Transatlantic Politics

Following the Russian military invasion, Georgia might soon be left out from the vital energy corridor now trasiting its territory, if Azerbaidjan comes to terms with Armenia over the frozen conflict in the Azeri region of Nagorno-Karabakh.

According to  Iranian Ambassador to Baku, Naser Hamidi-Zare, Iran is willing to mediate between Armenia and Azerbaijan over Nagorno-Karabakh.

“Iran proposed to mediate between Azerbaijan and Armenia in the resolution of the conflict” Hamidi-Zare said, adding that Tehran has held discussion on this issue with both parties of the conflict.

Why the sudden interest in Tehran for this very old conflict? Apart from an obvious image gain if it were to succeed in the mediator role, Iran wants to counter the US influence in the region. Early plans of the now functional Baku-Tbilisi-Ceyhan oil pipeline took into consideration another route, through Azerbaijan and Armenia, right on the border with Iran (see map). But with the US sanctions over Iran and the frozen conflict right in the middle of the shortest route from Baku to Turkey,, Georgia was then seen as a safer alternative.

But following the brutal "unfreeze" of the 2 Georgian frozen conflicts in South Ossetia and Abkhazia, now recognized as independent republics by the Kremlin, Azerbaijan is already hesitant in committing fully its exports through Georgia, rerouting some of these through Russia. And if its conflict with Armenia was to be solved, guess where the shortest route for its large oil and gas supplies would be? Exactly. Through Armenia.

Another key player in this whole energy game is Turkey, so far at odds with Armenia over a historical event it won’t recognize - the genocide against Armenians during World War 1 and over the Nagorno-Karabakh conflict, Ankara being a strong supporter of Azerbaijan.

Diplomatic ties were broken off between Armenia and Turkey in 1993, as a sign of support for Azerbaijan. But in the aftermath of the Georgian conflict, Turkish President Abdullah Gul made a historic visit to Erevan, the pretext being a football game between the two countries. And during the UN plenary in New York on September 26, Turkish Foreign Minister Ali Babacan sat down with his Armenian and Azeri counterparts in an attempt to move forward the discussions, so far championed by US envoy to the region Matthew Bryza.

Armenian media hope that Turkey’s increasing distance from the US and closer ties to Russia could work in its favour over the frozen conflict, and could end-up rerouting future Caspian-EU energy links through its territory instead of Georgia. Turkey is favoring both Russian and Iranian gas to be transported by the planned Nabucco pipeline, which is to reduce Europe’s dependancy on Russian gas. The US has so far insisted that Azeri gas and possibly gas from Turkmenistan would suffice for the pipeline.

Yet the Georgian conflict sees regional powers such as Turkey and Iran regrouping and arguably reinforcing their positions on the energy front. Russia can only encourage this.

P.S. According to EUObserver, an alleged Armenian-Russian connection during the Georgian conflict was highlighted in the European Parliament by the chairman of the Foreign Affairs committe Jacek Saryusz-Wolski, who asked EU’s foreign policy chief Javier Solana in a public hearing on 10 September if Russian bases in Armenia were used to launch missiles at Georgia during the conflict. Mr Solana said he could not confirm the information.

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Condoleezza Rice spoke yesterday at a press briefing before travelling to Paris and Tbilisi about the importance to grant Georgia the NATO Membership Action Plan (MAP), an intermediate stage before granting full membership of the Alliance.

One of the reasons for NATO Membership Action Plan and, ultimately, for NATO membership, is that it allows states to overcome longstanding difficulties, differences and conflicts under the umbrella of a collective security organization, defense organization of democracies. I have noted before that had anyone said that you would be able to resolve, for instance, differences between Hungary and Romania, between Bulgaria and Turkey in peaceful ways — no one would have believed it when the Soviet empire broke up. But in fact, under the umbrella of NATO, that has been taking place.
 
And so if you now look across Central and Eastern Europe, one thing that is also very different from just a few decades ago is that the countries that were liberated after the breakup of the Soviet Union and the Warsaw Pact, countries like the Czech Republic, Hungary, Poland, the Baltic states and the aspirants – Albania, Croatia, Macedonia and others are now – have made the transition and are making the transition into transatlantic institutions. That allows them both to resolve their differences and to have a reason, a spur, for internal reform and further democratization, the appropriate relationship between civilian and military leaders and so forth and so on. 

That is why Membership Action Plan has been so valuable, and it’s why the United States continues to stand for Membership Action Plan for Georgia and Ukraine.

She also fiercly condemned Russia’s military invasion beyond the South Ossetian borders and alluded to banning Russia from international organizations such as the WTO, the G8 and the OECD.

