Content

Shushanik Minasyan, 8 Caspian Gas Supplies: An Opportunity of EU Energy Diversification? in:

Wolfram Hilz, Rafal Ulatowski (ed.)

Energy Policy in Europe, page 109 - 126

Internal Dimensions and External Perspectives

1. Edition 2019, ISBN print: 978-3-8288-4388-2, ISBN online: 978-3-8288-7373-5, https://doi.org/10.5771/9783828873735-109

Series: Bonner Studien zum globalen Wandel, vol. 25

Tectum, Baden-Baden
Bibliographic information
109 8 Caspian Gas Supplies: An Opportunity of EU Energy Diversification? Shushanik Minasyan 1 Introduction Energy issues continue to dominate the European security policy discourse. The European Union Global Strategy in 2016 underlines the preservation of energy system resilience as a key security priority for the European member countries. The Strategy stresses heightened concerns over the European energy system’s vulnerabilities, calling on the relevant European and national actors to take measures to eliminate the threats to the community’s energy supply.1 In addition to internal risks such as the poor infrastructure connections between EU-countries,2 “isolated energy markets in Europe”3 and an absent regulatory framework, the EU is plagued with potential threats to its energy security. Instability in the global energy market, geopolitical rivalries between the traditional and emerging powers, increasing competition for global resources as well as conflicts in supplier or transit countries pose enormous challenges for European energy supply security due to its highly dependence on imported energy. In 2016, the dependency rate was equal to 54%, signifying that more than half of the EU’s energy needs were 1 See European Commission: Shared Vision, Common Action: A Stronger Europe. A Global Strategy for the European Union’s Foreign and Security Policy, Brussels, 2016, p. 9, p. 22. 2 See European Commission: European Energy Security Strategy, COM (2014) 330 final, Brussels, 2014, p. 9. 3 European Commission: Second Strategic Energy Review. An EU Energy Security and Solidarity Action Plan, COM (2008) 781 final, Brussels, 2008, p. 4. 110 met by imports.4 Critically, fossil fuels represent 61% (39.5% oil, 22.1% gas) of the EU’s primary energy consumption in the EU.5 Nearly a third of EU oil consumption (34.6%) and 23.3% of gas demands were covered by imports.6 In view of current energy trends, worldwide fossil fuels are expected to persist as the EU’s main energy security objective for the EU. The last decade saw an immense increase in the world’s demand for oil (a 1.7% growth from 2006 to 2016), particularly in developing countries including China and India.7 China’s share of global oil consumption grew by 4.4% over the same period while India increased its oil need by 5.7%.8 This dynamic could provide new sources of instability for Europe’s energy supply. Natural gas, however, represents the largest challenge for the EU. Whereas the global oil market is unified under the petrol dollar scheme and has more flexible distribution and supply infrastructures, the gas market is different in nature for which the concept of security of supply is significantly more complicated. The regional orientation of the gas market is due to the delivery system via pipelines, which creates limitations and reciprocal dependencies between trading partners.9 The EU faces serious challenges in natural gas supply because some of its member states are highly dependent on a single supplier. Gas supply implies both technical as well as economical instabilities such as investment and facility risks, producing reliability and transit risks. Natural gas security has also become a strategic component of the European foreign policy architecture and requires diplomatic efforts to maintain a balance with energy-relevant countries and to avoid any adverse threats to the energy supply arising from 4 See Eurostat: Database. Energy, available at: https://ec.europa.eu/eurostat/ca che/infographs/energy/bloc-2c.html (14 January 2019). 5 See Eurostat: Database. Energy Consumption, available at: https://ec.europa. eu/eurostat/cache/infographs/energy/bloc-3a.html (14 January 2019). 6 See Eurostat: Database. Energy Imports, available at: https://ec.europa.eu/ eurostat/cache/infographs/energy/bloc-2a.html (14 January 2019). 7 See British Petroleum: Statistical Review of World Energy, London, 2018, p. 8. 8 See ibid. 9 See Bundesanstalt für Geowissenschaften und Rohstoffe: Kurzstudie. Reserven, Ressourcen und Verfügbarkeit von Energierohstoffen, Hannover, 2009, p. 21. 