Caspian “Pentagon”: Gas labyrinths of politics

The Caspian Sea region – once the area of interests of two Soviet countries and Iran – has turned into the playground of at once five countries after 1991. Division of the Caspian shelf and its resources has grown into a serious problem, as “hard cash” for energy resources is at stake now and fighting for it is flaring up.

Turkmenistan has long been the only country in Central Asia to keep neutrality like an island shut in from the outside world. However, the present-day relations of super powers are gradually bringing the country back to the reality where it will face a dilemma of choosing its foreign policy vector.

The conflict in Ukraine - which the United States and some EU countries used as a reason for another wave of anti-Russian sentiments - has aggravated the problem of gas supply and transit of energy resources to Europe, where they call for energy independence from Russia, but, in fact, try to distance themselves from Russia politically and often do it at the expense of their own budget and opposed to their own national interests.

Lobbying the Trans-Caspian Gas Pipeline (TCGP) project is a case in point.  They remembered it only after Russia abandoned the South Stream and announced an intention to build the Turkish Stream.  Actually, Russia has made Turkey – the country European officials have been long palming off with promises to admit to the European Union - the key actor in the energy market instead of the unpredictable Ukraine.  Turkey is well aware of the cost of such promises.

The attempt to do without Russia will prove costly

As envisaged by sponsors, the TCGP will be part of the so-called Southern Energy Corridor and will link the gas networks of Turkmenistan and Azerbaijan.  The pipeline will run under the Caspian Sea (about 300km) to supply gas to Azerbaijan and then to Europe. On paper, the project looks perfect: Russia is not involved in it, gas supplies to European countries are guaranteed. Even the United States, which assumed the role of EU’s curator long ago, has supported the project. U.S. Minister of Energy Ernest Moniz has confirmed that too. It appears that in practice not everything will run as smooth as on the paper.

“The idea is economically unviable,” says Stanislav Pritchin, a research fellow at the Center for Central Asian, Caucasian and Volga-Urals Studies. “There are several reasons of why it makes no economic sense to implement that project. Suffice it to say that the pipeline from Azerbaijan to Turkey and the entire infrastructure is designed for delivery of gas from the Shah Deniz-2 gas deposit only.  If the TCGP is built, it will be necessary to increase the capacity of the pipeline from Azerbaijan to Georgia and farther to Turkey. The second aspect is the oversupply of gas via Turkey.  They already receive gas from Azerbaijan and Russia, and the supply of the Turkmen gas will not be in favor of any of the existing suppliers. And finally, the key issue: the Trans Caspian Gas Pipeline will run under the Caspian Sea. It will require additional investments and special equipment, which will increase the cost value of gas that is not cheap given the shipment distance. This project is political rather than economic. It demonstrates that the EU prefers any, even the most expensive gas, to the one supplied from Russia.”

It is fair to say that the United States has supported the TCGP project verbally and does not hurry to invest in it so far, thereby pushing its European partners for excessive expenses again.

They say there will be enough natural gas, but not soon

Turkmenistan’s stand is crystal clear: it will be selling gas, but on its own terms only. President Gurbanguly Berdimuhamedov has repeatedly said that the countries of the “Caspian Five” have a sovereign right to implement such projects in the Caspian basin belonging to them. Therefore, such projects can be implemented without the consent of the other countries of the “Caspian Five.”    

“Turkmenistan is actively involved in the preparations for gas supplies to the EU as a party to the Trans-Caspian Gas Pipeline project,” Minister of Energy of Azerbaijan Natig Aliyev said at a meeting with the Caspian European Club (CEIBC). “We have agreed to continue the negotiations on a regular basis. Turkmenistan has announced an intention to sell 30 billion cubic meters of natural gas on its border annually. Nevertheless, there are still many transit-related issues to settle.”

