The European Union signed an energy agreement on Friday aimed at speeding up the construction of a long-delayed pipeline that would bring gas from the Caspian Sea to Europe and help offset the bloc’s dependence on Russian energy.
The agreement, signed by the leaders of Azerbaijan, Georgia, Turkey and Egypt at a summit meeting in Prague, centers on the 2,000-mile Nabucco pipeline, which would bring Central Asian gas to Europe without passing through Russian territory. The European Union hopes the pipeline will start pumping gas to Europe by 2014. The pressing need to find an alternative to Russian supply was underlined in January when a pricing dispute between Russia and Ukraine resulted in a shortage of gas supplies in several European countries.
Turkey, whose cooperation is essential for the pipeline, has haggled for months over transit rules. It indicated on Friday that it was prepared to sign a transit deal by June. But Turkey’s president, Abdullah Gul, also made it clear that his acquiescence would depend on some progress in Turkey’s talks on membership in the European Union, which have stalled in recent months.
Diplomats said representatives of Kazakhstan, Turkmenistan and Uzbekistan refused to sign the agreement because of pressure from Russia, which supplies one-fifth of Europe’s gas. The Kremlin views the Nabucco pipeline as a potential geopolitical challenge, and it has sought to frustrate its developers at every turn. But the recent decline in energy prices has weakened its influence with the gas producers, creating more of an opening for the West.
Turkmenistan on Thursday defended its "sovereign" right to diversify gas export routes, as the West seeks to loosen Moscow's grip on this energy-rich but reclusive Central Asian nation.
Turkmen President Gurbanguly Berdymukhamedov told foreign energy bosses at a major conference in the nation's flamboyant capital that Turkmenistan, like any energy producer, had every right to look for new customers.
"Today we are looking for conditions to diversify energy routes and the inclusion of new countries and regions into geography of routes," he said, in an apparent snub to Russia which has a near-monopoly on Turkmen gas exports.
"A key component of securing the reliability of international energy deliveries is the diversification of routes, the creation of multi-branched infrastructure for delivery to consumers," he said.
"The diversification of alternative routes today is more than just a beneficial project," he told the packed conference hall.
His comments came after relations between Russia and Turkmenistan soured dramatically in recent weeks.
Earlier this month, Ashgabat, in a rare outburst of emotion, blamed Russian gas giant Gazprom for causing an explosion on a Turkmen pipeline by unexpectedly cutting its imports of natural gas, causing a pressure build-up.
Russia sent Prime Minister Vladimir Putin's influential deputy Igor Sechin to the Ashgabat conference in an apparent effort to contain the fallout.
The United States and European Union, keen to gain access to Turkmenistan's huge gas reserves, also sent their top officials to the gathering.
European Commission President Jose Manuel Barroso praised growing energy ties with Turkmenistan, which has begun opening up to the West since the 2006 death of longtime dictator Saparmurat Niyazov.
"Cooperation in the energy sphere is now well in hand," he said via video link to the conference.
"Our plan is to link up Turkmenistan with the European market through the South Caucasus," he said, adding he hoped to pay the nation a visit in the coming months.
The EU wants to diversify its gas imports and has placed high hopes on the Nabucco pipeline project, which is supposed to supply the bloc with gas from the Caspian Sea region by 2012-2013 while bypassing Russia.
The Kremlin has repeatedly cast doubt on the project.
Some officials at the conference saw signs that Turkmenistan was in favour of Nabucco, including Turkish Energy Minister Hilmi Guler, whose country lies on the route of the planned pipeline.
"There is a chance that Turkmenistan will join Nabucco," said Guler.
The head of Austrian oil and gas giant OMV, Wolfgang Ruttenstorfer, sounded a similar note: "Turkmenistan is expressing support of Nabucco."
Meanwhile Russia's Sechin downplayed any possible rift between Moscow and Ashgabat following the pipeline explosion in Turkmenistan.
"No accident will lead to an accident in relations with Turkmenistan," he said in his only comments to reporters.
Russia earlier this week presented new proposals for energy cooperation that could replace the 1991 Energy Charter, which it considers obsolete.
Secretary General of the Energy Charter Secretariat Andre Mernier defended the treaty at the conference, saying it had the necessary mechanisms to prevent transit disputes such as the Russia-Ukraine gas conflict in January.
Turkmenistan -- an ex-Soviet republic which lies between the Caspian Sea, Afghanistan, Iran, Kazakhstan and Uzbekistan -- is believed to have huge gas reserves beneath its mainly desert territory.
Those reserves languished mostly unexplored during the nearly two-decade rule of Niyazov, or Turkmenbashi as he preferred to be called.
But his successor Berdymukhamedov has shown signs of opening his country up to foreign investment and exploration.
