The Balkans - rising antagonism and energy problems

Posted in Energy Security , Other | 25-Aug-07 | Author: Ioannis Michaletos

"Which role should the Balkans play in 21st century ?"
"Which role should the Balkans play in 21st century ?"
A mark of our age is the interconnectivity of the political, social and economic global units, based on the expanding networks of telecommunications, transportation and in the case of the current article, energy. The future of the Balkans and the developments to occur in issues such as Kosovo, strongly depend on the emerging landscape shaped by the antagonisms of the stronger nations and based on the effective control of energy routes. These include oil and natural gas pipelines and the electricity networks between the states of that region. It has to be noted though, that politics and business sometimes might differentiate, which further complicates any assessment, especially in a traditionally turbulent region such as the Balkans.

Kosovo's Energy Outlook

It would be constructive to present the economic aspects of the Kosovo issue- a major theme of the present day Balkans- and how international politics and capital mix and influence one another. In late 2006, the Kosovo authority announced the initiation of an international competition regarding the privatization of the energy sector of the province. This includes the creation of a new power station with an estimated dynamic of 2,100 MW, the innovation of an older facility and establishing a lignite production station that will supply the aforementioned power facilities. The total estimated business plan would cost approximately 3 billion euros, and a substantial amount would be compensated by the future high energy demand of Kosovo and the ability to export electricity to Albania, Montenegro and possibly Bosnia-Herzegovina, another three small nations with rising energy needs. The energy market at stake on this privatization is of around 10 million people as the European Union Mission in Kosovo has reported and made numerous briefings on the aforementioned issue.

Regardless of the legality of the privatization initiative, since the province is still under Serbian sovereign rule under UN Resolution 1244, it is important to note that the competitors for the energy investment in Kosovo come from countries that enjoy more or less cordial relations with the US, such as the Czech Republic, Italy, Germany, Greece, and of course American companies. Russian or French companies were not present and the winner will certainly follow the existing policy of the US, meaning that it will pursue energy plans according to the planning made by the administration in Washington. Again it has to be stressed that as long as there is no definite solution in the status of the Kosovo province, there cannot be a definite outcome in the energy affairs as they need a stable political climate to unfold their projects and offer long-term viable business plans for the corporations involved.

Moreover, the energy sector development potential is based on Kosovo's enviable reserves of lignite, which are estimated at around 12 billion tonnes. The lignite reserves can be exploited in surface mines, thus providing a very cheap source of energy for thermo-electric power plants. At an exploitation cost of 1, 1 euro/GJ of energy, Kosovo's coal is definitely the most economical in the region. Investments in the energy and mining sectors are highly profitable and will make Kosovo a significant regional energy supplier, as concluded by the US State Department in a briefing last year. Kosovo now has two thermal power-producing blocks, "Kosovo A" and "Kosovo B," built between 1960 and 1984, with respective capacities of 800 MW and 678 MW. Currently their combined output cannot exceed 640 MW, due to physical deterioration.

The existing reserves of coal would enable the expansion of the generating capacity by up to an additional 2,000 MW. This would require investments in opening new coalmines. Lignite is currently mined at two locations in the vicinity of the power plants (Mirash and Bardh mines). These two mines have largely been exploited and new mines will have to be opened to provide adequate coal supply for the existing as well as the possible new power plants. With adequate investments, lignite mining will again become a large and profitable business in Kosovo and the Balkan Investigative Report Network assumes bright prospects for Kosovo's energy future, when and if the reconstruction of the existing power units takes place.

External Factors: Russia, Germany and France

"Russia continues to pursue its goal of becoming Europe's energy supply power house"
"Russia continues to pursue its goal of becoming Europe's energy supply power house"
Since Putin became president of Russia, Russia has proved to be an apt player in the economic game that is being unfolded through the construction of a variety of pipelines transferring hydrocarbon from East to West. Nowadays, at least 25% of the European Union’s energy needs in natural gas and oil are being met by Russia and in some cases such as Slovenia, the percentage reaches 60% (Gas) or even 100% for Romania and Slovakia. Moreover, the projector for the next generation is negative for the EU since its energy dependency levels will increase from 76% (Oil) to 93% in 2030 as the European Parliament Report revealed in its research on EU energy dependency rates. If one also includes the political perils concerning imports from the Middle East and the proximity of the Russian market, then the influence of the latter seems to be attractive, at least for the short and middle term.

