by Ferruh Demirmen
Türksam, December 9, 2009
(Turkish Center for International Relations & Strategic Analysis)
A misconceived engagement with Armenia has boomeranged beyond diplomacy to impact Turkey’s energy policy. The developments so far are already worrying, and further negative consequences may follow. Turkey’s energy policy is held hostage, and the culprit is a short-sighted Armenia rapprochement that has ignored Azerbaijan’s legitimate concerns on Nagorno-Karabakh.
While some may view the energy “fallout” as a case of “unintended consequences” for Turkey, the effects could have been foreseen easily.
Background
The secret, Switzerland-based Turkish-Armenian normalization process that surfaced in April 2009 in the aftermath of President Obama’s visit to Turkey, albeit launched with good intentions, turned out to be a disappointment for the Turkish side. The “road map” that was announced had a glaring omission: trustworthy preconditions or commitments requisite for normalization of bilateral relations.
In particular, there was no assurance that the Nagorno-Karabakh conflict, vital for Azerbaijan, would be resolved before opening the Turkey-Armenia border. Baku was concerned, and Turkish-Azerbaijani relations soured.
The two Turkish-Armenian protocols later initialed on August 31 and signed on October 10 confirmed the absence of any caveat on Nagorno-Karabakh, and further alienated Azerbaijan.
For the better part of 2009 Turkey has been trying to placate Azerbaijan, with promises that it will not open the Turkey-Armenia border unless the Nagorno-Karabakh conflict is first resolved.
The promise is like a double-edged sword. If Turkey reneges on its promise to Azerbaijan, Turkish-Azerbaijani relations will receive a serious, possibly fatal blow. If Turkey keeps its promise, and Turkish-Armenian normalization fails as a result, Turkey will be criticized in the West for being insincere or manipulative on Armenia “opening.” Armenian “genocide” allegations in the US Congress will come to the forefront again. April 24, 2010 is not too far ahead.
In either case, unless the Armenian parliament refuses to ratify the normalization protocols before the Turkish parliament does, Turkey will be the loser.
That will be the price paid for an ill-conceived political process. Armenia has made it clear repeatedly that it sees no linkage between the normalization process and the Nagorno-Karabakh conflict. So, Turkey is facing a major quandary.
At present, neither Turkey nor Armenia has submitted the protocols to their respective parliaments for ratification. The fate of the normalization process will hang heavily on the actions of the two parliaments. But for Turkey, and the West in general, some energy projects are at stake.
The fallout on energy
From energy point of view, worsening Turkish-Azerbaijani relations, if not stemmed, will come at a heavy price for Turkey. Alarmed at the Turkish-Armenian normalization talks conducted behind his back, an angry and resentful Ilham Aliyev, President of Azerbaijan, announced in May that, if forced, Azerbaijan would resort to military force to recapture the Azeri Nagorno-Karabakh territory it lost to Armenia in 1994. (See also recent analysis, ref. 1)
Aliyev had the sympathy of Turkey and a host of other nations and several UN resolutions to back him up, but that was not enough. Peace talks mediated by the OSCE Minsk Group were also not producing palpable results. (Armenian-Azeri talks in Munich in late November were also inconclusive, ref. 1).
To give credibility to his warning, or threat, Aliyev decided to play the gas card as a strategic tool. Partnership with Russia, at least on energy initially, was the strategy he had in mind. And Russia, given the opportunity to exploit the South Caucuses conflict, was more than willing to appear cooperative.
The gas card Aliyev was mulling over was the Shah Deniz gas lying below the bed of the Caspian Sea. Aliyev was already unhappy over the prolonged, yet unresolved, dispute with Turkey over the price of Shah Deniz-1 gas that Turkey had been importing since July 2007. The price of gas was up for negotiation in April 2008, but discussions had reached a deadlock. Aliyev complained that Turkey was paying, at $120/1000 m3, one-third of the market price for gas, and Turkey’s counter offers were not high enough.