111 strategic confrontations or political incidents in supplier and transit countries. Concerning enhancement of energy system operability and undermining of vulnerability immediate energy supply diversification remains the fundamental starting principles of European energy security.10 The EU identified the Caspian region as a central alternative supply source in the 1990s,11 where the bulk of gas reserves are concentrated (28.5% of global gas reserves).12 Despite major European political efforts over the last two decades to intensify the energy dialogue with Caspian states to construct an infrastructure bridge between the Caspian and Black Sea region, the EU failed to achieve relevant results. European initiatives and energy projects such as the proposed NABUCCO pipeline could not be implemented due to stakeholder disagreements and economic difficulties.13 However, the development of energy infrastructure as well as market integration between suppliers in the Caspian region and European energy consumer countries continues to be an imperative for the European energy security policy.14 The following paper presents the current European energy discussion regarding the role of the Caspian region and aims to analyze several crucial aspects of the energy dialogue between Caspian States and the EU. The main objective of this article is to demonstrate and examine the prospects and opportunities of this energy dialogue for the European energy diversification. 10 See European Commission: Second Strategic Energy Review. An EU Energy Security and Solidarity Action Plan, COM (2008) 781 final, Brussels, 2008, pp. 7-8. 11 See European Commission: White Paper. An Energy Policy for the European Union, COM (95) 682 final, Brussels, 1995, p. 21. 12 See British Petroleum: Statistical Review of World Energy, London, 2018, p. 26. 13 See Minasyan, Shushanik: Die energiepolitischen Interessen der EU im Südkaukasus, Marburg, 2016, pp. 142-183. 14 See European Commission: European Energy Security Strategy, COM (2014) 330 final, Brussels, 2014, p. 16. 112 2 The European Southern Gas Corridor and the Caspian region European energy policy is based on three parameters: sustainability, security of supply and competitiveness. The EU’s energy policy strives to strike a balance among these objectives by “combating climate change, limiting the EU’s external vulnerability to imported hydrocarbons, and promoting growth and jobs, thereby providing secure and affordable energy to consumers.”15 Yet reconciling these diverging aspirations into a cohesive realistic framework is a difficult task for the EU. The equilibrium in this energy triangle is disrupted by various factors, such as a lack of consensus among the EU’s economic and political interests, contrasting energy landscapes and differing energy-mixes in member states. The depletion of fossil fuel sources in the EU16 and high dependence on energy imports have brought security of supply to the top of the European energy agenda. The past years have revealed the EU notably is vulnerable to supply shocks in the natural gas sector. The supply insecurity arises from the location of distribution routes and its geopolitical implications. The European import infrastructure is limited to three main partners: Russia is the largest supplier of natural gas. The only other partner with a significant share in total EUimports is Norway and, at some distance, Algeria and Qatar (Figure 1). This existing market dominance of a few supplying countries restrains the EU’s capacity to act and generates many risks. Since 2006, this economic constellation has been supplemented by geopolitical complications when Russia began using its energy resources to promote its geopolitical agenda and to influence foreign policy decisions in its ‘near abroad’.17 After repeated supply interruptions in 2009 during the Ukrainian-Russian gas-crisis, which had dramatic consequences for a majority of EU countries directly and in- 15 European Commission: An Energy Policy for Europe, COM (2007) 1 final, Brussels, 2007, p. 4. 16 See Durand, Bernard: The Nearby Depletion of Fossil Fuels will force to hasten the Energy Transition, in: European Scientist, 25 June 2018, available at: https://www.europeanscientist.com/en/features/nearby-fossil-fuel-depleti on/ (27 January 2019). 17 See Pleines, Heiko: Der Erdgaskonflikt zwischen Russland und der Ukraine, in: Pleines, Heiko (ed.): Die Ukraine zwischen Ost und West. Außenpolitische und kulturelle Orientierungen, Bremen, 2008, pp. 45-48, p. 46. directly,18 Russia’ ously blighted. C cent years concer nowadays also see Figure 1: EU-Import Source: Eurostat data In order to addres sion developed s Southern Gas Cor tegic energy coop tries, “which coul future needs”.20 T security priority” foster a dialogue jective of rapidly and the construct development.”22 A ject, but Brussels 18 See European C liament and of t Gas Supply and Brussels, 2009, p 19 See ibid. 20 European Comm Security and Sol p. 4. 