S-a lansat revista de geopolitica, geostrategie si geoeconomie “Dialogul Marilor” – “Dialogue of the Seas”, o initiativa a Fundatiei Internationale Marea Neagra – Marea Caspica (BSCSIF), diriguita de celebrul jurnalist rus Viaceslav Samoskin. Revista are corespondenti in Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kirgizstan, Republica Moldova, Romania, Rusia, Serbia, Turcia si Ucraina, biroul de la Bucuresti fiind condus de reputatul jurnalist de politica internationala Corneliu Vlad, al carui cel mai recent volum de analize, “Rusia dupa URSS” a fost lansat zilele trecute la Fundatia Nicole Titulescu. Iulian Fota, consilierul prezidential pe probleme de securitate, este presedintele BSCSIF – Romania. Ziaristi Online va prezinta, in exclusivitate, articolul de fond al revistei, care apare in limbile rusa si engleza.
The Southern Corridor
THE POWER MAINLINE OF THE CENTURY
Wind of change on the old Silk Road
Viaceslav Samoshkin
The Black Sea – Caspian Sea region geopolitical highlighting for the past 15 years and its energy and transportation boom is quite natural and understandable.
Foremost, the traditional transport corridor, heir of the Great Silk Road caravan, was blocked for a long time in the twentieth century and especially during the Cold War period. And only after USSR had fold up, followed by formation of eight new sovereign states, the situation started to change. Having an independent evolution, these states were looking their ways out on both regional and world levels. Moreover, these aspirations were in tune with the interests of European Union and with China’s strategy. In 1994, Chinese Premier Li Peng brought up the idea of a modern version of the Great Silk Road. Naturally, this idea had an impetuous feedback from the countries of the region, especially Kazakhstan, Azerbaijan, Turkey and even Romania.
Secondly, the geostrategic importance of these countries as a tampon between Russia (Europe) and the unstable Muslim world (Afghanistan, Pakistan), a source of international terrorism, has increased since the invasion of international forces in Afghanistan (2001) and American forces in Iraq (2003). There is a struggle for political and economic influence in this region. The major participants in this new “big game” are the U.S., Russia and China. This implies another argument for the Caucasus-Central Asian countries to joint efforts over their future political, economic and social development.
Thirdly, the oil and natural gas available in this region comprise a huge amount of energy resources. And here comes the need for powerful transportation arteries to swap these resources, not only to Europe but also to China. The Caspian Sea basin ranks third-largest after the Persian Gulf and Siberia for its oil reserves. In the continental shelf of the Caspian Sea and its surrounding areas lodes of 5.5 billion tons are identified. Some estimate the total reserves to 13,6-27,2 billion tons (for comparison: Kuwait has 13.2 billion tons). As regarding to gas, seven trillion cubic meters have already been explored, while the total volume of gas storages is estimated to be at least 20-22 trillion cubic meters. This means that in several decades, the Caspian region as a global oil reserve will be able to take the place of the Arabian Peninsula and other oil regions in Africa and Latin America.
The struggle for Caspian Sea
By all means this has caused an intense competition among world oil companies; the struggle for the Caspian Sea has begun. Consumer countries (U.S., EU and China) tend to reduce its energy dependence on traditional sources and to diversify routes for energy delivery.
The first “project of the century” was developed and then the Baku-Tbilisi-Ceyhan pipeline was built and launched in 2006. Its costs, mainly supported by Americans ($ 4 billion) are high, but the efficiency is still far from objectives. The designed capacity of the pipeline is 50 million tons a year, but the actual filling of the pipe is still far from this figure. Thus, over the past four years, Ceyhan tankers have pumped 125.6 million tons of Azerbaijani oil and also partially Turkmen oil. It is assumed that Kazakh oil will also supply this pipe. The meaning of the project is primarily political one and, in a certain way aimed at ousting Russia from the region; but the important thing is that it bypasses not only its territory, but also the congested and inconvenient Black Sea channels, and this denotes its special value. In the same time, Baku-Tbilisi-Erzurum gas pipeline was created.
As to alternative oil flows to Europe, one of them promises to be on a Ukrainian route. Recently, the presidents of Ukraine and Azerbaijan – Viktor Yanukovych and Ilham Aliyev agreed to increase shipments of Azeri oil through the Odessa-Brody pipeline. This will be possible primarily due to Azerbaijan’s plans to increase oil production. For example, in years 2011-2014 in this country, 223 million tons will be extracted; in particular, the annual production in 2014 will amount 62.4 million tons.
