Central Asia Shifts Line in Europe’s Energy Quest Letter From Germany

By Judy Dempsey

Next week, Germany’s foreign minister, Frank-Walter Steinmeier, and other European Union diplomats travel to Kazakhstan to meet their counterparts from the Central Asian republics.

Ruled by more or less authoritarian leaders who have often displayed scant regard for Western concepts of human rights or the rule of law, Central Asia never really figured on the radar screens of the EU or Germany until after the Sept. 11, 2001, terrorist attacks on America.

Requiring a military base to provide logistics for its troops serving in northern Afghanistan, Germany started improving its ties with Uzbekistan, where President Islam Karimov runs a repressive regime. In May 2005, his security forces opened fire on civilians protesting against the jailing of people charged with Islamic extremism. At least 180 people were killed.

Despite their miserable human rights record, the Central Asian republics east of the Caspian Sea – Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan -are becoming increasingly important to Europe for another reason: They have the natural gas the EU needs to reduce its dependence on Russia. To get at Central Asia’s energy resources, however, the EU must show an unusual togetherness in order to fend off attempts by Russia’s state-owned energy giant Gazprom to thwart European ambitions in the region.

“Central Asia is the new region for power politics,” said Lieutenant Colonel Marcel de Haas, a Dutch Defense Ministry expert on Russian security currently at the Netherlands Institute of International Relations. “Europe needs more gas. It needs to diversify in order to weaken its dependence on Russia. The game is clear in Central Asia. The question is whether the EU has the political will to succeed in this region.”

The EU’s biggest and most ambitious project, the Nabucco pipeline, will test this political will. Conceived in 2002 as the bloc’s first attempt at forging a common energy security policy, the 3,300-kilometer, or 2,050-mile, gas pipeline is designed to start at Turkey’s borders with Georgia and Iran, later merging. It will then cross Turkey, Bulgaria, Romania and Hungary and end in Austria. Gas will be fed into the pipeline from Iran and Iraq, depending on the political situation, and from the new Caspian gas reserves from Azerbaijan and eventually Kazakhstan. So far, five energy companies have signed up to build the pipeline: Botas of Turkey, Bulgargaz of Bulgaria, Romania’s Transgaz, Mol of Hungary and OMV of Austria. Thomas Huemer of OMV said the project would cost between 4.6 billion and 5 billion, or between $6.1 billion and $6.6 billion, and could start operating in 2012, assuming the consortium’s feasibility report will soon be finished. Emre Engur, a Botas spokesman, said that by 2025, when the pipeline should be operating at full capacity, up to 15 percent of Europe’s gas supply would come from Central Asia – a sizable chunk compared with the 25 percent from Russia now.

As with many big EU projects, the financing has yet to be arranged and investors lined up. The consortium wants the European Investment Bank to pick up the lion’s share. Dusan Ondrejicka, a bank spokesman, said the bank was waiting for the study to be completed. “If asked, and the project is viable, we would finance it. It is one of the priorities of the bank to contribute to a project like Nabucco because it is about the diversification of energy supplies,” he said. The issue of financing is minuscule compared with the power politics. When the EU’s energy commissioner, Andris Piebalgs, announced last June the establishment of the consortium, Gazprom was already prepared. It had started to jump in, striking deals with the main energy players.

Kazakhstan agreed to sell its entire export and transit capacity to Gazprom over the next five years. In a 25-year deal with Turkmenistan, Russia will obtain all of its export surplus gas. If production is increased, Gazprom will also purchase those additional quantities. Gazprom has booked much of Uzbekistan’s transit pipeline network until 2010, preventing outsiders from sending gas through it. A report by the Center for Eastern Studies in Warsaw concluded that Gazprom’s long-term objective was to control the gas reserves, the transport routes to Europe and the gas exports from Central Asia to Europe.

De Haas said Gazprom was positioning itself to undercut the Nabucco project. “It is such an open policy. Gazprom has the politics to push things through because Gazprom is President Vladimir Putin,” he said.

Russia is playing games, too, with the consortium. Russia and Hungary, an EU member, have agreed to extend Gazprom’s Blue Stream pipeline, which already runs under the Black Sea from Russia to Turkey. The extension would run almost along the same route as Nabucco, but would end in Hungary, where Gazprom is building large underground storage facilities.

When asked in an interview why he was prepared to back the Russian project even though Hungary is part of the Nabucco consortium, Prime Minister Ferenc Gyurcsany replied: “Nabucco is a dream. We cannot heat our apartments with dreams.”

Turkey, another member of the Nabucco consortium and which is negotiating to join the EU, is playing hardball, too. It wants to control the transit prices for sending Nabucco’s gas up to Europe, and it would even consider putting Russian gas in the pipeline. In an internal note, the European Commission, the EU’s executive, gave a depressing account of what these developments by Turkey meant for Nabucco’s future. They would undermine the EU’s efforts at diversifying its energy imports and prevent Nabucco from functioning as a single project stretching from Turkey’s border with Iran to Austria. Huemer of OMV acknowledged that tariffs and transit prices still had to be discussed. “It is not an easy project,” he said. Then he added, “We are open to putting Russian gas into Nabucco.”

Gazprom noted during a briefing last week that the Nabucco pipeline was “only a project.” De Haas said Nabucco’s biggest problem was the EU’s lack of decisiveness.

“The possibility of the EU being outmaneuvered by Gazprom is very strong. They don’t seem to realize it in Brussels,” he said. Unless EU leaders stop foot-dragging, investors will stay away, Nabucco will remain a pipe dream and Russia will derail Europe’s entree into Central Asia. *

E-mail: pagetwo@iht.com

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Tomorrow: Steven Erlanger on the self-image of the Israeli Army.

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