Once Azerbaijani gas policy is seen as an example of a small state using the resources it as a tool to achieve foreign-policy goals it becomes much easier to understand the complex negotiations over the pipeline. In essence, Nabucco was an attempt to bypass Russia. For the EU and by extension the United States, especially after the Ukrainian civil war it is essential to reduce dependence on Russian gas. For Azerbaijan, there is no such imperative. Instead, it profits from playing off the powers against each other. Its supports Russia's South Stream, it has opened negotiations with Iran, and it continues to supply gas to Turkish pipelines. However, it is willing to cut or to renegotiate terms when it sees its strategic interests threatened. Thus, a rather lukewarm attempt by Turkey to normalize relations with Armenia was stalled because of the Nagorno-Karabakh dispute, to which Turkey is not a party. Even if the project made economic sense it is unlikely that Azerbaijan would agree to anything that sacrifices broader political and strategic interests. Azerbaijan, however, has a key advantage. The gas must come from Azerbaijani gas fields. What would weaken this advantage is alternatives from Iran or Russia. Given the tense relationship that the West has with both it is unlikely to lose this advantage soon.
TGI and Nabucco make sense only if Central Asian gas is available. The EU, Russia, Turkey and Iran are the major powers in the area, countries like Azerbaijan and the other Central Asian states play them against each other. The Nabucco project can be seen as a response to Putin 's energy agreements with Kazakhstan, Turkmenistan, and Uzbekistan in May 2007. The three Central Asian states agreed to enhance co-operation with Russia in the energy sphere, allowing the construction of a new Russia-bound gas export pipeline along the eastern shore of the Caspian Sea while upgrading and expanding existing pipelines. Russia would also develop Central Asian ﬁelds. New long-term supply contracts were also signed. 141
CHAPTER V: Conclusions
This thesis has shown that the only way to understand the fluctuating negotiations over Nabucco is to situate it in the broader context of Azerbaijani foreign-policy. On the surface, the Nabucco project was a failure. After numerous delays the project had to scrapped. However, if the question is reframed differently---Did the Nabucco project contribute to the overall aims of Azerbaijani foreign policy?--the answer is yes. In other words, the main conclusion is that Nabucoo is just a tool in a broader foreign policy strategy of Azerbaijan. This thesis showed how the Nabucco project, though a failure, has contributed over all to Azerbaijan’s energy independence which gives it a greater say in foreign policy.
This dissertation has used the neorealist theoritical framework in energy politics in order to analyse that it is not always ‘big players’ who decide energy policy for all and that small countries like Azerbaijan can use oil and gas policy as a tool to further national interests. It is essential to understand that Azerbaijan preferred TAP not Nabucco as it met its main national interest which was to keep Russia happy. Therefore, the Nabucco pipeline politics served Azerbaijan's multi-vector foreign policy. With the limited options that it had, its strategy was to not openly support the Nabucco project, as the issue of gas sources for Nabucco had not been addressed. Therefore, to protect it s national interest, which was to avoid making enemies in vain, Azerbaijan used the Nabucco pipeline negotiations to fulfil national interests.
So Azerbaijan purseued the policy not to make enemies in vain Indeed small states who have achieved their energy independence can also play significant role in regional energy politics, to put it specifically in pipeline politics. Azerbaijan has proven to be a good sample for that, which is observable while looking at the case of Nabucco project and Azerbaijan’s role in negotiations over it.
Being a transnational project, Nabucco cannot be investigated in isolation. Key actors with vested interested needed to be looked at to comprehend how and why Azerbaijan have had changing approach to the Nabucco project. That is why this dissertation looked at the Azerbaijan’s energy policy to the backdrop of the interests of important actors’ such as Russia, Turkey, Iran and Turkmenistan.
However lack of EU backing is another factor that caused the failure of the original Nabucco project. The EU was not very decisive in its support for the Nabucco project although it gave official support in the level of EU commission. However, the EU could not unite all interest groups to unite in support of Nabucco; some Nabucco shareholders shifted to the South Stream. Moreover, the EU could not secure required funding for the implementation of the project. Even when the classic Nabucco project reduced to West-Nabucco, the EU declared it is indifferent between TAP and Nabucco-West projects. Seeing no solid backing on the part of EU or U.S., Azerbaijan settled for the minimum it was looking for, namely transferring just its own available resources to Europe.
This thesis also investigated how Azerbaijan pursued the policy of diversification of energy transport routes and becoming owner of such routes in order to avoid possible future manipulations over these routes. Azerbaijan’s offer to finance the TANAP project, and buying energy infrastructures in Greece are good examples for this energy policy pursued by Azerbaijan.
