Business, Finance & Economics

Pipeline talks put Turkey at center stage


ISTANBUL — Recep Tayyip Erdogan's visit to Brussels last week, his first since Turkey began negotiations to join the European Union in 2005, threw the spotlight on an issue given fresh impetus by the recent gas crisis between Russia and Ukraine: the Nabucco pipeline project.

Nabucco, symbolically named for Giuseppe Verdi's 1842 operatic masterpiece that became a rallying cry for a generation of Italians determined to fight off Austrian military occupation, promises a different kind of freedom — that of energy independence from Russia.

Erdogan's visit, amid the distractions of the U.S. presidential inauguration, served to remind all parties to a summit beginning this week that Nabucco could become a key sticking point in negotiations over EU accession, which Erdogan described as a "top priority" for Turkey.

Erdogen had threatened to "review" Turkey's support for the $10 billion Nabucco project if the energy chapter of accession talks remained blocked, although Ankara has since backed away from the threat.

The Nabucco pipeline, which aims to bring natural gas reserves from the Caspian and Central Asia to Europe via Turkey, is a much-heralded attempt to obtain independence from Russia's Gazprom, the world's largest gas company.

The summit, bringing together ministers from the six shareholding countries — Austria, Hungary, Romania, Bulgaria, Germany and Turkey, as well as the potential suppliers, Azerbaijan, Egypt, Iraq, Kazakhstan and Turkmenistan — is a chance to iron out problems and shore up commitments on the pipeline's financing and construction. The U.S., EU, Russia and Georgia have also been invited.

The EU has sought to diversify its energy resources since the Russian invasion of Georgia last summer and the recent gas dispute between Moscow and Kiev, which saw trans-Ukraine supply lines to Europe shut off for more than a week.

The 4,400-kilometer proposed pipeline, stretching from Turkey to Austria, would transport natural gas from reserves in the Caspian region and Central Asia to Europe via Turkey.

While all parties to the summit, being held in Budapest, Hungary, recognize the need for a reduced reliance on Russia for energy, it seems that few can agree on the financial or political terms of the project.

But, analysts say, the Budapest summit is really more of an attempt to firm up a joint commitment to the project than hammer out concrete steps forward.

"They have to prove that all the countries involved in Nabucco have the political will to go ahead with the project and will do their utmost to bring it into being," said Barcin Yinanc, of Turkish newspaper Hurriyet.

If construction on Nabucco begins next year, as currently envisaged, the new pipeline could be operational by 2013.

Bulent Aliriza, director of the Turkey Project at Washington, D.C.-based think tank the Center for Strategic and International Studies, says the advantages for European countries, and for Turkey, are "undeniable."

"Europeans need the gas, and linked to that, they want to break away from the Russian monopoly," he said. "There is gas in and around the Caspian, and Turkey wants to be the key conduit in the transportation of this gas to Europe."

As an energy-transit nation that links Caspian and Central Asian suppliers with European consumers, Turkey has thus far worked its geostrategic advantage.

During Erdogan's Brussels visit, Nabucco featured prominently as the prime minister strove to regain momentum in Turkey's EU bid, which faces significant opposition, especially from France and Germany, where public opinion towards Turkish membership is low.

However, said Yinanc, "when people are sitting without heat in their cold home they understand, in a very real way, the importance of Turkey and why it should enter the EU."

Turkey's minister for EU affairs, Egemen Bagis, also reiterated Ankara's support for the project, backpedaling on Erdogan's threat to "review" Turkish support for Nabucco, saying, "Turkey will not use its cards as a weapon."

Turkey's bid to join the EU requires 35 chapters covering key areas of governance to be opened and agreed, with the energy chapter currently closed due to objections by Cyprus, which joined the EU in 2004.

Such support does not come cheap, however. Turkey is demanding, among other changes, a 15 percent cut of the gas transiting through its territory, as well as a price discount on gas delivered to Turkey from Azerbaijan.

"The fact that Turkey's demands have not been resolved prior to the summit has left a question mark in people's minds," said Zeyno Baran, Director of the Center for Eurasian Policy, who will be attending the summit. "Turkey has always been seen as the alternative, safe, reliable transit route to Europe and we are all just hoping this is only a hiccup and not more difficult to resolve."

While Nabucco enjoys EU support and U.S. approval, it has struggled from the start.

"On the consuming end, Europeans talk about diversifying but do not want to damage their relationship with the Russians," Aliriza said.

Russia has held European energy supplies in a tight grip and many experts doubt whether Nabucco's partners have a unified resolve strong enough to go up against the Kremlin.

Ensuring adequate supply from Azerbaijan, Turkmenistan and Iraq is yet another hurdle facing Nabucco, with suggestions that the project’s viability would depend on Iranian gas, a prospect roundly rejected by both the EU and the U.S.

And, Nabucco's price tag keeps rising, up $6 billion already on the initial proposal.

"While it looks great on paper and you have so many officials talking about how great this is, there are complications from one end all the way to the other," Aliriza said.