Azernews.Az

By Alex Jackson

Political risk analyst at Menas Associates in London. His work focuses on
political, energy and security issues in the wider Caspian region.

The article was provided by the Caspian Center for Energy and Environment (CCEE) of Azerbaijan Diplomatic Academy (ADA).

The story of the Southern Gas Corridor did not end with the June selection of the Trans-
Adriatic Pipeline to carry Azerbaijani gas to Europe. If the gas riches east of the Caspian are ever to come to Europe, a careful policy coordination between Turkey, Turkmenistan and Azerbaijan is needed - coordination which has so far been lacking.

Turkey has been courting alternative gas suppliers in order to reduce its over-dependence on imports of expensive, politically sensitive Russian and Iranian gas. In particular, it has been seeking additional gas supplies from the Caspian. This has predominantly meant Azerbaijan: the Trans-Anatolian Pipeline (TANAP) will bring an additional 6 billion cubic metres of gas to Turkey each year in its initial stage, sending another 10bcm to Europe. But Ankara has also been looking further afield, to Turkmenistan. Back in 1999 the two sides signed a contract to bring 16bcm of Turkmen gas west to Turkey (with another 14bcm for Europe), through a hypothetical Trans-Caspian Pipeline (TCP).

There have also been attempts to bring Turkmen gas to Turkey across Iranian territory.
However for a variety of political and commercial reasons - including Turkish reluctance -
this has never happened, and Iran has instead sold its own gas to Turkey whilst using
Turkmen imports for domestic consumption.Turkey has still continued to court Turkmen gas, and the two side have repeatedly met and announced their commitment to gas sales (Rejepova, 2010). There was significant interest in late May when Turkish President Abdullah Gül signed an agreement with his Turkmen counterpart "on bringing Turkmen energy supplies to Europe via Turkey" (Gurt, 2013). But the agreements have come to nothing for the simple reason that the export infrastructure required does not exist, and will not exist until significant political and commercial resources are invested in developing a Trans-Caspian link1. A TCP has failed to be built for three reasons: although predominantly concerning Azerbaijan and Turkmenistan, Turkey's lack of adequate engagement with these issues will continue to frustrate its attempts to secure Turkmen gas supplies.The first reason is political opposition from Russia and Iran, neither of which wants a westbound gas export route from Central Asia which does not cross their own territory. They have insisted that transnational projects in the Caspian require consent from all five littoral states, which Baku and Ashgabat reject.

Secondly, there have been bilateral disputes between Turkmenistan and Azerbaijan over the location of their maritime border. Although not an insurmountable obstacle, this has soured the relationship between the two sides and made it more difficult to cooperate.
Thirdly and crucially, a TCP has never been commercial enough to make it sufficiently
worthwhile for either side, given the high political cost of the project. For Azerbaijan,
Turkmen gas supplies to Europe would be ultimately competitive with its own. Azerbaijan's
gas exports will rise significantly in the coming years, with adequate gas within a decade to fill an expanded SCP without Turkmen additions. Baku does publicly support a TCP, and has welcomed the opportunity to become a transit state for Caspian gas - which would provide it with both financial and political influence. However, being a transit state does not provide Baku with a sufficient incentive to commit significant political capital. It would also prefer a smaller link, probably around 10bcm, to limit the extent of competition from Turkmen gas. For Turkmenistan the opposite logic holds. It makes little political or commercial sense to build a TCP unless it will carry significant amounts of gas, around 30bcm: although a smaller link could be expanded later, given the risks involved Ashgabat would prefer a binding commitment to a larger pipeline.

This cost/benefit analysis has never really been properly assessed by outside actors -
including Turkey - trying to promote a TCP. The EU insists that it is just 'mediating' between the two sides, which has been insufficient to bring them to an agreement, and has not taken a decisive stance on the size of a TCP. The private sector has been strongly interested but the scope of the project would require it to be underwritten by international institutions like the EU and World Bank, which have so far failed to make much progress.Turkey has also fallen into the trap of failing to coordinate between the two. Admittedly it has offered to help on the second issue by mediating on the Turkmen-Azerbaijani border dispute with a view to facilitating a TCP ("Turkey Offers Mediation", 2012), and has also occasionally tried to present a united front with all other actors, such as during the visit of Energy Minister Taner Yıldız to Ashgabat in September 2012 ("'Big Game' Heating Up",2012). But Turkish diplomacy has so far failed to address the underlying political and commercial factors - external interference, the attraction of China, and Turkmen-Azeri gas competition.The pattern of Turkish diplomacy serves as an illustration. For instance, since his election in 2007 Turkish President Abdullah Gül has visited Turkmenistan six times, and Baku four times; Turkey's premier and Energy Ministers have also been regular visitors.

However, outside of multilateral format like the Turkic Council, trilateral meetings between the heads of state - who are the ultimate decision-makers - are infrequent. The EU is very rarely included. And in its periodic statements regarding Turkmen gas exports, Turkey seldom makes reference to Azerbaijan or addresses the absence of a Trans-Caspian Pipeline. Energy Ministry reports and the Ministry of Foreign Affairs' energy strategy make very few references to the TCP. Indeed Ankara has not publicly demonstrated awareness of the complexity of the issue. For instance, it has called on Turkmen gas to be carried through the TANAP pipeline but without acknowledging that Azerbaijan holds a controlling stake in the consortium, and thus has the final say on which gas enters the pipeline. In order to address this point - the third critic is noted above - Ankara would have to demonstrate to Azerbaijan that Turkmen gas was not a competitor for its own suppliers, and that Turkey would commit to consuming and exporting gas from both countries.Turkish diplomacy has also failed to engage with Russia and Iran on their political opposition, the first problem facing a TCP, despite warnings about the presence of 'external powers' in the Caspian - which may mean America but also Turkey. Ankara has shown no indication of bargaining with Moscow or Tehran on a TCP, even though Iran in particular has warned that Turkey should seek to get Turkmen gas via Iranian pipelines rather than the Caspian ("Iranian Envoy Opposes", 2013). A Trans-Caspian Pipeline will not be an easy project to complete under any circumstances. Turkey, a key transit state which has close political and economic relations with both Azerbaijan and Turkmenistan, will need to demonstrate deeper engagement if further progress is made.
Doing so will require Ankara to coordinate its policies on a TCP with Baku and Ashgabat,
and to calibrate its approach on a real cost/benefit analysis. This will require active
diplomacy by Turkish officials to work closely with all sides, including efforts to negotiate
with Russia and Iran on their objections to the project. In the final analysis, Turkey's 1999 gas contract with Turkmenistan will never be fulfilled without the infrastructure in place.
Signing declarations of intent with Turkmenistan, whilst failing to address the underlying
issues and coordinate with Azerbaijan, is simply wishful thinking.