The United States says it doubts the feasibility of the South Stream project.
Prime Minister Vladimir Putin's decision not to attend the gas summit in Sofia was well justified. First of all, the summit's concluding declaration said the Energy Charter was a pillar of the European energy policy, therefore rejecting President Dmitry Medvedev's "conceptual approach." Second, the Czech Republic, now presiding over the European Union, said an agreement for the implementation of the Nabucco project would be signed by June 2009. Moreover, the U.S. State Department's Special Envoy for Eurasian Energy, Ambassador Richard Morningstar, promised that Washington would do everything it could to support this project, and even acknowledged the possibility that the Nabucco pipeline could receive gas from Iran.
In effect, the Sofia conference helped revive the Nabucco project, deemed impracticable over the past few months by many analysts, including some in the European media. Czech Deputy Prime Minister for European Affairs Alexandr Vondra said all the projects that have been declared priorities for the Southern Energy Corridor would start to be implemented as early as this year. Vondra said Prague would host a special conference on the Nabucco pipeline on May 8, and that an agreement between the concerned governments on implementing the project would be signed by June. The Caspian Development Corporation, an international consortium, which is planned to purchase gas for the Nabucco pipeline, will be established before the year is out.
Moreover, Vondra said the EU and Iraq would soon sign a memorandum of understanding on energy matters, and that an agreement on the construction of a gas pipeline from Greece to Italy would be signed by late 2009.
Turkish President Abdullah Gul also said his country viewed Nabucco as a project of strategic value, and that Ankara has the political will necessary to implement it. The Turkish position was a major obstacle hindering the Nabucco project until now. Turkey did not want to be a gas-transit country, preferring to buy gas on the border (the way Russia does) and to charge its own prices. Although this Turkish demand caused disagreements between Ankara and Azerbaijan, President Gul said he would do everything possible to improve bilateral cooperation while the Nabucco project was being implemented, and also called Azerbaijani President Ilham Aliyev his "brother".
Czech Deputy Prime Minister Vondra also told delegates that he was extremely optimistic about the results of his recent talks in Ankara because Turkey was "ready to cooperate". Vondra said he had recently attended an energy conference in Ashkhabad, and that Turkmen President Gurbanguly Berdymukhamedov had assured Vondra of his intention to diversify gas-delivery routes to Europe. In effect, President Berdymukhamedov supported the Trans-Caspian Pipeline project.
However, Ambassador Morningstar probably made the most important statement on the future of the Nabucco pipeline. He said the United States would do everything possible to assist in the project's implementation, but that Washington was ready to finance it only after European companies contributed their share.
Ambassador Morningstar, who served as special advisor to President Bill Clinton on assistance to the Commonwealth of Independent States (CIS) has repeatedly lobbied for a pipeline that would bypass Russia. At that time, he led key talks on the construction of the Baku-Tbilisi-Ceyhan oil pipeline. Numerous European analysts called that project impracticable and economically inappropriate. Russia also actively opposed the pipeline. However, the US administration consistently advocated the project and financed it. Consequently, the pipeline was completed.
But Ambassador Morningstar's statement that the Nabucco pipeline could be supplied with Iranian gas was even more sensational. In so doing, he refuted a recent statement by his colleague, Deputy Assistant Secretary of State for European and Eurasian Affairs Matthew J. Bryza, who said a month ago that the United States considered Iranian involvement in the project unacceptable.
"Obviously, right now, gas from Iran creates some difficulties for the United States as well as for other countries involved," stated Ambassador Morningstar, "but we reached out to Iran, we want to engage with Iran, but it also takes two to go to the dance and we are hoping that there will be positive responses from Iran."
Nevertheless, Iran did not attend the Sofia conference, and so, Qatar, which was represented at the summit by Emir Sheikh Hamad bin Khalifa Al-Thani, came to be regarded as the guarantor of European energy security. As the delegates applauded, the Emir of Qatar said that his country's readiness to supply liquefied natural gas (LNG) to Europe could usher in a new era in the global energy sector. Last week, Poland and Qatar signed a 20-year contract for LNG deliveries. Moreover, Croatia announced the construction of an LNG terminal at the planned final destination of the South Stream pipeline.
Although Russia was also mentioned at the forum, only Greek Prime Minister Kostas Karamanlis spoke positively about the South Stream project. Karamanlis said he did not oppose the Nabucco pipeline, and that both projects should be implemented.
Ambassador Morningstar met with Russian Energy Minister Sergei Shmatko, Prime Minister Putin's representative at the summit, and later said the United States would consider all of Russia's proposals, but that Washington viewed Russian energy giant Gazprom's South Stream project as quite dubious.
The ambassador stated that in the opinion of the United States, the South Stream project was too expensive, and it was unclear how it could be implemented. According to preliminary estimates, the Nabucco and South Stream pipelines would cost 8 billion euros and 15.3 billion euros, respectively.
Russian representatives in Sofia defended a diametrically opposite viewpoint. "The major difference between South Stream and Nabucco is that South Stream has gas. Its resource base is secured by Russia's joint gas-supply network. This will be enough to fill the pipeline to capacity on the first day of its work," said Stanislav Tsygankov, head of Gazprom's foreign economic department. Tsygankov proposed listing the Russian project as a high-priority Gazprom and EU project so that it could receive EU funding. In his opinion, the project should be implemented regardless of political and economic developments.
But Moscow received no answer to this proposal. Nevertheless, Bulgarian Prime Minister Sergei Stanishev is to visit Prime Minister Putin in the Russian capital today and will inform him of the results of the conference.
Transparency of all the participants of gas trade was one of the key issues discussed at the conference. Ambassador Morningstar noted the important role of the non-governmental organisation Extractive Industries Transparency Initiative, established by Peter Eigen, the founder of Transparency International. In his address at the conference, the American special envoy stated that "new pipelines are not a cure-all", and emphasised that all deals on the gas-market should be conducted transparently.
Transparency and non-cooperation with non-transparent partners were a key aspect of the conference's final declaration, which mentioned neither the South Stream nor the Nabucco projects. However, the document stresses that the Energy Charter, which has long provoked Russian hostility, is the pillar of European energy policy. Moscow refuses to ratify the Energy Charter, and proposes replacing it with a new agreement.
Last week, President Dmitry Medvedev visited Finland and submitted new Russian proposals for such an agreement. The proposals entitled "A Conceptual Approach to the New Legal Structure of International Cooperation in the Energy Sphere" were posted on the Kremlin's website. The Sofia conference did not discuss the Russian initiative. Its final declaration hinted that the Energy Charter did not need to be revised.
Mikhail Zygar