21 Ibid. 22 Ibid. 3. Alger 4 s reputation as a reliable energy supp onsidering political tensions with M ns about a possible outbreak of en m to be present. s of natural gas in 2017 (%) base. s the increasing concerns, the Europ everal energy policy initiatives19 in ridor (SGC). The SGC defines new f eration with Caspian and Middle E d potentially supply a significant par he EU designated this project the “h 21 and invited relevant European sta with Caspian energy suppliers, “with securing firm commitments for the ion of the pipelines necessary for al zerbaijan is still the only EU-partner intents reaching the other Caspian ommission: Proposal for a Regulation of th he Council Concerning Measures to Safegu Repealing Directive 2004/67/EC, COM (2 p. 2-3. ission: Second Strategic Energy Review. idarity Action Plan, COM (2008) 781 final, 1. Russia; 3 2. Norway; 37.7 ia; 11.9 . Qatar; 5.2 5. Others; 6.7 113 lier was serioscow in reergy conflict ean Commister alia, the rames of straastern count of the EU’s ighest energy keholders to the joint obsupply of gas l stages of its for this proenergy giant, e European Parard Security of 009) 977 final, An EU Energy Brussels, 2008, 8.5 114 Turkmenistan. The strategy of the Southern Gas Corridor also targets long-term cooperation with resource-rich Iran “when political conditions permit”.23 The envisioned length of proposed SGC infrastructures will span over 3.500 km. The Corridor comprises three pipeline projects: the existing South Caucasus Pipeline (SCP),24 which runs across Azerbaijan and Georgia; the Trans Anatolian Pipeline (TANAP)25 will allow to deliver of over 10 billion cubic meters (bcm) natural gas per year across Turkey to the Turkish-Greek border to Kipoi, where it will be connected to the last infrastructure part, the 878 km long Trans Adriatic Pipeline (TAP)26. TAP will carry natural gas from the Shah Deniz II field in Azerbaijan across Greece, Albania and the Adriatic Sea to Southern Italy to Apulia region (Figure 2).27 The TANAP project was inaugurated in Eski ehir, Turkey on 12 June 2018 after $8.5 billion of investments, will ensure a delivery of 6 bcm natural gas per year to Turkey.28 The TAP pipeline is under construction and is expected to commence operations in 2020. 23 Ibid. 24 The SCP shareholding is comprised of BP (United Kingdom, 28.8%), AzSCP (Azerbaijan, 10%), TPAO (Turkey, 19%), Petronas (Malaysia, 15.5%), Lukoil (Russia, 10%), NICO (United States, 10%), SGC Midstream (Azerbaijan, 6.7%). 25 TANAP’s shareholders are Azeri state energy company Socar (51%), Turkish Botas (30%), BP (12%) und Socar Turkey (7%). 26 TAP shareholding is comprised of BP (20%), Socar (20%), Snam (Italy, 20%), Fluxys (Belgium, 19%), Enagas (Spain, 16%) and Axpo (Switzerland, 5%). 27 See Official Page of BP Azerbaijan: Operations and Projects, available at: https://www.bp.com/en_az/caspian/operationsprojects/Shahdeniz/SouthernCo rridor.html (4 February 2019). 28 See Gotev, Georgi: Three Presidents inaugurate TANAP-Pipeline in Turkey, in: Euractiv, 12 June 2018, available at: https://www.euractiv.com/section/en ergy/news/three-presidents-inaugurate-tanap-pipeline-in-turkey/ (4 January 2019). Figure 2: Southern G Source: Interfax Glo 3 Azerbaijan Southern G Being the first res fy energy dialogu involvement in th partner in the Eur infrastructural ind resources proved the beginning of t 2007), Azerbaijan cubic meters.29 A progressed and T the European Co 29 See British Petro 26. 30 See Trans Adriat atic Pipeline (T 2013, available h-deniz-consortiu -pipeline (7 Febr as Corridor bal Energy. as a substantial contributor to Euro as Corridor? ource-rich country in post-Soviet spa es with international companies wit e mid-1990s, Azerbaijan has becom opean Southern Gas Corridor. The co ependence from Russia alongside va to be an enticing prospect for the E he Southern Corridor’s development ’s natural gas reserves were estimate s the energy dialogue with Azerba AP was selected as a European exp mmission welcomed the negotiation leum: Statistical Review of World Energy, L ic Pipeline: Shah Deniz Consortium selected AP) as European Export Pipeline, Press R at: https://www.tap-ag.com/news-and-events m-selects-the-trans-adriatic-pipeline-tap-asuary 2019). 115 pe’s ce to intensihout Russian e an essential mbination of st natural gas U market. At stage (end of d at 1 trillion ijani partners ort pipeline,30 s as a “door ondon, 2018, p. the Trans Adrielease, 28 June /2013/06/28/sha european-export 116 opener for [a] direct link to [the] Caspian Sea”.31 Then Commission President José Manuel Barroso hailed it as a “success for Europe and a milestone in strengthening the energy security of [the] Union.”32 But the question remained whether the current Southern Gas Corridor infrastructure could guarantee energy security in the EU and emancipate it from its dependence on Russia? Unfortunately, there are a number of economic, technical and political explanations for why the key goal of this project cannot be fulfilled under the current infrastructural arrangements. In light of Azerbaijan’s current natural gas production and export capacities, the feasible volume available to transport between Turkey and Europe is not of strategic importance for enhancing energy security