As geopolitical tangles go, the controversy over pipelines all along the rim of Eurasia can seem pretty daunting to sort out, but at bottom it is not all that complicated. If you rule out Russia as a source of additional gas for Europe, and you assume that Azerbaijan cannot displace Russia by itself, you are left with the following options: Iran, Kurdistan, and Israel and Cyprus. Turkey is needed as a corridor for any of this, so Turkey's relations with these various nations is an important factor to consider. Turkey's position gives it leverage with each of these actors, an unexpected boon from the Crimean crisis.
The standoff over Ukraine hovers in the back of this controversy; there too a complicated array of pipeline politics is playing out. The Ukrainians can't pay for the Russian gas and are basically flat broke. The Russians are within their rights in raising prices, but Ukraine can't pay even for cheaper gas, so that is less significant than Ukraine's generally bankrupt finances (hence its inability to service the debt for gas previously consumed, estimated by Russian president Medvedev at $16 billion). If the Russians stop shipments of gas intended for Ukrainian consumption, the Ukrainians would then probably follow suit and suspend transits of Russian gas through Ukraine to Europe. To avoid those tumbling dominoes one would need some kind of diplomatic settlement among Russia, the EU and America, but the prospects for that in the short term look pretty dismal.
Here's the take of Alexander Panin, "New Sanctions May Freeze South Stream Pipeline," writing in the Moscow Times, April 9, 2014:
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As the EU presses on with sanctions against Russia for seizing Crimea, the $50
billion South Stream pipeline, meant to bring Russian gas through the Black Sea
to Europe, may be frozen in favor of other projects.
The European Union is close to freezing the progress of South Stream and has
warned Bulgaria, the first country the pipeline would have a link to in Europe,
to be very careful and not to interfere with the EU's new toughened position on
the pipeline, said European Commission chief Jose Manuel Barroso, The Daily
Telegraph reported Tuesday.
On Thursday, Bulgarian Foreign Minister Kristian Vigenin said in an interview
with Reuters that while the standoff between the West and Russia over Ukraine
may temporarily disrupt realization of the South Stream gas pipeline, there is
no threat to it in the long run.
"Well, generally nobody is putting the project under question, but of
course in a time when political relations become more complicated this may
affect the speed with which the solutions are to be found," Vigenin said.
While South Stream is still far from receiving all the necessary permits to
operate across EU, Guenther Oettinger, the European Commissioner for Energy,
earlier said that discussions with Russia on the link were suspended.
South Stream pipeline will transport gas from Russia's Yamal peninsula in the
north, across the country to the Black Sea and underneath it to Eastern Europe,
bypassing Ukraine.
With a full design capacity projected at 63 billion cubic meters per year, it
aims to supply 15 percent of Europe's gas by the end of 2018. Delivery of the
first 15 billion cubic meters of gas per year is slated to start already by the
end of 2015.
Now, with the standoff over Ukraine, Europe may consider other alternatives. A
priority may be switched to gas supplies from Azerbaijan's Shah Deniz gas
field, Rosbalt news agency said Tuesday, citing European Commission's Barroso.
But this one gas field will not be enough to meet European demand, said Mikhail
Krutikhin, a partner and analyst at consulting firm RusEnergy.
Azerbaijan can supply about 10 billion cubic meters of gas per year, which will
clearly not cover up for the South Stream, Krutikhin said, adding that other
alternatives, if combined, could create a rival to the widely discussed
pipeline.
"Iran is increasing the capacity of its pipelines. It is able to transport
10 billion cubic meters of gas per year to Turkey today and this could be
boosted to 20 billion cubic meters and re-exported to Europe," Krutikhin
said.
Among other alternatives, he named the Iraqi Kurdistan zone that could supply
up to 30 billion cubic meters of gas per year and excess gas from Israel and
Cyprus, which could together provide another 12 billion cubic meters.
"If Turkey agrees to become a transit corridor for all this gas, it could
fill the Trans Adriatic Pipeline going through Albania to Italy or there could
be a return to the Nabucco West project which aimed to transport gas through
Turkey to Bulgaria and Romania toward Austria," Krutikhin said.
Nabucco West was abandoned in 2013 because it lacked gas to fill it to design
capacity and it was labelled too expensive and lost support from main
stakeholders.
At the same time both Nabucco and Trans Adriatic Pipeline would be economically
competitive with South Stream, Krutikhin said, because with a price tag of more
than $50 billion for all of its sections it is a "very expensive project
that is unlikely to pay off."
South Stream's offshore part under the Black Sea is planned to be built by a
consortium of international oil and gas companies led by state-owned Gazprom.
Other participants are Italy's Eni, France's EDF and Germany's Wintershall. And
most of them so far have voiced their support of the project.
A spokesman for Eni said, citing the company CEO Paolo Scaroni, that
"South Stream is a very important project from a commercial point of view
and we ought to be in favor of it to avoid the risks of transit [of gas]
through Ukraine."
Wintershall agreed that the pipeline will ensure security of gas supplies to
the EU and also voiced support for the project.
"Construction of the pipeline is on schedule. We are operating on the
assumption that the applications required continue to be duly processed by the
authorities responsible," the company said in a statement.
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From David Johnson's Russialist.org,, April 9, 2014.
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