Commission sources and leading experts said the main intention of the meeting will be to reach mutual understanding on how to tackle the ongoing economic crisis, which is threatening to hit emerging economies such as Russia and China even harder.
Speaking at a conference in Brussels yesterday (5 February), Thierry de Montbrial, president of IFRI, the French Institute of International Relations, warned of a doom-like scenario in which falling oil prices would cripple Russia's economy.
"The biggest danger is that we pass from one extreme to another. In mid-July 2008 previsions for prices of petrol were at $200. A few months later, we wonder if petrol prices will not return to the level of $15-20, as they were in 2000, when Mr. Putin was elected, and under the level of which Russia is estimated not able to buckle its budget," De Montbrial said.
He further explained that such "swings in thinking" are extremely detrimental, because they can paralyse much-needed investment planning in the energy sector. "The biggest danger before us if we start thinking along the following lines: since we are in a crisis, then we drop investments in the energy sector, or we postpone them for better times. But then we risk to prepare the next phase of petrol price explosion, similar to the one of the seventies, and in addition, we risk abandoning the other major problem of the beginning of the 21st century, namely climate change and CO2 reductions, that is, a concept of investment in a much wider public policy," the head of the French think tank further elaborated.
But Montbrial also warned about risks in China, which had up till now been considered relatively immune from the crisis. Such views are "extremely naïve", he said.
"We have a double risk of a particularly strong crisis in China and India. I am particularly worried for China," he said, explaining that in case of a serious economic slowdown in China, with the country politically fragile, the legitimacy of the Communist party, which up to know has been founded on the economic growth, will be challenged.
"Although some fear an overly powerful China, a overly weak China is a much bigger threat," he said.
Diplomats confirmed that the thoughts expressed by Montbrial reflected the state of mind of the EU executive, and that coordination of macroeconomic policies is seen as fundamental to facing the challenges to come.
Energy Commissioner Andris Piebalgs, who attended the event, completely dismissed the view that the last gas crisis had harmed EU-Russia relations.
"I think we should discuss how to better work against the economic crisis, how to deal with energy relations so that they could be better, more predictable. And I would say: they are not as bad as people think. We are not fighting. Yes, accidents happen. Yes, we could do better. But fundamentally, this is a Russian resource and Russian legislation regulates it. Does it give us access to the resources? Yes, it does. Does it sell to the European market? Yes, it does. Is it used for political purposes in the EU? No," Piebalgs stated.
Friday, February 6, 2009
Pipeline politics? Russia and the EU's battle for energy
While Russian gas giant Gazprom is drawing up long-term plans to strengthen its grip on Europe with pipeline projects backed by the Kremlin, the EU's response strategies are only in the early stages of development.
Milestones:
1 Jan. 2006: Russia briefly interrupts gas supplies to Ukraine over payment dispute, triggering criticism in the West that the Kremlin is using energy as a political tool.
26 May 2006: First oil pumped thorugh the Baku-Tbilisi-Ceyhan pipeline.
4 Oct. 2006: Agreement between Russia and Germany on the Nord Stream gas pipeline project under the Baltic Sea.
15 March 2007: Russia, Bulgaria and Greece sign agreement on Burgas-Alexandroupolis oil pipeline.
29 April 2008: Russia and Greece sign deal on the South Stream gas pipeline, a project perceived as a rival to the EU's flagship Nabucco project.
16 Oct. 2008: EU summit endorses report on energy security by the French EU Presidency, inviting EU countries and institutions to diversify energy sources and supply routes.
23 Dec. 2008: Twelve of the world's leading exporters of natural gas met in Moscow to create a producers' group that could develop into an OPEC-style cartel. Russian Prime Minister Vladimir Putin said "the era of cheap gas is over".
1 Jan. 2009: Second 'gas war' between Russia and Ukraine began. The crisis ended on 20 January with resumed deliveries and higher gas prices for Ukraine.
2009: Expected completion of Medgaz pipeline between Algeria and Spain, originally foreseen for 2001.
Policy Summary Links
Russian ambitions
Recent developments have shown that using energy as a tool, Russia is increasingly able to influence EU decision-making, primarily through "divide and rule" tactics.
Emboldened by the flow of petrodollars (and euros) in recent years, Russia has revealed ambitions to block plans to bring gas from Central Asia into the EU, bypassing Russian territory.
In addition, Russia is devising plans to avoid unfriendly transit countries. The Nord Stream and South Stream pipelines under the Baltic and the Black Sea are part of this strategy. The policy would also allow Moscow to keep traditional transit countries under pressure, as supplies to those states could be cut without affecting deliveries to the West.
Russia: Friends and foes in Europe
A recent study by Stefano Braghiroli and Caterina Carta has categorised EU countries according to their level of loyalty towards Russia.
On one extreme are the "Eastern divorced" countries of the former Soviet bloc, which nowadays are for the most part hostile to Moscow (Estonia, Lithuania, Poland, Latvia, the Czech Republic and Slovakia).
On the other are the "loyal wives", which maintain good relations with Russia (Italy, Austria and Greece).
In between are the "vigilant critics" (Romania, Slovenia, Sweden, Bulgaria, Hungary and the United Kingdom)
and the larger group, the "acquiescent partners" (Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Portugal and Spain).
Sympathy with or antipathy towards Russia may not represent the main disruptive force within the EU. But there is obvious readiness on Russia's part to engage in pipeline projects with countries such as Italy, Austria, Bulgaria, Greece, Hungary, Germany and Slovenia. Conversely, Moscow clearly intends to isolate critics such as Poland, the Czech Republic, Slovakia and the three Baltic states.
The Georgian crisis of August 2008 revealed that Russian leaders did not fear the imposition of EU sanctions on their country. The Kremlin would expect "friendly" countries like Italy, which is central to the Gazprom jigsaw, to veto all hard-hitting decisions.
Yet the EU's moderate criticism of Russia for its "disproportionate" response to an "irresponsible" Georgian attack on its breakaway regions of Abkhazia and South Ossetia was probably the right decision, as the alternative appeared to be a return to Cold War rhetoric. Nevertheless, the influence of energy dependence over decisions made by individual EU countries cannot be ignored, despite being difficult to measure.
Perhaps the most visible indication that Russia has regained influence in Europe came from NATO members' opposition to giving Georgia and Ukraine clear membership perspectives in April 2008 (EurActiv 02/04/08). According to observers, it was the first time that a non-NATO member – Russia – had been able to veto an American proposal to expand the alliance.
EU response: Towards a European energy security agenda
The European Commission's Second Strategic Energy Review, unveiled on 13 November 2008, warns that Europe will continue to rely on oil and gas imports until 2020, despite efforts to switch to a low-carbon economy (EurActiv 14/11/08 ).
Europe has a strong interest in a well-functioning global oil market based on transparency and reasonable, predictable prices. For gas, however, reliance on pipelines creates interdependence along the supply chain, the review warns.
In response, the EU is seeking a balanced energy partnership with Russia and is pushing for the renewal of a wide-ranging Partnership and Cooperation Agreement (PCA), which includes energy relations as part of a broader trade arrangement.
The EU is concerned that Russian companies are limiting their investment in developing new oil and gas fields. It is also worried about the legal difficulties encountered by European companies investing in Russia, such as Shell and BP, which have been forced to sell key assets to Gazprom to keep their operations going.
However, the Georgia crisis of August 2008 showed that friendly European countries were unwilling to go too far in imposing economic sanctions and freezing negotiations over the new EU-Russia basic treaty (EurActiv 02/09/08).
Should Russia fall short of its export commitments in the next few years, not only would gas prices soar, but Moscow would be able to cherry-pick individual European countries to which to sell its gas, leaving others in the dark. This is why the Commission's second strategic energy review uses the term "resilience", meaning the capacity to resist supply disruptions.
The document also admits that there is currently no definitive emergency plan at EU level to deal with short-term supply shortfalls or disruptions. The Gas Coordination Group, a body which advises the Commission on gas supply security issues, should become a forum for this kind of work, the strategy argues.
In addition, should the Lisbon Treaty be ratified, a mechanism would be introduced to increase solidarity among EU members "if severe difficulties arise in the supply of certain products, notably in the area of energy". Also, it was recently confirmed (EurActiv 13/05/08) that consensus has been reached in the European Parliament to create another top EU job, that of high official for foreign policy on energy security. The new office would be part of a future 'Foreign Minister's Office' created under the Lisbon Treaty.
The January 2009 gas crisis
On 31 December 2008, Russia stopped supplying gas to Ukraine over a payment dispute. Russia said Ukraine was stealing natural gas destined for Europe for its own needs. Ukraine denied the charges, but said it needed "technical gas" to pump fuel through the pipeline system (EurActiv 05/01/09).
On 6 January, supplies to Romania, Bulgaria, Greece, Macedonia, Serbia and Croatia were completely halted (First story; EurActiv 06/01/09). It also emerged that several countries, including Bulgaria, did not have enough reserves to make up for a supply cut.
Next, the conflict left Europe with no supply of Ukrainian gas at all (Second story; EurActiv 06/01/09). Bulgaria signalled that it could restart one of the nuclear reactors at its Kozloduy nuclear power plant, the closure of which was one of the conditions of the country's EU accession (EurActiv 07/01/09). Slovakia followed suit a few days later (EurActiv 12/01/09).
At this point, the EU agreed to send observers to monitor the supply of gas earmarked for Europe (EurActiv 08/01/09). A few days of hectic telephone diplomacy followed, breakthroughs were announced, but no gas flowed. The political aspects of the stalemate began to surface amid signs that it was weakening the positions of pro-Western President Victor Yushchenko, support for whom fell to an appalling 2% (EurActiv 14/01/09).
On 17 January, at a Moscow 'summit' that wasa almost boycotted by the EU (EurActiv 19/01/09), Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Timoshenko struck a deal, saying the crisis was over. The EU reacted cautiously.
According to the deal, Kiev will pay 20% less for Russian gas than the European market price, or around $450 per 1,000 cubic metres. Meanwhile, Russia said it will continue to pay $1.7 per 1,000 cubic metres for each 100 kilometres of gas transited via the Ukrainian pipeline system. Many observers decided that Russia "won" the conflict, as the new terms appeared to be worse than those agreed a year earlier.
On 20 January, supplies to Europe began to flow again. Commission President José Manuel Barroso welcomed the resumption of deliveries, after a two-week standoff that left millions of East Europeans without heating in the middle of winter (EurActiv 22/01/09). But he also warned that long-term lessons should be drawn from the crisis.
Issues:
Gas: A geopolitical commodity
Russia is the world's largest natural gas producer, with an output of 607 billion cubic meters in 2007, according to statistics from BP. Iran produced 112 billion, Algeria 83 billion and Qatar 60 billion that year. Production stood at 546 billion cubic metres in the U.S. and 184 billion in Canada.
Russia also has the largest proven natural gas reserves in the world, with 44.7 trillion cubic metres at the end of 2007, followed by Iran with 27.8 trillion and Qatar with 25.6 trillion.
Unlike oil, which can be easily shipped in containers, gas is a commodity which is more difficult both to transport and to store. Despite efforts to shift to Liquefied Natural Gas (LNG), the technology remains relatively expensive and pipelines remain of primary importance, both economically and geopolitically.
The EU only produces a quarter of the gas it consumes. It imports another quarter from Russia, 16% from Norway and 15% from Algeria, with the remainder coming from Libya, Nigeria and Central Asia.
From this perspective, the Union's dependence on Russian gas does not appear to be quite so dramatic: unless figures for individual countries are considered. While Spain does not import any Russian gas at all, Poland, Estonia, Latvia, Lithuania and Finland supply 100% of their gas needs from Russia.