in the EU. At the end of 2017, production capacity hovered around 17.7 bcm while 10.6 bcm was consumed domestically.33 Per the existing contractual obligations to Ankara, Baku exported 6.3 bcm gas to Turkey in the same year.34 The rest was supplied to Georgia, although its imports are exepted to grow. Georgia received 265 mcm (12% of net consumption) of its natural gas from Russia in 2015 as a transit fee for the Russian-Armenian gas pipeline. Azerbaijan was Georgia’s main source of gas supply in 2015 and covered nearly 83% of its total gas demand. On 31 December 2016, the Russian gas distribution agreement expired. Gazprom proposed an end to the gas-for-transit compromise and the monetization of transit fees.35 Considering the new developments minimizing Russia’s share of Georgian gas consumption, Azerbaijan became the sole gas supplier for the country. According to Georgia’s energy balance for 2018, the country’s net gas demand was estimated at more than 2.6 bcm. Tbilisi had reached an agreement with SOCAR 31 European Commission: EU Commission welcomes Decision on Gas Pipeline: Door-Opener for Direct Link to Caspian Sea, Press Release, IP/ 13/623, 28 June 2013, available at: http://europa.eu/rapid/press-release_IP-13623_ en.htm (7 February 2019). 32 Ibid. 33 See British Petroleum: Statistical Review of World Energy, London 2018, pp. 28-29. 34 See ibid, p. 34. 35 See Georgia agrees with Gazprom’s New Transit Terms, in: Civil Georgia, 11 January 2017, available at: https://civil.ge/archives/126069 (1 May 2019). 117 in April 2018 to supply the country’s entire demand from Azerbaijani sources.36 Another relevant aspect in Azerbaijan’s future export capability is its declining production in recent years (2015: 18.8 bcm; 2017: 17.7 bcm).37 Accordingly, the high demands of the domestic market and the country’s present demographic developments pose major challenges to a sustainable energy balance. The Azerbaijani population has grown rapidly in recent years and is expected to surpass 10 million by the end of 2020, up from 9.8 million in 2017.38 Undeniably, the demographic dynamic will also impact consumption projections and export capacities. The current data indicates that gas supplies intended for Europe could be reduced to zero by 2020. Even with the successful exploration in the Shah Deniz II gas field, which shall ensure a further 10 bcm for the European market per year,39 there is the slight possibility that Azerbaijan can become a vital factor for European energy security. The importance of planed capacity will be minor for the European energy market with overall gas consumption at about 531.7 bcm per year (2017).40 Yet the current infrastructural route will benefit from the connection of Turkmenistan’s gas reserves to the SCP in Azerbaijan. With natural gas reserves containing 688 trillion cubic meters,41 Ashgabat can offer new perspectives for the energy cooperation with EU countries and strengthen the economic feasibility of the Southern Corridor. The Commission began negotiating the project in 201142 with an expected transport capacity of around 30 36 See Socar names Volume of Gas Export to Georgia, in: AzerNews, 10 April 2018, available at: https://www.azernews.az/oil_and_gas/130060.html (1May 2019). 37 See British Petroleum: Statistical Review of World Energy, London, 2018, p. 28. 38 See Trading Economics: Statistics. Azerbaijan’s Population, available at: https://trading economics.com/azerbaijan/population (7 February 2019). 39 See Official Page of BP Azerbaijan: Operations and Projects. Shah Deniz Stage 2, available at: https://www.bp.com/en_az/caspian/operationsprojects /Shahdeniz/SDstage2.html (8 February 2019). 40 See British Petroleum: Statistical Review of World Energy, London, 2018, p. 29. 41 See ibid, p. 26. 42 See EU to negotiate Trans-Caspian Pipeline, in: Euractiv, 12 September 2011, available at: https://www.euractiv.com/section/energy/news/eu-to-neg otiate-trans-caspian-pipeline/ (9 February 2019). 118 bcm43 which would significantly increase the Corridor’s competitiveness. However, the future infrastructural link across the Caspian Sea is unclear at this time. The division and access rights to Caspian resources between the littoral states is a matter of dispute: There is no consensus whether the Caspian Sea is actually a lake, an enclosed or a semi-enclosed sea. The determination of its legal status is necessary in order to clarify the sovereignty and ownership rights over Caspian fossil fuel sources.44 In summer 2018, the five Caspian countries reached an agreement to divide up the inland body of water and its potentially vast oil and gas resources. The pact signed at a summit meeting in Kazakhstan takes both approaches in a compromise, treating the surface as international water and dividing the seabed into territorial zones.45 However, this compromise will not open the door for an underwater Caspian pipeline. Dividing