On June 29, Russia’s Gazprom and Azerbaijan’s state-owned company Socor signed a gas agreement in Baku in the presence of respective presidents. The agreement stipulated that, starting in 2010, Gazprom would buy Azeri gaz, including, apparently, Shah Deniz-2 gas when it becomes available (currently in 2015). This would be the first time in Azerbaijan’s history that Azeri gas would be exported to Russia.
The gas volume initially involved was small (annually 500 million m3), but it was announced that the volume would increase in future. Gazprom would have the right of first refusal on additional supplies of gas when available. The agreement paved the way for a broad Russian-Azerbaijani cooperation that could possibly extend beyond gas.
The June 29 deal received further endorsement in Baku on October 14.
The Russian-Azerbaijani accord was a clear message to Turkey, and the West in general, from Aliyev that Azerbaijan would keep its options open as far as exporting its gas from the planned Shah Deniz Phase-2 development. This cast doubt not only on future Shah Deniz-2 gas supplies to Turkey, but also on Azeri gas supplies to the planned west-bound Nabucco project that Turkey had boastfully committed itself to in Ankara on July 13 (ref. 2).
To export its gas, Azerbaijan is now pursuing other options that circumvent Turkish territory: a subsea line in the Black Sea running from Georgia to Romania (White Stream project), tanker transport of compressed gas from Georgia to Bulgaria, and a swap or direct gas sale deal with Iran. Preliminary agreements have been signed on all of these. The existing pipeline connections with Iran and Russia would facilitate Russia and Iran options.
Broader implications
Turkey’s ill-founded Armenia engagement process, lacking any meaningful preconditions, is derailing Turkey’s energy policy. A distrustful Azerbaijan has now moved closer to Russia, and Shah Deniz-2 gas exports to Turkey for its domestic needs, as well as for onward transit to Europe via the planned Nabucco pipeline, are put in jeopardy.
Import of Turkmen gas via a future Trans-Caspian pipeline, that could also feed the Nabucco pipeline, is also at risk. For Turkmen gas to reach Turkey via the Trans-Caspian pipeline, Azerbaijan’s cooperation is essential.
Turkey needs Azeri gas in excess of the currently imported Shah Deniz-1 gas to diversify its gas supply sources and routes. Currently there is excessive (some 60%) dependence on Russian gas supplies for Turkey’s domestic needs.
Despite its shortcomings, Nabucco project is still a vital project for Turkey both from energy and political point of view (ref. 2). If Nabucco does not receive throughput from Azeri or Turkmen sources, Turkey’s long-avowed strategic position as an energy corridor to the West will be seriously compromised.
Public outcry stemming from alienation from the brotherly Azeri nation is also a price that Turkish policy makers must consider.
The above considerations leave no doubt that the Ankara-Baku rift should be mended. The sooner the better. The onus of this burden rests mainly on Turkey, not Azerbaijan. Otherwise Azerbaijan will move even closer to Russia, and Turkey may have to do without new Azeri (Shah Deniz-2) gas supplies. That would be rather unfortunate.
While it would entail a higher cost, Azerbaijan has options to export its gas without transiting Turkish territory.
Aliyev has indicated a number of times that Azerbaijan is interested in the Nabucco project, but unless Turkey is more accommodating, that interest may go nowhere.
All indications are that Turkey has overplayed its hand as far as its geographic position as an energy conduit, and has also stonewalled too long to meet reasonable Azeri requests for a gas price that closely reflects market conditions.
Turkey should not be seen as being obstructionist for the implementation of the Nabucco project. In this connection, the possible ramifications of Turkey’s support for the rival South Stream project during the August 6 Russia-Turkey-Italy energy summit in Ankara were not lost on the EU, and may dampen the EU’s interest in Nabucco.
It is telling that Austrian OMV (the flag-bearer for Nabucco), Italian ENI and French EDF have signed preliminary agreements with Gazprom recently about joint implementation of the South Stream project. In the light of these developments, one wonders whether the EU’s support for Nabucco is as good as before, and whether Turkey’s apparent wavering on Nabucco is playing a role. The financing problem of Nabucco is also at a standstill.