Meanwhile, behind the vague diplomatic wordings there is a big pile of unresolved problems, the most important of which is the lack of agreement on how to divide the Caspian Sea basin to lay the pipe.  Although Astana showed no objection to the peculiar “Ashgabat-Baku” line, Moscow and Tehran will hardly accept that vector. Iran has already expressed concerns over the environmental factors of the given project. Besides, Iran is ready to implement its own gas projects where the neighbor-countries are mostly competitors.  Everyone can remember the talks around the Nabucco project and how it came to naught. Therefore, the forecasts for the TCGP should be conservative. Vice President for Energy Union, European Commission, Maroš Šefčovič said EU is keen to start natural gas supplies from the Caspian region by 2020.  For comparison, Russia looks to implement the Turkish Stream project a year earlier.  The question arises as to whether European taxpayers are ready to pay for gas more just to favor their ambitious politicians.

Terrorism: outside and inside

The United States and EU realize that it is hardly possible to make Russia change its mind. That is why they now try to enlist the support of other countries of the Caspian Sea region, and Iran, first. They promise Iran to lift the sanctions if it shows loyalty to U.S. and Europe.  However, these promises like the “cheerful reports” on diplomatic breakthroughs are just fine words. Iran still remembers Assistant Secretary of State Robert Blake calling on the Central Asian countries to refuse from trading with Iran. The U.S. official made such statement when visiting the region in 2012.  In Iran, they know that the changeable West can easily forget about its promises to lift the sanctions or postpone them in view of “force-majeure circumstances.”

There is another instrument to influence the Caspian region countries: internal destabilizing forces. It is not a secret that many citizens of the Caspian Sea countries get fighting experience by joining the Islamic State.  Although the IS battalions will hardly reach the Caspian Sea region shortly, the actions by the persons who “have returned from there” may become a source of serious destabilization in the region.  In addition, the situation on Afghanistan-Turkmenistan border is no longer calm either. There were reports on clashes on the border, and U.S. has already expressed concern over the growing threat of terrorism in the region.

The only thing to prevent the presence of foreign forces in the Caspian Sea region is that the “Caspian Five” have agreed not to allow the troops of the non-member countries to the Caspian Sea. Will all the five countries remain committed to that agreement in case of an upsurge in tensions? Meanwhile, it is the area the Russian and Iranian security services can render an effective assistance to. They can get the agreements implemented and will not let the armed forces of third countries to the region.

“It is instructive to recall that Russia has already offered creating KASFOR, a joint group for operational cooperation to ensure the regional security.  Simultaneously, U.S. offered establishing the ‘Caspian Guard’ as opposed to Iran and Russia. Neither of the projects has been welcomed by the majority of the Caspian Sea countries,” Stanislav Pritchin said.

To that end, the countries, including the neutral Turkmenistan, will have to specify their foreign policy vectors by choosing either West or Russia.

“Unaccounted” Chinese Factor

Speaking of the Caspian region, one should not ignore another factor that has become rather substantial recently – China’s economic investments.

“China has seriously intensified its activity in the region. Last summer, the third line of the Central Asia-China gas pipeline network was put into service. The C line was designed to deliver 25 billion cu m of gas annually. At present, China buys gas overwhelmingly from the region. The new price parameters of the deals are not disclosed.  Investing in development of gas pipeline from Turkmenistan to China continues as well.  Construction of a D line may significantly change the regional gas market,” Pritchin says. “When the eastern projects are put into service, Russia will get a chance to supply gas to both Europe and Asia-Pacific region and will become a major Eurasian gas hub.”

China keeps investing in economic projects. Although it has not expressed its stand on the Caspian region yet, very soon its economic participation will become tangible enough to be reckoned with. 

Stanislav Pritchin believes the pragmatism of the parties and the experience they have gained since the cold war, when the USSR and Europe actively cooperated in the energy field despite USA’s disfavor, can become a way out of the gas labyrinths of politics. 

 “Russia and EU are neighbors, it is a fact that cannot be changed, and their dependence on each other in the energy field will not disappear either. The decline in the relationships will repeat unless there is mutual respect,” says the analyst.

 Alexander Evgrafov