Regional hegemonic gas suppliers may move over

By: Laman Sadigova

As far as the export of natural gas to Europe is concerned, Iran and Russia are serious rivals. Iran, due to sanctions is not a major exporter of gas at all; however, it has the potential to break Russia’s dominance over the gas market in Europe.

The flow of huge gas resources of Iranian gas towards the EU region would mean the end of Russia’s energy hegemony over the gas market and carry a serious blow to Russia’s capability for making European countries tolerate its policies in the region. Growing hostility in between Western countries and Russia, and a serious inclination of Russia to keep its monopoly in the European gas market, along with Iran’s reliance of the Islamic regime on Russia’ support, puts Iran government in a difficult situation regarding gas exports to Europe.

Some of the officials of the Iranian government have recently shown signs of being interested in supplying gas through the Caspian Sea and other possible routes to the European countries. At the same time, some of the representatives of the Iranian parliament are talking about a bill to ban the export of gas to EU countries.

Iran, as a country that has the 2nd largest natural gas reserves in the world (after Russia) possesses the potentials to play a serious role in the gas market in both the region and the world. For the same reason, Russia has exerted pressure on Iran not to enter this market.

As the EU is growing tired of Russia, notwithstanding aggravated political tensions in between the two powers, talks over the Trans-Caspian pipeline project have intensified. The Trans/Caspian gas pipeline would run under the Caspian Sea from Türkmenbaşy to the Sangachal Terminal, where it would connect with the existing pipeline to Erzurum in Turkey, which in turn would be connected to the Southern Gas Corridor, thus taking natural gas from Turkmenistan to Central Europe.

The EU which so far has remained reliant on Russia for its energy needs is now looking to break its dependency by looking else where, mainly the South Caucasus.

Turkey which is also a major player in the immediate region has already voiced its willingness to forge ahead. While Russia has reduced its Turkmen gas purchases, Turkey has signed a long-term contract with Turkmenistan. Ankara reported its willingness to develop future relations with Turkmenistan.

The proposal was approved by all partners, in particularly by Azerbaijan.

Recent statements from the EU Commission vis a vis the Energy Union’s plans – “to reduce Europe’s dependence on Russian gas” stands a testimony to western Europe’s desire to move things along.

Commission President Jean-Claude Junker already told the press Europe needs the energy that will underpin its economic resilience.

Russia as it stands remains Europe’s main gas supplier, with over half of the EU needs being supplied by Russia. Russia’s recent environmental concerns over the Trans-Caspian project therefore appears rather suspicious.

In view of the tensed relations between Russia and the EU it would be difficult to imagine the two entities could maintain their existing energy partnership, especially since the EU slammed Moscow with a round of sanctions.

The existence of such a massive project as the Southern Gas Corridor can strengthen and secure EU’s position and also reinforce Turkey and Azerbaijan’s involvement and significance in the European market region.

There is only one missing link in order to transport Turkmen gas to Europe and this is the Trans-Caspian gas pipeline.

Vice President of the European Commission’s Energy Union, Maros Sevchovich stated that the legalization of Turkmen gas transportation to Azerbaijan via the Caspian Sea remains essential. This again proves how very eager the EU is toward the finalization of such a deal.

At the end of the day, both Azerbaijan and Turkmenistan will win from such collaboration. Simultaneously, political developments have slow downed the project.

Process launches

Turkey is revisiting the Trans-Caspian gas pipeline project, aligning with the European Union, Azerbaijan and Turkmenistan, to support transportation of Turkmenistan’s gas to Turkey and onward to Europe.

Ten years ago, Turkey failed to capitalize on the first trans-Caspian pipeline project The EU is reactivating its framework of the Southern Gas Corridor to Europe, along with the Azerbaijan-led Trans-Anatolia Pipeline project (TANAP) in Turkey.

Turkey said it intends to import and transport Turkmenistan’s gas through the proposed Trans-Caspian and TANAP pipelines. Turkey would buy certain volumes for its own needs while allowing other volumes to flow beyond Turkey. The line is planned for capacity increases by adding compressor power and parallel loops in a phased process correlated with the supply volume growth. The capacity increase to 30 Bcm could raise TANAP’s construction costs from the initially estimated $5 billion to $7 billion.

But though the project remains tied to economic realities, the project said experts relies on countries’ ability to strengthen their political ties. For example, Turkey and Turkmenistan signed a package of international human rights document on March 4. Turkey’s active move has been understood as the manifestation of its desire to meet its EU ambitions.

Turkey remains a key engine in the Trans-Caspian project and it is likely Ankara will help towards finalizing the agreement and make it a reality. Moreover, the agreement might help Turkey and the EU to resume their EU integration discussions.

As a result of the recent deal, Turkey has received a 10.25 percent discount on Russian gas as Russia’ second biggest customer after Germany.

In the long run Turkey will likely benefit from Europe’s energy dependence and thus be able to push forward its EU agenda. If the EU was able to ignore Ankara’s calls for integration, western capitals might have soon to revisit their positions and allow Turkey to become a integrant player within the European block.

Under the condition of EU, Turkey, Turkmenistan, Azerbaijan and even Russian cooperation (Russia can also join the project if it changes its hegemonic role) the Trans-Caspian project will come to fruition.

It will also help Azerbaijan take its next step towards progress in the larger gas market.