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11.05.2009

REGIONAL ENERGY DEVELOPMENTS

   

Sevak Sarukhanyan

energy.jpg (medium)The article touches upon the recent developments in the sphere of energy in South Caucuses and neighbouring countries. The main attention is paid to the political problems in interstate collaboration in the sphere of energy.

Republic of Armenia

The recent month will probably be most important for Armenia this year in the context of the implementation and pointing out the prospects of energy projects. It is conditioned by the official visit of the president of Armenia to Iran in April, and the prospects of energy projects, which are very important for Armenia, are connected with that visit. Those projects are the Armenia-Iran gas pipeline, Iran-Armenia pipeline for refined oil products, the construction of powerful hydroelectric power station on the river Vorotan in Meghri, the oil refinery, and the railway, which is not only important transport but also energy transition structure.

Armenian-Iranian top level negotiations can be regarded mostly effective not only from political point of view, but also from the point of view of energy significance. In the course of the talks and after it Armenian and Iranian parties took a number of very important decisions:

  1. Iran will finance the construction of the new powerful hydroelectric power station on the Araks in Meghri. The Iranian party will invest about $280 million, which will be compensated by Armenia through the electric power supply.
  2. On April 16 the ministers of transport of Armenia and Iran signed the agreement about the construction of Iran-Armenia railway. The general stretch of the railway will be about 470km, and 410km will go through the Armenian territory.

We can expect that in the months to come the active work will start in these two directions and this may increase the interest of the third parties, provide the appropriate investment flow and ground for the full-fledged implementation of the projects.

Iran

The main event in the sphere of energy in Iran was the controversy between Russia and Turkmenistan in the beginning of April. It was conditioned by the explosion on the gas pipeline (САЦ-4), in which Turkmen party blamed “Gazprom”. According to the Turkmen party Russian company closed the pipeline for some time and it blew up under the pressure of gas coming from Turkmenistan. In a couple of days after explosion the president of Turkmenistan G.Berdimuhamedov stated during the government session that Russian side refused to incur the guilt and it is not going to make restitution, thus the president of “Turkmengaz” state company B.Khojamuhamedov should visit Iran under his instruction and come to the agreement concerning the sale of the Turkmen gas to Iran.

Turkmen-Russian gas conflict is logical at some extent and is directly connected with the global financial and economic crisis. The point is that in Europe and Russia the gas consumption has reduced due to the crisis and in September - October when the Russian-European gas contracts are extended the gas price will considerably fall. Under such circumstances it is rather difficult for Russia to continue carrying on its role of Central Asian gas reseller with the same efficiency as it was in the

past. Amid the decrease in profits it would be difficult for Russian energy companies, including “Gazprom”, to provide not only their, but also state foreign policy interests. And Russian-Turkmen gas conflict is the evidence and the proof of that.

The official Tehran stated on the level of the minister of oil that it is ready to recover the Turkmen-Iranian energy collaboration at the size it used to be. At the same time it will be very difficult for Iranian and Turkmen parties to carry it out, as according to the agreement between “Gazprom” and “Turkmengaz”, Russian party has undertaken to buy the whole Turkmen gas. Besides, on March 15 the minister of energy of Russia S.Shmatko and the minister of oil of Iran G.Nozari signed Russian-Iranian declaration, according to which Russian party must supply Turkmen gas to the north of Iran. In fact, today Iran has the supplier of Turkmen gas and that supplier is Russian “Gazprom” and not “Turkmengaz”. It should be mentioned that in order to export gas to Iran by itself “Turkmengaz” either has to repudiate a “big contract” with “Gazprom” or “Gazprom” must refuse officially to buy the whole amount of Turkmen gas. Otherwise the gas export to Iran will be illegal.

However, developments in the energy collaboration between Iran and Turkmenistan in the context of the Russian-Turkmen relations can be committed in the months to come.