When you start bombing ports and threatening to bomb airfields and bombing a city like Gori and bringing troops in a flanking maneuver on the western flank of Georgia and tying up the main roads between Georgia – between Tbilisi and Gori, that’s well beyond anything that is needed to protect Russian peacekeepers. And that is why Russia is starting to face international condemnation for what it is doing.

 
This is not 1968 and the invasion of Czechoslovakia, where Russia can threaten its neighbors, occupy a capital, overthrow a government, and get away with it. Things have changed.

Meanwhile, a common naval exercise between Russia, US, France and UK in the Pacific was cancelled, and NATO refused the participation of a Russian vessel in common maneuvres in the Mediterranean. But are these gestures enough to protect Georgia from a brutal takeover by Russia?

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Coupled with a non-united Europe and the fading influence of the US State Department in Eastern Europe, Vladimir Putin strikes again today on the energy front by securing a deal on the South Stream gas pipeline with Bulgaria, one of his closest allies and also dubbed "Russia's trojan horse in the EU".

During his final visit as Russia's President to a foreign country, Putin managed to get Bulgaria on board for his pet project: The Nabucco pipeline.  This was accomplished even though the South Eastern European country is also a partner in an US-EU backed project designed to be an alternative to Russian pipelines across Eastern Europe and to Russia itself as a gas supplier.

Despite EU optimism, Russia's move is clear: the Baku-Tbilisi-Ceyhan precedent must not be repeated.  The Baku-Tbilisi-Ceyhan gas project was a U.S.-led pipeline that bypassed Russia and brought oil from Azerbaidjan directly to the Mediterranean via Turkey.  This project single-handedly helped Azerbaidjan and neighboring Georgia gain a degree of autonomy from Russia's sphere of influence.

Having witnessed the power of the pipeline, Russia has set its sights on the oil & gas-rich Caspian countries.  As a result, these same former members of the Soviet Union are also becoming more dependent on Russia's state-controlled Gazprom monopoly in an overt attempt by Russian-controlled Gazprom to bring the "lost countries" of the Warsaw Pact back into the sphere of Russian influence.

Reuters summarizes Gazprom's expansion in Central and Eastern Europe. However, Reuters fails to note Russia's recent coup d'etat in Austria, where Putin secured a deal concerning the termination of the previously-mentioned Nabucco pipeline.  The termination point of this pipeline in Austria is at the Baumgarten terminal and is based on the principle that  "if we can't own the pipeline, we should own the faucet". 

Such moves are to be expected from Russia's Gazprom.  Here is a list of Russia's latest energy dealings: 

• BULGARIA
• Gazprom supplies all of the Balkan country's natural gas and transits gas via its territory to Greece and Turkey.
• Russian President Vladimir Putin on Jan. 18 secured Bulgarian participation in the 10 billion euro ($14.66 billion) South Stream gas pipeline.The project, proposed by Italy's Eni  as well as Gazprom, is Moscow's challenge to a rival Nabucco plan to pipe Central Asian gas to the European Union and reduce the bloc's reliance on Russian energy. Gazprom is also interested in buying a stake in Bulgaria's state gas monopoly Bulgargaz if the government goes ahead with plans to list a minority stake on the bourse. Gazprom is also reportedly interested in acquiring the Sofia heating utility plant.
• Bulgaria has picked Atomstroyexport, controlled by Gazprom, to build its new 4 billion euro power plant of Belene.
•  CZECH REPUBLIC
• Czech natural gas firm Vemex has signed a deal with Gazprom unit Gazexport on gas deliveries to the Czech Republic which bypass the former Czech monopoly.
• ESTONIA, LATVIA, LITHUANIA
• Gazprom wants to build gas storage in the former Soviet Union's Baltic states, but it is seeking alternative pipeline routes to avoid dependence on traditional transit states.
• In particular, it wants to build a pipeline under the Baltic Sea from Russia to Germany, which would bypass Estonia, Latvia and Lithuania, as well as Poland and Belarus.
• The planned pipeline is to be built by a consortium, Nord Stream, majority-owned by Gazprom and also Germany's BASF and E.ON
• GREECE
• Putin said last month that Greece wanted to double imports of Russian gas after 2016. He said Greece supported Gazprom's plans to build the controversial South Stream pipeline (a rival to the aforementioned other Russian pipeline: Nabucco).
• HUNGARY
• Under a deal announced on July 13, 2006, Gazprom gained stakes in Hungarian gas and power companies in return for giving Germany's E.ON a share in the Siberian Yuzhno-Russkoye field.
• Gazprom and Hungary's MOL have formed a company to study the proposed extension of the Blue Stream gas pipeline, which takes Russian gas to northern Turkey.
• SERBIA
• In December, Russia proposed to Belgrade a controversial energy pact that would potentially see Serbia included in Gazprom's South Stream gas pipeline.
• In return Gazprom would get a 51 percent stake in Serb oil monopoly NIS for 400 million euros. But the proposal has drawn fire from one faction of Serbia's ruling coalition, which argues the offer undervalues NIS.
• Analysts believe nationalist Prime Minister Vojislav Kostunica wants to accept the offer, to reward Russia for backing Serbia's efforts to block the independence of its breakaway Kosovo province by threatening to use its U.N. veto.
• SLOVAKIA
• Gazprom owns 49 percent of the gas network SPP together with Germany's Ruhrgas (a subsidiary of E.On) and Gaz de France.
• TURKEY
•  Gazprom supplies three quarters of Turkey's gas via southern Europe and by a pipeline under the Black Sea, which it jointly owns with Eni.
• It wants to buy Turkish gas distribution firms is also seeking direct deals with Turkish utilities with an eye towards supplying gas to Israel.

