Caspian gas goes east
HDN | 12/23/2009 12:00:00 AM | Borut Grgic
Though late to the Caspian energy game, China is the first to plug-in in a big way, opening a 1,140-mile-long pipeline that will carry gas from Turkmenistan to China.
Though late to the Caspian energy game, China is the first to plug-in in a big way. This weekend, just two years after the project was announced, Chinese President Hu Jintao opened the 1,140-mile-long pipeline that will carry up to 40 billion cubic meters, or bcm, of gas from Turkmenistan to China.
This is a huge boon not only for China’s energy security, but also for its regional influence.
The new Turkmenistan-China gas pipeline also passes through Uzbekistan and Kazakhstan, and is the biggest non-Russian pipeline project ever to be completed in the post-Soviet region. The strategic significance of this pipeline cannot be underestimated. With up to 40 bcm due to flow through the pipeline for the next 30 years, China has become the biggest buyer of Caspian gas, displacing even Russia.
For states such as Uzbekistan and Kazakhstan, this pipeline yields significant revenues in terms of transit fees, and also provides them with a channel to sell their own gas to China. Uzbekistan in particular is believed to have significant gas reserves, which it can sell to external buyers in the future.
Most importantly, a stronger Chinese presence in the region provides considerable leverage and balance against over-dependence on Moscow. The new pipeline will help ensure autonomy in decision-making for the Central Asian leaders, while bringing to the forefront political and economic links that existed for centuries before the Soviet Union along the east-west corridor also known as the Silk Road.
The new Turkmenistan-China pipeline is significant for at least one other reason: Everything about it contrasts with the European Nabucco project. Europe has been eyeing Caspian gas for a decade now, but so far it has very little to show for its efforts. The biggest obstacle to Europe’s Caspian policy is Europe itself. There are too many competing interests pushing forward contradictory projects: Including Nabucco, White and South Stream and the TGI, there are at least four competing European projects aiming to unite Caspian producers with European consumers.
The patience of the Caspian producers and transit countries such as Azerbaijan is running thin. Baku, too, has started to look for alternative options to sell its gas – considering options such as Iran, Russia and even China by connecting Azerbaijan across the Caspian Sea to the new Turkmenistan-China pipeline.
The European gasmen crowding hotel lobbies in Baku and Ashgabat keep convincing themselves that Europe is indispensable to the gas security of Azerbaijan and Turkmenistan. This crowd is deeply convinced that the Caspian producers need access to the European markets more than we need Caspian gas. The logic is absurd, but it is consistent with European arrogance. Actually, the facts speak to the contrary.
This summer, Baku signed a deal with Russia for 0.5 bcm of gas and the Azerbaijanis are about to sign a similar deal with Iran. At the same time, the Azerbaijani gas due to be sold to Europe is being blocked by Turkey, which insists on unreasonable tariff terms and a below-market price for the gas it buys from Azerbaijan. China, on the contrary, pays market price for Caspian gas, and doesn’t ask for a “brotherly discount” (as the Turks are demanding from Azerbaijan); the country also does not attach a long list of human-rights issues to its gas relations with the Caspian states.
Can Europe still get its hands on Caspian riches? The prospect is extremely bleak, and not because Caspian states won’t sell to Europe or because Chinese negotiators are so much better at landing deals. The problem is in Europe. We are too divided and not strategic enough when it comes to managing our gas relations with current and future partners, and Brussels has no leverage on Ankara to force Turkey into a more cooperative mode on the transit of Azerbaijani gas to Europe.
But that’s the nature of European common foreign policy – a lot of talk and a little action – and, further, the nature of European energy policy. In competing against each other to get their hands on Caspian gas, the European energy companies are not only hurting themselves and European consumers, but also giving China free reign to determine the flow of Caspian gas. This lack of European solidarity when it comes to Caspian energy must be put aside immediately. Otherwise, there will be no Caspian gas left for Europe to handle, and no one left to drink beer with in the pubs of Baku and Ashgabat.
* Borut Grgic is the founder of the Institute for Strategic Studies in Brussels.