US Deputy Assistant Secretary of State George Krol was scheduled to address the conference Friday.
See also:
The latest Jamestown Foundation reports on Central Asia, Russia and Energy Games
"We need to discuss the full range of problems - both in Russia and in Europe - in order to be able to solve them," Mr Putin said, accusing EU states of themselves mistreating Russian ethnic minorities, prisoners and migrants."In [EU] public opinion there is some concern regarding some recent events that happened in Russia. Namely, the murder of some journalists and some rights activists," Mr Barroso replied in bullish tones. "Human rights and rule of law are much more important than diplomacy between two states."New contexts, old mentalities. During the Cold War, the communist countries leader praised their wonderful life standards with pictures from the "Wild West". One of their favorite topics was the homeless Americans. The former Russian president is accusing the EU states now of neglecting the minorities and immigrants. What about the constant attacks against foreigners in big Russian cities?
Benjamin Weinthal
The Wall Street Journal
Berlin
February 5
While the U.S. has ratcheted up its efforts to prevent Iran from obtaining nuclear arms, the Islamic Republic is reaping a windfall from European companies. These firms' deals aid a regime that is bent on developing nuclear weapons and which financially supports the terror organizations Hamas and Hezbollah.
The Austrian oil giant OMV is itching to implement a €22 billion agreement signed in April 2007 to produce liquefied natural gas from Iran's South Pars gas field; at last May's annual shareholder meeting, Chief Executive Officer Wolfgang Ruttenstorfer said OMV was only waiting for "political change in the U.S.A." Raiffeisen Zentralbank, Austria's third-largest bank, is active in Iran and, according to a story by the Journal's Glenn Simpson last February, has absorbed the transactions of key European banks that shut down their operations in Iran. And in late January Paolo Scaroni, CEO of Italian energy corporation Eni SpA, told the Associated Press that his firm will continue to fulfill its contractual obligations in Iran and feels no external pressure to sever ties with Iran's energy sector.
Yet because of the sheer volume of its trade with Iran, Germany, the economic engine of Europe, is uniquely positioned to pressure Tehran. Still, the obvious danger of a nuclear-armed Iran has not stopped Germany from rewarding the country with a roughly €4 billion trade relationship in 2008, thereby remaining Iran's most important European trade partner. In the period of January to November 2008, German exports to Iran grew by 10.5% over the same period in 2007. That booming trade last year included 39 "dual-use" contracts with Iran, according to Germany's export-control office. Dual-use equipment and technology can be used for both military and civilian purposes.
One example of Germany's dysfunctional Iran policy is the energy and engineering giant Siemens. The company acknowledged last week at its annual stockholder meeting in Munich, which I attended, that it conducted €438 million in trade with Iran in 2008, and that its 290 Iran-based employees will remain active in the gas, oil, infrastructure and communications sectors.
Concerned stockholders and representatives from the political organization Stop the Bomb, a broad-based coalition in Germany and Austria seeking to prevent Iran from building a nuclear-weapons program, peppered Siemens CEO Peter Löscher with questions about the corporation's dealings with the Iranian regime. A Stop the Bomb spokesman questioned Siemens's willingness to conduct business with a country known for its human- and labor-rights violations, ranging from the violent oppression of women to the murder of gays to the repression of religious and ethnic minority groups. The spokesman referred to Siemens's Nazi-era history as an employer of forced labor from the Auschwitz extermination camp and asked how, in light of the corporation's Nazi history, the company could support an "anti-Semitic and terrorist regime" that threatens to wipe Israel off the map.
Mr. Löscher replied to the 9,500 stockholders in Olympic Hall that, "For Siemens, compliance and ethics have the highest priority, including where human-rights issues are involved." Yet, after further questions from the Stop the Bomb spokesman, he acknowledged that Siemens and its joint partner, Nokia, had delivered state-of-the-art communications surveillance technology to Iran last spring.
Information-technology experts say that the companies' "monitoring centers" are used to track mobile and land-line telephone conversations, and that their "intelligence platform" systems allow the Iranian secret service to track financial transactions and airplane movements. The technologies could also be used to monitor persecuted minority and dissident groups in Iran.
Siemens, the largest German trade partner of Iran, represents a window onto an opulent economic partnership between the two countries. German firms such as Mercedes-Benz, whose Web site lists an Iranian general distributor, and insurance giant Munich Re have also remained indifferent to the growing calls to isolate Iran economically. Yesterday, a Munich Re spokesman confirmed to me that the company insures goods in transit to Iran. This was the first such public disclosure by the firm.