the seabed’s mineral wealth would require additional agreements and raises environmental concerns. Russia and Iran maintain that any pipeline built under the Caspian Sea will cause serious problems for the already-fragile ecosystem und have blocked the motion for almost three decades.46 Finally, the energy cooperation with Azerbaijan and Turkey faces serious political challenges for the EU and contradicts its goal to strengthen energy security by diversifying supply routes, in order to provide an appropriate response to external threats such as political manipulation by suppliers. The energy interdependence of countries where state power becomes more concentrated in the hands of one 43 See European Commission: Annex to the Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Implementation of the Trans- European Energy Networks in the Period 2007-2009, COM (2010) 505 final, Brussels, 2010, p. 34. 44 See Vinogradov, Sergei & Wouters, Patricia: The Caspian Sea. Current Legal Problems, in: Zeitschrift für ausländisches öffentliches Recht und Völkerrecht, Vol. 55, No. 2, 1995, pp. 604-623. 45 See President of Russia: Convention on the Legal Status of the Caspian See, 12 August 2018, Astana, available at: http://en.kremlin.ru/supplement/5328 (15 May 2019). 46 See Tarr, David G.: The Economic Impact of Export Restraints on Russian Natural Gas and Raw Timber, in: OECD (ed.): The Economic Impact of Export Restrictions on Raw Materials, OECD Trade Policy Studies, Paris, 2010, pp. 131-154, p. 138. 119 family (Azerbaijan)47 or one person (Turkey)48 can be exploited for political leverage. Combined with the significant dominance of Azerbaijan and Turkey’s energy companies in current projects (SCP – 45%; TANAP – 88%), this energy cooperation can be advantageous for relations with the EU. But due to serious political tensions in recent years, the contrasting geopolitical identities and unresolved issues between Ankara and the EU, the central role of Turkey as a transit country should be expected to produce new risks for Europe. 4 Iran and the Southern Gas Corridor According to the BP Statistical Review for 2017, Iran possesses the world’s second largest natural gas reserves after Russia with an estimated 33.2 trillion cubic meters of proven reserves.49 The production increase to 223.9 bcm per annum (2017)50 and the fact that nearly 62% of Iranian natural gas reserves have not been developed yet make the country an economically attractive partner. Iran has been an alluring supplier for the European energy mix.51 Thanks to its geographical proximity to Qatar and Iraq, Iran has been able to increase the geographical diversification of Europe’s gas supplies. Iran also has the potential to be a cost-effective export bridge to Central Asian natural gas reserves, particularly those in Turkmenistan, through the Turkmen-Iranian pipeline Dauletabad-Sarakhs- Khangiran. Thus, there was no doubt that the inclusion of Iran in the Southern Corridor would provide efficiency and bolster the economic viability of the project. However, the realization of this concept was prob- 47 See Freedom House: Nations in Transit 2018. Country report. Azerbaijan, available at: https://freedomhouse.org/report/nations-transit/2018/azerbaijan (9 February 2019). 48 See Freedom House: Nations in Transit 2018. Country report. Turkey, available at: https://freedomhouse.org/report/freedom-world/2018/turkey (9 April 2019). 49 See British Petroleum: Statistical Review of World Energy, London, 2018, p. 26. 50 See ibid, p. 28. 51 See European Commission: Green Paper. Toward a European Strategy for the Security of Energy Supply, COM (2000) 769 final, Brussels, 2000, pp. 44-45. 120 lematic and not free of geopolitical tensions. The Iranian route was ultimately avoided due to US sanctions,52 though the EU has struggled to define a coherent policy of its own. Brussels has criticized Iran’s unacceptable position regarding nuclear proliferation issues53 while at the same time continuing an open political dialogue with Teheran. The negotiations led by Britain, France and Germany with Iran in 2002-2003 were certainly limited and did not produce any meaningful cooperation frameworks.54 The conditions for a dialogue-oriented environment on energy issues became increasingly poor after the UN Security Council imposed restrictive measures in 2006/2007.55 Russia also influenced the fate of EU-Iranian energy diplomacy during this period. In May 2007, Vladimir Putin signed an agreement with Turkmenistan and Kazakhstan to improve the extensive Central Asia-Center pipeline system shipping Central Asian gas to Russia.56 In the run-up to the ongoing Turkmen-Iranian energy dialogue in the summer of 2009 which sought to increase the annual export capacity from Turkmenistan to northeastern Iranian consumers and construct the new Dauletabad pipeline,57 Gazprom offered a deal to buy 50 bcm of natural gas from Turkmenistan for European prices of about 240-250 USD per thousand cubic meters, approximately double the average 2008 price paid to Turkmenistan.58 Rus- 52 See United States Congress: Iran. Nonproliferation Act or 2000, Public Law 106-178, 14 March 2000; White House: H.R. 1954 – ILSA Extension Act of 2001, 25 June 2001. 