Another fallout from strained Turkish-Azerbaijani relations could be the curtailment of the BTC (Baku-Tbilisi-Ceyhan) throughput, with some of the crude diverted to the Russian and Georgian ports of Novorossiysk and Supsa, respectively. Lukoil, ExxonMobil and Devon, shareholders of AIOC (Azerbaijan International Oil Company) but not the BTC consortium, are already using these routes to export their entitlements from the ACG (Azeri-Chirag-Gunesli) field in Azerbaijan.
Export of Kazakh crude through the BTC could also be delayed or blocked. An ominous sign in this respect comes from the Russian-Kazakh oil transit agreement signed in Yalta on November 20. The agreement signaled support for the Samsun-Ceyhan pipeline, which Russia, at Turkey’s strong urging, recently endorsed. Samsun-Ceyhan will undermine plans to export Kazakh oil through a trans-Caspian pipeline link to the BTC.
An irony for the US
As a footnote to the above, it is also worth observing an irony in Turkey’s “opening” to Armenia. It is no secret that US pressure, in particular the urging of President Obama in person, played a key role in launching the Armenia engagement process. Yet, the process has not only damaged the close Turkish-Azerbaijani partnership, it has drawn Azerbaijan into Russia’s orbit of influence. This runs counter to the long-established US policy of weaning Soviet-era Turkic republics from Russia’s sphere of influence, in particular on energy.
The maxim, “unintended consequences,” describes this situation well for the US.
Concluding remarks
An ill-conceived political normalization process undertaken with Armenia has pushed a nervous Azerbaijan closer to Russia and has driven this small nation to seek alternative gas export options that circumvent Turkish territory. Future Azeri, and in the longer term Turkmen, gas imports to Turkey are jeopardized.
Some of the throughput to the BTC may be diverted, and plans to channel Kazakh oil to the BTC may be cancelled or postponed indefinitely.
In parallel, Turkey’s role to act as an energy corridor to the West is compromised.
The energy projects impacted are all important for Turkey. If for no other reason than to safeguard these projects, it is vitally important that the Turkish-Azerbaijani relations are put back where they belong, and where they traditionally have been: good, friendly terms.
Despite rosy statements from Turkish government circles, Turkish-Azeri relations are severely strained. Rapprochement with Armenia should not come at the expense of brotherly relations with Azerbaijan.
Turkish policy makers who now claim the Turkey-Armenia border would not be opened until the Nagorno-Karabakh conflict is resolved, should answer the question: If that were to be so, why did the normalization protocols signed with Armenia not contain the requisite precondition in the first place? It is no secret that the Armenia engagement started under external pressures, both from the US and the EU.
The adverse energy-related effects stemming from the ill-conceived Armenia normalization process were no surprise, and could have been foreseen in advance.
Those who are entrusted to lead the nation should be cognizant of the fact that one-sided foreign-policy initiatives that are launched without due consideration of underlying risks can have boomerang effects that may undermine national energy interests.
If the rift in energy cooperation between Turkey and Azerbaijan deepens, in a sense it will be a betrayal of the legacy of the late Azerbaijani President Haydar Aliyev, who, with resolute determination, championed the realization of the BTC project despite many roadblocks. Turkey will bear the lion’s share of responsibility for this state of affairs.
Separate from the Nagorno-Karabakh issue, the Armenia normalization process has ignored other legitimate concerns that are important for Turkey (ref. 3).
A far-sighted national energy policy requires vision, foresight and perseverance. Whether Turkey’s policy makers have these traits, the readers should ponder.
References cited
(1) “Nagorno-Karabakh negotiations in Munich and the possibility of war,” by Sinan Oğan, Türksam, Nov. 23, 2009.
(2) “Nabucco: A challenge for EU and a partially fulfilled promise for Turkey,” by Ferruh Demirmen, Eurasia Critic, September 2009.
(3) “Current Turkish ‘opening’ to Armenia cannot be supported,” by Ferruh Demirmen, Turkish Forum, October 9, 2009.
ferruh@demirmen.com
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