European Energy Policy Needed
Late to the Caspian energy game, China is the first to plug in in a big way. This weekend, only two years after the project was announced, Chinese President Hu Jintao opened the 1140-mile long pipeline that will carry up to 40 bcm of gas from Turkmenistan to China. This is a huge boon for China’s energy security, but also for China’s regional influence.
The new Turkmenistan-China gas pipeline also passes through Uzbekistan and Kazakhstan, and it is the biggest non-Russian pipeline project ever to be completed in the post-Soviet space. The strategic significance of the Turkmenistan-China 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 like Uzbekistan and Kazakhstan, this pipeline yields significant revenues in terms of transit fees, and it 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, and it brings to the forefront the political and economic links that existed for centuries before the Soviet Union – 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 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 – from Nabucco to 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 like Azerbaijan is running thin. Baku too has started to look for alternative options to sell its gas – considering options like Iran, Russia and even China by connecting Azerbaijan across the Caspian Sea to the new Turkmenistan-China pipeline.
The European gasmen that are crowding the 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. This 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 .5 billion cm of gas and the Azeris are about to sign a similar deal with Iran. At the same time, the Azeri gas due to be sold to Europe is blocked by Turkey, which insists on unreasonable tariff terms and a below-market gas price for the gas it buys from Azerbaijan. China on the contrary pays market price for the Caspian gas, and they don’t ask for a brotherly discount (as the Turks are demanding from Azerbaijan); they also don’t attach a long list of human rights issues to their gas relations with the Caspian states.
Can Europe still get its hands on the 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 the Caspian gas, the European energy companies are not only hurting themselves and European consumers, but they are 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 in Baku and Ashgabat.
Borut Grgic, a nonresident senior fellow at the Atlantic Council, is the founder and chairman of the Institute for Strategic Studies in Brussels. Photo credit: Reuters Pictures.