To sum up, even if Nabucco was mostly a political and strategic project its failure was due to both political and economical reasons. Main problem was the uncertainty with the availability of natural gas from the targeted supply sources. Turkmenistan’s own way-outs for diversification of its transportation routes played a critical role. The undecided legal status of the Caspian Sea plays also a great role, as most likely Russia and Iran would not agree on construction of trans-Caspian pipeline and small countries of the region like Azerbaijan and Turkmenistan has not much say on that. Now with changing regional politics even Trans-Caspian pipeline project is being mentioned in the news quite often.
Commercial considerations were also decisive in failure of the project, as estimated costs of the project by time increased; at the beginning it was estimated at roughly 8 billion Euros, but by 2012 it was put as high as 15 billion which further questioned the commerciality of the project and additionally no country or company was willing to break the ice to make substantial investments. The inconsistency in EU common energy policy also negatively impacted the realization of the project. Now it is up to ‘big brothers’ like EU and USA if Nabucco will be returned back to the life.
The commerciality of Nabucco project was questioned from the beginning. However, this doubt was deepened in last few years because of several reasons. First of all, many experts argued that this project is not economically profitable; it is purely political project to decrease EU’s dependence from Russia142. Initially, partners for the project planned to transfer 31 bcm of gas to Europe, however once they realised difficulties with most of the supply sources, they started only to count on Azerbaijani gas, which could make only 10 bcm. That substantially strengthened the doubts on the commerciality of the project. The cost of the project was estimated at 12-15 billion Euros. Here came the question on who are going to pay for the construction of the pipeline? EU, the USA or the supplier countries. The ongoing economic crisis made it difficult for the countries to undertake financial burdens of the construction.
Without a doubt, countries would have financed Nabucco’s construction, only if there were no other viable alternatives to it. First of all, shorter pipelines regarded more economically viable than financing such a big pipeline without being sure about the supply sources other than Azerbaijan’s.
Another development that impacts Nabucco project is the emergence of LNG. Traditionally, LNG has not been part of the energy mix in Europe. For example, Import of LNG into Europe fell by a quarter between 2011 and 2012 and by almost a third between 2012 and 2013. Between 2010 and 2013 European supply fell by 54.8 bcm, LNG import by 40.6 bcm.143 The below quotation from the renowned energy expert Jonathan Stern summarizes the impact of LNG on Nabucco very well:
"Although people talk about the southern corridor, and it is still correct -- the original concept is still correct that there is a lot of gas at the other end of Europe, in the Caspian and Middle East region -- the complexity of actually getting something going there has been so great, and so long-term, that in the meantime a lot of European countries have built, and more are planning to build, LNG terminals."144
Furthermore, LNG developments had also an impact on reconsideration of the economic viability of Nabucco project. In case of Nabucco no one showed willingness to undertake any financial burden by itself and because of that process did not move forward. However, now changing political circumstances bring back the hope that there will be shareholders willing to invest into Nabucco.
As long as sanctions against Iran are in place, Iranian gas cannot be brought to Europe. However, now game can be changed as deal on sanctions against Iran has been made. In fact, Nabucco announced that they would not built access lines to Iran, but now with the changing rules, this conviction can change as well. Qatar is another option. Qatari gas is send by tanker to East Asia and Europe. However, to deliver it by pipe line via the Southern Gas corridor Iranian infrastructure would have to be used, or new pipelines built through Iraq. Both were considered unfeasible at the time, but now it is an open option in case Nabucco is back.
This is where the importance of Azerbaijan comes. Though it has small reserves of 1.3 tcm or 0.7 per cent of world wide natural gas reserves, it is most accessible. This minuscule capacity will expand as new gas fields are discovered but Azerbaijan still will have only small share of the total. However, Azerbaijan's gas is far more accessible. In addition, Azerbaijan is closely interconnected with Georgia which is an important transit country. Georgia is key transit country for Azerbaijani gas on its way to Europe. Azerbaijan has supplied Georgia with natural gas since 2006 at prizes lower than Gazprom. Azerbaijan would like to leave orbit of Russia. The construction of the Baku-Tbilisi-Ceyhan oil pipeline (BTC), with American support, and the Baku-Tbilisi-Erzurum gas pipeline (BTE) have given it an advantage. Southern gas corridor would have given Azerbaijan a key advantage, as it generates more than 60% of its Gross Domestic Product (GDP) with the export of oil and natural gas. Thus, Azerbaijan plays a key role in the Southern Gas Corridor as the source of natural gas and transit country. Azerbaijan can offer much to Europe, but it needs full commitment on the part of the EU. Azerbaijan has achieved to link Caspian Basin to EU with TANAP and TAP. It can be interpreted as a beginning and there is space for expanding further gas deliveries along this line. EU will look for additional supplies from the region, and if additional supplies become available then the full capacity of the existing pipelines will be used or new pipelines will be added up.