Dr. Zurab Garakanidze*
In July 2011, Turkey hosted an international conference to discuss navigation security issues in the Bosphorus and Dardanelles Straits. Ankara has announced its intention of working with foreign oil companies to create a fund for protecting the Turkish Straits against accidents.
The cost of this plan may exceed US$30 billion, by some estimates. However, the Turkish government, pointing again to the massive spill in the Gulf of Mexico, says the proposed measures are well worth the price. Part of Turkey’s plan involves reorienting oil flows away from the straits and into an overland pipeline – specifically, the Samsun-Ceyhan Oil Pipeline, which will be built by a Russian-Italian-Turkish consortium along the Samsun-Ceyhan route. But construction Samsun-Ceyhan and Burgas-Alexandrupolis Oil Pipelines are stoped and increased volumes of Kazakh oil throught CPC need a new export route. That’s why we propose to revive Russian-Georgian-Turkish Novorossiysk – Supsa – Ceyhan Oil Pipeline project. This scheme, on the one hand, is designed to establish a crude transportation route to bypass the Bosphorus and Dardanelles. On the other hand, this project will help to open a deadlock in Georgian-Russian tense relations.
In his opening address at the conference, Turkish Energy Minister Taner Yildiz called for introducing emergency measures to protect the straits in light of swelling ship traffic. Over the last 15 years, he noted, some 115,000 tonnes of crude oil and petroleum products have been spilled in the Turkish Straits. He also noted that Istanbul, which is home to 15 million people, was located on the Bosphorus. Any accident involving an oil tanker in the area would have grave environmental consequences for the city, he said. Despite this threat of environmental catastrophe, Turkey does not have the option of closing or tightly restricting shipping traffic through the straits. Under the 1936 Montreux Convention, which regulates navigation in these waters, the Bosphorus and Dardanelles must remain open. Yildiz said at the conference that Ankara was committed to upholding its obligations. He also commented, though, that attitudes had changed because of the disaster that followed the collapse of the Deepwater Horizon drilling platform at BP’s Macondo field in the Gulf of Mexico in April 2010.
Russian support for bypassing the straits
Ankara has actively lobbied for the construction of a pipeline from Samsun to Ceyhan for years. It has achieved some success on this front with the recent signing of a deal with the Russian energy giant Rosneft, which will join Italy’s Eni and Turkey’s Calik Enerji to build the pipeline. Russia’s state oil pipeline operator Transneft will also be involved in the project. Its participation, and that of Rosneft, will ensure that the Samsun-Ceyhan link is filled and therefore profitable. Russia had long resisted the pipeline project, in part because of its own plans for the establishment of another bypass route through Greece and Bulgaria. In the face of Turkey’s plans to introduce new environmental protection measures for the Bosphorus and Dardanelles, though, it seems to have decided to embrace Samsun-Ceyhan. This logic is sound; if the pipe were built by other investors and the straits somehow shut down, Russia would have a very difficult time finding an alternative route for oil exports through the Black Sea. Meanwhile, Russia has not given up on the other bypass line, which would run from Burgas on the Bulgarian Black Sea coast to Alexandroupolis, a Greek port on the northern Aegean coast.
If both of these pipelines were built, they would be able to accept most of the oil that is now transited through the straits. However, Nikolai Tokarev, the president of Transneft, has said that the cost of pumping oil through the Burgas-Alexandroupolis pipeline is likely to be nearly twice as high as the cost of tanker shipments through the Turkish Straits. He also estimated that the cost of using the Samsun-Ceyhan pipeline would be nearly three times as high. Nevertheless, Eni, Transneft and Rosneft have agreed to co-operate with the Turkish government on this pipeline venture. Meanwhile, reports from the conference in Istanbul state that US companies have suggested upgrading the straits rather than establishing transportation routes. A Chevron representative, for example, said that his company was not considering any new routes for fuel oil shipments. (BP, for its part, has prepared a special document on methods of bypassing the straits, according to an employee of the company’s Turkish office.) Turkey, however, has resisted the US proposals. Turkish Environment Minister Veysel Eroglu has said: “Freedom of passage through the [straits] should be controlled in the interests of ecology and for the people of Turkey.” However, there is no way to redirect oil flows immediately. Moreover, Turkey will probably have a difficult time convincing foreign energy giants to fork out the many billions of dollars needed to cover the costs of setting up the proposed environmental programme and of constructing the pipeline to Ceyhan.
Neccesity for the CPC expansion
At the same time Central Asian energy is strategic, enabling Russia to expand its economic gains in the energy market. Russia’s gas and oil fields are aging and production is slowing. Bringing additional reserves online will take both significant time and investment.