EU-Russia relations are inexorably related to the Balkans, because of their importance as a hub from which energy projects are going to facilitate the transport of energy. Furthermore, the fragile political conditions that the Balkan states are experiencing will always prove to be a trigger box for the European states that so far have failed to address the regional conflicts properly, meaning peacefully. It is essential to draw the attention to the reader that the whole of the Southeastern European area contains multiple international missions, heavily militarized zones and is also one of the main networks for traversing narcotics and illegal immigrants from East to West. Therefore, the amalgamation of energy security considerations and the other forms of security nowadays truly preserves a unique placement for the region for years to come. This of course includes the great attention of all nations that have international interests or aspire to expand their influence further.

The Kosovo negotiations and the diplomatic marathon that has begun have focused on the resolution around this province of Serbia. It seems to be heading toward endless talks unless the Albanian side decides to negotiate with Belgrade on the fate of Kosovo based upon the protection of national sovereignty, which is after all the cornerstone of the United Nations principles and the sine qua non for the peaceful existence of all nationalities in present-day Southeastern Europe. What attracts interest so far is the formation of diverging interests between the major power units affecting politics in the Balkans and consequently the underlying importance of the energy factor in the tactics used by the aforementioned.

First of all, the new President of the French Republic, Nicola Sarkozy, drifted considerably from the previous Chirac administration regarding France’s Balkan policy. In the recent G-8 meeting, Sarkozy proposed several months’ delay on a Kosovo resolution, without of course providing any concrete assurance for a final positive stance of France on the Albanian demands for independence. For the time being it seems as if France wants to buy time so as to better place itself in the changing Balkan scenery, predicting – as it is going to be examined below – the relative decline of the American influence and the rise of German and Russian influence in the region. Also, France experienced a significant political change with the recent ascendancy of Sarkozy to the presidency, and no one can exclude a dramatic change to French policy and a re-examination of its global priorities. For the moment it is best to conclude that Paris is slowly beginning to acquire a role in the Balkan geopolitical landscape.

Secondly, the “Ahtisaari affair,” relating to the revelations about an alleged bribe of the Ex-Finnish President by the Kosovo-Albanian organized crime has caused a stir in the Balkans, not just for the probability of the verity of the accusations, but also speculation about a possible United Nations cooperation in the whole affair. Supposedly the German Federal Intelligence Agency (BND) headed by one of its chief operatives in the Balkans leaked to the Bosnian journal "Focus" the information about Ahtisaari. The UN envoy responded to the accusations 6 full days afterwards as it was reported in the Finnish press, by calling them “rubbish,” although he didn’t mention the bare facts and most importantly he hasn’t asked for judicial protection or even pressed charges against the individuals accusing him of being corrupt. The latest reports from Finland indicate a call for Ahtisaari to withdraw from public office and the consequent end of his mediation role in Kosovo. Moreover, for the time being no official or unofficial statement exists from international bodies, and one has to take into account the detailed report by the BND in mid-2006 about Albanian organized crime activities in the Balkans and Kosovo. This report severely damaged the reputation of the Albanian side while it was negotiating with the Serbians and the international community. This report was also leaked to the German newspaper "Berliner Zeitung." Furthermore, additional German troops are heading to Kosovo after a decision by Berlin that anticipates troubles in the province due to Albanian resentment for the fading hopes of independence, Deutsche Welle confirmed a few weeks ago. On the other hand, high-level German diplomats and politicians occasionally make remarks favoring the independence of Kosovo, thus appeasing the sentiment of the Albanian people. Two things can be assessed concerning the German tactic in the region. Germany wants to maintain links with all sides, and most importantly it has already reached unofficially a modus vivendi with Moscow on certain regional affairs. The latter would include Berlin acting as the main EU voice in the Balkan region and the ability to get in touch with Moscow much easier than Paris or even London.