European solidarity requires such realities to be taken into account, as well as the situation of non-EU countries such as Ukraine, which is also highly dependent on Russian supplies both as a consumer and a transit country.
Towards an OPEC for gas?
Meeting in April 2007, major gas-exporting countries decided to set up an expert group to examine issues such as gas pricing. Although they rejected the idea of forming a cartel for now, Algerian Energy Minister Chakib Khelil said at the time that "in the long term", the objective was to "move towards a gas OPEC" (EurActiv 10/04/07).
Moscow is keen to develop a cartel which would decide on gas pricing and production levels. It is able to pursue a clear strategy to support such a cartel via Gazprom, the state-controlled energy giant.
In October 2008, Gazprom representatives met representatives of Iran and Qatar in Tehran with the objective of establishing a 'gas troika'. Gazprom CEO Alexei Miller announced his intention to institutionalise the structure by drawing up a charter and establishing a headquarters. Together, the three countries hold an estimated 60% of the world's known gas reserves.
Energy ministers from twelve of the world's leading exporters of natural gas met in Moscow on 23 December 2008 to create a producers' group that consumers fear could develop into an OPEC-style cartel.
Russian Prime Minister Vladimir Putin, who chaired the meeting, warned that the era of "cheap gas" was coming to an end. He said members of the group would co-operate to make the gas market "predictable".
The move came at a time of heightened concern over Russian gas supplies as a result of Moscow's dispute with Ukraine over pricing and unpaid debts.
Experts believe a gas producers' group would not be able to operate in the same way as OPEC, which alters its members' production levels from month to month in an attempt to influence the market. This is because gas is generally sold under long-term contracts, which are very difficult to break or amend. However, the new group said it would seek to drive up prices in the medium term. The gas producers' group decided to establish a secretariat, based in Doha, the capital of Qatar.
The emergence of a spot market for cargoes of liquefied natural gas (LNG), which can be sold wherever prices are highest, also creates the potential for short-term market management. LNG, however, only represents a small proportion of total gas sales, and is likely to remain so.
Post-Soviet era: US pipeline deals in Russia's backyard
Following the collapse of the Soviet Union, US strategists achieved their ambition of diversifying oil and gas transport routes to Europe. For the first time, deliveries to the West were able to bypass Russian territory, helping the US to knit a web of friendly states in the Caucasus and Central and Eastern Europe.
The Baku-Tbilisi-Ceyhan (BTC) oil and the Baku-Tbilisi-Erzurum (BTE) gas pipelines in particular became a reality thanks to unequivocal US support. But such activity angered Moscow at a time when Russia was embroiled in an economic slump amid declining influence over its former satellite states in Central and Eastern Europe.
Russia's post-2000 resurgence
Russian moves to reassert its authority, especially after Vladimir Putin took over as president from Boris Yeltsin, may be considered as a reaction to this flurry of US activity.
The first warning came on 1 January 2006, when Russia briefly interrupted its gas supplies to Ukraine over a payment dispute. The move, which took place on the very day that Russia took over as chair of the G8 group of industrialised nations, was seen by the West as a warning and a response to Ukrainian President Viktor Yushchenko's bid to join NATO.
'Nord Stream' gas pipeline
The following year, Russia launched a project to build a gas pipeline linking Russia directly to Northern Germany across the Baltic Sea. Billed 'Nord Stream', the project was launched in partnership between Russian giant Gazprom and German companies E.ON and BASF.
Critics pointed to attempts by Russia to bypass Ukraine, Poland, the Czech Republic and Slovakia, which had tense relations with Moscow. Western countries and transit countries themselves suspected the Kremlin of preparing a scenario whereby their supplies of Russian gas could be halted without affecting Germany and Western Europe.
Indeed, Russia's cooler relations with some of the countries in its periphery were also accompanied by warmer ties with major consuming countries. Significantly, former German Chancellor Gerhard Schroeder was appointed head of the shareholders' committee of Nord Steam AG soon after leaving office in November 2005. Schroeder was later criticised for apparent conflict of interest after signing a state guarantee of one billion euro should Gazprom ever default on a loan just before stepping down as chancellor. The guarantee has never been used.
Ukraine: Pushing for 'White Stream'
Today, Ukraine is confident that its position as a major transit country for Russian gas also provides a guarantee against the possibility of Russian aggression.
But the Nord Stream pipeline could change the situation, isolating Ukraine by loosening the country's ties with Western nations that rely on the gas that crosses its territory. To counter this threat, Ukrainian Prime Minister Yulia Tymoshenko, during a visit to Brussels on 28-29 January 2008, proposed a joint EU-Ukraine project to bring more Caspian gas to Europe.
The project, termed 'White Stream', would bring gas from Turkmenistan via the Caspian Sea, South Caucasus and the Black Sea to Ukraine and EU territory. Tymoshenko, who often dresses in white, originally outlined this concept in 2005 during her first premiership.
French Foreign Minister Bernard Kouchner recently warned of a possible Russia-Ukraine conflict similar to the one in Georgia. The reality of this threat was further developed by French MEP Bernard Poignant (EurActiv 19/09/08).
'South Stream' gas pipeline
During the last days of his term, on 29 April 2008, Russian President Vladimir Putin signed a deal with Greek Prime Minister Kostas Karamanlis for the South Stream gas pipeline, a project perceived as a rival to the EU's flagship Nabucco project.
South Stream was launched in 2007 by Italy's ENI and Russia's Gazprom. It is designed to pump 30 billion cubic metres of Russian gas per year to Europe: under the Black Sea via Bulgaria, Greece, Serbia and Croatia to Italy.
A branch of the South Stream pipeline will run through Serbia and Hungary to Austria, ending at the Baumgarten gas storage facility. Previously, on 25 January 2008, the Austrian state-controlled energy company OMV and Gazprom had signed a deal to turn the Baumgarten trading platform into a 50%-50% joint venture. This was wrongly seen by observers as a move to deprive Nabucco of its strategic hub, as the ownership of the gas storage does not change. Exhausted gas fields in Baumgarten are now used for underground storage of gas needed to compensate fluctuations between winter and summer demand.
'Burgas-Alexandroupolis' oil pipeline
The following month, Putin - together with Bulgarian Prime Minister Sergey Stanishev and Greek Prime Minister Kostas Karamanlis - signed an inter-governmental agreement to launch the Burgas-Alexandroupolis oil pipeline project. The pipeline aims to transport Russian and Caspian oil from the Bulgarian Black Sea port of Burgas to the Greek Aegean port of Alexandroupolis, bypassing the Bosphorus strait of Istanbul.
The US, a solid ally of Turkey, has expressed concern that Russia holds a 51% stake in the project, with a Senate report calling it "the first Russian-managed oil pipeline in the EU". The pipeline is expected to be completed in 2011, with construction scheduled to start in 2009. Among the outstanding issues is the ownership of the terminal in the Bulgarian port of Burgas.
AMBO oil pipeline
AMBO (based on the names of Albania, Macedonia and Bulgaria) is a planned oil pipeline from the Bulgarian Black Sea port of Burgas to the Albanian Adriatic port of Vlore. The 894-kilometre pipeline aims to bypass the Turkish Straits (which connect the Black and Aegean Seas via the Sea of Marmara) in transporting Russian and Caspian oil. The project has the backing of the US government, which financed a feasibility study. The pipeline will be built by a US-registered company.
The project was first proposed back in 1993. In 2004, the prime ministers of Albania, Macedonia and Bulgaria signed a political declaration, which was followed in 2007 by a trilateral convention determining the construction, operation and maintenance of the pipeline. The convention was ratified by the parliaments of the three countries.
To some extent, AMBO represents an alternative to Burgas-Alexandroupolis. Although it is longer and more expensive, its advantage is that it takes oil to the deep-water port of Vlore, which is more accessible for large tankers than Alexandroupolis.
EU projects in the Caspian: Nabucco
The most striking examples of the "divide and rule" tactics pursued by Russia in the European Union can be found in the Caspian. A likely victim of the Union's difficulties in dealing with its Russian partner is the EU's flagship Nabucco pipeline project, which aims to bring Caspian gas to Vienna in Austria from the Georgian/Turkish border and the Iranian/Turkish border. The gas would be shipped via Turkey, Bulgaria, Romania and Hungary.
However, continued private-sector hesitation to finance the project and the brief war between Georgia and Russia in August 2008 mean that Nabucco faces an uncertain future (EurActiv 25/08/08). Officially, the European Commission refuses to admit to any setbacks. It also maintains that Nabucco is not an attempt to find alternatives to Russian supplies but a necessary additional channel (EurActiv 04/07/08). This position is confirmed by one of the companies central to the Nabucco project – OMV of Austria.
The French Institute for International Relations (IFRI) sees the Georgia crisis as a turning point in Russia's attempt to recover control of the Caspian. It notes that Moscow could have destroyed the BTC and BTE pipelines which run through Georgia, but refrained from doing so. IFRI sees this as a sign that Russia, although tempted by military solutions, increasingly prefers the leverage of the market.
Following the latest gas crisis, which ended on 20 January 2009, leading energy experts asked difficult questions in the European Parliament about the future of Nabucco (EurActiv 20/01/09). They pointed out that there was no answer to the question of where gas was going to come from and that alternative routes were unreliable.
Central Asia and the Caucasus
In the cases of Turkmenistan and Azerbaijan, Russia did not use political pressure to channel resources through its own pipelines, preferring only cash arrangements. In August 2008, in the midst of the Georgian conflict, Gazprom offered to buy all of Azerbaijan's gas exports, proposing to buy their gas at market prices and resell it to the West via its favoured pipeline network (EurActiv 25/08/08).
The 'Finlandisation' of Azerbaijan and Georgia – transformation into neutral states in exchange for keeping their sovereignty - would complete Russia's recovery of the Caspian, according to IFRI. The process has already been successfully applied to Armenia, IFRI notes.
Meanwhile, the EU is also trying to convince Kazakhstan, Turkmenistan and Uzbekistan, which are home to some of the world's biggest oil and gas reserves, of the need to diversify their supply routes (EurActiv 11/04/08).
However, the Central Asian countries may be tempted to choose the Russian option, especially since human rights groups are urging the EU to seize the opportunity to apply pressure on Central Asian governments to improve their record in this area.
Nabucco: the litmus test
If EU governments were to finance Nabucco, at an estimated cost of 10 billion euro, despite uncertainties regarding the availability of gas to fill the pipeline, it would give out a strong political message. In a certain way, it would match the political design of some Gazprom projects such as South Stream, which are suspected to be far from cost-effective. However, a major difference between Nabucco and South Stream is that the former will be privately financed and thus needs to be cost-effective.
According to a study recently presented to the foreign affairs committee of the US Senate by Zeyno Baran, director of the Hudson Centre for Eurasian Policy in Washington, DC, Gazprom is willing to use its pipelines at low capacity, losing money in the short term. After having killed off all the competition, Russia expects to end up with a web of pipelines under its control, similar to the blood system in an organism. Once such control has been established, Baran says Russia could apply even more leverage to extract political concessions from European countries in exchange for gas.
In a recent interview with Handelsblatt, EU Energy Commissioner Andris Piebalgs made it plain that Nabucco remained an important project for achieving supply diversity. He added that he expected construction to start in 2010 with the first gas flowing by 2013, although problems persist. Among them, he specified the cost of transit trough Turkey, yet to be negotiated, and the contractual guarantee of access to Turkmen gas. Turkmenistan has a long history of supplying gas to Russia and Moscow is pressuring the government in Ashgabat to give Russia exclusive access to the country for gas exploration and exploitation purposes.
