The Southern Gas Corridor in its Final Phase

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How Russia’s geopolitical and geo-economic interests

shaped the Southern Gas Corridor

Sandu-Daniel Kopp, M.A.

PhD-Student, Researcher

Berlin Centre for Caspian Region Studies (BC CARE)

Otto-Suhr-Institut für Politikwissenschaft

Freie Universität Berlin

Email: sdkopp@zedat.fu-berlin.de

20. February 2012: “Interconnector Turkey-Greece-Italy (ITGI) loses out to

Trans-Adria-Pipeline (TAP) for Italy route” (Natural Gas Europe).

26. June 2012: “Turkey and Azerbaijan sign agreement for new Trans-

Anatolian-Gas-Pipeline, TANAP” (Pipelines International)

16. July 2012: “Nabucco Outbids SEEP For Shah Deniz Gas” (Bloomberg)

What Happened?

Problem Definition:

• Beginning of 1990s: USA/Turkey pursue strong policy to support an independent development of the emerging new economies in Central Asia and the Caucasus region.

• Turkey: Emphasis of common Turkic cultural, historical and linguistic links in Central Asia

• US State Department 1997: Caspian Basin Report: Estimation of huge oil and gas reserves in Central Asia

Strong advocacy for the development of east-to-west oil and gas pipelines to enable the oil and gas producing Caspian and Central Asian countries to export their hydrocarbons without traversing the territory of the Russian Federation or Iran

1999: Discovery of Shah Deniz II: Azeri withdrawal of TCP and "driver" behind the Southern Gas Corridor concept shifted from Turkmenistan to Azerbaijan

Milestones: • 1 Jan. 2006: First 'gas war' between Russia and Ukraine. Moscow briefly interrupts gas supplies to Ukraine over a payment dispute, triggering criticism in the West that the Kremlin is using energy as a political tool.

• 16 Oct. 2008: EU summit endorses report on energy security, inviting EU countries and institutions to diversify energy sources and supply routes.

• 13 Nov. 2008: Commission publishes EU Security and Solidarity Action Plan, outlining several initiatives, including a southern gas corridor.

• 1 Jan. 2009: Second 'gas war' between Russia and Ukraine. Crisis ended on 20 January when deliveries resumed with higher gas prices for Ukraine. Several European countries were severely hit by supply cuts.

• 8 May 2009: Czech EU Presidency hosts southern gas corridor summit in Prague. Event was largely ceremonial.

• 13 Jan. 2010: European Commission President José Manuel Barroso signs deal with Azerbaijan to bring ten million cubic metres of gas per year to Europe.

Southern Gas Corridor

Research Questions

The Nabucco-Pipeline for the import of natural gas from the Middle

East and Central Asia was first proposed in 2002. Huge amounts of

resources are available in the respective regions and scientific studies

did prove the economic efficiency of the project. Nevertheless,

Nabucco in its initial form has not been realised till this day. Why?

How can the decisions of the Shah Deniz Consortium on the Southern

Corridor be assessed from a political theory perspective?

Hypotheses:

1. In Central Asia, a geopolitical and geo-economic race for energy resources

is taking place.

2. The 2012 decisions on the SGC can be cited as evidence that the EU-

strategy to become more independent from Russian gas has failed for the time

being.

3. Russia is pursuing a comprehensive energy strategy,

which masterfully integrates geopolitics and geo-economics and which can be

explained by the international relations theory of Neorealism.

4. Moscow’s energy strategy is aiming at the perpetuation of a Russian

predominance on the European gas market. It has been the main factor

leading to the non-realisation of Nabucco and it had considerable impact on

the decision’s on the SGC so that these matched with the Kremlin’s interests.

State of the Art: Power politics vs. Purely economic Consideration

A) Russia‘s energy strategy in Central Asia is led by considerations of power politics

• Europe‘s dependence on Russian gas is a threat to European energy

security

• Russia aims at an energy export and pipeline monopoly

• A gas cartel is supposed to prevent the liberalisation of the EU gas market

• Europe is loosing importance as Moscow has alternative customers in

Asia (India, China)

• The Russian Renationalisation of its energy industry is necessary to use

the energy weapon against other countries/ to reward allies

B) Russia‘s energy strategy in Central Asia is led by economic considerations

• Russia is pursuing economic objectives as it is highly dependent on

European currency income for the modernisation of its economy/energy

industry

• Gas-OPEC is not a realistic scenario as interests of countries such as

Kasachstan, Turkmenistan, Iran and Russia are highly divergent.