On the other hand, the option of energy resources swapping from the east coast of the Caspian Sea is considered practical and this fact was confirmed by Azerbaijan and Kazakhstan. According to President Ilham Aliyev, “The oil of neighboring countries, located on the east coast of the Caspian Sea may be transported through the territory of Azerbaijan to the Ukrainian market”. “And this project – he said – will also contribute to a better integration of the Black Sea and Caspian Sea region countries. Thus, we will create another very reliable energy corridor that will connect the Caspian Sea to the markets of Ukraine and the markets of Europe”.
The President of Kazakhstan, Nursultan Nazarbayev talks in the same spirit about the Precaspian resources, but he has in mind a somewhat different route: “It would be nice to open a new route for oil transport across the Caucasus corridor, meaning through the Caspian Sea, Azerbaijan and Georgia to the Black Sea, and further, on tankers to Romania. In this case, the project Constanta-Trieste would be useful to us”. Astana’s interest for this route can be explained for two reasons: firstly, once the biggest Kashagan oilfield is being explored, Kazakhstan will get an additional 50 million tons of oil per year, and secondly, the KazMunaiGaz national Kazakh company owes today 100% shares of Rompetrol Romanian company, which includes two refineries: Petromidia (in the Black Sea) and Vega.
It is important to note that Azerbaijan bears two pipelines in order to supply oil to the Black Sea: the Baku-Supsa and Baku-Novorossiysk. If necessary, they can be used for Kazakh oil transportation. Negotiations in this direction are already happening between KazMunaiGas and SOCAR (State Oil Company of Azerbaijan Republic).
The idea of Nabucco
Another project of the Southern Corridor from the series of alternative projects is the Nabucco gas pipeline, although, his designed capacity is not very high (31 billion cubic meters per year). The original idea of Nabucco was to organize the supply of gas from Iranian fields in the Persian Gulf. But in 2006, as the relations between NATO countries and Iran have downgraded, because of the Iranian nuclear program, the idea of receiving gas from Azerbaijan and Turkmenistan came out. A pipeline would be connecting the eastern border of Turkey to Baumgarten in Austria, passing through Bulgaria, Romania and Hungary.
The shareholders of the project are Bulgarien Energy Holding (Bulgaria), Botas (Turkey), MOL (Hungary), OMV (Austria), RWE (Germany) and Transgaz (Romania). Each shareholder owns 16,67% of Nabucco Gas Pipeline International Gmbh, established on June 24, 2004. And the EU is ready to allocate of €7.9 billion for the construction. The intergovernmental agreement on Nabucco project was signed in Ankara in July 2009. In the year 2012 works are expected to start, in order to launch this important gas pipeline till the end of 2014.
The strategic significance of the project for the participating countries is proven by the fact that, for example, in Romania it is included into the Energy Strategy till the year 2020.
It is required to build an underwater pipeline from the port of Turkmenbashi to Baku in order to transport gas from Turkmenistan. But it is unlikely to accomplish this in the foreseeable future due to the unresolved question of the Caspian Sea legal status; this issue hasn’t been solved even on the recent Baku Summit of Caspian region states, held on November 18. It is assumed that the next attempt will be made in 2011 at the Summit in Russia. Having these clauses, a consortium of European companies is analyzing the opportunities of Turkmen gas transportation to Europe via the Caspian Sea in a liquefied form (3-4 billion cubic meters a year) starting with 2014. Hypothetically, this is possible, but it would require a construction of gas liquefaction plant on the Turkmen coast and a terminal for receiving and re-gasification on the Azeri coast.
There is also another circumstance: after all, is not clear how much gas can Turkmenistan deliver, whereas it is already supplying 30 billion cubic meters a year through the Turkmenistan-China gas pipeline, launched in 2009.
The European Union is able to get gas in limited volumes from Azerbaijan, bypassing in this way, Russia. Azerbaijan has already some opportunities in this sense. While domestic needs are 10-11 billion cubic meters, 28 billion cubic meters were produced from its oil fields in the last year. The European Union plans to receive in the coming years 8-12 billion cubic meters of Azeri gas by ITGI pipeline (Turkey – Greece – Italy). It will be connected to already existing Baku-Tbilisi-Erzurum gas pipeline. The launching is set on year 2012.
The cumulated gas production in Azerbaijan for the years 2011-2014 will be 120 billion cubic meters. In 2011, the country will produce 29 billion cubic meters, and in 2014 – 32 billion cubic meters. We cannot exclude the participation of Azerbaijan in the Nabucco project. According to existing estimates, in order to obtain minimum profitability out of filling, the pipeline should convey about 10 billion cubic meters, and the republic will have available such additional amounts in 2014-2015.