 Putin's Russia understands that energy is the lifeblood of an economy.  Chavez's Venezuela understands that energy is the lifeblood of an economy.  Why do the largest economies in the world, the EU & the US, not do more to secure their own lifebloods? 

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The Nabucco project is one feeble EU attempt to build an alternative to the Gazprom-controlled, already-built natural gas pipeline-network. 

It is supposed to bring gas from Azerbaijan and/or Iran, through Turkey, Bulgaria and Romania to the huge gas-hub in Austria, at Baumgarten. Russia tried first to discourage the Azerbaijan government from moving forward with the project.  Instead, Russia built its own direct pipeline through the Black Sea via Turkey (entitled Bluestream), all the while openly dismissing the Nabucco pipeline, by saying that Russia needs to protect and expand its own pipelines in order to ensure an uninterrupted gas flow to its European clients.  Given Russia's recent history towards energy policy, some might view this sequence of events as disturbing.

But Russia's ultimate strategy came to life 10 days ago, during Putin's visit to Vienna. The gas hub in Baumgarten, where the Nabucco pipeline would be connected to other Western European pipelines is now a shared venture between OMV (the Austrian gas corporate) and..Gazprom - the Kremlin-controlled Russian oil conglomerate!

Can't own the pipeline? No big deal, we'll own the faucet.

This might just be the beginning of a "beautiful friendship" with the Austrians, similar to the Gerhard Schroeder affair.  The former German chancellor struck a deal with Putin just weeks before the election he lost that called for building a direct pipeline through the Baltic Sea linking Germany directly to the gas fields in Siberia.  Doing so conveniently reduces the gas flow through the Baltic states and Poland - who have openly criticized Russia. Punishment and reward in its most basic form.  Since signing this deal on behalf of the German government he no longer leads, Schroeder has been rewarded with a seat on the executive board of Gazprom and he is now actively lobbying for the continuation of this and other projects of the Russian state-controlled giant.

Pictured above is the map of the Nabucco-project. The construction of the pipeline is due to start next year and be ready by 2011. It is not clear yet which branches will be developed first. With Russia having also struck a deal with Kazakhstan and Turkmenistan regarding their Caspian Sea reserves, and with Iran being the second gas producer, there is only Azerbaijan left to feed the pipeline. And Azerbaijan's reserves are not sufficient. With Gazprom waiting patiently at the other end of the pipeline, one might ask if it really matters anymore.

As Ed Lucas puts it in this week's Europe view column -

"Russia has largely won the gas wars before most Europeans even noticed they were being fought. So far this year the Kremlin has stitched up the Caspian (by striking a pipeline deal with Turkmenistan and Kazakhstan). It has nobbled Austria, Belgium and Hungary (to add to its powerful position in Germany, France and Italy). By schmoozing other producers it has begun to form a gas cartel. Russia has also built a strong pro-Kremlin camp elsewhere in the European Union (Greece, and Cyprus chiefly; Hungary, Latvia and Slovakia increasingly; and probably Bulgaria too if anybody looked closely). Its banks and businesses have created a fifth column in the City of London and other world financial centres."

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53% - Nicolas Sarkozy

47% - Segolene Royal

The exit polls are clear: France's new president is the center-right candidate Nicolas Sarkozy. Good news for the economy, immigration policies and France-US relations. Bad news for Turkey, as Sarkozy is a fierce opponent to its future EU membership. He might soften his stance though, especially since Turkey is not due to join before 2014 anyway.

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