53 See European Parliament: Resolution on Iran, P6_TA (2005) 0011, in: OJ (C) 247 E/159, 6 October 2005. 54 See Harnisch, Sebastian & Linden, Ruth: Iran and Nuclear Proliferation – Europe’s Slow-Burning Diplomatic Crisis, in: German Foreign Policy in Dialogue, Vol. 12, No. 17, 2005, pp. 44-54. 55 See United Nations Security Council: Resolution 1737 (2006) Adopted by the Security Council at its 5612th Meeting, 23 December 2006; Unites Nations Security Council: Resolution 1747 (2007) adopted by the Security Council at its 5647th meeting, 24 March 2007. 56 See International Energy Agency: Perspectives on Caspian Oil and Gas Development. Directorate of Global Energy Dialogue, IEA-Working Paper Series, No. 1, Paris, 2008, p. 18. 57 See Minasyan, 2016, p. 151. 58 See Price for Gas Supply from Turkmenistan to Russia will be 240-250 US- Dollar per Thousand Cubic Meters [Zena postavok gaza iz Turkmanii v Rossiju sostavit $240-250 za tisjachu kubov], in: RIA Nowosti, 23 December 2009, available at: https://ria.ru/20091223/200950245.html (1 May 2019). 121 sia intended to prevent Iran from acquiring control over Central Asian natural gas resources and providing a transport alternative to Russia’s monopoly in the Central Asian energy market. It remains indisputable that Russia profits from the international isolation of Iran and its exclusion from the European energy market since it solidifies Moscow’s position as the energy superpower in the European market. The deal reached between Iran and the six world-powers (EU3, United States, Russia, China) in 2013 “to curb the Iranian nuclear program in exchange for initial sanctions relief”59 precipitated a new dynamic in energy dialogues. The diplomatic efforts in 201560 reopened introduced new opportunities for Iranian talks regarding energy and transport issues. The intensive diplomatic exchanges61 led to the setting of a framework for institutional dialogue: “The two sides have […] expressed their intention to establish an Energy Business Forum that would bring together public institutions, regulators, manufacturers, operators and financial experts to analyze the prospects and facilitate investment in the hydrocarbons sector, as well as in the renewable and energy efficiency sectors and to create a favorable environment for companies wishing to invest in the energy sector of the Islamic Republic of Iran and the EU.”62 By emphasizing the significance of Iran’s energy potential for the European energy security, the European Parliament also called for European companies “to invest in the Iranian energy sector […], in particular […] in developing LNG technology in Iran”.63 59 EU hails Nuclear Deal with Iran, credits Ashton, in: Euractiv, 25 November 2013, available at: https://www.euractiv.com/section/global-europe/news/euhails-nuclear-deal-with-iran-credits-ashton/ (10 February 2019). 60 See Joint Comprehensive Plan of Action on Iran’s Nuclear Program, Vienna 14 July 2015. 61 See EU Officials to Visit Iran in February to develop Energy Ties, in: Euractiv, 18 January 2016, available at: https://www.euractiv.com/section/energy/ news/eu-officials-to-visit-iran-in-february-to-develop-energy-ties/ (1 May 2019). 62 Joint Statement on Energy, Teheran, 17 April 2016. 63 European Parliament: Resolution of 25 October 2016 on the EU Strategy towards Iran after the Nuclear Agreement, P8_TA (2016) 0402, in: OJ (C) 215/90, 19 June 2018. 122 The resumption of activities by various European energy companies in 2017 including Shell, Total and Eni also opened new perspectives for European energy security.64 The French energy giant Total was the first European corporation to show concrete interest in energy cooperation with Iran and acknowledged its intension to sign a multibillion dollar gas deal with Teheran in 2017 to develop South Pars (SP11), the world’s largest gas field.65 The project would have had a production capacity of 2 billion cubic feet per day including condensate. The produced gas was envisioned to supply first and foremost the Iranian domestic market starting in 2021. However, this cooperation never came to fruition. US Secretary of State Mike Pompeo announcement in May 2018 that the US planned to strengthen its military and economic pressure on Iran and its decision to withdraw from the Iran nuclear deal,66 which complicated the situation for European energy companies. A renewed imposition of restrictive measures would have negative repercussions for EU companies. Furthermore, the proposed sanctions would significantly decrease Iran’s ability to attract foreign investments in the energy industry. The EU attempted to persuade President Trump to uphold the 2015 agreement, but the White House has remained resolute.67 In response, the High Representative of the EU and foreign ministers of the EU3 declared they are “determined to protect European economic operators engaged in legitimate business with Iran.”68 Despite the US’ skepticism of the EU’s capacity 64 See Iran certifies 29 International Companies to bid for Oil, Gas Projects, in: Euractiv, 3 January 2017, available at: https://www.euractiv.com/section/ener gy/news/iran-certifies-29-international-companies-to-bid-for-oil-gas-projects/ (10 February 2019). 