Russian Energy Expansionism: Common Interests & Differences

"Lignite mining will again become a large and profitable business in Kosovo"
"Lignite mining will again become a large and profitable business in Kosovo"
Russia from its point of view continues to pursue its goal of becoming Europe’s energy supply powerhouse and the Balkans seems to be the perfect terrain for laying down the basis for this. Of course, energy is only one aspect of Moscow's desire to ultimately regain as much as possible the geopolitical space that it has abandoned since 1991.

A few days ago, another grand deal was signed between Athens, Sofia, Rome and Moscow, relating to the creation of a massive pipeline transferring natural gas from the Burgas Port to northern Greece and up to southern Italy, named “South Stream.” The pipeline will have a total length of some 3,200 km and it will be pumped with approximately 30 billion cubic meters of gas each year from the Russian reservoirs, the Eurasian Daily Monitor service of the Jamestown Foundation reported.

Moreover, the total cost will exceed 10 billion USD and it is interesting to note that it will negatively affect Turkey and Iran. Turkey will be affected because the proposed pipelines will bypass its territory, thus degrading to an extent its role in the regional energy politics. Teheran will also suffer from a partial exclusion from the European market that will be tapped for the time being by Russia. In addition, Italian options for Russian gas imports and in general the European common energy policy is heading toward the final stage, after similar moves by Germany as well.

The pipeline will traverse sub-water the Black Sea and end in the Burgas Port in Bulgaria. Afterwards, it will split most probably into two parts: One heading towards Southern Austria or Northern Italy and the other one passing through Greece and terminating in the Otrando Port in southern Italy, just opposite the island of Corfu. This massive project will be commenced in late 2009 and will be financed by the Italian ENI Corporation and the Russian energy giant, Gazprom.

Over the past 4 months, another two important deals were reached concerning energy routes in the Balkans. Primarily, the Burgas-Alexandroupoli pipeline transferring oil from Burgas in Bulgaria to the Aegean Greek port of Alexandroupoli and with a 51% Russian stake. Also the initial agreement was reached for the Constanja-Trieste pipeline that will connect the Black Sea with the Adriatic via the central Balkans. Lastly, the Turkish-Greek-Italian natural gas pipeline will support the exportation of Azeri energy to the West, again through the Balkan terrain.

From all the above schemes, only the last one has the full support of the United States, whilst the rest have - for the moment - the tacit disapproval of Washington. This can be explained by the persistence the US has followed in securing the interests of the Albanian side in the Balkans – or simply not planning forward, thus disengaging itself from the regional culminations. The assessment of the American policy of the past decade was initially drawn on the fact that Russia is weak and Europe not willing to invest political capital in the Balkans. On the contrary, the modern political climate favors Russian expansionism whereas the main European actors, and most importantly Germany, seek energy sources and new markets in order to survive the very competitive global arena as it is being shaped by globalization, as well as the emergence of the giants of the East (China & India) and the unpredictable Arab-Islamic world.

The American Strategic Option

Since the political strategy of the 1990s is effectively discredited, US foreign policy experts are in the sensitive position of reshaping their aims without at the same time being seen as blaming themselves for the mistakes made, regardless of the administration in charge. In simple terms, the US faces an antagonism in a region it invested in heavily in political, diplomatic and military terms. The possibility of an American radical change in its Balkan policy should be excluded since large nations never admit past mistakes for reasons relating to their international prestige and posture. Therefore, an engagement with Russia in relation to the Balkans, energy routes and Kosovo should come in hand gradually and certainly after careful considerations of possible tradeoffs and negotiations between Washington and Moscow. The meeting between Presidents Bush and Putin in Maine on July 1-2 revealed a sense of agreement regarding the Iranian nuclear issue and could prove to be a critical stage for the implementation of a paradigm shift in the American policy and in the locality of the Balkans in particular. Lastly, it is interesting to note a contradiction of US foreign policy in a peripheral affair. As far as Kosovo is concerned, Washington supports independence, along with Teheran and many other Islamic states that seek to benefit from the creation of stronger bonds between the newly-created mini-state in the Balkans, which is strongly influenced by "Islamic charities" and organizations aimed at exporting Sunni Wahhabist or fundamentalist Shia ideologies. On the other hand, the US is trying to curb Iranian influence in the Middle East (i.e. Lebanon), even though this is a far more difficult task.

