September 24, 2009

While Western Europe seems bored by the German election, it is being closely watched in the Caspian region. For the countries sitting on the massive energy potential of the Caspian Sea, Sunday's outcome is of vital importance.


Much hangs in the balance for the small former Soviet states – regional stability, relations with Europe, and energy contracts are just a few of the issues. A Social Democrat win on Sunday means the Caspian will go to Russia. For almost a decade, German policy in the region has been subjugated to Berlin’s relations with Moscow. The argument went that Germany should do nothing in the Caucasus-Caspian region that would upset Russia. This policy was applied religiously, to the point of undermining a whole score of European initiatives for the region, including the recent Eastern Partnership proposed by Sweden and Poland.

The boring but striking fact is that European foreign policy without Germany is no foreign policy at all, which is to say, the European Caspian outreach has never work because Berlin was never really on board.

This needs to change. The fact is that Germany can afford a policy in the Caspian region that is at least independent of its Russia policy. It is a given that Russia is and will remain an important partner for Germany, and for Europe. The complex economic relations and the vast potential, which lures German and European companies to the Russia market, despite the difficult Russian business environment, are undeniable factors. But it is also true that Germany’s Russia policy will work better if Moscow gets the sense that Germany is willing and able to compete with Russia in the Caspian region. An increasing number of German and European companies are discovering the vast market opportunities on offer in the Caucasus-Caspian region and in Central Asia.  To fully capitalize on this potential, Ms. Merkel will have to deliver a political strategy that does more than pay lip service to the region. Paying an official visit to the region is a good place to start recalibrating Germany’s relationship with the Caspian states.

The energy picture in Europe and in Germany has changed drastically in the last years.  Russia is no longer the supplier that can be trusted. Moscow has shown Europe with the example of Ukraine how easy it is to break market rules, and how willing it is to trade in contracts for political leverage. There is also the question of free access. If Europe so chooses and if the Caspian states agree to sell their gas to Europe, why shouldn’t the EU have access to Caspian energy without having to first check with Moscow?  With RWE now on board the Nabucco project, the southern gas corridor strategy is becoming more palatable also to Berlin’s tastes. Germany’s leadership on energy security is vital to Europe’s ability to tap the Caspian energy market. Nabucco is a realistic European project if backed by Germany. Without it, it will remain a pipedream.

 The Caucasus-Caspian security is also compromised by the protracted conflicts, which have been frozen for sometime now. Armenia’s occupation of Azerbaijan’s Nagorno-Karabakh territory is a major obstacle to a functional and stable energy relationship between Europe and the Caspian countries. The security situation is deteriorating and frozen conflicts never remain frozen forever. Europe’s preference for non-engagement will eventually end up costing us our access to the Caspian energy. No gas and oil can flow west if there is a conflict between Armenia and Azerbaijan. Russia knows this and probably so do many in Europe. But European ability to impact the peace talks between Armenian and Azerbaijan is nil if Germany remains more preoccupied about managing the Russian reaction to a European effort at peace-making in the region than it is concerned about the prospects of a peace deal itself.

This brings us back to the German election. With a new government in charge of the German foreign policy – should Ms. Merkel win with big enough margin to bring into a coalition some of the smaller parties and leave SPD in the opposition – there is a real opportunity for Germany to revive its Caspian policy.  And it should do so, because its vital economic and strategic interests in the region hang in the balance, as does Europe’s energy security.
 
Borut Grgic is the founder of the Institute for Strategic Studies.

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