22 Oct 2009
Enter the CDC: Europe gets serious about gas
I have gradually become more and more fascinated by the energy politics of Eurasia since moving to Tbilisi. Georgia was a key transit point on the silk road over a thousand years ago, and now sees itself as the prized link in the geo-political struggle for the West to hammer down access to the massive Central Asia natural gas reserves.
Turkmenistan alone has enough natural gas to provide about 10 percent of Europe’s total natural gas demand. For Europe, a super-developed continent of about 500 million people, that’s a lot of gas. Furthermore, because natural gas is the cleanest most accessible resource at the time, if they want to keep up their their objectives for emission reduction by 2020, they are definitely going to have to increase their consumption of natural gas.
From Turkmenistan’s point of view, they know they are a poor country sitting on a gold mine. But they know that as soon as they let any of the three big players around them – Europe, Russia, China — to start mining and buying up their gold that that relationship will define their country’s economy and foreign policy for decades to come. The Turkmen are already more or less dependent on Russia, and Russia could easily buy their gas supply and export it for them simply by upgrading existing gas infrastructure that sends gas north from Turkmenistan to the Russian gas network. China is also a good candidate, which is going to see its energy demands go through the roof as it rapidly develops.
But Turkmenistan would really rather deal with Europe. Despite some worries within Turkmenistan that Europe may use the gas relationship as leverage to force human rights reforms on its brutal authoritarian government, the reality is that Europe couldn’t even if it wanted to. The reason why Turkmenistan is hesitant to deal with Russia and China is because both have centralized power systems that are directly linked to their energy sector. Russia has already proven that it is willing to use economic relationships — particularly in the energy sector — as political leverage, and China certainly has the power to do so as well.
Europe, bless its heart, just can’t. Although Europe possesses immense soft power that it can wield, even with the Lisbon Treaty approved and a EU president to be named, the European Union can never act as a decisive single-voiced government like Russia and China. Even if Turkmenistan were to make some particularly egregious breaches of human rights, if sanctioning them meant hiking up gas prices across Europe you can bet at least 27 different positions would be emerge as to how to deal with the problem. With a political system still largely dependent upon consensus, Europe can’t really bully anyone.
However, if Turkmenistan is going to work with the Europeans, it has to be prepared to be bullied by Russia. By exporting natural gas to Europe, Turkmenistan would not only be slipping further from Russia’s reach, it would be directly undermining Russia’s attempts to entrench it’s monopoly of the East-West energy trade. Russia proved last August that it is willing to use force in its neighborhood if it has to, and Turkmenistan is nervous. Europe hopes to assuage those worries with its new strategy involving the Caspian Development Corporation, a strategy I describe in my latest article in the Asia Times:
TBILISI, Georgia – As Europe pushes forward in the race to lock down natural gas supply commitments from Central Asian countries, it now hopes that its new creation, the Caspian Development Corp, will allow the continent to take the lead against Russia and China.
Europe has long sought to develop the “southern energy corridor” – an energy route that would pass south of Russia and connect Europe to Central Asia’s largely untapped natural gas resources.
The Caspian Development Corp (CDC), which is currently undergoing a feasibility study, would aggregate European demand and allow the European Union to propose a deal to buy a massive quantity of Turkmen gas.
While much of the discussion over European supply deals in the Caspian Sea region has focused on the European Union-backed Nabucco pipeline, the strategy behind the CDC is much bigger.
“The Southern Corridor implies a number of pipelines, the main two would be Nabucco and [the Interconnector Turkey-Greece-Italy], but we do look in the future to have [Trans-Adriatic Pipeline] or White Stream,” said Ferran Terradellas Espuny, energy spokesman for EU Energy Commissioner Andris Piebalgs.
Terradellas said the goal of binding European gas buyers and these pipeline projects together under a single entity is to simplify the process going forward and give Europe a leg-up in buying a large portion of Turkmenistan’s huge natural gas resources.