Iran and Russia are opposing the implementation of the Trans-Caspian project, which is supported by Azerbaijan and is in the EU’s interest, writes Shahnar Hajiev.
Shahnar Hajiyev is the leading specialist of the Baku based Center for Analysis of International Relations.
The broader Caspian Basin – a region at the center of what has been called the “strategic energy ellipse” between Russia and the Persian Gulf – remains an important alternative source of oil and natural gas for European and Asian markets. It is estimated that the Caspian region contains 48 billion barrels of oil and 292 trillion cubic feet (tcf) of natural gas in proved and probable reserves. Hence, rich energy resources of the Caspian Sea attract the attention of many regional and non-regional states. According to BP Statistical Review of World Energy 2019, Azerbaijan’s total proved natural gas reserves were estimated at 2.1 trillion cubic metres (tcm) and Turkmenistan’s total proved gas reserves were estimated at 19.5 (tcm) at the end of 2018. It is worth noting that the EU has strong interest in the energy supplies from the Caspian countries, such as Azerbaijan and Turkmenistan in order to diversify its sources of natural gas supply. Azerbaijan has almost completed the construction of trans-regional Southern Gas Corridor including gas pipeline chains of South Caucasus Pipeline, Trans-Anatolian Pipeline, and Trans-Adriatic Pipeline to supply Europe with natural gas. It is clear that the Caspian states have a huge potential to contribute significantly to the energy security of Europe.
The Convention on the Legal Status of the Caspian Sea signed between five Caspian states – Russia, Azerbaijan, Iran, Kazakhstan and Turkmenistan in 2018 was supposed to facilitate the building of the undersea pipelines (a.k.a Trans-Caspian Gas Pipeline) with the consent of the countries only involved in the project. Earlier, Russia and Iran argued that any undersea pipeline must be agreed between five Caspian states. However, the signed agreement has not been ratified by all countries yet. The Iranian parliament has not ratified the document yet. As it is clear, the agreement did not solve all the issues between the Caspian states as distribution and transportation of energy resources of the Caspian Sea still remains a major problem.
In this regard, it is worth noting that after signing the agreement on the status of the Caspian Sea, the EU restarted the negotiations with Turkmenistan on Trans-Caspian gas pipeline. According to Peter Burian, the European Union’s Special Representative for Central Asia the EU had “resumed negotiations with Turkmenistan on participation in the financing of a Trans-Caspian Pipeline”.
This is very important, because negotiations between the EU and Turkmenistan in this direction seemed as frozen. Despite the resumption of negotiations between Brussels and Ashgabat, Iran and Russia, however, are opposing the implementation of the Trans-Caspian project, claiming the pipeline could cause serious environmental damage to the Caspian Sea. In the meantime, Moscow, whereas, has already laid gas pipelines (Blue Stream with full gas pipeline capacity is 16 bcm of gas annually, and Turk Stream with throughput capacity of 15.75 bcm) to Turkey through the Black Sea bed. In addition, Russia has implemented the Nord Stream gas pipeline with annual capacity of 55 bcm through the Baltic Sea, and currently is seeking to implement the Nord Stream-2 Pipeline. All those energy projects did not cause any environmental crisis in the Black Sea and the Baltic Sea.
When it comes to the Trans-Caspian pipeline, Russia refers to the Framework Convention for the Protection of the Marine Environment of the Caspian Sea also known as the “Tehran Convention” signed in 2003. It is relevant to recall that during the 1990s Russia and Iran opposed the development of Azerbaijan’s oilfields in the Caspian Sea, and now they are raising obstacles to the diversification of Turkmenistan’s energy supply routes. Currently, Turkmenistan’s main gas markets are China through Central Asia and Russia through Kazakhstan.
In this context, it is important to highlight that Russia’s Gazprom signed a five-year contract for the supply of natural gas from Turkmenistan in 2019. Under the agreement, Gazprom will receive 5.5 bcm of natural gas from Turkmenistan annually. Earlier in 2015, Gazprom announced that it had reduced its annual import of Turkmen natural gas to 4 bcm from 10 bcm in 2010, and in early 2016 it decided to halt all exports due to disagreements over the price of gas. Therefore, Ashgabat began pondering about the diversification of its export opportunities.
In the end, Moscow has a significant share in the European natural gas market but will unlikely preserve it because Brussels has a long-term strategy to have multiple supply sources. For example, in 2018, Russia was the largest supplier of natural gas to the EU with 40.2%. Norway is followed by Russia with 35.0%. In the near future, other players like Algeria or LNG exporters will increase their share in the European gas market. In this regard, the Trans-Caspian project might fill certain niche but will not threaten Moscow’s energy interests as per se. Russia should sort out political issues with Brussels rather than oppose the Trans-Caspian project. Azerbaijan has shown interest to become a transit route for this project, however it is Turkmenistan who should play a more active role in promoting the Trans-Caspian project.