And the deals just keep on coming. The Hannoversche Allgemeine newspaper, for example, reported in late January that the German engineering firm Aerzen secured a contract totaling €21 million to supply process gas blowers and screw-type compressors to a steel factory in Esfahan, Iran.
All of this is taking place while Iran is moving at an astonishing pace to process high-grade uranium for its atomic bomb. Iran's launch of its first domestically produced satellite on Tuesday prompted an alarmed French Foreign Ministry spokesman Eric Chevallier to underscore the link between Iran's military nuclear capability and its compatibility with the satellite technology.
Trade and security experts assert that Iran cannot easily replace high-tech German engineering technology with that from competitor nations such as China and Russia. The hollow pleas by Chancellor Angela Merkel, who favors a policy of moral pressure to convince corporations to be "sensitive" about cutting new deals with the regime in Tehran, did not prevent her administration from approving over 2,800 commercial deals with Iran in 2008.
Transparency is badly needed in this area. The German Federal Office of Economics and Export Control (BAFA) refuses to disclose the nature of these agreements. Economics Minister Michael Glos, who oversees BAFA and is considered an advocate of trade with Iran, should reveal the names of the firms commencing trade with a country that sponsors terror organizations such as Hezbollah and Hamas. The German firms are hiding behind a wall of nondisclosure to avoid being blacklisted on the U.S market.
The Merkel administration heavily subsidizes investments in Iran by providing German firms with €250 million in credit guarantees. A day before the International Holocaust Remembrance Day on Jan. 27, the German business daily Handelsblatt reported that Berlin intended to discontinue all credit guarantees supporting trade with Iran. After the report was picked up by the major media, Mrs. Merkel's spokesman quietly denied that the government had canceled the credit guarantees. This suggests that Berlin cynically leaked the story to Handelsblatt to polish its international image and repair strained relations with Israel, a country whose security Chancellor Merkel has deemed "nonnegotiable" for Germany.
There are other signs that Germany's political elites consider Iran just another trading partner. Former Chancellor Gerhard Schröder is scheduled to visit Iran in late February, just after 10 days of celebrations in the country honoring Ayatollah Khomeini and the radical Islamic state he ushered in 30 years ago. Mr. Schröder, who plans to attend the dedication of a foundation for supporting scientific research and has opposed the imposition of sanctions on the Iranian regime, surely will not use the opportunity to criticize Germany's booming trade relationship with the Islamic Republic of Iran.
In short, while Berlin claims it wants to discourage Iran from building a nuclear bomb, it has so far done little to actually stop the bomb. German legislation prohibiting trade with Iran, coupled with an immediate cessation of credit guarantees, would decisively setback, if not stop, Iran's nuclear weapons program and set an invaluable example for other EU countries to adapt for their own companies.
Following recent developments in Europe 's gas crisis, experts at the European Council on Foreign Relations have issued the following reactions:
Pierre Nöel, Senior Policy Fellow and energy Expert, says: "It's high time the EU gets serious about gas security and presses ahead with the creation of a single gas market. Moreover, the EU must be instrumental in the push for investment in energy security in Eastern Member States. The Czech Presidency should organise a summit where each member state is asked to present a national action plan, which could be backed by common resources."
Andrew Wilson, Senior Policy Fellow and expert on Russia and Ukraine, says: "Europe has woken up to the fact that gas 'crises' are now an annual New Year event, and is rightly resentful at being held hostage to a far-off argument between two neighbouring states. But the truth is even worse: Europe is being held hostage to a Russo-Ukrainian corruption scheme which is a cancer in the politics of the whole of Eastern Europe ."
Vessela Tcherneva, Senior Policy Fellow and Head of ECFR's Sofia Office, says:
"The lesson from the gas crisis in Bulgaria and other countries in the region is that close bilateral relationships with Russia do not translate into gas security. Countries such as Bulgaria , Serbia and Greece , who played the role of Russian 'Trojan horses', were among the first whose gas deliveries were interrupted. Only a European-wide solution - interconnecting the networks of East and West - can be a sustainable one."
ECFR argues for an EU energy security conference to discuss and agree national strategies by vulnerable states to make the European Union less vulnerable for these kinds of crisis situations. The Czech presidency should take the lead in designing a common EU response to this recurring challenge, which regards the whole EU, and not only the East European countries, which are directly affected by the gas cut.
See more on this issue:
EU press Russia to comply its obligations
By James M. Gomez and Agnes Lovasz
Jan. 8 (Bloomberg) -- Ukrainian President Viktor Yushchenko may be calculating that his “No” to Russian Prime Minister Vladimir Putin in their dispute over natural gas will make the West more likely to say “Yes” to him.
