Day.Az: The White Stream pipeline is being designed to transport Azerbaijani gas via Georgia and onwards via the Black Sea into Ukraine, Romania and then to western European markets. It was said that part of this project is funded by the European Union. How does the EU see Azerbaijan’s capabilities as a reliable and stable gas transporter?
Samuel Lussac: White Stream is an alternative project to both Nabucco and South Stream. It proposes to transport from 8 billion cubic meters (bcm) of gas to 32 bcm in a final stage from the Caspian to Europe. Georgia and Ukraine are the main supporters of this project and a memorandum of understanding was signed in Tbilisi on April 03, 2009 to make official the support of the Georgian government.
However, this project seems to be quite unrealistic for the moment. First, even if the Azerbaijani Minister of Foreign Affairs E. Mammadyarov has said off-the-record in April in Tbilisi that Azerbaijan would support it if Nabucco fails, White Stream seems to be not as advanced as Nabucco - an Intergovernmental Agreement was signed in Istanbul on July 13 - or ITGI (Interconnection Turkey-Greece-Italy) - the first half of the pipeline between Turkey and Greece already exists.
This pipeline would also be quite difficult to build, as it means to construct a submarine tube from Supsa in Georgia to Crimea in Ukraine or Constanta in Romania. Finally, during my interviews with officials from the European Commission a few months ago, they all told me that they did not believe in this project. Why? Because it is the only gas pipeline project in the region which no gas company are part of. The main company within the White Stream consortium is the Pipeline Systems Engineering, which is specialized in the construction and design of pipelines.
It means that this consortium is able to build a pipeline but that it needs to negotiate with gas companies such as StatoilHydro or SOCAR to buy some gas. This may further complicate the implementation of this pipeline. However, the fact that the EU considers White Stream to be part of the South Corridor shows that it is willing to consider any option to transport gas from the Caspian, and especially from the Shah Deniz field in Azerbaijan, to Europe.
Q: The White Stream pipeline will be running through Georgia… To what extend can Georgia be considered a reliable partner given its troubled relations with Russia?
A: Since a few years now, Georgia’s reliability as a transit country is often questioned. Firstly, it was an issue during the construction of the Baku-Tbilisi-Ceyhan (BTC) pipeline in 2003 when a Russia company took the control of electricity supply to Tbilisi. It was again an issue in 2004 when the construction of the BTC pipeline was stopped because of some concerns on environmental safety in the Georgia region of Borjomi. It is especially a source of concern these last months with the Russian-Georgian war in August 2008, the demonstrations held in Tbilisi in the spring of 2009 and the permanent tensions between both Abkhazia and South Ossetia and Georgia. One might think that the consumers as the producers would not rely anymore on Georgia. Despite such a context, it is still considered as a reliable transit partner and, paradoxically, much more questions have risen about Ukraine as a transit country rather than about Georgia.
During the war between Georgia and Russia, the East-West energy Corridor has been shut down. But the BTC pipeline has been already closed because of the terrorist attack in Turkey on August 05, 2008. The only source of concerns was Russian bombings around the Baku-Supsa pipeline and the explosion of a mine on the Baku-Batumi railroad in the end of August. But, as Georgia is the only way to transport huge volumes of oil of gas (48 million tons of oil and 4.6 bcm of gas in 2008) from the Caspian to the world energy markets, it was not questioned as a transit country.
Moreover, as some Western officials from the European Union and the oil companies stated to me, there is “some stability within the instability” in Georgia. Most of the oil and gas investors are aware of this risk and they firmly believe that it would be very dangerous for an enemy of Georgia to attack the pipelines. It would bear far too heavy political costs, as the European Union, the United States and international financial institutions like the World Bank strongly support these infrastructures. This may explain why Russia during the last war “only” the surroundings of the Baku-Supsa pipeline and not the pipeline itself or one of its pumping stations.
Q: Both U.S. Secretary of State Special Envoy for Eurasian Energy Richard Morningstar and Turkish Prime Minister Recep Tayyip Erdogan have stated that Russia could become a part of the Nabucco project. There even was an opinion that Russia should be thought of as partner. Taking into consideration that Russia doesn’t believe in Nabucco, is there a possibility that it come become a part of the project?
A: Such a proposal is not new: Claude Mandil, the former director of the International Energy Agency, notably made it in 2008 in a report on energy security for the French government. It could be a good way indeed to alleviate the rivalry between the European Union and Russia regarding gas supply to Europe. Such a decrease of tensions would be in the interest of Turkey that wants to keep good relations with both Brussels – it plans to become a member-state of the EU – and with Moscow – Russia represents 63% of Turkish gas imports. Since March 2009, the United States and Russia are getting closer and the latter joining Nabucco would be a strong signal on the international scene. However, in my opinion, such a scenario seems to be rather unlikely.
First, as you said, Russia does not believe in Nabucco and is heavily supported its own project South Stream. The fact that Gazprom is leading negotiations with EDF to see the French electricity company joining the consortium shows that, despite its very high costs (more than 20 billion dollars), this project is not dead. Then, I am not sure it is in the interest of Russia to send gas through Nabucco. It would lose a lot of political leverages compared to the South Stream. As Gazprom is one of the main companies within this consortium (the other is ENI), it has a strong word on the development and the future of the project. Within Nabucco, Gazprom would probably be just a company among others, thus being unable to change the destiny of the project. For these reasons, the statements made by Mr. Morningstar and Mr. Erdogan appear to be just political speeches willing to decrease the political rivalry between Nabucco and South Stream.
Q: What projections can you make about the upcoming Caspian summit, which is expected to be attended by all heads of the Caspian littoral states? Can any decision on the Caspian sea status be reached?
A: I don't think any real decision will be made. The interests of the various parties are too different for expecting in any real change in a near future. However, the most important for the moment is that discussions are still going on. This kind of meetings have been pretty rare these last years and it is notably of great importance that Azerbaijani, Iranian and Turkmen heads of states can, at least, talk together. This is a very important first step before reaching any agreement.
Q: There were much talks about Armenia participating in the Nabucco project...
A: The rumors stating that Armenia would be a transit country for Nabucco seem to me quite unrealistic. In addition to a potential resolution of the Nagorno-Karabakh conflict, it would mean to build a new pipeline between Azerbaijan and Turkey through Armenia while such a pipeline is already available in Georgia and is able to transport up to 16 bcm of gas per year.
Armenia would only be interesting for Nabucco to transport Iranian gas. Such an opportunity would be consider only after the resolution of the nuclear crisis between Iran and the international community and after the expansion of the Iranian-Armenia gas pipeline. Therefore, in my opinion, Georgia will remain in a foreseeable future a major transit country in the transportation of Caspian oil and gas to European and world energy markets.
T. Teymur
Day.Az
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