The threat to Russian energy dominance originates in the Caucasus. The Western energy corridor through Azerbaijan, Georgia, and Turkey offers the opportunity for the West to break Russia’s grip on Caspian and Central Asian energy. While the BTC and BTE already allow Caspian oil and gas to flow west along this corridor, it might be expanded by trans-Caspian pipelines to tap Central Asia’s large deposits. Though such a pipeline route would be a feat of both engineering and politics, it is a possibility that Russia appears to view as a serious threat.
To secure its future as a global energy superpower, Russia needs to reassert itself in the former Soviet regions of Central Asia and the Caucasus and Georgia provides a strategic chokepoint. If Georgia could be brought in line, Moscow could use its political dominance to cut the NATO air corridor into Central Asia, the Western energy corridor, and reduce the negative consequences of Russia’s declining economic importance for Georgia and the former soviet countries. The problem for Moscow is that Tbilisi is anything but pro-Russian.
This problem was highlighted by two developments in December 2010. On one hand, Moscow struck an agreement with the Caspian Pipeline Consortium (CPC) on the expansion of the Tengiz-Novorossiisk oil export link. On the other hand, Russia and Turkey signed documents providing for Rosneft and Transneft to join with Eni and Turkey’s state pipeline operator Botas on the Samsun-Ceyhan project. These events may be linked. The CPC expansion project will increase the volume of oil flowing into the Black Sea, not via the South Caucasus but through the Russian territory. It will boost the capacity of the Tengiz-Novorossiisk link from its current level of about 36.5 million tonnes per year (733,000 bpd) to 67 million tonnes per year (1.34 million bpd). Most of the additional volumes will come from the massive Tengiz field in western Kazakhstan, which is operated by a Chevron-led consortium. However, some may come from Kashagan, an even larger field in the Caspian Sea. The cost of the expansion project is expected to reach US$5.4 billion, a figure that some Russian observers have described as unreasonable. It is also important that to Russian government needs the CPC expantion to block the «big Kashagan oil’s» possible transportation to the South Caucasian routes. But in Astana have little bit different opinion. As underlined by professors V. Papava and M. Tokmazishvili, «…despite close relations with Russia, Kazakhstan is also very interested in the security of the transportation corridor passing through Azerbaijan and Georgia.3
Moscow resisted the plan for years but agreed to approve it after Transneft managers, along with First Deputy Prime Minister Igor Sechin, struck a deal with Chevron that provided for crude from the Tengiz field to be transported by tanker
To secure its future as a global energy superpower, Russia needs to reassert itself in the former Soviet regions of Central Asia and the Caucasus and Georgia provides a strategic chokepoint.
from Novorossiisk to Burgas for loading into the Burgas-Alexandroupolis link. Then in 2010, Bulgarian Prime Minister Boiko Borisov, who was appointed in July 2009, said he would rather not go ahead with the pipeline project. He said it posed an unacceptably high risk of pollution for the magnificent beaches of southern Bulgaria. This would endanger the tourist business, which is much more important for the country than the “pittance” of 36 million euros (US$49 million) per year in transit fees from the pipeline, he said. There is an obvious and simple alternative to Burgas-Alexandroupolis – namely, continued use of the Bosphorus and Dardanelles Straits. However, Ankara is seeking to limit oil shipments through these channels. Initially, Moscow openly objected to the Turkish position and accused Ankara of violating the Montreux Convention, which guarantees freedom of passage for civil transport through the Turkish Straits. These protests failed to move Turkish officials, who remained unwilling to accept the risk of increased tanker traffic. Signs of a rapprochement appeared in 2009, when Russian Prime Minister Vladimir Putin and his Turkish counterpart Recep Tayyip Erdogan signed an agreement that gave Russia’s state-run natural gas monopoly Gazprom the right to build a section of the South Stream pipeline in Turkey’s section of the Black Sea. In exchange for this, Putin agreed to Ankara’s insistence on using the Samsun-Ceyhan pipeline for shipments of Russian oil. Sechin, who had long opposed the Turkish bypass route, publicly expressed his displeasure with the deal. However, Putin appears to have decided that it is more important to please Alexei Miller, the head of Gazprom. This is perhaps because South Stream is meant to serve the important strategic purposes of bypassing Ukrainian transit routes and of competing with EU’s Southern Gas Corridor, a pipeline projects designed to reduce European dependence on Russian gas.4
It appears that Russia has abandoned the Burgas-Alexandroupolis project in favour of the Samsun-Ceyhan pipeline and Turkey’s programme for protecting the Bosphorus and Dardanelles Straits. In so doing, it has also made a point about its relationship with one of its main post-Soviet partners – Bulgaria.
