential elections are soon to come.
Irakli Chikhladze, for newcaucasus.com
scheme 1.
scheme 2.
scheme 3.
