"on">Romania. This has profound ramifications for halting Turkey’s ability to hold the EU hostage to energy supplies via Turkey, and offers far more rapid easing of European energy pressures.

 

The new agreement calls for transporting the Azerbaijani gas via pipelines to the SOCAR-owned Kulevi terminal on the Georgian coast of the Black Sea. From there, the liquified gas will be shipped across the Black Sea by tankers to new terminals in the Romanian port of Constanta. From Constanta, the gas will be distributed through the Romanian pipeline system. “In five years’ time, Romania will become an energy hub in its geographical region thanks to this project,” predicted Tudor Serban, the Secretary of State for Romania’s Ministry of Economy, Commerce, and Business Milieu.

 

This agreement is aimed primarily at ameliorating Romania’s near-total dependence on natural gas delivered by the pipeline from Russia via Ukraine. During the Winter of 2008-09, Romania suffered disproportionally as a result of the Ukrainian-Russian gas crisis, when Ukraine disrupted the flow of gas to Europe via Ukrainian territory in order to avoid paying its debt to Russia. Hence, it became imperative for Romania to diversify its sources of gas supplies in order not to be so vulnerable in future crises.

 

Moreover, given Romania’s own economic crisis, Bucharest cannot afford to purchase and stores huge reserves, and therefore any disruption in ongoing gas supplies will have an immediate impact on Romanian customers. Hence the Romanian interest in, and commitment to, all previous alternatives to the pipelines via Ukraine. Romania is an active participant in the Nabucco pipeline project despite its growing problems and diminishing viability.

 

As well, Romania has expressed a growing interest in the Russian South Stream pipeline, and, with the volatile Government of Bulgaria having growing problems with Russia over energy security issues, Romania is increasingly emerging as the entry point of the South Stream into the EU.

 

This approach is shared by the European Union’s (EU’s) Office of the Commissioner of Energy. In early 2010, the EU launched quick and profound changes such as a declared willingness to support South Stream. This policy change amounts to the EU virtually abandoning Nabucco, at least until a viable southern route, via Armenia rather than Georgia, is secured and the Azerbaijan-Turkey price dispute is resolved.

 

In contrast with Nabucco, South Stream is a concrete project and in 2015, by the time it goes on line, its capacity will be four times the anticipated initial capacity of Nabucco, and twice the potential capacity if Nabucco is fully upgraded. Furthermore, Russia and Italy, the main stakeholders in South Stream, have expressed interest in integrating the inner-European gas transportation and supply system in order to achieve increased flexibility at a significant reduction of redundancy and thus cost.

 

Still, both pipelines — Nabucco and South Stream — are years away from completion. With Romania’s vulnerability to the disruption of gas supplies via Ukraine painfully clear, Bucharest resolved to seek a quicker alternate source of natural gas and delivery, hence the just concluded agreement with Azerbaijan and Georgia.

 

Although Bucharest signed the agreement in order to address Romania’s own immediate energy problems, this agreement has the potential to become a major contribution to the overall long-term energy security of the EU.

 

The present agreement between Romania, Azerbaijan and Georgia covers the transportation of between seven- and 20-billion cubic meters of gas a year depending on Romania’s own market needs. Initially, Nabucco is expected to transport 15-billion cubic meters a year, and, if the second-phase upgrade is implemented, Nabucco’s maximal capacity will hit 31-billion cubic meters per year. If properly expanded, the Azerbaijan-Georgia-Romania route can thus become a viable replacement for the failing Nabucco: that is, a major source of natural gas transported into the EU outside Russian control. This factor — the diversification of suppliers and routes — has always been the sole purpose for Nabucco and the intense support it enjoys from the US. Since Azerbaijan was to be the primary source of natural gas for Nabucco, this project actually returns to the original alternate supplies as envisaged by the US.