Thus, we think it would not be bad, that Georgian energy policy will be transformed as a rational policy. In this regard, and according to the Georgian government’s “10 Point strategic Plan”5 in the coming years the country should become as a regional energy and transport “hub”. For that porpose we discuss two projects: 1)An alternative route for Kazakh oil in the South Caucasus: Novorossiysk – Supsa – Ceyhan Oil Pipeline, and 2)EU’s “Southern Gas Corridor” and the Russian – Armenian “North – South Gas Pipeline» Interkonnector.
Alternative route for Kazakh energy resources in the South Caucasus: the Novorossiysk – Supsa – Ceyhan Oil Pipeline
Forgotten proposals for an along Black Sea cost Novorossiisk-Supsa-Ceyhan pipeline deserve a second look, because the Caspian Pipeline Consortium’s (CPC) Tengiz-Novorossiysk oil pipeline threatens an ecology of the turkish straits.
Along with Azerbaijan, Kazakhstan is vitally interested in diversifying its options for oil and gas deliveries to world markets and in reducing its dependence on transit routes through Russia. To some extent, it has succeeded; it has, for example, been exporting oil to China via the Atasu-Alashankou pipeline since 2006. However, the growth of production at the Tengiz and Karachaganak deposits, along with the promise of future output from Kashagan, has created a powerful incentive for the creation of an additional export route through the Southern Caucasus.
Since the disintegration of the USSR, Kazakhstan has exported most of its oil via Russian territory, using two high-capacity pipelines. One of these is the Soviet-built Atyrau-Samara link. The other is the conduit from Tengiz to Novorossiisk built by the Caspian Pipeline Consortium (CPC).
The CPC was meant to allow Kazakhstan to export more oil, especially production from the Tengiz field. Since the pipeline ends at the Black Sea coast, however, the oil must then be loaded onto tankers for transport through the Turkish Straits into the Mediterranean market. Many shippers favour continuing this arrangement recently.
The CPC provides export of the Kazakhstan and Russian oil. For 10 years of work it has shipped to consumers from the sea terminal near Novorossisk, Russia, almost 270 million tons of raw materials which have taken out more than 2500 tankers. In July 2011 realization of the project of expansion of capacity of petrowire system which will come to the end in September, 2012 has begun.
Project CPC is one of the most successful in energy sphere on the post-Soviet territory. Application of the advanced organizational and administrative technologies, the modern and reliable equipment, highly professional and responsible shots became its card. 10 years oil pipeline Tengiz – Novorossisk in the general length of 1511 kilometers functions without uniform failure. Currently ongoing project CPC reconstruction was developed taking into account prospect of increase in its initial throughput in 2,5 times – to 67 million tons of oil annually, with antifrictional additives – 76 million tons.6
Bosphorus bypass may help in conflict resolution
Now works on a number of the CPC pipeline objects undergo with a schedule advancing for two months. In particular, on reconstructed pumping station Kropotkinsky it is executed about 20% of
Since the disintegration of the USSR, Kazakhstan has exported most of its oil via Russian territory, using two high-capacity pipelines.
works. Modernization will end and starting of operations are planned for September, 2012. The expansion project is realized without a stop of swapping of oil.
Ankara, though, is wary, especially in light of the mentioned campaign to expand the CPC’s capacity. It would instead like to see Kazakhstan crude shipped across the Black Sea for loading into the planned Samsun-Ceyhan pipeline. Russia, meanwhile, has previously urged Kazakhstan to use the planned Burgas-Alexandroupolis pipeline.
All of these options pose certain problems. Turkey opposes the first on the grounds that it would put too much strain on the Bosphorus and Dardanelles Straits7, while Russia and Kazakhstan have yet to make concrete throughput commitments to the Samsun-Ceyhan project. Bulgaria, for its part, has effectively blocked the Burgas-Alexandroupolis scheme.
As such, Georgia, Russia and Turkey ought to team up for talks on another alternative – an oil pipeline connecting Novorossiysk, Supsa and Ceyhan, along the Russia and Georgia Black Sea costs. One virtually nobody remembers, which calls for moving Kazakhstani oil along the Georgian Black Sea coast, from southern Russia through Abkhazia, a breakaway region of Georgia, and into Turkey. The idea gained some popularity in the 1990s but was later abandoned. It is worth reviving, though, now that work on the CPC expansion project has begun.