65 See Total: Iran: Total and NIOC sign Contract for the Development of Phase 11 of the Giant South Pars Gas Field, Press Release, 3 March 2017, available at: https://www.total.com/en/media/news/press-releases/iran-total-and-nioc-si gn-contract-development-phase-11-giant-south-pars-gas-field (10 May 2019). 66 See Dorell, Oren: Strongest Sanctions in History. U.S. demands big Changes in Iran, in: USA Today, 25 May 2018, available at: https://eu.usatoday.com/st ory/news/world/2018/05/21/mike-pompeo-iran-sanctions/628152002/ (1 February 2019). 67 See DiChristopher, Tom: Washington and Europe playing ‘Game of Chicken’ over Iran Nuclear Deal Sanctions, in: CNBC, 24 May 2018, available at: https://www.cnbc.com/2018/05/24/washington-and-europe-playinggame-of-chicken-over-iran-nuclear-deal.html (10 February 2018). 68 Rios, Beatriz: EU tries to Soften Impact of US Sanctions against Iran as they re-enter into Force, in: Euractiv, 7 August 2018, available at: https://www. 123 to act and its confidence that Washington will prevent attempts to evade sanctions,69 the EU launched a new trade mechanism for avoiding the sanctions in January 2019 that allows European companies to cooperate with Iran despite the embargo.70 At this stage, it is too premature to predict the possible impact of the Instrument in Support of Trade Exchanges (INTEX) on the energy dialogue with Iran because it focuses primarily on the sectors essential for internal Iranian requirements – such as pharmaceutical, medical and agricultural issues. However, in the context of the continuing Transatlantic rivalry, which has been provided through unilateral and ultimate policy favored by the Trump administration,71 this decision can be seen as a turning point in European foreign policy as the EU signals its readiness to pursue more capable and autonomous decisions. 5 Conclusion and recommendations The European Statistical Office Eurostat published the results of the data evaluation regarding the EU’s primary energy consumption, which determined an increased demand for the third consecutive year.72 Particular attention should be given in this context to natural gas. Immediately after this announcement, Miguel Arias Cañete, the EU’s Commissioner for Climate Action and Energy, emphasized the important role of natural gas for the energy transition, targeted euractiv.com/section/global-europe/news/eu-tries-to-soften-impact-of-us–san ctions-against-iran-as-they-re-enter-into-force/ (11 February 2019). 69 See US ‘disturbed and deeply disappointed’ by EU over Iran Sanctions, in: Euractiv, 26 September 2018, available at: https://www.euractiv.com/section /global-europe/news/us-disturbed-and-deeply-disappointed-by-eu-over-iransanctions/ (11 February 2019). 70 See Europeans open New Trade Channel to Iran, Bypassing US Sanctions, in: Euractiv, 1 February 2019, available at: https://www.euractiv.com/section /global-europe/news/europeans-open-new-trade-channel-to-iran-bypassing-us -sanctions/ (11 February 2019). 71 See Schwarz, Madeleine: The End of Atlanticism: has Trump killed the Ideology that won the Cold War, in: The Guardian, 4 September 2018, available at: https://www.theguardian.com/news/2018/sep/04/atlanticism-trump-id eology-cold-war-foreign-policy (12 February 2019). 72 See Eurostat: Energy Consumption in 2017, Press Release, 26/2019, 7 February 2019, available at: https://ec.europa.eu/eurostat/documents/2995521/9549 144/8-07022019-AP-EN.pdf/4a5fe0b1-c20f-46f0-8184-e82b694ad492 (11 March 2019). 124 by Europe.73 Due to the size of the EU economy and the lack of indigenous gas resources, import supplies continue to be a strategic challenge for European foreign policy and require diplomatic efforts to maintain a balance with energy-relevant countries and diminish any external risks, which can arise from political confrontation with supplier and transit countries. Enhancing energy security and improving the supply diversification remain fundamental objectives for the EU. Over the last two decades, the EU has tried to shape an energy dialogue with Caspian resource-rich countries to diversify its energy import portfolio. The results have been disappointing: Azerbaijan is the only partner who can potentially supply gas, but the country has a slim chance to become a vital player for the European energy mix because of its