There is also the AGRI project (Azerbaijan – Georgia – Romanian Interconnector), which involves delivery of Azerbaijani liquefied natural gas (LNG) to Romania through Georgia (Kulevi port) and the Black Sea. Ukraine also shows some interest to the Azerbaijan’s LNG, but this will require a re-gasification terminal construction in Odessa.
It is expected that Europe’s dependence on imports of natural gas will grow and will reach by 2020 three quarters of the total demand for gas. This means that the need for additional volumes of natural gas will be at least 60 billion cubic meters.
According to the Romanian professor Radu Dudau, the Nabucco competitors include not only the South Stream project, promoted by Russia, but a series of other, already existing gas pipelines and “tangles” with their infrastructure, like Turkey-Greece-Italy (ITGI), Trans-Adriatic Line, AGRI and others.
The EU interests
In the early 90’s the EU was dealing with the condition of the Caucasus and Central Asia transportation infrastructure – their road, rail and maritime arteries, concerning the development of new routes between Europe and Asia, reducing time and costs for cargo transportation, but also, of course, general development of economic relations and trade along the Southern Corridor. On the 3rd of May, 1993, ministers of transport and trade of the eight countries, former Soviet republics (Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Armenia, Azerbaijan, Georgia), were invited on a conference in Brussels, where the first step towards registration of the TRACECA Intergovernmental program (Transport Corridor Europe-Caucasus-Asia) were made. Here, the agreement on EU financing the technical assistance on development of the European East-West transport corridor, crossing the Black Sea through Caucasus and Caspian Sea, with access to Central Asia, was signed. It was conceived as an alternative to a more northern Trans-Siberian railway and highway passing through the territory of Russia. The integration of this corridor into the trans-European transport networks is also foreseen. Naturally, the TRACECA is also regarded as a booster for the development of economic relations and trade along the Corridor.
In 1996, Ukraine and Mongolia joined the TRACECA program, then – Republic of Moldova and in 2002 – Bulgaria, Romania and Turkey.
But the key moment was signing the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor, on September 8, 1998, at the International Conference on restoration of the historic Silk Road, held in Baku. The Agreement contains an annex on the international road and rail transport, international trade marine navigation, customs and registration procedures.
We should emphasize the fact that EU has aimed to support from the very beginning the political and economical independence of the CIS Black Sea-Caspian Sea region countries, and subsequently – the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor member countries.
What specific projects does TRACECA program include and how do they run?
EU has allocated until year 2002, €50 million to finance technical assistance projects and has spend more than €100,2 million on investment projects for the rehabilitation of road and rail arteries, port infrastructure, terminals, cargo containers, ferryboats starting with the Black and Caspian seas up to Ilyichevsk near Odessa and to Bishkek in Kyrgyzstan.
According to the project, which started in 2007, the railways of Azerbaijan (from Baku), will be connected to the railways of Turkey by the railways in Georgia. For this purpose the route of the Baku-Georgian border, having the length of 503 kilometers is set into motion. It is supposed that a steel railway is to be built from the Akhalkalaki station in Georgia to Kars station in Turkey. The project cost is estimated at $800 million, which is equally assumed by Azerbaijan, through providing credit for Georgia, and Turkey. In the future, this route is expected to have a transport capacity of 25 million tons of cargo per year. An underwater railway tunnel is being built in Turkey under Bosphorus in Istanbul, which will provide a direct link to the European railway network. All of these lines are part of the high-speed rail Corridor Europe-Caucasus-Asia.
In 2009, the Corridor has transported 56 million tons of cargo, including bilateral traffic between members, which is lower than in 2008.
However, in recent years, the interest of European Union to TRACECA project has lowered down. The expectations from this project have not been yet justified, because of the geographical complexity of the route, as well as organizational difficulties in transporting goods across the borders of the participating countries.
Russian interests
The accelerated development of the Black Sea – Caspian Sea region, which includes Russia’s North Caucasus, is objectively beneficial for her from several points of view.
This region is the most vulnerable to Russia from a security standpoint, because of the two resulting threats – international terrorism, which feeds the North Caucasus separatism, and drug trafficking (we can say that the “Silk Road”, in the sense drug transportation, unfortunately, already exists).
