RIP Nabucco: What the Southern Corridor gas route decision means for the US
Friday, August 16, 2013
Nabucco is dead. Long live TAP. The Nabucco pipeline, a highly political piece of gas transportation infrastructure, was designed to carry natural gas from Azerbaijani gas fields and neighboring suppliers to gas-hungry European customers. That was the logistical agenda, at least.
The political agenda was to reroute the movement of gas to avoid Russian territory, a strategic priority to undermine Russian dominance over Eastern European countries. So given all of this is happening far from U.S. soil — and the U.S. on the road to energy independence — why do we still have so much at stake in the squabbles over the details of the Southern Corridor route?
The final decision to progress with TAP, which will instead transport Caspian gas via Greece into southern Italy, leaves the European Union's darling Nabucco dead in the water. The decision has been interpreted by some as a victory of logistics over politics in the back-and-forth world of transnational pipeline planning. But let's not write off politics yet. After all, the U.S. and EU would be unlikely to support a proposal that sent Azerbaijani gas south through neighboring Iran, regardless of commercial viability.
From the outset, the objective of the Southern Corridor route was to counteract Russian political leverage in Europe, which in 2007 still depended on Russia for around 40 percent of its gas imports. The states further east are even more vulnerable; Estonia, Latvia and Lithuania rely on Russia for 100 percent of their gas.
A series of antagonistic moves by the Kremlin to use its gas supplies as a political weapon against its neighbors has injected greater urgency into efforts to diversify supply toward other producers. Most prominent among these was the 2009 spat with the Ukraine (which draws 66 percent of its gas from Russia) over a price hike that threatened to put the lights out in midwinter not only in Kiev but across other parts of the continent that rely on the Ukraine as a transit country. Germany's decision to phase out nuclear energy in the wake of Fukushima, and broad-based opposition to the exploitation of shale in Europe raise further questions about the future supply of gas.
So what does all this have to do with the U.S.? A December 2012 staff report for the U.S. Senate Committee on Foreign Relations, led by former Sen. Richard Lugar (R-Ind.), addresses precisely the issue of why the U.S. should care what is going on in the distant Caspian basin.
The report recognizes that "the world's evolving gas markets invite a reassessment of the Southern Corridor's strategic benefit and commercial viability." This refers to the glut of liquefied natural gas that had arrived on European markets, destined for U.S. soils before a boom in the U.S. shifted global gas supply dynamics.
This reminds us of the reality that the Nabucco project was born in a very different geopolitical era. The initial protocol was signed back in 2002 (followed by a visit to Verdi's "Nabucco" at the Vienna State Opera, hence the improbably flamboyant name for a piece of steel). At that time, U.S. domestic natural gas production stood at 536 billion cubic meters (bcm), little changed since the 1970s. By 2012 that figure had already risen to 681 bcm, in what is predicted as the beginning of a sharp upward trend toward energy self-sufficiency.
However, the same report concludes by urging the Obama administration to keep its eye on the ball, and to retain energy security as a central component of its foreign policy. Of course, U.S. oil majors such as Chevron and ExxonMobil, whose interests need protecting, have invested heavily in the Eurasian region. But more importantly, both NATO allies in Eastern Europe and strategic security alliances in Central Asia could be boosted by a more assertive Eurasian policy, of which the Southern Corridor would be a key component.
The report refers to energy as the "economic lifeblood of many NATO allies and partners in Europe and the Eurasia region." It also notes that the (now-failed) Nabucco West project would represent the clearest strategic benefit to U.S. policy interests, directly providing energy to those countries in central and southeastern Europe most dependent on Russian supplies.
Panning out, it has become fashionable to speak of a new "Great Game" over energy resources in central Asia. Discussions have been taking place (and stalling) for some time over the construction of further pipelines to carry Kazakh and Turkmen hydrocarbons across the Caspian seabed to feed into the Southern Corridor.
But China, too, is looking West to secure vital energy resources to underpin its own growth and will exploit any delays in transportation projects to court supplier countries itself. In addition, as the U.S. continues its troop withdrawal from Afghanistan, its relationship with central Asian states will transform from a broadly military one to one built on economic and political considerations. Against this backdrop, US-central Asia relationships can not be neglected, and U.S. strategy in the region has been formalized in the government's "Silk Road" economic program.
Lugar is not the only one to urge a renewed focus on Eurasia in American foreign and energy policy, with other commentators asserting that a similar effort of political will is needed to that of the Clinton administration in the immediate post-Cold War period to drive through the construction of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. But the demise of Nabucco suggests that, as it stands, the U.S. is not getting its way this time.
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