limited natural gas reserves. The planned transport volume of 10 bcm will also not reduce the EU’s dependency on Russian exports. The EU would undoubtedly benefit from Iran’s involvement in the Southern Gas Corridor. Due to its enormous resource potential and geographic position, it could become a substantial supplier for the European energy market. However, the realization of an EU-Iranian energy dialogue faces serious challenges. Brussels needs to reshape its regional strategy for Caspian states and define a more independent policy on Iran. European goals and interests must be clear and protect diplomatic achievements as well as maintain the EU’s mediatory role in the West’s dialogue with Iran. Moreover, the elaboration of a favorable legal and contractual regime is a necessary condition for energy cooperation with Teheran. INTEX could generate positive trend but such an outcome would require more time. In order to ensure a true diversification of supply routes and a reduction of energy dependence on critical neighbors, it is in the interest of the EU to examine the possibilities of an Iranian-Armenian import route to transport Iranian gas to EU member states on the Black Sea via Georgia. The project was the subject of an intensive discussion within the European Neighborhood Policy. However, the 73 See Simon, Frédéric: Cañete sees Gas as ‘a Bridge’ to reach EU’s Clean Energy Goals, in: Euractiv, 11 February 2019, available at: https://www.euracti v.com/section/climate-strategy-2050/news/canete-sees-gas-as-a-bridge-to-rea ch-eus-clean-energy-goals/ (12 February 2019). 125 pipeline posed a threat to Russian hegemony because it would enable Yerevan to decrease its dependence on Russian gas imports and undermine Moscow’s political leverage, weakening Russian influence in the South Caucasus and its transport monopoly in the Caspian region. Gazprom bought the Armenian-Iranian pipeline in 2006 precisely to limit Iran’s capacity to export gas to Armenia. A reduction of more than 75% of the pipeline’s capacity at any given pressure effectively blocked Armenia from importing Iranian natural gas.74 Yet the Armenian government never demonstrated any assertiveness. Recent political developments in the country75 and Yerevan’s readiness to act as a platform for closer economic ties between Iran and Eurasian Economic Union (EEA)76 could create new avenues for energy cooperation in the region, with implications for the EU. Proceeding with the cooperation would allow Armenia to diminish Russian influence in its energy sector and open new transport perspectives for the Caspian Basin. 74 See Minasyan, 2016, pp. 247-250. 75 See Minasyan, Shushanik: The Velvet Revolution – A new Path for Armenia, in: Hilz, Wolfram & Minasyan, Shushanik (eds.): Armenian Developments. Perspectives of Democratization and the Role of the Civil Society, Baden- Baden, 2019, pp. 119-132. 76 See Armenia ready to Act as Platform for Closer EU-Iran Economic Relations, in: Financial Tribune, 22 October 2018, available at: https://financialtri bune.com/articles/economy-domestic-economy/94637/armenia-ready-to-actas-platform-for-closer-eeu-iran (12 February 2019).

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Abstract

After two decades of rather moderate interest in European energy issues, the awareness for this policy area began to grow again in the early 21st century. This is due to several changes in the energy market. Firstly, the great powers increasingly compete for access to energy resources. Secondly, the second biggest exporter of energy resources, Russia, started to develop its energy diplomacy by trying to transform resource wealth into political power. After several gas crises in Ukraine, the effectiveness of Russia’s “energy weapon” became only too clear. Finally, the impact of climate change on energy policy became a current topic in international politics, since the energy sector is the largest producer of greenhouse gases. The European Union as organization and international player has significantly gained importance in the field of energy policy. At first, it concentrated on creating a single market for energy goods and services, but subsequently became an important player on the international energy market: building institutions, promoting norms and transforming into a “realist” actor interested in improving its own energy security. Today, the EU’s climate policy strongly affects its energy policy, driving a transformation from fossil fuels to renewables. The goal of this volume is to contribute to the ongoing discussion on energy in international relations by covering different aspects of energy policy in Europe. The analysis focuses on the national perspectives of three EU members – Germany, France and Poland – as well as on the perspective of the EU. Mit Beiträgen von Hubertus Bardt, Florian Engels, Wolfram Hilz, Timo Karl, Shushanik Minasyan, Maciej Ras, Rafał Ulatowski