Therefore, the full cooperation of the countries in the region, strengthening their economies, infrastructure and human welfare, embedding European standards in the fields of democracy, human rights, civil society development and strengthening dialogue and religious harmony – that is on what the Black Sea Caspian Sea International Fund (BSCSIF) aims its activities – inevitably strengthens the stability and security in the region, weakens the position of international terrorism and drug trafficking, therefore being beneficial to Russia. This policy for active participation in this regional cooperation has been already fixed in Russia’s foreign policy strategy since year 2002. Therefore, her participation in the BSCSIF project seems quite natural.
Russia’s government is doing everything to raise the economic and social standards of its North Caucasus, to increase the inflow of investments in there, both public and private, to create more jobs and improve the social and cultural infrastructure. For poverty, by the way, is one of the factors conducive to recruit fighters-separatists from the North-Caucasian youth range.
In this context, the appointment of Alexander Khloponin as a plenipotentiary representative of the Russian president in the North Caucasus is significant. He is very appreciated for his qualities of a successful businessman and an efficient governor of Krasnoyarsk region, also due to the authority and confidence he enjoys in the business environment, he can act as a guarantor for private investment in the region.
The construction of Olympic complex in Sochi for 2014 Winter Olympics will contribute a lot to the modernization of transport and tourism infrastructure in the region.
Russia actively participates in the development of transport corridors in the south. Together with Kazakhstan, it increases the rail and road transit of goods from China to Europe. In addition, there is a project of transportation corridor “North-South”, the agreement on which was signed between Russia, India and Iran in September 2000. Later, Belarus, Kazakhstan, Tajikistan, Armenia, Azerbaijan, Kyrgyzstan, Ukraine, Bulgaria, Turkey, Oman and Syria have joined it. The project “North-South” has three sketch routes to Iran: 1) via Kazakhstan and Turkmenistan, 2) via Azerbaijan or 3) across the Caspian Sea. The end points of the corridor in the north are: the Baltic ports of Russia, as well as the passing points on the border with Finland, Belarus and Baltic countries; and in the south: Iran’s Persian Gulf ports, where goods are being shipped to India by sea. However, the development of this corridor requires the construction of a new railway across Kazakhstan and Turkmenistan, while a large share of cargo traffic between Russia and Iran is carried by sea.
There is another mega-project examined by Russia and Kazakhstan. This is a plan of new connections between the Caspian and Azov seas. There are two options: channel “Eurasia” (revival of the Stalinist project – the 740-kilometer Manych channel, from the Azov Sea through Krasnodar and Stavropol, which has been frozen once World War II begun) or the construction of a second line of the Volga-Don channel (1065 km. length). The Moscow Hydroproject Institute has already accomplished the necessary studies, while the two leaders should take the final decision.
According to the Russian Prime Minister Vladimir Putin, this project “would also radically change the geopolitical situation of the Caspian states and allow them to become sea powers”. But the economic aspect is the important one. The main cargo on the new path is oil. 20 oil and gas fields are found and more than 250 promising oil-bearing areas are identified on the Caspian shelf. The forecasted resources of oil fields are estimated around 6-10% of world reserves. For the present, a considerable proportion of Kazakh hydrocarbons is being pumped through the Caspian Pipeline Consortium (CPC). There are other routes, such as the Baku-Tbilisi-Ceyhan pipeline. But in any case, the Kazakh side is compelled to ship oil across the Caspian Sea on tankers, in order to pump it into the pipe and pay for use of pipelines. Then, on the Black Sea, the oil is loaded on ships again. The costs are high. Currently, only the transfer via the CPC costs $ 38 per ton, and through the Baku-Ceyhan pipeline – even more expensive, while transportation by tankers through the channel will be less expensive.
The end of the last year brought yet another news from the region: before visiting India, the Russian President Dmitry Medvedev told about the possible participation of Russia in the TAPI gas pipeline project (from Turkmenistan through Afghanistan to Pakistan and India), the idea on which discussions have been made for 15 years. The length of the pipeline – 1735 km, capacity – 33 billion cubic meters of gas per year, preliminary cost – $7,5 billion. Earlier, at the Ashgabat Summit, the four direct participant countries have signed an intergovernmental framework agreement on the “practical” beginning of this project.
The gas supply is expected to be from Dovletabad field, whose reserves are estimated at 1,7-4,5 trillion cubic meters. However, many experts consider the TAPI project risky because of the difficult situation in Afghanistan and in Kashmir.