Building Nabucco simply to counter Russia's ambitions may be the wrong strategy, experts warn. In a recent report for the French EU Presidency , Claude Mandil, formerly executive director of the International Energy Agency (IEA), suggests that the EU should build Nabucco not to rival Gazprom, but together with Gazprom, accepting that the pipeline must also transport Russian gas.
The paper, entitled "Energy Security in the European Union," suggests a renewal of EU-Russia relations in the energy sector, based on substantial auto-criticism. Mandil in particular wonders whether the EU has alienated Russia with a policy of double standards. The French energy expert says the EU is insisting that Russia must open its internal energy transport market to European companies, but within the Union there is a practice of denying third-country companies such access.
Similarly, Brussels is asking Moscow to open up its energy market and insfrastructure to foreign investors. "But how do we react in Europe to acquisition attempts by foreign investors?," asks Mandil. He considers it unfair of the EU to insist that Russia should ratify the Energy Charter Treaty, recognising the validity of a number of Russian arguments.
The French energy expert goes as far as advising that the "Gazprom clause" - designed to limit the Russian giant's penetration into the European market - should be abandoned, and that the European market should be protected by the strict enforcement of rules valid for all.
Positions:
Speaking at a conference in St. Petersburg held on 7 June 2008, Gazprom CEO Alexei Miller complained of opposition, in his words, to the company's participation in projects on EU territory. "We find this opposition simply astounding! Especially if one takes into account the acute energy deficit currently facing the European economy. One gets the impression that certain European officials are still unable to decide what it is they fear more – a real energy shortage, or the fictitious 'Russian threat'," Miller said. He gave assurances to his Western counterparts by saying that the market situation in Russia was changing: Gazprom's profits do not only come from foreign markets.
On 8 July 2008, the Alliance of Liberals and Democrats in Europe (ALDE) issued a statement expressing the group's environmental concerns regarding the planned 'Nord Stream' Baltic gas pipeline linking Russia and Germany. The statement went further: "ALDE members share the environmental concerns, but also underline and deplore the politico-strategic dimension to the project, which has led Russia to negotiate a bilateral deal with one member state to avoid seeking approval and paying transit fees for a land-based pipeline and thus disregarding the concerns of neighbouring Baltic states."
Speaking on 24 May 2008 during the spring session of the NATO Parliamentary Assembly (NATO PA), Roland Götz, a researcher at the German Institute for International Affairs and Security, said there was no geopolitical risk regarding the diversification of gas delivery given the density of the network of gas pipelines linking Russia to Europe.
Götz considers this analysis to be reinforced by the development of gas pipeline projects such as Nord Stream, intended to link Russia and Germany under the Baltic, and Nabucco, which should bring natural gas from Central Asia and Azerbaijan to Central Europe. "Unlike oil, there will probably be no gas supply problems in Europe for the next twenty years," said Götz.
In his report 'Energy Security in the Transatlantic Region', unveiled at the spring 2008 session of the NATO Parliamentary Assembly, Bulgarian MP Mario Tagarinski criticised the European Commission for its inability to oppose Gazprom's strategy. "The current European Commission is perceived as being liberal and 'pro-market'. It believes that market rules, rather than geopolitical considerations, should be applied in the energy sector. Therefore, the Commission actively promotes the liberalisation and decentralisation of energy markets in Europe, despite concerns [that] Gazprom […] is increasing its share of European energy grids."
In a paper published in 2005, Özden Zeynep Oktav, a professor at Yildiz Technical University in Istanbul, criticised US policies towards the 'Baku-Ceyhan bloc' for leading to the growing polarisation of regional politics. Prof. Oktav argues that by favouring a partnership of Azerbaijan and Georgia with Turkey, Washington's policy of containment and isolation were meant to block Iran’s power in the area and to prevent Russia from reasserting hegemony over the region.
But in a way, the Baku-Ceyhan project also fuelled a rapprochement between Russia, Iran and Armenia while solidifying a strategic alliance between Azerbaijan, Georgia, Turkey and the US, Prof. Oktav wrote.
Quentin Perret, a former research fellow at the Fondation Robert Schuman (Paris), argues in a paper published in 2007 that Russian "energy nationalism" has been largely prompted by what he calls the experience of the 1990s, which "essentially discredited Western economic prescriptions among Russians of all stripes". As a consequence, Perret laments that the most contentious issue now is the fate of Russia's "near abroad".
"Ukraine, Belarus, Moldova and Georgia have not just become pawns in a potentially destructive game of EU-Russian geopolitical rivalry, they have also become a bone of contention within the EU itself, with new members accusing old members of selling out these countries' interests for the sake of peaceful relations with Russia," Perret writes. He concludes that "in the long run, this disagreement is probably the single biggest obstacle to any effective common European foreign policy – including a common external energy policy".
Dr. Shamil Midkhatovich Yenikeyeff, a research fellow at the Oxford Institute for Energy Studies (OIES), writes in an Oxford Energy Comment published in August 2008 that unabated competition between Russia, the US, and Europe as traditional guarantors of security in the Caspian and Central Asian countries is likely to destabilise the region even further.
Dr. Yenikeyeff invests his hope in a potential rapprochement between the US and Iran, which "could further considerably change the energy game in the region and give a boost to alternative energy supplies to Europe as well as other exotic routes for Caspian and Central Asian oil and gas".
Milestones:
1 Jan. 2006: Russia briefly interrupts gas supplies to Ukraine over payment dispute, triggering criticism in the West that the Kremlin is using energy as a political tool.
26 May 2006: First oil pumped thorugh the Baku-Tbilisi-Ceyhan pipeline.
4 Oct. 2006: Agreement between Russia and Germany on the Nord Stream gas pipeline project under the Baltic Sea.
15 March 2007: Russia, Bulgaria and Greece sign agreement on Burgas-Alexandroupolis oil pipeline.
29 April 2008: Russia and Greece sign deal on the South Stream gas pipeline, a project perceived as a rival to the EU's flagship Nabucco project.
16 Oct. 2008: EU summit endorses report on energy security by the French EU Presidency, inviting EU countries and institutions to diversify energy sources and supply routes.
23 Dec. 2008: Twelve of the world's leading exporters of natural gas met in Moscow to create a producers' group that could develop into an OPEC-style cartel. Russian Prime Minister Vladimir Putin said "the era of cheap gas is over".
1 Jan. 2009: Second 'gas war' between Russia and Ukraine began. The crisis ended on 20 January with resumed deliveries and higher gas prices for Ukraine.
2009: Expected completion of Medgaz pipeline between Algeria and Spain, originally foreseen for 2001.
Policy Summary Links
Russian ambitions
Recent developments have shown that using energy as a tool, Russia is increasingly able to influence EU decision-making, primarily through "divide and rule" tactics.
Emboldened by the flow of petrodollars (and euros) in recent years, Russia has revealed ambitions to block plans to bring gas from Central Asia into the EU, bypassing Russian territory.
In addition, Russia is devising plans to avoid unfriendly transit countries. The Nord Stream and South Stream pipelines under the Baltic and the Black Sea are part of this strategy. The policy would also allow Moscow to keep traditional transit countries under pressure, as supplies to those states could be cut without affecting deliveries to the West.
Russia: Friends and foes in Europe
A recent study by Stefano Braghiroli and Caterina Carta has categorised EU countries according to their level of loyalty towards Russia.
On one extreme are the "Eastern divorced" countries of the former Soviet bloc, which nowadays are for the most part hostile to Moscow (Estonia, Lithuania, Poland, Latvia, the Czech Republic and Slovakia).
On the other are the "loyal wives", which maintain good relations with Russia (Italy, Austria and Greece).
In between are the "vigilant critics" (Romania, Slovenia, Sweden, Bulgaria, Hungary and the United Kingdom)
and the larger group, the "acquiescent partners" (Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Portugal and Spain).
Sympathy with or antipathy towards Russia may not represent the main disruptive force within the EU. But there is obvious readiness on Russia's part to engage in pipeline projects with countries such as Italy, Austria, Bulgaria, Greece, Hungary, Germany and Slovenia. Conversely, Moscow clearly intends to isolate critics such as Poland, the Czech Republic, Slovakia and the three Baltic states.
The Georgian crisis of August 2008 revealed that Russian leaders did not fear the imposition of EU sanctions on their country. The Kremlin would expect "friendly" countries like Italy, which is central to the Gazprom jigsaw, to veto all hard-hitting decisions.
Yet the EU's moderate criticism of Russia for its "disproportionate" response to an "irresponsible" Georgian attack on its breakaway regions of Abkhazia and South Ossetia was probably the right decision, as the alternative appeared to be a return to Cold War rhetoric. Nevertheless, the influence of energy dependence over decisions made by individual EU countries cannot be ignored, despite being difficult to measure.
Perhaps the most visible indication that Russia has regained influence in Europe came from NATO members' opposition to giving Georgia and Ukraine clear membership perspectives in April 2008 (EurActiv 02/04/08). According to observers, it was the first time that a non-NATO member – Russia – had been able to veto an American proposal to expand the alliance.
EU response: Towards a European energy security agenda
The European Commission's Second Strategic Energy Review, unveiled on 13 November 2008, warns that Europe will continue to rely on oil and gas imports until 2020, despite efforts to switch to a low-carbon economy (EurActiv 14/11/08 ).
Europe has a strong interest in a well-functioning global oil market based on transparency and reasonable, predictable prices. For gas, however, reliance on pipelines creates interdependence along the supply chain, the review warns.
In response, the EU is seeking a balanced energy partnership with Russia and is pushing for the renewal of a wide-ranging Partnership and Cooperation Agreement (PCA), which includes energy relations as part of a broader trade arrangement.
The EU is concerned that Russian companies are limiting their investment in developing new oil and gas fields. It is also worried about the legal difficulties encountered by European companies investing in Russia, such as Shell and BP, which have been forced to sell key assets to Gazprom to keep their operations going.
However, the Georgia crisis of August 2008 showed that friendly European countries were unwilling to go too far in imposing economic sanctions and freezing negotiations over the new EU-Russia basic treaty (EurActiv 02/09/08).
Should Russia fall short of its export commitments in the next few years, not only would gas prices soar, but Moscow would be able to cherry-pick individual European countries to which to sell its gas, leaving others in the dark. This is why the Commission's second strategic energy review uses the term "resilience", meaning the capacity to resist supply disruptions.
The document also admits that there is currently no definitive emergency plan at EU level to deal with short-term supply shortfalls or disruptions. The Gas Coordination Group, a body which advises the Commission on gas supply security issues, should become a forum for this kind of work, the strategy argues.
In addition, should the Lisbon Treaty be ratified, a mechanism would be introduced to increase solidarity among EU members "if severe difficulties arise in the supply of certain products, notably in the area of energy". Also, it was recently confirmed (EurActiv 13/05/08) that consensus has been reached in the European Parliament to create another top EU job, that of high official for foreign policy on energy security. The new office would be part of a future 'Foreign Minister's Office' created under the Lisbon Treaty.
The January 2009 gas crisis
On 31 December 2008, Russia stopped supplying gas to Ukraine over a payment dispute. Russia said Ukraine was stealing natural gas destined for Europe for its own needs. Ukraine denied the charges, but said it needed "technical gas" to pump fuel through the pipeline system (EurActiv 05/01/09).
