Monday, January 21, 2008

Pipeline Diplomacy, Redux

This little item got buried over the weekend, but it's a pretty significant development. Russia just signed a major pipeline contract with Bulgaria which, combined with the imminent deal giving Russia a controlling interest in Serbia's largest gas and oil company, tightens Russia's grip on the Balkans' energy supply. Russia will now be able to pipe gas directly to the European market, bypassing Turkey as a transit point altogether.

Meanwhile, the EU's Nabucco project, whereby gas from Azerbaijan and Iran would be transitted through Turkey to the continent, has been bogged down by disputes over financing, transit routes, and the Iran nuclear standoff. With Russia having already locked down Turkmenistan's entire annual gas production and already in possession of the major supply lines, any hope for diversified European gas sources just grew much slimmer.

How Turkey reacts to these developments will be very significant. They've been stalling on a deal to develop Iran's gas reserves in order to entertain the US' offers of becoming a regional energy hub for Iraqi and Azerbaijan gas and oil reserves. The problem is that Iraq is far from stabilized, and so far no acceptable route has been found for the Azerbaijan supplies. Should Turkey decide that one tactical energy alliance in hand is better than two in the bush, it could have a dramatic impact on the region's strategic realignment.

And history, when it gets around to the Iraq War, may very well decide that while Bush and the neocons were emptying the American treasury to conquer the last of the dwindling oil reserves, Putin and the mullahs were turning a profit off of locking down the gas supplies.

Posted by Judah in:  European Union   Russia   Turkey   

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