Nonetheless, the South Stream gas pipeline project has a strategic importance for Russia. It must pass under the Black Sea and then through Romania or Bulgaria to the Central and Western Europe. The final decision of the Black Sea route is still pending: the Gazprom company is considering both Romanian and Bulgarian versions. A joint venture agreement on design and construction of the pipeline on Bulgarian land was signed in November 2010. In turn, the Romanian side should finish in the first quarter of this year the feasibility study for the project, in case the pipeline will pass through Romanian waters and territory. For each of the two countries the option of disbranching from the main thread stays on, which would mean not transit, but only delivery to the consumer.
As to the technical parameters of the South Stream pipes, they are: capacity – 63 billion cubic meters a year, or 35% of the total annual Russian gas exports, launching – year 2015, the estimated construction cost (here is the most vulnerable point of the project) – from €19 up to €24 billion. The French company EDF may join those two main shareholders of the South Stream – Gazprom and Italian Eni (holding 40% shares each).
The Caspian Sea juridical state
The problem of the new status of the Caspian Sea occurred immediately after the emergence of new three littoral states – Azerbaijan, Turkmenistan and Kazakhstan. But unfortunately, this problem has not yet been solved on none of the three summits of the five states of the region. However, on the last one, in Baku (November 2010), the light at the end of the tunnel has showed up. Preparing for signing the convention on the Caspian Sea status, which may occur at the next summit in Russia in 2011, diplomats should develop proposals on a national coast zone scale, on the basis of 24-25 nautical miles.
The stumbling block is how to deal with the Caspian Sea – a lake or a sea? If this is a sea, which opposes to Russia and Iran opinion, then the international maritime law will be applicable, and the Volga, along with its channels, Volga-Don and Volga-Balt with access to open seas, should get the status of an international shipping channel, and, respectively, free navigation. In the same manner, the delimitation of national coastal zones and shelves will occur according to this law. But it seems that, at this moment all parties are willing to work out some midpoint option.
Until the status of the Caspian Sea is not clear, the construction of transcaspian gas pipeline from Turkmenistan to Azerbaijan – the countries lobbying for this project – is not possible. The Caspian pipe is designed to be the basis for the international Nabucco project. Russia sticks to the environmental issue of the project and does not agree with the construction of such a pipeline. Russia believes that due to the enclosed body of water of the Caspian Sea-Lake, there will be an inevitable danger of environmental catastrophe, which can have by far terrifying consequences than the recent disaster in the Gulf of Mexico.
One more alternative
Meanwhile the construction of the Nabucco gas pipeline is for some reason delayed, Romania and Azerbaijan are considering new proposals referred to the diversification of energy transportation routes to the EU countries. In April 2010, the “Memorandum regarding mutual understanding on cooperation in the field of supply and transportation of liquefied natural gas” between Azerbaijan, Georgia and Romania was signed in Bucharest. This relatively not expensive project, called AGRİ (Azerbaijan-Georgia-Romania Interconnector), yields for transportation of natural gas from the Caspian Sea through the Black Sea waters to Europe, by joining efforts of three countries. In this case, Azerbaijani gas will be liquefied in Kulevi (Georgia) and then transported to Constanta on particular ships, where it will go through re-gasification process. In the first stage, from three to eight billion cubic meters of gas will be supplied a year, later – up to 20 billion.
On September 14, the declaration of support for the AGRI project was signed in Baku. Together with the presidents of Azerbaijan, Georgia and Romania, it was signed by the Prime Minister of Hungary. Bulgaria has also expressed its interest in participating in the project.
The joint venture AGRI LNG Project Company, headquartered in Bucharest, which will be responsible for project, is already registered in Romania. Its founders are Romgaz (Romania), SOCAR (Azerbaijan) and GOGC (Georgia). It is expected that the EU will take part in financing the feasibility study of the project, also in its implementation, since, as much as Nabucco, AGRI will work towards the development of European energy infrastructure in the Southern Gas Corridor.
In this article we touched on only some aspects of the historical awakening to a new life of the ancient intercontinental main. The palette of this economic recovery is far richer. For example, one of the most important aspects is the joint efforts of countries in the region aimed at environmental protection. And we will constantly come back on this matter on the pages of our magazine.
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Black Sea – Caspian Sea International Fund (BSCSIF) is a non-governmental, non-for-profit organization, established in March 2009 in Bucharest, following a common idea of Traian Băsescu – President of Romania, and Ilham Aliyev – President of Azerbaijan. The organization is lead by reputed representatives from 11 countries in the region – politicians, professors, diplomats from Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Russia, Serbia, Turkey and Ukraine.