On 6 January, supplies to Romania, Bulgaria, Greece, Macedonia, Serbia and Croatia were completely halted (First story; EurActiv 06/01/09). It also emerged that several countries, including Bulgaria, did not have enough reserves to make up for a supply cut.
Next, the conflict left Europe with no supply of Ukrainian gas at all (Second story; EurActiv 06/01/09). Bulgaria signalled that it could restart one of the nuclear reactors at its Kozloduy nuclear power plant, the closure of which was one of the conditions of the country's EU accession (EurActiv 07/01/09). Slovakia followed suit a few days later (EurActiv 12/01/09).
At this point, the EU agreed to send observers to monitor the supply of gas earmarked for Europe (EurActiv 08/01/09). A few days of hectic telephone diplomacy followed, breakthroughs were announced, but no gas flowed. The political aspects of the stalemate began to surface amid signs that it was weakening the positions of pro-Western President Victor Yushchenko, support for whom fell to an appalling 2% (EurActiv 14/01/09).
On 17 January, at a Moscow 'summit' that wasa almost boycotted by the EU (EurActiv 19/01/09), Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Timoshenko struck a deal, saying the crisis was over. The EU reacted cautiously.
According to the deal, Kiev will pay 20% less for Russian gas than the European market price, or around $450 per 1,000 cubic metres. Meanwhile, Russia said it will continue to pay $1.7 per 1,000 cubic metres for each 100 kilometres of gas transited via the Ukrainian pipeline system. Many observers decided that Russia "won" the conflict, as the new terms appeared to be worse than those agreed a year earlier.
On 20 January, supplies to Europe began to flow again. Commission President José Manuel Barroso welcomed the resumption of deliveries, after a two-week standoff that left millions of East Europeans without heating in the middle of winter (EurActiv 22/01/09). But he also warned that long-term lessons should be drawn from the crisis.
Issues:
Gas: A geopolitical commodity
Russia is the world's largest natural gas producer, with an output of 607 billion cubic meters in 2007, according to statistics from BP. Iran produced 112 billion, Algeria 83 billion and Qatar 60 billion that year. Production stood at 546 billion cubic metres in the U.S. and 184 billion in Canada.
Russia also has the largest proven natural gas reserves in the world, with 44.7 trillion cubic metres at the end of 2007, followed by Iran with 27.8 trillion and Qatar with 25.6 trillion.
Unlike oil, which can be easily shipped in containers, gas is a commodity which is more difficult both to transport and to store. Despite efforts to shift to Liquefied Natural Gas (LNG), the technology remains relatively expensive and pipelines remain of primary importance, both economically and geopolitically.
The EU only produces a quarter of the gas it consumes. It imports another quarter from Russia, 16% from Norway and 15% from Algeria, with the remainder coming from Libya, Nigeria and Central Asia.
From this perspective, the Union's dependence on Russian gas does not appear to be quite so dramatic: unless figures for individual countries are considered. While Spain does not import any Russian gas at all, Poland, Estonia, Latvia, Lithuania and Finland supply 100% of their gas needs from Russia.
European solidarity requires such realities to be taken into account, as well as the situation of non-EU countries such as Ukraine, which is also highly dependent on Russian supplies both as a consumer and a transit country.
Towards an OPEC for gas?
Meeting in April 2007, major gas-exporting countries decided to set up an expert group to examine issues such as gas pricing. Although they rejected the idea of forming a cartel for now, Algerian Energy Minister Chakib Khelil said at the time that "in the long term", the objective was to "move towards a gas OPEC" (EurActiv 10/04/07).
Moscow is keen to develop a cartel which would decide on gas pricing and production levels. It is able to pursue a clear strategy to support such a cartel via Gazprom, the state-controlled energy giant.
In October 2008, Gazprom representatives met representatives of Iran and Qatar in Tehran with the objective of establishing a 'gas troika'. Gazprom CEO Alexei Miller announced his intention to institutionalise the structure by drawing up a charter and establishing a headquarters. Together, the three countries hold an estimated 60% of the world's known gas reserves.
Energy ministers from twelve of the world's leading exporters of natural gas met in Moscow on 23 December 2008 to create a producers' group that consumers fear could develop into an OPEC-style cartel.
Russian Prime Minister Vladimir Putin, who chaired the meeting, warned that the era of "cheap gas" was coming to an end. He said members of the group would co-operate to make the gas market "predictable".
The move came at a time of heightened concern over Russian gas supplies as a result of Moscow's dispute with Ukraine over pricing and unpaid debts.
Experts believe a gas producers' group would not be able to operate in the same way as OPEC, which alters its members' production levels from month to month in an attempt to influence the market. This is because gas is generally sold under long-term contracts, which are very difficult to break or amend. However, the new group said it would seek to drive up prices in the medium term. The gas producers' group decided to establish a secretariat, based in Doha, the capital of Qatar.
The emergence of a spot market for cargoes of liquefied natural gas (LNG), which can be sold wherever prices are highest, also creates the potential for short-term market management. LNG, however, only represents a small proportion of total gas sales, and is likely to remain so.
Post-Soviet era: US pipeline deals in Russia's backyard
Following the collapse of the Soviet Union, US strategists achieved their ambition of diversifying oil and gas transport routes to Europe. For the first time, deliveries to the West were able to bypass Russian territory, helping the US to knit a web of friendly states in the Caucasus and Central and Eastern Europe.
The Baku-Tbilisi-Ceyhan (BTC) oil and the Baku-Tbilisi-Erzurum (BTE) gas pipelines in particular became a reality thanks to unequivocal US support. But such activity angered Moscow at a time when Russia was embroiled in an economic slump amid declining influence over its former satellite states in Central and Eastern Europe.
Russia's post-2000 resurgence
Russian moves to reassert its authority, especially after Vladimir Putin took over as president from Boris Yeltsin, may be considered as a reaction to this flurry of US activity.
The first warning came on 1 January 2006, when Russia briefly interrupted its gas supplies to Ukraine over a payment dispute. The move, which took place on the very day that Russia took over as chair of the G8 group of industrialised nations, was seen by the West as a warning and a response to Ukrainian President Viktor Yushchenko's bid to join NATO.
'Nord Stream' gas pipeline
The following year, Russia launched a project to build a gas pipeline linking Russia directly to Northern Germany across the Baltic Sea. Billed 'Nord Stream', the project was launched in partnership between Russian giant Gazprom and German companies E.ON and BASF.
Critics pointed to attempts by Russia to bypass Ukraine, Poland, the Czech Republic and Slovakia, which had tense relations with Moscow. Western countries and transit countries themselves suspected the Kremlin of preparing a scenario whereby their supplies of Russian gas could be halted without affecting Germany and Western Europe.
Indeed, Russia's cooler relations with some of the countries in its periphery were also accompanied by warmer ties with major consuming countries. Significantly, former German Chancellor Gerhard Schroeder was appointed head of the shareholders' committee of Nord Steam AG soon after leaving office in November 2005. Schroeder was later criticised for apparent conflict of interest after signing a state guarantee of one billion euro should Gazprom ever default on a loan just before stepping down as chancellor. The guarantee has never been used.
Ukraine: Pushing for 'White Stream'
Today, Ukraine is confident that its position as a major transit country for Russian gas also provides a guarantee against the possibility of Russian aggression.
But the Nord Stream pipeline could change the situation, isolating Ukraine by loosening the country's ties with Western nations that rely on the gas that crosses its territory. To counter this threat, Ukrainian Prime Minister Yulia Tymoshenko, during a visit to Brussels on 28-29 January 2008, proposed a joint EU-Ukraine project to bring more Caspian gas to Europe.
The project, termed 'White Stream', would bring gas from Turkmenistan via the Caspian Sea, South Caucasus and the Black Sea to Ukraine and EU territory. Tymoshenko, who often dresses in white, originally outlined this concept in 2005 during her first premiership.
French Foreign Minister Bernard Kouchner recently warned of a possible Russia-Ukraine conflict similar to the one in Georgia. The reality of this threat was further developed by French MEP Bernard Poignant (EurActiv 19/09/08).
'South Stream' gas pipeline
During the last days of his term, on 29 April 2008, Russian President Vladimir Putin signed a deal with Greek Prime Minister Kostas Karamanlis for the South Stream gas pipeline, a project perceived as a rival to the EU's flagship Nabucco project.
South Stream was launched in 2007 by Italy's ENI and Russia's Gazprom. It is designed to pump 30 billion cubic metres of Russian gas per year to Europe: under the Black Sea via Bulgaria, Greece, Serbia and Croatia to Italy.
A branch of the South Stream pipeline will run through Serbia and Hungary to Austria, ending at the Baumgarten gas storage facility. Previously, on 25 January 2008, the Austrian state-controlled energy company OMV and Gazprom had signed a deal to turn the Baumgarten trading platform into a 50%-50% joint venture. This was wrongly seen by observers as a move to deprive Nabucco of its strategic hub, as the ownership of the gas storage does not change. Exhausted gas fields in Baumgarten are now used for underground storage of gas needed to compensate fluctuations between winter and summer demand.
'Burgas-Alexandroupolis' oil pipeline
The following month, Putin - together with Bulgarian Prime Minister Sergey Stanishev and Greek Prime Minister Kostas Karamanlis - signed an inter-governmental agreement to launch the Burgas-Alexandroupolis oil pipeline project. The pipeline aims to transport Russian and Caspian oil from the Bulgarian Black Sea port of Burgas to the Greek Aegean port of Alexandroupolis, bypassing the Bosphorus strait of Istanbul.
The US, a solid ally of Turkey, has expressed concern that Russia holds a 51% stake in the project, with a Senate report calling it "the first Russian-managed oil pipeline in the EU". The pipeline is expected to be completed in 2011, with construction scheduled to start in 2009. Among the outstanding issues is the ownership of the terminal in the Bulgarian port of Burgas.
AMBO oil pipeline
AMBO (based on the names of Albania, Macedonia and Bulgaria) is a planned oil pipeline from the Bulgarian Black Sea port of Burgas to the Albanian Adriatic port of Vlore. The 894-kilometre pipeline aims to bypass the Turkish Straits (which connect the Black and Aegean Seas via the Sea of Marmara) in transporting Russian and Caspian oil. The project has the backing of the US government, which financed a feasibility study. The pipeline will be built by a US-registered company.
The project was first proposed back in 1993. In 2004, the prime ministers of Albania, Macedonia and Bulgaria signed a political declaration, which was followed in 2007 by a trilateral convention determining the construction, operation and maintenance of the pipeline. The convention was ratified by the parliaments of the three countries.
To some extent, AMBO represents an alternative to Burgas-Alexandroupolis. Although it is longer and more expensive, its advantage is that it takes oil to the deep-water port of Vlore, which is more accessible for large tankers than Alexandroupolis.
EU projects in the Caspian: Nabucco
The most striking examples of the "divide and rule" tactics pursued by Russia in the European Union can be found in the Caspian. A likely victim of the Union's difficulties in dealing with its Russian partner is the EU's flagship Nabucco pipeline project, which aims to bring Caspian gas to Vienna in Austria from the Georgian/Turkish border and the Iranian/Turkish border. The gas would be shipped via Turkey, Bulgaria, Romania and Hungary.
However, continued private-sector hesitation to finance the project and the brief war between Georgia and Russia in August 2008 mean that Nabucco faces an uncertain future (EurActiv 25/08/08). Officially, the European Commission refuses to admit to any setbacks. It also maintains that Nabucco is not an attempt to find alternatives to Russian supplies but a necessary additional channel (EurActiv 04/07/08). This position is confirmed by one of the companies central to the Nabucco project – OMV of Austria.