"The EU has to play a fundamental role"
"The EU has to play a fundamental role"
The strategic aim of the United States is to retain – at least – its influence in the Eurasia and the Balkans are an integral strategic field for this. The importance of the region is vast in comparison to its population, due to its use as a hub for the energy needs of the West as well as Russian ambitions. Moreover, the proximity of the Balkans to the Middle East and North Africa reserves a truly unique placement for the Balkans in the strategic considerations of the global power-architecture cores in London, Washington, Moscow, Paris, Berlin and Beijing increasingly. The coming months will reveal more of the intrigues involved, and most importantly the winners and the losers of the energy game of the 21st Century.

In general, for the time being the situation of the state of Balkan affairs is more in flux than even since the beginning of the Rambouillet negotiations in late 1998, and there are numerous scenarios that could unfold depending on the extent of the Russian ambitions, the willingness of the US to negotiate or manipulate developments and the ability of the Europeans to exert influence in between. Last but not least, the other non-state actors such as the organized crime syndicates, the Islamic terrorist groups and the plethora of international NGOs will also be assessing the situation since their vital interests depend upon a final “Balkan solution,” albeit differently for each one of them, in their own unique way.

Balkan Prospects and Practical Steps

It is seems that the Balkans are entering into a classic era of antagonism between the "Great powers," as if history never forgets to repeat itself, so as to provide concrete lessons to the younger generations as well. The region is in need of a large, thorough and conclusive series of agreements between the stakeholders, i.e. the Balkan countries and the global powers that have vital interests in there.

  • A series of high-level roundtables, between diplomats on all sides should commence in order to assess the situation and propose solutions that will aim to compromise the antithetical interests of most parties. It should not only be targeted for the Kosovo issue, which is a part of the wider "Balkan architecture" relating to the European energy security and beyond.
  • The heads of states in the region should aim to interconnect further their power infrastructures, albeit after a modernization scheme that could be provided by the EU in most respects.
  • The American and Russian presidents should be encouraged by the international community to engage further in issues concerning the European continent and the Balkan locale in particular. An American-Russian confrontation would not be a positive development and would quickly result in political instability and conflicts in the already fragile Balkan political scene.
  • The EU should quickly take over all responsibilities of the UN in the region. The United Nations has not been an adequate international force to deal with the explosive problems in the Balkans. A European-led initiative in a political, economic, diplomatic and cultural level is perhaps the only alternative for the Balkan people, and a viable solution for the Kosovo issue.
  • The spread of multiple oil and natural gas pipelines traversing the Balkans should be encouraged, so as to offer a pluralistic environment concerning European energy security considerations. In parallel, importation of energy commodities from states not under the Russian aegis should be assisted in order to balance imports and secure alternatives.
  • The respect for territorial integrity should be viewed as an integral part of stability in the Balkans and in Europe. With regard to Kosovo, there could be many legal and political options under which the rights of the majority and minority could be respected without the need for redrawing maps. The EU again is to play a fundamental role in this.
  • Lastly, there should be a serious public debate - in Europe at least- as to what role the Balkans should play in the 21st Century. Judging by the geopolitical proximity to the Middle East and North Africa, it might be wise to consider them as both a forefront and a gateway to Europe in the Muslim world. This surely needs to be taken into consideration regarding the long-term prospects of Western-Islamic relations, along with how the Balkans could both became a model for coexistence and a region that could offer protection in times of crises or dramatic upturns.