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Europe keeps Nabucco on life-support

The European Council, in a meeting principally devoted to determining the European Union's policy towards its eastern members and preparing an EU position for next week's Group of 20 summit in London, also took an important decision last week on energy with a compromise to keep plans for the Nabucco gas pipeline on life-support.

The European Council brings together the heads of state or government of the European Union and the president of the European Commission, the union's executive branch. It defines the general political guidelines of the European Union.

Out of nearly 4 billion euros (US$5.4 billion) allocated for the energy sector over the next two years, less than 7% has been set aside for Nabucco, which seeks to pipe natural gas from the Caspian Sea basin through Turkey to the Balkans and Italy for eventual distribution throughout Europe as greater quantities come on line. The amount agreed is more than German Chancellor Angela Merkel would have preferred.

Germany strongly favors the North Stream pipeline agreed with Russia by Merkel's predecessor, Gerhard Schroeder, to pass undersea directly between the two countries - also making Germany the monopsonistic distributor of Russian gas in the region. Merkel had sought to have Nabucco downgraded in the EU's priority list of energy projects and earlier in the month succeeded in having the European Commission, meeting earlier this month, take a preliminary decision to withhold all public funds from the project.

Nabucco was entirely eliminated from the register of projects to be supported from out of the EU's 5 billion euro stimulus plan to counteract the current financial crisis, but a compromise at the European Council meeting in Brussels restored just over a quarter-billion euros after East European members of the EU raised strong protests.

Besides Turkey's attitude (Ankara insists on the right to buy at below-market prices 15% of the Azerbaijani gas that would fill Nabucco), the question of Georgian transit has in some eyes become a complicating factor. While the Russian invasion of Georgia has altered Azerbaijan's politico-strategic perceptions and view of the North Atlantic Treaty Organization, pipeline volumes through Georgia are coming back up to pre-invasion levels. Volumes that had transited by rail, however, seem not to have recovered as well. Kazakhstan has decided not to build a refinery at the port of Batumi, ostensibly for commercial reasons.

At the European Council last weekend, the EU also launched its "Eastern Partnership" cooperative initiative (first bruited last December) with Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. Building upon the European Neighborhood Policy (ENP), this initiative includes Belarus for the first time. While focused principally on such matters as assistance to small and medium-sized enterprises, improving the rule of law, and the like, this initiative represents a formal recognition by the EU of its interests in the region. But it was not planned this way.

The current ENP programs, which were launched in 2007, were to have been renewed next year for a second three-year period, during which a process of program evaluation would have led to the determination of what initiatives might be launched to follow on the ENP.

While it is true that such countries as Ukraine were advocating for something other than a mere renewal of the ENP next year, it is unlikely that Brussels would not have proposed the Eastern Partnerships (which point towards the possibility of subsequent Association Agreements) without the experience of Russia twice closing the taps that conduct natural gas to Europe through Ukraine and of watching Russian troops occupy Georgian territory.

In contrast to the less-than-lukewarm endorsement of Nabucco, which has been vitiated for years by EU's internal divisions, the economic aid for reconstruction pledged to Georgia by the EU has not been trivial; and the concern to build democratic institutions and promote civil society throughout the region is genuine.

Programmatic EU documents recognize the need for diversification of energy sources. As is too often the case, the problems are in the realization because these documents are only indicative in nature and depend upon the national governments of the member states for their implementation. The particular interests of Germany and of its leading politicians in the case of Nabucco illustrates the point.

EU programs such as INOGATE and TRACECA have been in existence for years and, while they have been effective in an "under the radar” manner by conducting feasibility studies, upgrading port facilities in the region, and so on, they have not created political realities, with the exception of INOGATE coming to act as the secretariat of the Baku Initiative and its knock-on conferences and consultations (see Euro-Caspian Energy Plans Inch Forward, 27 November 27 2008).

There is, however, no substitute for facts on the ground, and it is in this endeavor that the EU has proven once again sorely lacking due to internal divisions arising from the national interests of its member states and their of their political elites.

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URL:  http://www.robertcutler.org/blog/2009/03/europe_keeps_nabucco_on_lifesu.html
First published in Asia Times Online, 27 March 2009.

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