The French Institute for International Relations (IFRI) sees the Georgia crisis as a turning point in Russia's attempt to recover control of the Caspian. It notes that Moscow could have destroyed the BTC and BTE pipelines which run through Georgia, but refrained from doing so. IFRI sees this as a sign that Russia, although tempted by military solutions, increasingly prefers the leverage of the market.
Following the latest gas crisis, which ended on 20 January 2009, leading energy experts asked difficult questions in the European Parliament about the future of Nabucco (EurActiv 20/01/09). They pointed out that there was no answer to the question of where gas was going to come from and that alternative routes were unreliable.
Central Asia and the Caucasus
In the cases of Turkmenistan and Azerbaijan, Russia did not use political pressure to channel resources through its own pipelines, preferring only cash arrangements. In August 2008, in the midst of the Georgian conflict, Gazprom offered to buy all of Azerbaijan's gas exports, proposing to buy their gas at market prices and resell it to the West via its favoured pipeline network (EurActiv 25/08/08).
The 'Finlandisation' of Azerbaijan and Georgia – transformation into neutral states in exchange for keeping their sovereignty - would complete Russia's recovery of the Caspian, according to IFRI. The process has already been successfully applied to Armenia, IFRI notes.
Meanwhile, the EU is also trying to convince Kazakhstan, Turkmenistan and Uzbekistan, which are home to some of the world's biggest oil and gas reserves, of the need to diversify their supply routes (EurActiv 11/04/08).
However, the Central Asian countries may be tempted to choose the Russian option, especially since human rights groups are urging the EU to seize the opportunity to apply pressure on Central Asian governments to improve their record in this area.
Nabucco: the litmus test
If EU governments were to finance Nabucco, at an estimated cost of 10 billion euro, despite uncertainties regarding the availability of gas to fill the pipeline, it would give out a strong political message. In a certain way, it would match the political design of some Gazprom projects such as South Stream, which are suspected to be far from cost-effective. However, a major difference between Nabucco and South Stream is that the former will be privately financed and thus needs to be cost-effective.
According to a study recently presented to the foreign affairs committee of the US Senate by Zeyno Baran, director of the Hudson Centre for Eurasian Policy in Washington, DC, Gazprom is willing to use its pipelines at low capacity, losing money in the short term. After having killed off all the competition, Russia expects to end up with a web of pipelines under its control, similar to the blood system in an organism. Once such control has been established, Baran says Russia could apply even more leverage to extract political concessions from European countries in exchange for gas.
In a recent interview with Handelsblatt, EU Energy Commissioner Andris Piebalgs made it plain that Nabucco remained an important project for achieving supply diversity. He added that he expected construction to start in 2010 with the first gas flowing by 2013, although problems persist. Among them, he specified the cost of transit trough Turkey, yet to be negotiated, and the contractual guarantee of access to Turkmen gas. Turkmenistan has a long history of supplying gas to Russia and Moscow is pressuring the government in Ashgabat to give Russia exclusive access to the country for gas exploration and exploitation purposes.
Building Nabucco simply to counter Russia's ambitions may be the wrong strategy, experts warn. In a recent report for the French EU Presidency , Claude Mandil, formerly executive director of the International Energy Agency (IEA), suggests that the EU should build Nabucco not to rival Gazprom, but together with Gazprom, accepting that the pipeline must also transport Russian gas.
The paper, entitled "Energy Security in the European Union," suggests a renewal of EU-Russia relations in the energy sector, based on substantial auto-criticism. Mandil in particular wonders whether the EU has alienated Russia with a policy of double standards. The French energy expert says the EU is insisting that Russia must open its internal energy transport market to European companies, but within the Union there is a practice of denying third-country companies such access.
Similarly, Brussels is asking Moscow to open up its energy market and insfrastructure to foreign investors. "But how do we react in Europe to acquisition attempts by foreign investors?," asks Mandil. He considers it unfair of the EU to insist that Russia should ratify the Energy Charter Treaty, recognising the validity of a number of Russian arguments.
The French energy expert goes as far as advising that the "Gazprom clause" - designed to limit the Russian giant's penetration into the European market - should be abandoned, and that the European market should be protected by the strict enforcement of rules valid for all.
Positions:
Speaking at a conference in St. Petersburg held on 7 June 2008, Gazprom CEO Alexei Miller complained of opposition, in his words, to the company's participation in projects on EU territory. "We find this opposition simply astounding! Especially if one takes into account the acute energy deficit currently facing the European economy. One gets the impression that certain European officials are still unable to decide what it is they fear more – a real energy shortage, or the fictitious 'Russian threat'," Miller said. He gave assurances to his Western counterparts by saying that the market situation in Russia was changing: Gazprom's profits do not only come from foreign markets.
On 8 July 2008, the Alliance of Liberals and Democrats in Europe (ALDE) issued a statement expressing the group's environmental concerns regarding the planned 'Nord Stream' Baltic gas pipeline linking Russia and Germany. The statement went further: "ALDE members share the environmental concerns, but also underline and deplore the politico-strategic dimension to the project, which has led Russia to negotiate a bilateral deal with one member state to avoid seeking approval and paying transit fees for a land-based pipeline and thus disregarding the concerns of neighbouring Baltic states."
Speaking on 24 May 2008 during the spring session of the NATO Parliamentary Assembly (NATO PA), Roland Götz, a researcher at the German Institute for International Affairs and Security, said there was no geopolitical risk regarding the diversification of gas delivery given the density of the network of gas pipelines linking Russia to Europe.
Götz considers this analysis to be reinforced by the development of gas pipeline projects such as Nord Stream, intended to link Russia and Germany under the Baltic, and Nabucco, which should bring natural gas from Central Asia and Azerbaijan to Central Europe. "Unlike oil, there will probably be no gas supply problems in Europe for the next twenty years," said Götz.
In his report 'Energy Security in the Transatlantic Region', unveiled at the spring 2008 session of the NATO Parliamentary Assembly, Bulgarian MP Mario Tagarinski criticised the European Commission for its inability to oppose Gazprom's strategy. "The current European Commission is perceived as being liberal and 'pro-market'. It believes that market rules, rather than geopolitical considerations, should be applied in the energy sector. Therefore, the Commission actively promotes the liberalisation and decentralisation of energy markets in Europe, despite concerns [that] Gazprom […] is increasing its share of European energy grids."
In a paper published in 2005, Özden Zeynep Oktav, a professor at Yildiz Technical University in Istanbul, criticised US policies towards the 'Baku-Ceyhan bloc' for leading to the growing polarisation of regional politics. Prof. Oktav argues that by favouring a partnership of Azerbaijan and Georgia with Turkey, Washington's policy of containment and isolation were meant to block Iran’s power in the area and to prevent Russia from reasserting hegemony over the region.
But in a way, the Baku-Ceyhan project also fuelled a rapprochement between Russia, Iran and Armenia while solidifying a strategic alliance between Azerbaijan, Georgia, Turkey and the US, Prof. Oktav wrote.
Quentin Perret, a former research fellow at the Fondation Robert Schuman (Paris), argues in a paper published in 2007 that Russian "energy nationalism" has been largely prompted by what he calls the experience of the 1990s, which "essentially discredited Western economic prescriptions among Russians of all stripes". As a consequence, Perret laments that the most contentious issue now is the fate of Russia's "near abroad".
"Ukraine, Belarus, Moldova and Georgia have not just become pawns in a potentially destructive game of EU-Russian geopolitical rivalry, they have also become a bone of contention within the EU itself, with new members accusing old members of selling out these countries' interests for the sake of peaceful relations with Russia," Perret writes. He concludes that "in the long run, this disagreement is probably the single biggest obstacle to any effective common European foreign policy – including a common external energy policy".
Dr. Shamil Midkhatovich Yenikeyeff, a research fellow at the Oxford Institute for Energy Studies (OIES), writes in an Oxford Energy Comment published in August 2008 that unabated competition between Russia, the US, and Europe as traditional guarantors of security in the Caspian and Central Asian countries is likely to destabilise the region even further.
Dr. Yenikeyeff invests his hope in a potential rapprochement between the US and Iran, which "could further considerably change the energy game in the region and give a boost to alternative energy supplies to Europe as well as other exotic routes for Caspian and Central Asian oil and gas".
From Russia, kind words and a punch in the nose
By Ellen Barry
Friday, February 6, 2009
MOSCOW: Talk about mixed messages. Russian leaders could not say enough good things about President Barack Obama this week. His statements on Afghanistan were "encouraging," his arms control proposals were "a fresh signal," and plans for talks with Iran were "encouraging signals."
But the compliments came with the geopolitical equivalent of a punch in the nose.
On Tuesday, visiting Moscow to accept $2.15 billion in aid, the president of Kyrgyzstan announced a decision to shut down the U.S. air base of Manas, creating a formidable obstacle to Obama's single biggest foreign policy aim, pursuing the war in Afghanistan.
Maybe this should not have come as a surprise. Beginning with the bristling speech that President Dmitri Medvedev gave hours after Obama was elected, the signals from Moscow to the new U.S. administration have veered from hostile to conciliatory and back again. Moscow is clearly exploring the idea of cooperation. But it is also demanding, in arm-twisting fashion, that Obama make Russian interests a priority.
"It's not clear to me who's calling the shots or what exactly the message is," said Strobe Talbott, who was deputy secretary of state under President Bill Clinton and is now president of the Brookings Institution. "It's an odd way to set the table for a serious, forward-looking dialogue. The Russians claim to want a discussion."
Afghanistan has been seen as an important area for cooperation between the two countries, since Russia is deeply worried about the spread of Islamic extremism in the region. That notion was thrown into doubt Tuesday when, at a news conference in Moscow, the Kyrgyz president, Kurmanbek Bakiyev, announced plans to shut down the base.
Kyrgyz and Russian officials have said the move had nothing to do with the pledge of Russian aid, but Moscow has long sought to push the United States out of the bases it has leased in Central Asia. Russian comments since then have suggested that if Obama hopes to move forward with his plans to deploy as many as 30,000 additional troops to Afghanistan, he will have to secure Moscow's support. That means addressing Russian complaints, including plans for missile defense facilities in Poland and the Czech Republic and expanding NATO.
"In the Russian mind, there is a window of opportunity to bargain, and if we are sitting down to bargain, we better have good cards on our side of the table," said Oksana Antonenko, a senior fellow at the Institute for International Strategic Studies in London.
"What they see in the best case scenario is a deal. A bargain. It's not a partnership."
The move was startling because it came amid a string of signals that Moscow was actually willing to engage Obama.
U.S. policymakers were encouraged by Prime Minister Vladimir Putin's speech at the World Economic Forum in Davos, which muted his typically caustic anti-U.S. tone. Medvedev organized a candid, hourlong meeting with the editor of Novaya Gazeta, a newspaper critical of the Kremlin which has lost a series of employees to contract killings, and he promised to rewrite an anti-treason law that had infuriated human rights activists.
In the last two weeks, Moscow announced that it was ready to open a NATO supply route to Afghanistan through Russia. And though official sources would not confirm it, an anonymous Defense Ministry official told the Interfax news service that Moscow had dropped a plan to station a battery of Iskander missiles in Kaliningrad.
Then came the announcement Tuesday about the Manas air base.
"This really did come out of the blue for me," said Andrew Kuchins, director of the Russia-Eurasia program at the Center for Strategic and International Studies in Washington. "It is a particularly Russian tactic — it's sort of brutal, and rude, and makes it harder to achieve what you think their goal is."
