The Oil and the Glory

Pipeline politics redux

Generals are consigned to fight the last war, as we know from the 118 million hits that Google turns up on the phrase. But must politicians? Such has been the spectacle this week in Istanbul, where the West and Russia did their best imitation of the uber-dramatic pipeline wars of the 1990s that established the ...

AFP/Getty Images
AFP/Getty Images

Generals are consigned to fight the last war, as we know from the 118 million hits that Google turns up on the phrase. But must politicians? Such has been the spectacle this week in Istanbul, where the West and Russia did their best imitation of the uber-dramatic pipeline wars of the 1990s that established the United States as a key player on the Caspian Sea. Meanwhile, 2,000 miles to the east, an unchallenged China advanced another rook by signing a preliminary deal to pipe Uzbek natural gas into Xinjiang, and supported a fourth round of United Nations sanctions against Iran on the condition that it could continue its gasoline trade with Tehran.

The fight is over Europe’s natural gas supply, and the perceived economic and political muscle that goes with it. Russia’s natural gas giant, Gazprom, supplies some 25 percent of Europe’s gas — the figure rises to 100 percent in Finland and the Baltic states — and Washington and many former Warsaw Bloc nations see this as a potent Russian economic and political weapon. Three times in the last four years, Russia has cut off the natural gas flow in rows with neighboring Ukraine, and Washington and the Europeans both want to lessen Russia’s market dominance by finding a competing supply.

Enter Nabucco, a proposed $9 billion, 2,100-mile pipeline that would ship some 30 billion cubic meters of natural gas from the Caspian and elsewhere to Europe. This Western-backed plan has set Russia on edge, resulting in South Stream, Moscow’s retort to Nabucco. Russia envisions building South Stream along much the same route as Nabucco, and shipping double the volume.

There has been much in the way of pyrotechnics because of this rivalry. In a way, it is a reprise of the 1990s, when the United States and Russia vied to ship Azerbaijan’s oil bounty. The U.S. won that first round of pipeline politics when the Baku-Ceyhan pipeline began transporting oil in 2006 (interestingly, the main oil company in Baku, and Washington’s main partner in the pipeline is BP).

My friend Edward Lucas, who writes for the Economist, has a good primer on the latest round of pipeline politics:

But while both Russia and the West have attempted to replay their 1990s contest, geology and technology have gotten ahead of them. In the United States, a Texan named George Mitchell figured out how to extract natural gas from shale, igniting a gas-patch boom that is estimated to have provided the country with a 100-year supply of natural gas. Meanwhile, Qatar has come on the market with the first economically viable fleet of ocean-going liquefied natural gas tankers.

Together, the shale gas and LNG have created a new ocean of natural gas. There is such a glut in Europe that, according to a Bloomberg report today, Qatar has decided to cut off two-thirds of its exports until the market settles.

All of this means that, unlike Baku-Ceyhan, neither Nabucco nor South Stream actually have much gas to ship. When the concept behind the Nabucco project originated in the 1990s, it was intended as an essential link from the former Soviet states of Central Asia to the outside world that would break Russia’s then-monopoly on pipeline transport in the region. But on Monday, Turkey and Azerbaijan got together to announce an agreement that the Azerbaijanis will ship just 6 billion cubic meters of natural gas a year in the pipeline by 2019, or one-fifth of the envisioned volume; there is no other supply in sight. But even if Nabucco’s backers could somehow find the gas, it would still represent just 5 percent of the 540 billion cubic meters that Europe currently uses.

Alexandros Petersen, a senior fellow in the Eurasia Center at the Atlantic Council, thinks the clock has not entirely run out on European pipeline politics. He says the shale gas advances, for instance, "have yet to revolutionize the heavily restricted European/Eurasian natural gas markets." "2010 is a year of decision" for the pipelines to go forward or not, Petersen says.

But Sam Charap, the associate director for Russia and Eurasia at the Center for American Progress, thinks the Nabucco-South Stream rivalry is a "distraction" for the Obama administration. "The unconventional gas revolution has undermined" the Nabucco project, he told me. Shale gas is known as unconventional gas; conventional supplies are the stuff you pump out of the ground and deliver by pipe.

In any case, there is still intrigue on the Caspian. In December, China opened an 1,100-mile natural gas line starting in Turkmenistan, and connecting into the Chinese natural gas grid in Xinjiang. Iran has done the same in a smaller way, but China is fast replacing the United States as the main geopolitical-balancer in Central Asia. China’s energy policy also undermines U.S. efforts to isolate Iran, another Caspian Sea state. Here is Michael Klare on that topic.

China’s investments are also giving the country a lasting presence in Central Asia that, so far, the United States has failed to match. It almost doesn’t matter that the U.S. has put down military bases in the region. The Manas Air Base in Kyrgyzstan is ephemeral; pipelines by comparison are forever. China, its eye affixed on the original prize, has won the second round of pipeline politics.

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