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    Natural Gas Strengthens Ties in the Caucasus and Central Asia

Summary

Though recent Turkish and Caspian relations have been strengthened via energy partnerships, regional peace and prosperity still requires more effort.

by: Olgu Okumuş

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Natural Gas Strengthens Ties in the Caucasus and Central Asia

Over the last few weeks, Turkish and Caspian authorities have several times celebrated the successful implementation of their oil and gas pipelines, alongside announcing their willingness to cooperate in building the Baku-Tbilisi-Kars (BTK) Railway, though they are still need the consent of two excluded neighbors, Iran and Armenia.

Recently, two meetings have drawn attention to the region: the Second Trilateral Meeting of the Ministers of Foreign Affairs of Turkey, Azerbaijan and Georgia (held in Batumi on March 28) and the World Economic Forum (WEF) Meeting on “Strategic Dialogue for the Future of the Caucasus and Central Asia” that was held in Baku over April 7-8.

How this region can contribute to the world’s prosperity and peace?” was the questions posed to participants at the WEF's opening plenary.  Both high-level meetings shared the same answer: the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the Baku-Tbilisi-Erzurum (BTE) gas pipeline have shown the success of regional cooperation. This strengthened cooperation has, in turn, given birth to a colossal project set to influence Europe’s gas supply: the Azeri-Turkish joint Trans-Anatolian gas pipeline project (TANAP), as well as the BTK railway, which will connect the Eastern and Western worlds.

These energy partnerships have strengthened relations and opened the path for a new railway and a pipeline running from Baku to Turkey, via Georgia. This path is not the shortest way to connect Baku and Ankara. A road passing from Iran to Turkey would be some 600 km, while one passing from Armenia would be 550 km, instead of the 860 km of the Azerbaijan-Georgia-Turkey route.  Indeed, the BTE, the BTC, TANAP, and the BTK would also bypass Iran and Armenia.

Moreover, Turkish and Caspian authorities cannot exclude Iran and Armenia without their consent. That may explain why Turkey still insists on receiving oil and gas exports from Iran, despite international embargoes.

How can Turkish and Caspian authorities find the right regional consensus with Iran and Armenia to ensure prosperity and peace?

The BTC system transports crude oil from the offshore Azeri-Chirag-Guneshli oil field in the Caspian Sea to Ceyhan on Turkey’s Mediterranean coast via Tbilisi. From Ceyhan the crude oil is then shipped via tanker to global oil markets.  In the 1990s, the BTC was a game changer for two reasons. The first was the flow of crude oil from the Caspian Sea of a landlocked Caucasus republic to the Mediterranean Sea. The second was that the BTC was the first hydrocarbon transport project not to be controlled by Russia, Iran, or a country in the Gulf.

The BTE gas pipeline also transports natural gas from the Shah Deniz gas field, crosses Azerbaijan and Georgia, and joins Turkish grids at Erzurum. This gas pipeline uses the same corridor as the BTC.  The BTE is the first gas pipeline running from Central Asia and the Caucasus to the Western world without relying on Gazprom.

The BTE and BTC, despite their small transport capacities, opened the path of the southern energy corridor project, which aims to bring gas from the Caspian to Europe via Turkey. TANAP makes up the undertaking of the initial leg of this journey, running between Azerbaijan and European markets across Turkey. This project hopes to supply 16 billion cubic meters (bcm) of natural gas to Europe by 2018—i.e., ten percent of Russia’s total current supply to Europe. Furthermore, as adding parallel loops and compressor stations would increase its capacity, in ten years TANAP could reach 60 bcm—approximately half of current Russian supply.

The BTK railway project will follow this opening. It aims to build a new “silk road” between Central Asia and Europe—considered the shortest, most effective, and most clean-carbon transit route between China and the Western world. The Trilateral Sectoral Cooperation Action Plan for 2013-2015, adopted in Batumi, noted that the BTK railway “could become a strong basisfor deeper regional integration and politicalconsolidation.”

This growing regional cooperation in Central Asia and the Caucasus would benefit the EU’s energy security and western markets.

However, Iran and Armenia missed out on the meeting and the three projects, due to embargoes—Turkey's embargo on Armenia after the secession of Nagorno-Karabakh in 1988, and the US/EU embargo on Iran since 1996.

In the absence of politically-reliable initiative from Iran, the embargoes have widened. Nevertheless, some concessions have already taken place.  The Iranian National Oil Company, NIOC, owns 10 percent of Azerbaijan's Shah Deniz gas field, worth up to $2.4 billion per year. (This joint venture between a Switzerland-based subsidiary of NIOC and BP is not subject to international sanction.) Turkey, a major buyer of Iran's oil and gas, has no plans to reduce its imports despite the growing prospect of tougher sanctions, according to Taner Yildiz, Turkey's energy minister.  

Growing regional cooperation prompted Azerbaijan’s foreign minister, Elmar Mammadyarov, to tell press after the March 28 meeting that cooperation between the three states is a “message to our neighbors in Armenia that it would be better for them to join the club rather than getting out of the club." This may be a first step by Azerbaijan towards solving the 25-year-old Nagorno-Karabakh conflict.

However regional peace and prosperity still needs more effort. The ministers have underlined the need for strengthening economic and business ties on all sides and are welcoming the upcoming third Azerbaijani-Georgian-Turkish Business Forum that will be held in Qabala, Azerbaijan in May 2013.

Olgu Okumuş (olgu.okumus@sciences-po.org_) is finishing her PhD on "The Role of Turkey in EU Energy Security" at Sciences Po-CERI in Paris. She is also an affiliated lecturer in energy diplomacy at Collège Universitaire de Sciences Po, Paris.