It came as a reminder that Russians do not share Europeans' giddiness over Obama. Relations between Russia and the United States last year reached their lowest point since the fall of the Soviet Union, and dialogue between the two governments had basically halted. In that sense, Obama will have to deal with "the tail end of the Bush legacy," including bitter memories of the war in Georgia last summer, said Sergei Rogov, director of the Institute for USA and Canada Studies in Moscow.
"Can you imagine, after the Georgia war, that Russia would lobby Kyrgyzstan on behalf of the United States?" Rogov said, adding that the decision "was not something Russia did, it was something against which Russia didn't object."
Moreover, Russian leaders are getting impatient to see concrete plans from Washington. Obama seems willing to slow the timeline on missile defense and NATO expansion, but not to publicly shelve the projects. Russian leaders, eager to renegotiate the relationship, want to make sure they have Obama's attention.
"The real ball game has not started," Rogov said. "There will be tough bargaining on many issues. It's a legacy of the semi-Cold War."
It may be a mistake to look for a grand plan in statements coming out of Moscow, where major players still disagree about the benefits of a friendlier relationship and may be addressing themselves to domestic audiences.
A single, raw issue — U.S. influence in post-Soviet space — underlies the raft of policy disputes between the two capitals, said Angela Stent, who directs Russian studies at Georgetown University. Resolving it, she said, "may be impossible to do, but it has to be tried."
"How much does Russia really want the relationship to change?" she said. "That's still an open question."
Friday, February 6, 2009
MOSCOW: Talk about mixed messages. Russian leaders could not say enough good things about President Barack Obama this week. His statements on Afghanistan were "encouraging," his arms control proposals were "a fresh signal," and plans for talks with Iran were "encouraging signals."
But the compliments came with the geopolitical equivalent of a punch in the nose.
On Tuesday, visiting Moscow to accept $2.15 billion in aid, the president of Kyrgyzstan announced a decision to shut down the U.S. air base of Manas, creating a formidable obstacle to Obama's single biggest foreign policy aim, pursuing the war in Afghanistan.
Maybe this should not have come as a surprise. Beginning with the bristling speech that President Dmitri Medvedev gave hours after Obama was elected, the signals from Moscow to the new U.S. administration have veered from hostile to conciliatory and back again. Moscow is clearly exploring the idea of cooperation. But it is also demanding, in arm-twisting fashion, that Obama make Russian interests a priority.
"It's not clear to me who's calling the shots or what exactly the message is," said Strobe Talbott, who was deputy secretary of state under President Bill Clinton and is now president of the Brookings Institution. "It's an odd way to set the table for a serious, forward-looking dialogue. The Russians claim to want a discussion."
Afghanistan has been seen as an important area for cooperation between the two countries, since Russia is deeply worried about the spread of Islamic extremism in the region. That notion was thrown into doubt Tuesday when, at a news conference in Moscow, the Kyrgyz president, Kurmanbek Bakiyev, announced plans to shut down the base.
Kyrgyz and Russian officials have said the move had nothing to do with the pledge of Russian aid, but Moscow has long sought to push the United States out of the bases it has leased in Central Asia. Russian comments since then have suggested that if Obama hopes to move forward with his plans to deploy as many as 30,000 additional troops to Afghanistan, he will have to secure Moscow's support. That means addressing Russian complaints, including plans for missile defense facilities in Poland and the Czech Republic and expanding NATO.
"In the Russian mind, there is a window of opportunity to bargain, and if we are sitting down to bargain, we better have good cards on our side of the table," said Oksana Antonenko, a senior fellow at the Institute for International Strategic Studies in London.
"What they see in the best case scenario is a deal. A bargain. It's not a partnership."
The move was startling because it came amid a string of signals that Moscow was actually willing to engage Obama.
U.S. policymakers were encouraged by Prime Minister Vladimir Putin's speech at the World Economic Forum in Davos, which muted his typically caustic anti-U.S. tone. Medvedev organized a candid, hourlong meeting with the editor of Novaya Gazeta, a newspaper critical of the Kremlin which has lost a series of employees to contract killings, and he promised to rewrite an anti-treason law that had infuriated human rights activists.
In the last two weeks, Moscow announced that it was ready to open a NATO supply route to Afghanistan through Russia. And though official sources would not confirm it, an anonymous Defense Ministry official told the Interfax news service that Moscow had dropped a plan to station a battery of Iskander missiles in Kaliningrad.
Then came the announcement Tuesday about the Manas air base.
"This really did come out of the blue for me," said Andrew Kuchins, director of the Russia-Eurasia program at the Center for Strategic and International Studies in Washington. "It is a particularly Russian tactic — it's sort of brutal, and rude, and makes it harder to achieve what you think their goal is."
It came as a reminder that Russians do not share Europeans' giddiness over Obama. Relations between Russia and the United States last year reached their lowest point since the fall of the Soviet Union, and dialogue between the two governments had basically halted. In that sense, Obama will have to deal with "the tail end of the Bush legacy," including bitter memories of the war in Georgia last summer, said Sergei Rogov, director of the Institute for USA and Canada Studies in Moscow.
"Can you imagine, after the Georgia war, that Russia would lobby Kyrgyzstan on behalf of the United States?" Rogov said, adding that the decision "was not something Russia did, it was something against which Russia didn't object."
Moreover, Russian leaders are getting impatient to see concrete plans from Washington. Obama seems willing to slow the timeline on missile defense and NATO expansion, but not to publicly shelve the projects. Russian leaders, eager to renegotiate the relationship, want to make sure they have Obama's attention.
"The real ball game has not started," Rogov said. "There will be tough bargaining on many issues. It's a legacy of the semi-Cold War."
It may be a mistake to look for a grand plan in statements coming out of Moscow, where major players still disagree about the benefits of a friendlier relationship and may be addressing themselves to domestic audiences.
A single, raw issue — U.S. influence in post-Soviet space — underlies the raft of policy disputes between the two capitals, said Angela Stent, who directs Russian studies at Georgetown University. Resolving it, she said, "may be impossible to do, but it has to be tried."
"How much does Russia really want the relationship to change?" she said. "That's still an open question."
Top EU delegation in Moscow talks
Russia and the EU are holding their first high-level talks since relations were strained over the interruptions to Russian gas supplies last month.
European Commission President Jose Manuel Barroso is leading a team of nine commissioners in the discussions.
Going into the talks in Moscow, Mr Barroso spoke of the need for "positive interdependence" in EU-Russia ties.
Russia's plan to build military bases in two breakaway regions of Georgia is also expected to be high on the agenda.
On Thursday, the Czech Republic, holder of the EU presidency, said it was "seriously concerned" by the moves in South Ossetia and Abkhazia, over which Russia and Georgia went to war last August.
"The EU would consider the implementation of such plans to be a serious violation of the principle of Georgia's sovereignty and territorial integrity," it said.
'Many issues'
At the start of the talks with Russian President Dmitry Medvedev, Mr Barroso told reporters that negotiations on a new framework agreement were under way and that the EU was "very interested in developing these negotiations in a positive and constructive way".
He said the nine commissioners represented "the many issues we need to discuss so that we can deepen our relationship".
Mr Barroso said the Russia-Ukraine gas dispute was one of the issues and reiterated his disappointment at the incident.
"It is important now to create conditions for this kind of crisis not to happen again. We believe energy security is a very important sphere of interest for Russia and the European Union."
"And this positive interdependence is more important now than ever because we are facing a very serious global financial crisis," he said.
Mr Medvedev said there needed to be a "fully-fledged international legal system" to prevent a recurrence.
"The recent gas crisis has shown things are not all right," he said.
'Test'
The BBC's Richard Galpin in Moscow says the gas row has shaken EU countries' faith in both Russia and Ukraine as energy partners.
A commission spokesman told the BBC that the meetings with Mr Medvedev, Prime Minister Vladimir Putin and members of his cabinet were a test - to see if the political relationship can move forward.
He stressed that reliability and predictability were key for a proper partnership.
Last month, Mr Barroso told the European Parliament that the dispute between Ukraine and Russia over gas prices was "most unacceptable and incredible".
Russia cut gas supplies to Ukraine on New Year's Day, saying it would pump only enough for customers further down the pipeline. But then Moscow accused Ukraine of siphoning off gas intended for third countries.
Ukraine denied the claim, but the flow of Russian gas ceased completely on 7 January, leaving many European countries with major shortages.
Hundreds of thousands of people went without heating in Eastern and South-Eastern. Bulgaria, one of the hardest hit countries and a historical ally of Russia, had to close schools and public buildings.
Gas flows were resumed on 12 January after Russia and Ukraine finally agreed prices at which Ukraine would buy gas, and ship it to Europe.
European Commission President Jose Manuel Barroso is leading a team of nine commissioners in the discussions.
Going into the talks in Moscow, Mr Barroso spoke of the need for "positive interdependence" in EU-Russia ties.
Russia's plan to build military bases in two breakaway regions of Georgia is also expected to be high on the agenda.
On Thursday, the Czech Republic, holder of the EU presidency, said it was "seriously concerned" by the moves in South Ossetia and Abkhazia, over which Russia and Georgia went to war last August.
"The EU would consider the implementation of such plans to be a serious violation of the principle of Georgia's sovereignty and territorial integrity," it said.
'Many issues'
At the start of the talks with Russian President Dmitry Medvedev, Mr Barroso told reporters that negotiations on a new framework agreement were under way and that the EU was "very interested in developing these negotiations in a positive and constructive way".
He said the nine commissioners represented "the many issues we need to discuss so that we can deepen our relationship".
Mr Barroso said the Russia-Ukraine gas dispute was one of the issues and reiterated his disappointment at the incident.
"It is important now to create conditions for this kind of crisis not to happen again. We believe energy security is a very important sphere of interest for Russia and the European Union."
"And this positive interdependence is more important now than ever because we are facing a very serious global financial crisis," he said.
Mr Medvedev said there needed to be a "fully-fledged international legal system" to prevent a recurrence.
"The recent gas crisis has shown things are not all right," he said.
'Test'
The BBC's Richard Galpin in Moscow says the gas row has shaken EU countries' faith in both Russia and Ukraine as energy partners.
A commission spokesman told the BBC that the meetings with Mr Medvedev, Prime Minister Vladimir Putin and members of his cabinet were a test - to see if the political relationship can move forward.
He stressed that reliability and predictability were key for a proper partnership.
Last month, Mr Barroso told the European Parliament that the dispute between Ukraine and Russia over gas prices was "most unacceptable and incredible".
Russia cut gas supplies to Ukraine on New Year's Day, saying it would pump only enough for customers further down the pipeline. But then Moscow accused Ukraine of siphoning off gas intended for third countries.
Ukraine denied the claim, but the flow of Russian gas ceased completely on 7 January, leaving many European countries with major shortages.
Hundreds of thousands of people went without heating in Eastern and South-Eastern. Bulgaria, one of the hardest hit countries and a historical ally of Russia, had to close schools and public buildings.
Gas flows were resumed on 12 January after Russia and Ukraine finally agreed prices at which Ukraine would buy gas, and ship it to Europe.
Thursday, February 5, 2009
Gaza war creates rift between Israel and Turkey
By Sabrina Tavernise and Ethan Bronner
Thursday, February 5, 2009
ISTANBUL: The four daily flights to Tel Aviv are still running. The defense contract signed in December has not been scrapped. But since Israel's war in Gaza, something has changed in relations between Israel and Turkey, its closest Muslim ally.
Israel's Arab allies stood behind it in the war, but Turkey, a NATO member whose mediating efforts last year brought Israel into indirect talks with Syria, protested every step of the way in a month of angry remarks capped by the Turkish prime minister, Recep Tayyip Erdogan, leaving a symposium at the economic meeting in Davos, Switzerland.