The alternative pipeline would also be cost-effective. Russian experts have calculated its costs at US$600 million, as compared with US$30 billion for the proposed Turkish Straits fund, US$2 billion for Samsun-Ceyhan or 1 billion euros (US$1.44 billion) for Burgas-Alexandroupolis. 8
Additionally, the pipeline would generate additional transit fees for both Moscow and Tbilisi. Russia could use these revenues to recoup its losses from the Azerbaijani pipelines, while Georgia could use its share to cover costs related to reunification with Abkhazia.
It is worth noting, though, that unless the problem of Abkhazia’s status vis-à-vis Georgia is resolved, the Novorossiisk-Supsa-Ceyhan project will not be able to gain any momentum.
Possible Iran-Armenia-Georgia-Russia Interconnector project
At present, the only place where Caspian and Russian gas transport network intersect is in Georgia. In that country, the North-South Trunk Pipeline9, which runs from Russia to Armenia via Georgia, crosses the South Caucasus Pipeline (SCP), which is currently pumping gas from the first stage of Shah Deniz (SD1) and which will direct gas into Nabucco or Transanatoian Gas Pipeline. The point of intersection is near the village of Jandara, near Gardabani. The North-South Trunk Pipeline begins in the southern Russian city of Mozdok in Russia and terminates at the Armenian-Georgian border. The 235-km conduit includes two pipes – one with a diameter of 1,200 mm and a second or spare tube with a diameter of 700 mm. Most of the gas transited through these pipes is now delivered to Armenia, as Georgia has been receiving SD1 gas since 2007. Following the collapse of the Soviet Union, the pipeline operated far below capacity. While the design capacity of both pipes comes to 18 bcm per year, the network pumped only 1.7-1.9 bcm per year in 2007-2010. (Even in Soviet times, the maximum annual transit volume was 9.5 bcm per year.) If it were connected to SCP, this pipeline could be used to channel some of the gas that Russia might have exported via South Stream into the Nabucco or Transanatolian pipelines. Increasing gas transits would also be profitable for Georgia. The country already receives 10% of the gas pumped through the North-South Trunk Pipeline as a transit fee. In recent years, gas consumption in Georgia has averaged about 1.73 bcm per year, while Armenia has used about 1.93 bcm per year. This implies that the state-owned Georgia Oil and Gas Corporation (GOGC) receives approximately 190-193 million cubic metres per year of free gas, equivalent to about 11.0-11.2% of the country’s gas consumption, which it then monetises through sales to the local population. The volume of gas transited through Georgian territory is slated to rise in 2017, when SD2 begins production. At that time, the SCP link, which has only been pumping 4.7 bcm in 2011, will see its capacity increase dramatically to 20 bcm per year. An agreement signed between Turkey and Azerbaijan on the transit and volume of SD2 gas in June 2010 provides for the pipeline to operate at full capacity. Linking the SCP to the North-South Trunk Pipeline would improve the latter’s prospects while also giving Russia access to a new high-capacity export route and improving Nabucco’s or Transanatolian’s access to gas supplies. Making the connection would be easy and would not restrict supplies to Armenia, especially since that country is now able to receive gas from another supplier – namely, Iran. If this can be done, the competition between Southern Gas Corridor’s projects and South Stream would subside, and the two projects would instead complement each other. That is, rather than working against Southern Gas Corridor, Gazprom would be able to make use of the EU’s pipelines to gain a new export route to Europe. We fully agree to idea, according which «…harmonizing gas pipelines is even more important given that it is far from clear whether the Russian gas transport system will be sufficient to transport expanded volumes of Central Asian gas during the first part of the next decade».10
Moreover, connecting SCP with the North-South Trunk Pipeline would allow the creation of a wider network in which Iran could serve as a supplier, so far as western anti-Iranian sanctions are against the oil exports and doesn’t extend on the Iranian gas. Iranian gas pumped through the Tabriz-Meghri line to Armenia could then be pumped to Georgian village Jandara, near Gardabani, via the Armenian network and redirected into the SCP for loading into the Transanatolian or any Southern Gas Corridor’s gas line, just as gas from Russia could be pumped through the North-South line for transfer to the SCP. This would be cost-effective, as it would make use of existing pipes rather than require the construction of new lines.