• Russia‘s business is business: Moscow is pursuing business objectives

even though it aims to dominate the market (no power politics)

• From a business perspective, Russia needs access to Central Asian gas

resources as it has reached a gas production limit and is expecting a gas

deficit

Theoretical Approach: Geopolitical and Geo-economic Perspective

The theoretical approach is based on the neoclassical concept of geopolitics, which corresponds to what geopolitics is commonly expected to be:

A study about effects of geographical position and other geographical features on a foreign policy of a state and its relations with other states. In such interpretation, neoclassical geopolitics is concerned with the strategic value of geographical factors (resources, access to the sea, etc.) and closely related to the tradition of political realism in international relations (the power politics school of thought).

Geo-economics can be seen as a branch of geopolitics. The term refers to the study of spatial, temporal and political aspects of economies and resources.

WHY GEOPOLITICS MATTERS:

Halford Mackinder (1919):

“Who rules East Europe controls the Heartland; who rules the Heartland commands the World-Island [the entirety of Eurasia]; who rules the World-Island commands the World”

Nicolas Spykman (1944):

“Who controls the Rimland rules Eurasia; who rules Eurasia controls the destinies of the world”

After Cold War: Brzezinski (1997):

Zbigniew Brzezinski coined Russia a ‘black hole’ and referred to the region made up of Central Asia, the Caucasus, and Afghanistan (with potential addition of two other “significant geostrategic players” - Turkey and Iran) as ‘Eurasian Balkans’:

- Extreme volatility and instability

- Transport corridor between Eurasia’s richest and most industrious western and eastern extremities

- enormous concentration of natural gas and oil reserves is located in the region

Theory: Neorealism

- International System is anarchic

- States first and foremost seek security

- Increase in material capabilities motivates states to seek hegemonic power

more vigorously, thereby activating a zero-sum game scenario (Gas as a zero-

sum game!)

- State as central actor, emphasis of economic considerations (wealth) for

cooperation BUT relative gains are decisive and NOT absolute gains (Gas

Contracts Azerbaijan-Russia or Azerbaijan-EU?)

- States’ self-interest is force behind international regimes (ECT)

Chapters:

1. European-Russian energy relations

- History and market development

- The importance of Russian gas for the EU

2. The European-Russian confrontation over the Southern Gas Corridor

- The collapse of the Soviet Union and Central Asian gas resources

- Confrontation over the SGC

- Research question and hypotheses

- State of the art

- Methods and approach

3. Theory

- Geopolitics and Geo-economics (Mackinder, Spykman, Brzezinski, Luttwack)

- Energy politics and the international relations theory of Neorealism

4. European interests and initiatives in CA – Why geopolitics matters

- Energy Charta Treaty

- Partnership and cooperation agreements

- INOGATE, TACIS, TRACECA

- The development of the SGC

- Theoretical inclusion: Geo-strategy – A product of Geopolitics

EU approach aims at energy resources

EU approach corresponds with geopolitical/geo-economic theory

(first hypothesis)

Development of SGC shows that EU could not reach its diversification objectives (second hypothesis)

5. The SGC in the conflict area between geopolitcal and geo-economic interests and the role

of Russia

5.1. The lack of resources for Nabucco

- Russian initiatives/offers to secure/purchase Shah Deniz gas

- Russian initiatives to prevent the construction of the TCP (Turkmenistan)

- Russian initiatives to isolate Iran

- Russian gas contracts with Kasachstan and Turkmenistan

-Theoretical inclusion

5.2. Nabucco’s route: Energy hub Turkey and Russia’s role

- Russian-Turkish energy deals, interests, cooperations

- Theoretical inclusion

5.3. Financing of Nabucco

- Excursion: New European gas market reality

- Russia under pressure

- Uncertain demand in Europe: Advantage South-Stream

- LNG for Europe?

- Russian-Qatari interests and deals

- BP and Russia: interests and deals

-Theoretical inclusion

6. Theoretical inclusion and conclusions

Thank you for your attention.