In the week since then, both sides have taken pains to mend fences, with officials in both Israel and Turkey making conciliatory statements.
"Turkey and Israel attribute a special importance to their bilateral relations," the Turkish deputy prime minister, Cemil Cicek, said Monday. "We want to protect our relations with this country."
But privately, both sides acknowledge that some damage has been done, and while the full implications for the relationship are unknown, many analysts who watch it say they sense a shift.
"It's not a business-as-usual relationship anymore," said Cengiz Candar, a columnist for Radikal, a Turkish newspaper. "It's a very uneasy sort of cohabitation in this region now."
Turkey has been unique in the Middle East for its robust relations with Israel. It was the first Muslim country to recognize Israel as a state, and in recent years it has built up $3 billion in annual trade, far more than for any other Middle Eastern country, including a bustling tourist exchange and millions of dollars in defense contracts.
Erdogan encouraged the relationship, taking a trip to Israel in 2005 with a group of Turkish businessmen and becoming the first Turkish prime minister to visit the office of the chief rabbi in Turkey, Isaac Haleva, after a synagogue was bombed in 2003.
But when it comes to Hamas, they disagree. Israel views it as a militant group doctrinally committed to its destruction. Erdogan sees other aspects: It began as a grass-roots Islamic movement and like his own party - Justice and Development, also inspired by Islam - was democratically elected against overwhelming odds.
"They identified with some parts of the Hamas story," said Femi Koru, a columnist for Today's Zaman, a Turkish daily. "They were also outcasts who were not allowed to join national politics. They were also in the margins."
When Israel began its war in Gaza on Dec. 27, Turkish officials were caught by surprise, they said. Ehud Olmert, the Israeli prime minister, had visited Turkey just days before. According to Turkish officials, he had promised a response on talks with Syria, which progressed during the visit, when Erdogan called Syrian officials in Olmert's presence.
Erdogan, furious, castigated Israel for its military campaign, a stance that he continued to press over the course of the war. Turkey argues that it was simply expressing healthy criticism of Israel's campaign, which it opposed - words of warning from a close friend that sincerely believed Israel had gone too far.
"Turkey has simply lost its patience with the status quo in the Mideast," a senior Turkish official said. "Gaza is the bankruptcy of the military solution."
The official added: "Israel is there to stay, and Palestinians are there to stay, and they need to be talking right now."
Israel, for its part, says Olmert was not bound to reveal military details to Erdogan. The two countries will remain allies, it says, maintaining the substantial relations between their militaries and their societies, but Erdogan's reaction means that he can no longer be trusted as a mediator.
"He has burned all the bridges with Jerusalem," said one senior Israeli official. "He won't be seen as an honest broker anymore."
Liberal Turkish columnists criticized Erdogan for what they said was a double standard, raising the issue of killings of civilians by Israel, but failing to mention the thousands of Kurdish citizens killed during military operations in Turkey since the 1980s.
"One would naturally ask Erdogan, who stands up against violence imposed on people in Gaza, what he thinks about Kurds being killed in his own country," Ahmet Altan wrote in Taraf, a liberal newspaper. "Will he own the Kurdish children who became disabled after police bent their arms in street protests, or crushed under armored vehicles?"
Tourism has already taken a hit. Fewer Israelis have traveled to Turkey in recent weeks, according to travel agencies in Israel. Avi Mendelbaum of Unital, a travel agency in Tel Aviv, said that a year ago his agency alone could fill an airplane with 180 tourists going to the Turkish coast. This year, his and four other agencies have joined forces to fill an equivalent flight.
"There is of course a worldwide economic crisis, but we are not seeing a similar falloff in flights to, say, Prague," he said.
Sebnem Arsu contributed reporting from Istanbul.
Israel diverts supply ship
The Israeli Navy on Thursday intercepted a ship delivering 60 tons of supplies from Lebanon to the Gaza Strip and said it was towing the vessel into an Israeli port, The Associated Press reported from Jerusalem.
The ship set sail from the Lebanese port of Tripoli on Tuesday in a bid to defy Israel's blockade of Gaza. Reporters from Arab TV stations Al Jadeed and Al Jazeera who were on the Togolese-flagged vessel said the Israelis fired at the ship before boarding it.
Organizers said 18 people were on board. Among them was an 86-year-old Greek Catholic priest, Hillarion Capucci, who while serving as an archbishop in Jerusalem was convicted in 1974 by an Israeli court for using his diplomatic status to smuggle arms to Palestinian militants. The Syrian-born Capucci was jailed but released three years later and deported.
The Israeli military said that those on the ship would be handed over to the Israeli police and that the aid would be transferred to Gaza by land.
Israel has kept Gaza's cargo crossings closed since Hamas seized control of the area in 2007.
Thursday, February 5, 2009
ISTANBUL: The four daily flights to Tel Aviv are still running. The defense contract signed in December has not been scrapped. But since Israel's war in Gaza, something has changed in relations between Israel and Turkey, its closest Muslim ally.
Israel's Arab allies stood behind it in the war, but Turkey, a NATO member whose mediating efforts last year brought Israel into indirect talks with Syria, protested every step of the way in a month of angry remarks capped by the Turkish prime minister, Recep Tayyip Erdogan, leaving a symposium at the economic meeting in Davos, Switzerland.
In the week since then, both sides have taken pains to mend fences, with officials in both Israel and Turkey making conciliatory statements.
"Turkey and Israel attribute a special importance to their bilateral relations," the Turkish deputy prime minister, Cemil Cicek, said Monday. "We want to protect our relations with this country."
But privately, both sides acknowledge that some damage has been done, and while the full implications for the relationship are unknown, many analysts who watch it say they sense a shift.
"It's not a business-as-usual relationship anymore," said Cengiz Candar, a columnist for Radikal, a Turkish newspaper. "It's a very uneasy sort of cohabitation in this region now."
Turkey has been unique in the Middle East for its robust relations with Israel. It was the first Muslim country to recognize Israel as a state, and in recent years it has built up $3 billion in annual trade, far more than for any other Middle Eastern country, including a bustling tourist exchange and millions of dollars in defense contracts.
Erdogan encouraged the relationship, taking a trip to Israel in 2005 with a group of Turkish businessmen and becoming the first Turkish prime minister to visit the office of the chief rabbi in Turkey, Isaac Haleva, after a synagogue was bombed in 2003.
But when it comes to Hamas, they disagree. Israel views it as a militant group doctrinally committed to its destruction. Erdogan sees other aspects: It began as a grass-roots Islamic movement and like his own party - Justice and Development, also inspired by Islam - was democratically elected against overwhelming odds.
"They identified with some parts of the Hamas story," said Femi Koru, a columnist for Today's Zaman, a Turkish daily. "They were also outcasts who were not allowed to join national politics. They were also in the margins."
When Israel began its war in Gaza on Dec. 27, Turkish officials were caught by surprise, they said. Ehud Olmert, the Israeli prime minister, had visited Turkey just days before. According to Turkish officials, he had promised a response on talks with Syria, which progressed during the visit, when Erdogan called Syrian officials in Olmert's presence.
Erdogan, furious, castigated Israel for its military campaign, a stance that he continued to press over the course of the war. Turkey argues that it was simply expressing healthy criticism of Israel's campaign, which it opposed - words of warning from a close friend that sincerely believed Israel had gone too far.
"Turkey has simply lost its patience with the status quo in the Mideast," a senior Turkish official said. "Gaza is the bankruptcy of the military solution."
The official added: "Israel is there to stay, and Palestinians are there to stay, and they need to be talking right now."
Israel, for its part, says Olmert was not bound to reveal military details to Erdogan. The two countries will remain allies, it says, maintaining the substantial relations between their militaries and their societies, but Erdogan's reaction means that he can no longer be trusted as a mediator.
"He has burned all the bridges with Jerusalem," said one senior Israeli official. "He won't be seen as an honest broker anymore."
Liberal Turkish columnists criticized Erdogan for what they said was a double standard, raising the issue of killings of civilians by Israel, but failing to mention the thousands of Kurdish citizens killed during military operations in Turkey since the 1980s.
"One would naturally ask Erdogan, who stands up against violence imposed on people in Gaza, what he thinks about Kurds being killed in his own country," Ahmet Altan wrote in Taraf, a liberal newspaper. "Will he own the Kurdish children who became disabled after police bent their arms in street protests, or crushed under armored vehicles?"
Tourism has already taken a hit. Fewer Israelis have traveled to Turkey in recent weeks, according to travel agencies in Israel. Avi Mendelbaum of Unital, a travel agency in Tel Aviv, said that a year ago his agency alone could fill an airplane with 180 tourists going to the Turkish coast. This year, his and four other agencies have joined forces to fill an equivalent flight.
"There is of course a worldwide economic crisis, but we are not seeing a similar falloff in flights to, say, Prague," he said.
Sebnem Arsu contributed reporting from Istanbul.
Israel diverts supply ship
The Israeli Navy on Thursday intercepted a ship delivering 60 tons of supplies from Lebanon to the Gaza Strip and said it was towing the vessel into an Israeli port, The Associated Press reported from Jerusalem.
The ship set sail from the Lebanese port of Tripoli on Tuesday in a bid to defy Israel's blockade of Gaza. Reporters from Arab TV stations Al Jadeed and Al Jazeera who were on the Togolese-flagged vessel said the Israelis fired at the ship before boarding it.
Organizers said 18 people were on board. Among them was an 86-year-old Greek Catholic priest, Hillarion Capucci, who while serving as an archbishop in Jerusalem was convicted in 1974 by an Israeli court for using his diplomatic status to smuggle arms to Palestinian militants. The Syrian-born Capucci was jailed but released three years later and deported.
The Israeli military said that those on the ship would be handed over to the Israeli police and that the aid would be transferred to Gaza by land.
Israel has kept Gaza's cargo crossings closed since Hamas seized control of the area in 2007.
Tuesday, February 3, 2009
Greek riot police quell farmer protest
By Kerin Hope
Published: February 2 2009 17:07 | Last updated: February 2 2009 17:07
Riot police took over the port of Piraeus on Monday to stop about 1,200 olive oil producers from the island of Crete from driving tractors into central Athens, as protests by farmers moved into a third week.
A Socialist opposition member of parliament was slightly injured when police fired tear gas at a group of farmers trying to break through a dockside barrier.
“We came to Athens to pursue our rights but the police blocked us from holding a peaceful demonstration, so we will stay here,” said a farmers’ representative.
The arrival of the Cretans with more than 200 tractors transported by coastal ferries, threatened a renewal of unrest after most protests ran out of steam at the weekend.
Farmers on the Greek mainland on Sunday lifted more than 60 tractor blockades on main roads to the capital and at border crossings with Macedonia and Turkey.
The main crossing with Bulgaria at Promachonas where local farmers joined the Greek protesters was opened intermittently on Monday to allow trucks through.
Cretan producers are demanding a larger share of a proposed €500m government support package to compensate growers for crop damage and falling commodity prices.
Sotiris Hatzigakis, Greece’s farm development minister, on Monday presented the package in Brussels for approval by the European Commission.
In Crete – the largest and wealthiest Greek island that exports olive oil worldwide – protesters on Monday blocked the main west-east highway and surrounded the regional governor’s office in the capital Heraklion.
Producer prices for high-quality olive oil have fallen to about €1.80 a kilo from €3 last year, according to farmers.
