After the selection of Trans-Adriatic Pipeline (TAP) by Shah Deniz Consortium for bringing Azerbaijani gas to European markets instead of Nabucco West last year, the concept of Southern Gas Corridor has become more concrete. The Consortium plans to deliver 6 bcm of natural gas from Shah Deniz II field to Turkey through Trans-Anatolian Pipeline (TANAP) in 2018 and 10 bcm of natural gas further to Europe through TAP in 2019. Neither the selection process nor the aftermaths of this decision have been so easy. For the part after TANAP, a fierce competition occurred between Nabucco West and TAP projects. Moreover, the decision had crucial importance not only for EU gas markets but also for the future energy and security environment in Western Balkans.
Western Balkan countries, Albania-Bosnia Herzegovina-Croatia-Kosovo-Macedonia-Montenegro-Serbia are either non-consumers of gas or buying blue fuel solely from Russia, constitute remarkable demand potential to suppliers in a time when the demand in EU gas market is not optimistic. 10 bcm of gas supply will be sufficient to cover the additional demand of this region by 2020. Supplying Western Balkans with this amount of natural gas makes the region economically dependent on this source and more importantly who owns the pipeline, which brings gas, will increase its political sphere of influence in this volatile region. As geopolitics of pipelines dictates the golden rule that the pipelines are not sole construction equipment but are a tool for realizing strategic foreign policy aims of states. Not surprisingly, different actors are involving in gas pipeline politics over Western Balkans by supporting specific projects that would serve their own strategic interests. Even taking the geopolitics of gas pipelines into account one might argue that historical rivalry for the dominance over Balkans between Austrian-Russian and Ottoman Empires in 19th century has been reproduced in the form of pipeline politics in 21st century.
Among the actors involved, Russian Federation is interested in diversifying transport routes for its traditional European market by creating new routes and avoiding transit risks especially with problematic Ukraine. In line with this, Moscow has developed the South Stream gas pipeline project since 2006 with 63 bcm maximum capacity to strengthen current position of Gazprom in EU gas market. Investment cost of the South Stream is calculated approximately 40 billion dollars mainly because of under sea section in the Black Sea from Russian to Bulgarian mainland. The planned project will also pass through Western Balkans by reaching Serbia after Bulgaria. Gazprom is already very active in Serbian energy sector and Serbia will become the center for regional distribution of gas that will be pumped through South Stream.
On the other hand, in order to diversify its supply sources and lessening its dependence on Russia, European Commission has developed the concept of Southern Gas Corridor, which aims to contribute to supply security of EU by reaching alternative resources in the Caspian and the Middle East. Nabucco with its 31 bcm-designed capacity from the beginning was the first pipeline project within this framework. As one of the core members of the EU, Austria was actively lobbying for the Nabucco pipeline even when the project became Nabucco West (from western border of Turkey) later. Nabucco was planned to deliver Caspian gas via transit of Bulgaria, Romania and Hungary before reaching Austria. Austrian oil company OMV was planning to make Central European Gas Hub in Baumgarten more liquid with Caspian gas and further to feed Balkan countries through its own infrastructural systems. In addition to those two, the TAP project, which connects TANAP in Turkey-Greece border is designed to reach Italy via Albania and Adriatic sea. Interestingly, non-EU actors created TAP at first: EGL Company of Switzerland and Norwegian Statoil. Later main shareholders became BP and Socar together with Statoil, Total, E.ON, Fluxys and Axpo. This project is designed to transport 10 bcm of natural gas with a possible expansion to 20 bcm and has also support from the United States. Actually both of these projects were seen as competitor by Russia but especially Nabucco was posing a direct threat to the dominant position of Gazprom in Eastern and Central Europe. In order to realize Southern Gas Corridor, there should be huge investment, in order to transmit 16 bcm of gas nearly 45 billion dollars of is needed: Shah Deniz phase 2 development is 25 billion dollars + expansion of SCP pipeline 3 billion dollars + 12 billion dollars for TANAP + 5 billion dollars for TAP.
In realization of South Stream and Sothern Gas Corridor, Turkey is the key country as geographically located between producers/exporters and consumers/importers. Increasing transit role of Turkey both in North-South and East-West axis energy projects owes to the fact that all of the pipelines mentioned above should cross Turkish land or exclusive economic zone in Black Sea as in the case of South Stream. Like EU countries, Turkey is also seeking to diversify its energy imports but it does not limit its role in European energy security only to transit. Rather Turkey aims to gain more from gas trade with re-export right from the producers and with this condition to contribute to European energy security. That’s why Turkish interests are not always compatible with those of EU and Russia. Energy triangle between EU-Russia and Turkey is complicated in this sense because EU is not eager to have another Gazprom in its immediate neighborhood and Russia will not welcome to see second Ukraine in its gas transit to EU,
Under these circumstances, motive of the decision of Shah Deniz Consortium in favor of TAP was open to discussion. The consortium declared the higher prices in Italian market as the main reason but a tacit cooperation between the Consortium and Russia could also be possible. From Russian point of view, preventing the flow of Azerbaijani resources towards westward is not possible and selection of TAP was preferable to Nabucco since TAP will bring less competition to Gazprom in European markets compared to the latter. Establishment of strategic partnership between Rosneft and BP after TNK-BP deal in 2013 could have played a big role in this decision since the latter is also a partner in development of Azerbaijani resources. At the end of the day, Nabucco is out of the picture and there are two concrete projects: The South Stream and the TAP.
Although TAP was preferable to Nabucco for Russia, the projects might easily be transformed into a new source for Western Balkans and therefore undermine Gazprom plans in the region. From Albanian mainland, the TAP could merge with another project namely Ionian Adriatic Pipeline (IAP) that is envisaged to interconnect Albania with Montenegro, Bosnia and end in Split, Croatia. 516 km long IAP is planned to bring 5 bcm of gas and provides a second source for the countries of region in addition to Russian gas. Russia-Ukraine crisis accelerated the anxiety in Europe for Russia’s intentions and increased the probability of each alternative pipeline projects to Russia. Therefore TAP-IAP option has become more viable after recent Russian-Ukraine crisis. Integration of TAP with IAP would also mean a new energy link between Southern Gas Corridor and Western Balkans under this new geopolitical reality.
Integrating IAP with the TAP also proposes a new mission for Turkish energy diplomacy: Consolidating its sphere of influence in the Balkans through gas pipelines. In order to realize this Turkey should firstly participate into TAP project through its state pipeline company BOTAŞ and then become active in region’s downstream markets. TANAP will become more meaningful for BOTAŞ if it will manage to extent its cooperation with current project partners (Socar & Bp) in TAP as well. While realization of Southern Gas Corridor is becoming more viable after Crimean crisis, Turkey could use this opportunity to upgrade its energy cooperation with different actors into a new level. However, it is not difficult to observe that Turkey is far away from being an influential energy actor out of its borders and making necessary adjustments for its energy companies to become more competitive in international markets will take time.