Azerbaijan

The most important event from the point of view of energy policy in previous month for Azerbaijan was connected with the visit of the president of the country Ilham Aliev to Moscow. The subtext of the visit was mainly political, because there were no serious documents regarding economic or energy spheres concluded. But after the talks with D.Medvedev I.Aliev stated that Baku was aiming to diverse the ways of gas export and D.Medvedev, in his turn, said that Russia’s readiness to buy Azerbaijani gas remained valid and the parties could come to an appropriate decision concerning that issue.

Baku started to talk about the necessity of deepening of Russian-Azerbaijani cooperation in the sphere of energy mainly in connection with the possible regulation of Armenian-Turkish relations. Azerbaijani authorities seem to try to influence Ankara’s policy in the line of the opening Armenian-Turkish border through the threat of deepening of cooperation in the sphere of energy with Russia and this may deeply affect Turkish interests. But it is not clear yet how sincere the stances of both Baku and Ankara are, and it is equally important how independent they are from each other.

In the aspect of transport and energy policy of Azerbaijan the statement of the minister of transport of Azerbaijan made on April 1 that in 2010 Baku would fully finance the section of Dezvin-Resht-Astara railway going through Azerbaijan may be important. The total cost of the works may be about $40 million. The statement by Azerbaijani minister was directly connected with the fact that on the same day in Saint Petersburg the railway companies of Iran, Azerbaijan and Russia, at last, after the negotiations, which had been lasting for eight years, signed a memorandum about the Dezvin-Resht-Astara railway construction. It is difficult to predict the future of that project, but it is clear that it is directly connected with the actions of Iran, as the main part of the construction must be done on the territory of Iran. About 510rm of railway is to be built and its total cost may exceed $1.5 billion. There were no suggestions on behalf of the Iranian party that the project would be financed from the Iranian budget. There is no mentioning about the possible sources of finance in the declaration signed in Saint Petersburg either. This goes to show that the building works may, most probably, be delayed for quite a long time and this may reduce the competitive ability of the project. At the same time the construction of Armenia-Iran railway, which may create efficient and competitive junction between the Persian Gulf and the black Sea, should be regarded as rather important.

Turkey

There are rather interesting developments in the sphere of Russian-Turkish energy cooperation. The negotiations about the construction of “Bleu Stream-2” gas pipeline have been going on for about 5 years. The inefficiency of those negotiations is mainly connected with the fact that the parties have not decided yet the purpose of the pipeline construction. Turkish party intends to resell Russian gas, and “Gazprom” does not agree with this. Those are, or it is better to say were the stances of the parties. But at recent period the fresh breath to the prospects of the gas pipeline construction has been attached by Israel, which looks to be interested in getting Russian gas through that pipeline. There have always been rumours and non-official information concerning it. But on May 3 it all became official. On that day, during the meeting with the head of “Gazrom” A. Miller the prime-minister of Russia V.Putin said that he had had a phone conversation with the newly elected prime-minister of Israel B.Netatnyahu and during that conversation the importance of the gas pipeline going through the territory of Turkey to Israel was mentioned.

After the statement by Russian prime-minister the analysis, articles and interviews, devoted to the construction of the “Blue Stream-2” pipeline appeared in Russian and Turkish press. According to the Turkish press the pipeline construction talks activated in the end of March, during the meeting of A. Miller and the minister of energy of Turkey H.Guler. In accordance with the Russian sources the head of “Gazprom” will leave for Tel-Aviv in the second half of April to hold the pipeline construction talks. In the opinion of Turkish analyst N.Pamir, the Russian party should sign the contract with Israel before the construction of the pipeline and accept all the obligations and take the risks, as Ankara will avoid being an active actor in the implementation of that process in front of Islam community. This will affect its authority.

The developments, mentioned in this article, evidence that regional energy processes pass to a new phase and in the course of that phase the conclusion of a new contract and project implementation are possible. They may also deeply affect the regional developments.


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