The sustained protest by Cretans, who overwhelmingly support the opposition Socialists, raises a fresh challenge for the centre-right government of Costas Karamanlis, the prime minister.
With only a one-seat overall majority in parliament, the government’s position remains precarious after violent demonstrations in December followed the killing by a police officer of a 15-year-old schoolboy in Athens.
Farmers’ representatives said on Monday they would continue the protests until the government makes concessions over demands for tax rebates for citrus and vegetable growers on Crete as well as olive oil producers.
The stand-off in Piraeus paralysed coastal shipping operations to Crete and several Aegean islands. The farmers said they would remain in the port after reaching a deal with ferry operators to stay aboard ships overnight.
Published: February 2 2009 17:07 | Last updated: February 2 2009 17:07
Riot police took over the port of Piraeus on Monday to stop about 1,200 olive oil producers from the island of Crete from driving tractors into central Athens, as protests by farmers moved into a third week.
A Socialist opposition member of parliament was slightly injured when police fired tear gas at a group of farmers trying to break through a dockside barrier.
“We came to Athens to pursue our rights but the police blocked us from holding a peaceful demonstration, so we will stay here,” said a farmers’ representative.
The arrival of the Cretans with more than 200 tractors transported by coastal ferries, threatened a renewal of unrest after most protests ran out of steam at the weekend.
Farmers on the Greek mainland on Sunday lifted more than 60 tractor blockades on main roads to the capital and at border crossings with Macedonia and Turkey.
The main crossing with Bulgaria at Promachonas where local farmers joined the Greek protesters was opened intermittently on Monday to allow trucks through.
Cretan producers are demanding a larger share of a proposed €500m government support package to compensate growers for crop damage and falling commodity prices.
Sotiris Hatzigakis, Greece’s farm development minister, on Monday presented the package in Brussels for approval by the European Commission.
In Crete – the largest and wealthiest Greek island that exports olive oil worldwide – protesters on Monday blocked the main west-east highway and surrounded the regional governor’s office in the capital Heraklion.
Producer prices for high-quality olive oil have fallen to about €1.80 a kilo from €3 last year, according to farmers.
The sustained protest by Cretans, who overwhelmingly support the opposition Socialists, raises a fresh challenge for the centre-right government of Costas Karamanlis, the prime minister.
With only a one-seat overall majority in parliament, the government’s position remains precarious after violent demonstrations in December followed the killing by a police officer of a 15-year-old schoolboy in Athens.
Farmers’ representatives said on Monday they would continue the protests until the government makes concessions over demands for tax rebates for citrus and vegetable growers on Crete as well as olive oil producers.
The stand-off in Piraeus paralysed coastal shipping operations to Crete and several Aegean islands. The farmers said they would remain in the port after reaching a deal with ferry operators to stay aboard ships overnight.
Monday, February 2, 2009
EMU on the rocks and all exits closed
The euro was created to bring economic stability to Europe. However, the politicians who promoted European Monetary Union ignored inherent flaws in the project. The credit crisis has exposed these flaws. As a result, a number of the weaker eurozone members are facing severe deflation and a quite desperate economic outlook.
The leading European politicians behind the euro project, such as former French president Francois Mitterand, weren’t much interested in economics. In a new book, The Euro: The Politics of the New Global Currency (Yale) David Marsh shows how these politicians brushed aside the concerns of their advisers as they rushed eagerly towards monetary union. Mr Mitterand’s vision for the single currency, says Mr Marsh, was “based on emotion, psychology and wishful thinking” rather than rational economics.
It was hoped that the euro would bring faster and more stable economic growth, while exporting Germany’s record of price stability to other members of the single currency. But many potential economic problems with European Monetary Union were identified decades ago. In 1973 Derek Mitchell, a British Treasury official, observed that the loss of exchange rate flexibility would remove a simple method for rectifying imbalances between Europe’s economies. Without the option of exchange rate depreciation, once imbalances appeared “equilibrium could only then be restored”, declared Mr Mitchell, “by inflation in the ‘high performance’ countries and unemployment and stagnation in the ‘low performance’ countries, unless central provision is made for the imbalances to be offset by massive and speedy resource transfers”.
Economists at the Bundesbank wanted to delay monetary union until the performance of Europe’s various economies had converged around similar inflation and growth rates. They were defeated by French bureaucrats, who believed that the euro would bring about convergence. Former Bundesbank (and later chief European Central Bank) economist Otmar Issing questioned whether Europe could move to a single currency without parallel moves to political union. Eddie George, then governor of the Bank of England, warned that Europe needed to improve its labour market flexibility before entering into a monetary union. His counterpart at the Bank of Italy, governor Antonio Fazio, questioned whether Italy would make a suitable member of EMU given that the country had a history of periodically devaluing the lira in order to regain competitiveness.
Despite these reservations, the single currency was created without effective controls on the ability of member governments to issue debt and with no formal arrangements for fiscal transfers to aid stricken countries through hard times. A high level of cross-border labour mobility, which anyhow would have required a common language, was never achieved. There were no ground rules for dealing with divergent economic competitiveness among member countries produced by differing rates of inflation and productivity over time.
Europeans are paying the price for the oversights of their former political masters. Since the euro came into existence a decade ago, consumer prices in Portugal, Ireland, Italy, Greece and Spain have risen by an average of about 20 percentage points more than in Germany. They have also experienced lower productivity growth. In addition, they have run large current account deficits and, with the exception of Italy, have experienced tremendous housing bubbles and credit booms. The ECB inadvertently contributed to the credit booms by setting an excessively low interest rate for fast-growing economies, such as Ireland.
In the past, the weaker European economies faced with the current crisis would have simply devalued their currencies. With that option closed by monetary union, their economic outlook appears dire. Spain’s unit labour costs are currently about 20 per cent higher than Germany’s, according to Andrew Hunt Economics. Unemployment is rapidly approaching 15 per cent of the workforce. To regain competitiveness, Spain would have to cut costs sharply, including wages.
Ireland’s problems are even more acute. Irish exports amount to about 90 per cent of GDP and roughly a third of these exports go to the UK. Ireland also competes with Britain for foreign direct investment. Yet over the past year, the euro has appreciated by 20 per cent against sterling, rendering Ireland even less competitive at its moment of crisis.
As the credit ratings for the peripheral members of the eurozone are downgraded and their borrowing costs rise relative to Germany, there has been speculation that some countries may choose to ditch the euro. The trouble is that EMU is an economic roach motel – it’s easier to check in than it is to quit. Leaving the euro would be a painful and messy business. It would require breaking supposedly “irreversible” treaty commitments and disentangling a web of euro-denominated financial obligations. As former German Chancellor Helmut Schmidt says “the great strength of the euro [is] that nobody can leave it without damaging his own country and his own economy in a very severe way”.
However, the alternatives aren’t pleasant. Germany might be forced to make reluctantly huge fiscal transfers to eurozone countries with large current account deficits, such as Spain. But this wouldn’t make them more competitive. As former Bundesbank president Karl-Otto Poehl says: “The other European countries have no choice [but] to . . . embark on a course of cost-cutting.”
A decade after its birth, the euro is playing a similar deflationary role in the current credit crisis as the gold standard performed in the Great Depression. The Europeans of the 1930s had certain advantages. For a start, they were less leveraged and when the crisis arrived, they had no trouble casting off their golden fetters.
Edward Chancellor is a member of GMO’s asset allocation team
The leading European politicians behind the euro project, such as former French president Francois Mitterand, weren’t much interested in economics. In a new book, The Euro: The Politics of the New Global Currency (Yale) David Marsh shows how these politicians brushed aside the concerns of their advisers as they rushed eagerly towards monetary union. Mr Mitterand’s vision for the single currency, says Mr Marsh, was “based on emotion, psychology and wishful thinking” rather than rational economics.
It was hoped that the euro would bring faster and more stable economic growth, while exporting Germany’s record of price stability to other members of the single currency. But many potential economic problems with European Monetary Union were identified decades ago. In 1973 Derek Mitchell, a British Treasury official, observed that the loss of exchange rate flexibility would remove a simple method for rectifying imbalances between Europe’s economies. Without the option of exchange rate depreciation, once imbalances appeared “equilibrium could only then be restored”, declared Mr Mitchell, “by inflation in the ‘high performance’ countries and unemployment and stagnation in the ‘low performance’ countries, unless central provision is made for the imbalances to be offset by massive and speedy resource transfers”.
Economists at the Bundesbank wanted to delay monetary union until the performance of Europe’s various economies had converged around similar inflation and growth rates. They were defeated by French bureaucrats, who believed that the euro would bring about convergence. Former Bundesbank (and later chief European Central Bank) economist Otmar Issing questioned whether Europe could move to a single currency without parallel moves to political union. Eddie George, then governor of the Bank of England, warned that Europe needed to improve its labour market flexibility before entering into a monetary union. His counterpart at the Bank of Italy, governor Antonio Fazio, questioned whether Italy would make a suitable member of EMU given that the country had a history of periodically devaluing the lira in order to regain competitiveness.
Despite these reservations, the single currency was created without effective controls on the ability of member governments to issue debt and with no formal arrangements for fiscal transfers to aid stricken countries through hard times. A high level of cross-border labour mobility, which anyhow would have required a common language, was never achieved. There were no ground rules for dealing with divergent economic competitiveness among member countries produced by differing rates of inflation and productivity over time.
Europeans are paying the price for the oversights of their former political masters. Since the euro came into existence a decade ago, consumer prices in Portugal, Ireland, Italy, Greece and Spain have risen by an average of about 20 percentage points more than in Germany. They have also experienced lower productivity growth. In addition, they have run large current account deficits and, with the exception of Italy, have experienced tremendous housing bubbles and credit booms. The ECB inadvertently contributed to the credit booms by setting an excessively low interest rate for fast-growing economies, such as Ireland.
In the past, the weaker European economies faced with the current crisis would have simply devalued their currencies. With that option closed by monetary union, their economic outlook appears dire. Spain’s unit labour costs are currently about 20 per cent higher than Germany’s, according to Andrew Hunt Economics. Unemployment is rapidly approaching 15 per cent of the workforce. To regain competitiveness, Spain would have to cut costs sharply, including wages.
Ireland’s problems are even more acute. Irish exports amount to about 90 per cent of GDP and roughly a third of these exports go to the UK. Ireland also competes with Britain for foreign direct investment. Yet over the past year, the euro has appreciated by 20 per cent against sterling, rendering Ireland even less competitive at its moment of crisis.
As the credit ratings for the peripheral members of the eurozone are downgraded and their borrowing costs rise relative to Germany, there has been speculation that some countries may choose to ditch the euro. The trouble is that EMU is an economic roach motel – it’s easier to check in than it is to quit. Leaving the euro would be a painful and messy business. It would require breaking supposedly “irreversible” treaty commitments and disentangling a web of euro-denominated financial obligations. As former German Chancellor Helmut Schmidt says “the great strength of the euro [is] that nobody can leave it without damaging his own country and his own economy in a very severe way”.
However, the alternatives aren’t pleasant. Germany might be forced to make reluctantly huge fiscal transfers to eurozone countries with large current account deficits, such as Spain. But this wouldn’t make them more competitive. As former Bundesbank president Karl-Otto Poehl says: “The other European countries have no choice [but] to . . . embark on a course of cost-cutting.”
A decade after its birth, the euro is playing a similar deflationary role in the current credit crisis as the gold standard performed in the Great Depression. The Europeans of the 1930s had certain advantages. For a start, they were less leveraged and when the crisis arrived, they had no trouble casting off their golden fetters.
Edward Chancellor is a member of GMO’s asset allocation team
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