Russia on March 13 went on the diplomatic offensive in an attempt to undermine Azerbaijan's credibility as an energy exporter, and cast doubt on the financial viability of a Western-backed pipeline plan. The Russian criticism, experts believe, is a response to earlier moves by Baku and the United States to press ahead with the construction of a trans-Caspian pipeline.
On March 5, Azerbaijan took a significant step toward restoring its working relationship with Turkmenistan, signing an inter-governmental agreement to repay Baku's outstanding debts to Ashgabat covering Turkmen gas exports in the 1990s. Under the agreement, Baku will pay up close to $45 million for the Turkmen gas that it has imported since the 1991 Soviet collapse. Prior to the agreement, Turkmen officials had sought upwards of $56 million in payment, while Baku had insisted that it owed only $18 million.
The debt issue had been a source of considerable friction in bilateral relations. The dispute's removal, experts hope, could catalyze efforts to build the trans-Caspian Pipeline (TCP). [For background see the Eurasia Insight archive]. Turkmenistan and Kazakhstan, Central Asia's two largest natural gas exporters, have expressed vague interest in the TCP plan, but have made no specific commitments to date. At the same time, both countries have pledged in principle to participate in a Kremlin-sponsored project to expand an existing route, dubbed Prikaspiiski, which skirts the Caspian coastline to Russia. [For background see the Eurasia Insight archive].
Russian officials believe that the Prikaspiiski project would ensure Moscow's long-term control of Central Asian gas exports. If Turkmenistan and/or Kazakhstan ever made a significant commitment to TCP, on the other hand, Russia's ability to control exports, and therefore influence prices, would be severely compromised.
US diplomats have been highly active in the Caspian Basin in recent weeks, striving to lay the groundwork for a TCP agreement. Turkmenistan's leader, Gurbanguly Berdymukhamedov, has been the primary target of US diplomacy, as Ashgabat's agreement to a large TCP role is seen as crucial to the project's economic success. The TCP's viability is, in turn, seen as vital for the success of another pipeline project, known as the Nabucco route, which would ferry natural gas from Turkey to points westward in Europe. [For background see the Eurasia Insight archive].
From February 29-March 3, Steven Mann, State Department's Caspian Basin energy trouble-shooter, visited Ashgabat to lobby various Turkmen officials, including Berdymukhamedov, for closer energy cooperation. The trip was Mann's second to Turkmenistan since the start of 2008.
Another high-ranking US diplomat, Deputy Assistant Secretary of State Matthew Bryza, also toured Caspian Basin nations in early March. One of the objectives of his diplomatic mission was to promote a transit fee agreement between Azerbaijan and Turkey that could facilitate the flow of gas from Turkmenistan to Western Europe via the TCP and Nabucco routes. "It is necessary to solve the problems. It is time to go forward [with the Nabucco project]," Bryza told journalists in Baku on March 4.
Despite the lack of a formal Turkmen or Kazakhstani commitment, the first steps to build TCP have already been taken. On February 29, Azerbaijan's state energy concern, SOCAR, awarded a $1.7 million contract to the US firm KBR to conduct a TCP feasibility study.
Clearly alarmed by the building body of evidence that TCP and Nabucco are moving forward, Russia took action March 13 designed mainly to sow doubt in Berdymukhamedov's mind about the prospects for the two pipelines. In comments published by the Vremya Novostei newspaper, Russian Deputy Foreign Minister Andrei Denisov characterized TCP and Nabucco as being economically unsound.
Denisov argued that there were only three possible exporter options available to fill the Nabucco route Azerbaijan, Iran and Turkmenistan. Iran was problematic both for political reasons, and because it would need "tens of billions of dollars" in investment to unlock existing reserves and build the infrastructure needed to connect to Nabucco. Azerbaijan, meanwhile, can't be relied up to handle such a large export obligation, Denisov claimed.
"Azerbaijan's hydrocarbon reserves are large, but not sufficient to ensure the pumping of 20-30 billion cubic meters of gas" via Nabucco," Denisov said. "Lower capacities would be senseless."
"We can speak about Nabucco being viable only in the distant future," Denisov added. "It would thus be in Turkmenistan's best economic interests to pump gas by existing routes."
While Denisov's comments were a clear attempt to dissuade Turkmenistan from joining a Western-controlled export route, some experts in Baku believe Russia may also be resorting to more indirect means of trying to scuttle the TCP-Nabucco plan. In particular, at least one analyst sees a potential correlation between the movement toward TCP construction and the recent spike in tension along the Contact Line separating Armenian and Azerbaijani troops. The last 10 days have seen some of the fiercest fighting between the two sides since the 1994 cease-fire pact. [For background see the Eurasia Insight archive].
"An agreement on a trans-Caspian pipeline is against strategic interests of both Russia and Armenia. It is possible that by this hostility at the frontline, Russia is trying to [undermine] the negotiations on the Nabucco and trans-Caspian gas pipelines
Rovshan Ismayilov is freelance journalist based in Baku.