 

Nabucco is presently an excellent engineering idea without any gas to transport. Because of the consortium’s excessive demands for international guarantees that Russia does not attack the feeding pipeline on Georgian territory under any circumstance (Nabucco itself will start inside the Turkish territory), it is highly unlikely such a pipeline will be built or existing pipelines be converted to carry gas for Nabucco.

 

Simply put, not without reason, Russia refuses to have its military leverage and right to self-defense neutralized by, and held hostage to, the mere existence of the Nabucco feeder pipeline. The Kremlin has repeatedly declared that Russia has no interest in bombing pipelines on Georgian territory. Indeed, Russian forces refrained from bombing the pipelines and pumping stations during the August 2008 war. However, the Kremlin insists of reserving the right to bomb the hydrocarbon transportation infrastructure in Georgia as an instrument of deterring the volatile and unpredictable Tbilisi from instigating a new crisis.

 

In the absence of a negotiated solution to the Nagorno-Karabakh conflict respecting the territorial integrity of Azerbaijan, the prospects of a more viable southern-route feeder pipeline via the Arak River valley and Nakhichevan are virtually non-existent. Moreover, the long-term disagreements between Turkey and Azerbaijan over the pricing of the gas for Nabucco make the availability of Azerbaijani gas for Nabucco highly unlikely.

 

Originally, Azerbaijan was to be the prominent/primary source of gas for Nabucco, a point which was stressed by the US George W. Bush White House. The other potential substitute sources of gas for Nabucco are not viable. Iran (and Turkmenistan via Iran) is still hostage to the US-led sanctions, and in Iraq the energy infrastructure remains hostage to the escalating Arab-Kurdish-Turkoman disputes and sporadic fighting. Indeed, in August 2008, Kurdish terrorists blew up the natural gas line from Georgia, in eastern Turkey.

 

Official denials and protestations notwithstanding, Ankara is holding Nabucco as a hostage and instrument of pressure on the EU in order to expedite Turkey’s accession to the EU without Turkey’s meeting numerous preconditions (particularly judicial and human-right reforms and the question of Turkish military occupation of another EU country, Cyprus).

 

Since the major EU states are adamantly opposed to Turkey’s joining the EU, a major crisis with Turkey is inevitable. It is inconceivable that, should Nabucco exist at that time, Turkey will not shut down Nabucco at a time of major crisis in order to pressure the EU into concessions. Both Ankara and Brussels are cognizant of this scenario, and Brussels is therefore adamant on preventing such EU vulnerability by reducing the EU’s future use of Nabucco if it is ever constructed.

 

In contrast, the new trans-Black Sea shipping route provides potential for a viable substitute to Nabucco.

 

The gas pipeline from Baku to the Kulevi Black Sea port can be covered by the current understandings between Azerbaijan and Russia because Azerbaijan owns the terminal facilities. Significantly, these understandings already withstood the August 2008 war. On the other side of the Black Sea, natural gas can be shipped from Constanta via existing pipelines into the original system envisioned for Nabucco, as well as be shipped by barges up the Danube and into Europe’s canal-and-river system. A barge-based transportation system can go into operation far faster than pipeline construction, thus enhancing Europe’s energy security and diversifying suppliers more rapidly than originally anticipated.

 

Moreover, Azerbaijan is ready to commit the gas originally earmarked for Nabucco, and Turkmenistan is willing to reconsider support for and future export via a TCP.

 

The expansion of the Azerbaijan-Georgia-Romania natural gas transportation route meets the primary precondition which prompted the original US support for, and sponsorship of, Nabucoo: namely, natural gas transportation system free of Russian control. At the same time, this route does not suffer from any of the debilitating shortcoming of the proposed Nabucco pipeline. Therefore, the Azerbaijan-Georgia-Romania route should be considered the viable, faster and cheaper alternative to Nabucco.

 

Analysis By Yossef Bodansky for Oilprice.com who offer detailed analysis on Crude oil, Geopolitics, Gold and most other <a href="http://www.oilprice.com/articles-commodities.php" target="new">Commodities</a>,. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com

April 8, 2010