Yushchenko’s rejection of Russia’s demand that his country pay more for Russian gas reinforces his message that Ukraine’s future lies in closer ties with the European Union, which meets today to look for ways to resolve the dispute, rather than with Russia, its neighbor and fellow former Soviet republic.
The dispute comes as Ukraine is torn by infighting between top politicians, a sharp decline in Yushchenko’s popularity and a global financial crisis that prompted a bailout by the International Monetary Fund. The risk is that his tactics may backfire, weakening the country’s bid to join the EU and the North Atlantic Treaty Organization.
“When people in Europe look at Ukraine, all they see is squabbling, self-serving politicians, and they don’t have much sympathy in the West any more,” said Katinka Barysch, deputy director of the London-based Centre for European Reform.
“The Russians have zero credibility but the Ukrainians don’t have much more,” she said.
Russia’s gas monopoly, OAO Gazprom, and NAK Naftogaz Ukrainy yesterday said all gas shipments to Europe through Ukraine were halted, causing some countries to ration supplies. The two state-controlled companies blamed each other for the stoppage. About 80 percent of Russian gas to Europe flows through Ukraine.
Mediation
A team of EU lawmakers today will hold mediation talks in Brussels with the two companies to try to forge a compromise. Mikhail Margelov, chairman of the Foreign Affairs Committee in Russia’s upper house of parliament, said Ukraine is drawing out the conflict to erode Russia’s relations with Europe. Russia has been on poor terms with its neighbor since Ukraine’s 2004 Orange Revolution, which brought Yushchenko to power with promises to join the EU and NATO.
Yushchenko, 54, criticized Russia’s August war with Georgia and pleaded with NATO in Brussels on Dec. 1 to ignore Russia’s opposition to Ukraine’s application to join the Atlantic accord. On Nov. 25, he urged Russia to reach agreement on gas pricing before the end of December, saying the issue would otherwise become “political, not economic.”
“There are attempts in Ukraine to tarnish the image of Russia as a reliable energy partner,” said Alexander Rahr, director of Russian programs at Berlin’s German Council on Foreign Relations. Ukraine “is forming an image of Russia as a foe and Ukraine as a victim.”
Czech Complaint
Ukraine’s EU bid so far hasn’t been helped by the conflict. Czech Prime Minster Mirek Topolanek, whose country took over the EU’s six-month rotating presidency on Jan. 1, warned yesterday that the 27-nation bloc would have to toughen its response to the gas crisis if supplies are not restored by today. He said he spoke with Putin yesterday, adding that both countries may have to compromise.
European Commission President Jose Barroso, speaking at a press conference in Prague yesterday, warned the two countries not to let the dispute hurt the rest of Europe and said it may erode the EU’s trust in both nations. “It’s critical” that supplies “start immediately,” he said.
Ukraine’s relationship with NATO hasn’t improved either, after the organization last month stuck by its April decision to offer neither Ukraine nor and Georgia a pre-membership plan.
Political Adversaries
While bidding for support abroad, Yushchenko is losing friends at home as he regularly feuds with Prime Minister Yulia Timoshenko and prepares to run for re-election against Viktor Yanukovych, the pro-Russian opposition leader he beat in 2004.
A Dec. 17-24 survey by the Kiev-based Razumkov Center for Economic and Political Studies gave Yushchenko’s party a 4.5 percent popularity rating, compared with 27.2 percent for the party of Yanukovych.
His support began to wane in 2006, when Russia withheld gas to Ukraine for the first time over a pricing dispute. Yushchenko backed down in the face of Russian demands to pay double the price. Last year, he dissolved parliament and called for early elections to be held in December, only to delay the elections indefinitely and re-establish a coalition government with Timoshenko, whom he had previously dismissed -- a move that raised further doubts about the country’s stability.
At the same time, the global financial crisis has caused the national currency, the hryvnia, to plunge and the credit market to freeze up, prompting the IMF to approve a $16.4 billion loan on Nov. 6. Gross domestic product, which grew at a 6.9 percent annual rate in the third quarter, may shrink by as much as 7 percent in the first quarter of next year, Yushchenko said on Dec. 16.
Eastern Europe
Should the dispute continue beyond the next few days, eastern Europe’s economy, already hit by worldwide economic and market turmoil, may suffer further, said Rory MacFarquhar, an economist at Goldman Sachs in Moscow.
Slovakia and Hungary, both EU members, restricted natural- gas supplies to industrial customers a day after Slovakia declared a state of emergency. Bulgaria, which depends on Russia for all of its gas needs, will seek compensation for any financial and economic losses incurred from the shutoff, Economy Minister Petar Dimitrov said at a press conference in Sofia yesterday.
“If it drags on, then it will potentially have a huge impact,” said Neil Shearing, an emerging-market economist at London-based Capital Economics.