Not only is energy a source of economic wealth, but also it translates into political power. Coercive energy diplomacy is not the only source of leverage that Russia has in the case of Georgia, however. Having assumed responsibility for mediating Georgia’s separatist conflicts with Abkhazia and South Ossetia, Moscow has the ability to manipulate these internal disputes for political gain.11
Now Georgia has a chance to use its geographical location for country’s reunification. Development of the Central Asian energy projects and growing shipments of Kazakh oil via the Turkish Straits, gives Tbilisi chance to start dialogue with Russia on the topic to use Georgian territory, including occupied districts, in which it is possible to involve the West. For that purpose to revive the Novorossisk-Supsa-Ceyhan oil pipeline project is necessary. Also, according to the Georgian government’s strategic plan, in the coming years country should become a regional energy and transportation HUB. For that, the EU “Southern Gas Corridor’s” projects, via the SCP as an interconnector, can be connected with the Russian – Armenian “North-South Gas Pipeline”, which will also become as a leverage to use Iranian and Armenian economic interests in future Georgia, Russia energy cooperation. PR
* Dr. Zurab Garakanidze is an author in News Base E-magazine.
1. Boris Rumer, “The Search for Stability in Central Asia,” in Central Asia: A Gathering Storm?, Boris Rumer, ed. (Armonk: M.E. Sharpe, 2002), 56.
2. Alman Mir Ismail, “Is the West Losing the Energy Game in the Caspian?,” CA-CI Analyst, May 6, 2009, http://www.cacianalyst.org/?q=node/5100 (accessed May 12, 2009).
3. Vladimer Papava & Michael Tokmazishvili. “RUSSIAN ENERGY POLITICS AND THE EU: HOW TO CHANGE THE PARADIGM”. CAUCASIAN REVIEW OF INTERNATIONAL AFFAIRS VOL. 4 (2) – SPRING 2010. p. 106. http://www.cria-online.org/Journal/11/Done_Russian_Energy_Politics_and_EU_How_to_Change_the_Paradigm_by_Vladimer_Papava_and_Michael_Tokmazishvili.pdf
4. Z. Garakanidze. “Successful Visit of the EC High Level Officials to Azerbaijan and Turkmenista”. English-language Magazine “Political Reflection”, Turkey, Ankara. Vol 2, No 1, p. 49-52. March, 2011.
5. “10 point strategic plan of the Government of Georgia” http://www.government.gov.ge/index.php?lang_id=geo&sec_id=234&info_id=33014
6. Z. Garakanidze. “Protecting the Turkish Straits”. NewsBase, week 28, p. 4; 21 July, 2010
7. E. Ismailov and V. Papava have underlined: “Practically from the very moment of the inception of the idea of transporting Caspian oil to the West and the construction of oil pipelines bypassing the territories of Russia and Iran, Azerbaijan, Georgia and Turkey appeared as one ‘team’…” (See: ”A new concept for the Caucasus”. Eldar Ismailov and Vladimer Papava. Southeast European and Black Sea Studies; Vol. 8, No. 3, September 2008, p. 293)
8. Z. Garakanidze. “Important Step has been Made in Supply and Transit of the Shah Deniz 2 Gas”. English-language Magazine “Political Reflection”, Turkey, Ankara. Vol 2, No 4, p. 24-27, December, 2011
9. The North-South Trunk Pipeline begins in the southern Russian city of Mozdok and ends at the Armenian border after passing through Georgia. It is 235 km long and includes two parallel lines – one 1,200-mm pipe and a 700-mm backup pipe. The pipeline has never operated at its full design capacity of 18 billion cubic metres per year for both lines. Even during the Soviet period, transit volumes never topped 9.5 bcm per year. But after the collapse of the Soviet Union, throughput dropped sharply. In 2007-2009, for example, it pumped only 1.7-1.9 bcm per year. Most of the gas pumped through the pipeline is transited to Armenia, since as of 2007 Georgia began sourcing most of its gas from Azerbaijan’s Shah-Deniz offshore field. The state-controlled Georgia Oil and Gas Corporation (GOGC) is, however, entitled to take 10% of throughput as a transit fee. In recent years, Georgia has consumed about 1.73 bcm per year of gas, while Armenia has used about 1.93 bcm per year. These figures indicate that GOGC receives approximately 190-193 million cubic metres per year of free gas as so-called monetisation of the transit fee. These volumes, which the company sells to the local population, cover only about 11.0-11.2% of Georgian gas consumption.
10.Vladimer Papava and Michael Tokmazishvili. “Pipeline Harmonization Instead Of Alternative Pipelines: Why The Pipeline “Cold War” Needs To End” http://www.ada.edu.az/biweekly/issues/150/20090327030535315.html
11.Konstantin Preobrazhensky, “South Ossetia: KGB Backyard in the Caucasus,” CA-CI Analyst, vol. 11:5 (March 11, 2009): 3.