Energy developments in South Eastern Europe

Posted in Europe | 13-Feb-07 | Author: Ioannis Michaletos

Representatives from Greece, Russia and Bulgaria on Wednesday 7th of February took yet another step towards finalizing a long-expected agreement to construct and operate an oil pipeline linking the western Black Sea coast with the northeastern Aegean — a route bypassing the increasingly congested Bosporus straits.

The Greek side was represented by the Ministry of Industry & Development who initiated the draft agreement in the Bulgarian Black Sea port of Burgas from where the pipeline will begin before running overland and concluding at the North East Greek port of Alexandroupoli.

The above agreement is one of the main ones as far as energy security is concerned in the Balkan region. The original concept for the Burgas-Alexandroupoli pipeline was formed some 16 years ago, just as the old USSR was beginning to disintegrate and the globalization process was accelerating economic growth in East Asian countries and most notably China. Greece, Bulgaria and Russia have already signed a series of lesser political agreements for the cross-border pipeline, with the last one in September 2006. At the time the project was budgeted at approximately 700 million euros. The 285-kilometre pipeline will carry Russian oil from Burgas in Bulgaria to Alexandroupoli in northern Greece and has an estimated investment cost of 750-800 million US dollars with an annual capacity of 35 million tons of oil initially, reaching to a maximum of 50 million tons.

When the pipeline will be operational, around late 2011 it will engage in a geo-economic sense the Central Asian oil producing states and the Aegean Sea. Moreover for the first time in Greek and Bulgarian history both countries will become members of the world wide petroleum industry, without having of course their own oil fields, but as important trespassing gateways for the commodity. Furthermore the congestion in the chock point of the Bosporus Straights has reached unbearable levels and that resulted to increased costs, as well as, raised security issues concerning the safe passage of commercial vessels from this Black Sea entrance to the Aegean. Already Russia and Kazakhstan have a producing capacity of 180 million tons, whilst the Bosporus Straights cannot absorb traffic in excess of 130 million tons. Hence for purely practical reasons it was important for all interesting parties to construct a by-passing route that could be done relatively inexpensively and in a short period of time.

Russia from its point of view is mostly interested in having multiple exit points for its oil exports and not being depended in one state; no less for reasons that are correlated with the Realpolitik. For the time being according to all available information 51% of the pipeline will be under Russian share, even though there are various indications of the entrance of the American Chevron and the Kazakh KazMunaigazk as shareholders, since their product coming from the Tengiz oil field will be mostly flowing through the pipeline. The Russian oil companies that will actually control the whole project are Transneft, Rosneft and Gazprom Neft. All three of them are vital for the overall 21st century strategy by the Kremlin that dictates a kind of state capitalism based on the combination of the vast mineral wealth, military might and strong state security services of modern Russia.

Over the past 16 years despite the various efforts from oil conglomerates and individual statesmen the ongoing tripartite negotiation- Greece-Bulgaria-Russia- seemed to be dragging on without a viable time frame. The main reason was the antagonist forces between the three states on who is going to have the lion’s share in the project. Also the USA Administration was eager to develop the Baku –Cheichan pipeline first and was very much worried around the consequences of having to deal with a Russian controlled pipeline before Bulgaria entered NATO and the EU. As soon as the latter and former became concrete realities, the pipeline project moved on from being a “pipe dream” and according to most pundits it will be finalized by 2011 and it will be ready to reach its maximum capacity of 50 million tons by early 2013.

Continuing, South Eastern Europe has now its fair share of large energy & pipeline schemes that when and if all completed, will certainly upgrade the overall importance of the region. Therefore the AMBO proposed pipeline –From Bulgarian Black Sea to the Albanian Adriatic shore-, the Kostanja- Trieste passing from Rumania, Serbia, Croatia and reaching to Italy; will form the new energy complex carrying the precious “Black gold” from the CIS to the EU and possible to the large importers from Asia.

The future energy strategy in S.E Europe most surely affects long standing geopolitical realities in the region and quite possibly creates new issues to deal within the coming years. Firstly, Russia has accomplished its task in securing to an extent its export base in the Balkans and that may in the future relate to a further interest of that Eurasian entity in establishing more its presence in the area. Continuing, Turkey sees its role somewhat downgraded, because it looses its lead as the sole transit path for the Russian and Central Asian oil flowing to the Mediterranean Sea. On the other hand Greece and Bulgaria become passage points and in relation to other natural gas projects of the same magnitude, they further enchase their position in the European energy security structure. The European Union member states view positively the whole affair that increases the pluralistic model of energy transfer and might in the future ease tensions due to political and social strife that may object the oil flow. In simple terms the more the merrier when it comes to importing countries safeguarding their interests and hoping for continuous energy flow.

USA from its point of view has achieved one of its goals which was the existence of multiple exit routes of the Eurasian oil in order to check the oil prices and being able to diversify oil trade, especially in areas that are strategically aimed towards the West either through NATO the EU and their individual bilateral agreements. That of course doesn’t mean that Washington doesn’t keep a close eye to any future developments concerning Russia’s plan for the “South”. Since the late 18th Century one of the main concerns of all international capitals was the all-timely “Eastern Question”. It meant the advancement by Russia towards the “Hot waters” of the Mediterranean in order to facilitate the exit from its continental isolation, and the subsequent effort by the Maritime powers-UK then-USA now- to obstruct such a move. Over the coming years due to energy considerations the Eastern question will sensationalize headlines in our multipolar global environment that is becoming less predictable, and far more interconnected than any other recorded in human history.

Sources & Further readings:

On Burgas-Alexandroupoli pipeline

1) http://en.wikipedia.org/wiki/Burgas-Alexandroupoli_pipeline
2) http://www.tmcnet.com/usubmit/2007/02/02/2307938.htm
3) http://www.robertamsterdam.com/2006/11/wsj_russia_looks_to_overtake_t.htm
4) http://www.mosnews.com/money/2005/04/07/balkanpipeline.shtml
5) http://www.setimes.com/cocoon/setimes/xhtml/en_GB/newsbriefs/setimes/newsbriefs/2007/01/29/nb-08
6) http://www.birn.eu.com/en/59/10/1646/
7) http://acturca.wordpress.com/2007/02/08/russia-grabs-lions-share-in-bourgas-alexandroupolis-oil-pipeline-project/

On energy projects in S.E Europe

1) http://www.bankwatch.org/balkan_energy/
2) http://www.balkanalysis.com/2006/11/02/greek-energy-diplomacy-and-future-balkan-oil-pipelines/
3) http://www.worldpoliticswatch.com/article.aspx?id=212
4) http://www.sofiaecho.com/article/macedonia-albania-and-bulgaria-sign-balkan-pipeline-agreement/id_20265/catid_67
5) http://www.gasandoil.com/goc/news/nte64945.htm
6) http://www.ekonomist.co.yu/en/magazin/perspectives/0502/sopt/oil.htm
7) http://english.ohmynews.com/articleview/article_view.asp?menu=c10400&no=322878&rel_no=1

Ioannis Michaletos is WSN Editor South East Europe.

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