A conference on the Nabucco gas pipeline project attended by the partners involved was held on 14th and 15th September in Budapest. Apart from the main representatives of companies, which are the members of the consortium composed of OMV, MOL, Transgas, Bulgargaz and Botas, among those who attended the conference were also the European Commissioner for Energy Andris Piebalgs, the Hungarian Prime Minister Ferenc Gyurcsany, the Hungarian Economy Minister Janos Koka and the Azerbaijan Minister for Energy and Industry Natig Aliyev. The President Nicolas Sarkozy of France, who was paying an official visit to Hungary in the same time, took a stand on the project as well.

Nowadays, the EU is been importing gas from three sources, namely, the North Sea, Russia and Northern Africa. The remaining sources, which are not accessible through pipeline yet, are the Caspian area and the Middle East. It is exactly these territories that the Nabucco projects covers. It is of much greater importance than, for instance, the Nord Stream project which doesn’t increase the energy security of the EU. It is important because it doesn’t divide the current supplies, but it makes available a new source with enormous potential.

All parties involved used the opportunity to present their attitudes. The Hungarian party confirmed its vested interest in the construction of gas pipeline and dispelled, at least temporarily, the fears of preferring the Russian alternative of the Blue Stream pipeline extension to the country. According to the Economy Minister it was a mistake to perceive Nabucco a dream (1) and according to the Prime Minister it would be an error to remain dependent solely on a single supplier. (2)

The Commissioner for Energy designated the former Dutch Foreign Affairs Minister Jozias van Aarsten the project coordinator. In this way he has highlighted the project’s priority and value. (3)

The construction consortium is comprised of five members and is in quest for yet another one. This will have to fulfil the following criteria: it must be of West European origin, possess financial strength and, moreover, it must be a significant consumer.

Particularly the clarification of Hungarian position along with the inclination to the Nabucco project was an impetus to set up the conference. The Russian agreement with Austria, which omitted Hungary, as well as the decision to make its neighbour a distribution centre are behind the shift in Hungary’s attitude. At first, the Kremlin offered this position to Hungary in exchange for its inclination to the Blue Stream gas pipeline extension to Europe. (4) In March 2007, the strategy was considered successful when the Hungarian Prime Minister deemed Nabucco a dream and the Russian gas pipeline a real plan. Thus Hungary was put in an unenviable situation when it found itself under the pressure from the side of the EU as well as the US that wanted Hungary to alter its stance.

Following the Russian President Putin’s visit to Vienna in May, the situation changed and the distribution centre for Russian gas was supposed to be built in the Austrian Baumgarten. There were already gas tanks, originally intended for Central Asian gas, in Baumgarten. Hungary became aware of its situation and arranged a conference at which it confirmed its interest in the construction of the Nabucco gas pipeline.(5) The struggle of OMV, the initiator of the Nabucco project, to take over another consortium member MOL, contributed to shape of Hungary’s stance. The EU didn’t comment the official efforts of OMV since it was a private company. Nevertheless, Nabucco has remained its priority and the interests of singular countries are supposed to be subordinated to its construction. At the same time private companies, united in the Nabucco consortium, will participate in the construction of the gas pipeline. This fact limits the EU’s influence on political support.

The next project partner will be decided on in the course of following months, namely, by the end of October 2007 according to the Financial Times (6). The reason is the project’s financial situation which still hasn’t been agreed on by the subjects involved. In 2006, the French company Total negotiated the entry into the project. It wasn’t successful in the end. At present, primarily Gaz de France (GdF) and the German RWE come into account. The French company has been negotiating its participation recently. It confirmed its interest at the conference and was also supported by the French President. Originally it was interested in becoming a Nord Stream construction consortium member in order to confirm the fact that the project was not a German on but a European one (7). Lastly, the Dutch company Gasunie was asked to join it. (8). In order to prevent the country from omission in terms of the construction of new gas pipelines, it entered into a dialogue on the collaboration in Nabucco. However, this change doesn’t necessarily mean that GdF is interested in diversification which is the case of Nord Stream. France wants to be more active in the Caspian region and the participation in the project is a good opportunity.

A bottleneck occurred during the endorsement of the project entry, because Turkey, as a consortium member, expressed it discontent. Turkey justified the freezing of entry talks by a law which defined the murdering of Armenians dated back to the Ottoman Empire as genocide and which the French parliament had been about to adopt. (9) France is against the commencement of EU-entry talks as well. Further decision was delayed owing to elections in France as well as Turkey and it was not until the course of conference that the GdF representative Jean-Marie Dauger proclaimed the ongoing interest in project participation.

Turkey has begun to realise its strengthening position of a transit country of energy bearers to Europe and wants to turn it into account adequately. It has clearly shown that unless the EU-entry talks begin, the EU cannot rely on it. Energy is a powerful political as well as economic ground for country admission. However, among the states which disapprove of it and have at the same time the largest Turkish communities living in are Germany and France, i.e. the most powerful EU member states. (10) From the long-term point of view, a too strong position of a country as far as the supply of the EU is concerned wouldn’t be advantageous for the union.

Also the German concern RWE Gas Midstream has shown through Stefan Judisch, the Head of the Board of Directors, interest in joining the consortium and investing one billion EURO.

Turkey, however, is under the Russian Federation’s pressure. Nowadays, the country is dependent on Gazprom and its supplies. This is a situation Turkey would like to change. After the EU had started to deal with the Nabucco project more intensively after the dispute between Russia and Ukraine in January 2006, the Kremlin offered Turkey the possibility to extend the Blue Stream gas pipeline via Greece to Europe. In June 2007, however, Gazprom also signed an agreement with the Italian ENI company on the South Stream project, which was a gas pipeline supposed to lead underneath the Black Sea across Bulgaria to Italy. South Stream might be a political response to several impetuses, because according to estimates, its construction would be inadequately costly. On the one hand some European countries are alarmed by the strengthening position of Turkey as a transit country. On the other hand the extension of Blue Stream and the construction of Nabucco aren’t feasible now and if Turkey prefers the European priority, there would be yet another option for Kremlin to sabotage Nabucco, namely, Bulgaria.

It is exactly Bulgaria that has been taken into consideration as another Nabucco project participant. The South Stream line would lead through its territory. The realisation of the Russian proposal would yield significant profit due to transit and the gas prices would be easily negotiable.

To what extent is the Nabucco capacity exploitable remains a question. Azerbaijan promised that it will be able to secure sources from the Shah-Deniz field for the first stage of the project. Anyway, there are further suppliers to gain in order to secure further sources. Iran and Turkmenistan are among potential countries. There are, however, persistent US sanctions implemented on Iran and its nuclear programme which impede possible investments in the country as well as a contract concerning the supplies. In spite of this the US doesn’t support Nabucco as a project increasing the energy security of its ally. Nevertheless, they are for the Caspian gas, not the Iran one. (11) In May 2007, Turkmenistan signed preliminary contracts with the Russian Federation on the export of its raw materials through its territory. The Kremlin wants to ensure that there will be no sources left for an effective exploitation of the Nabucco capacity and that Caspian raw materials will remain under its control.  It was the firm decision in favour of Nabucco that has been the primary Turkmen objection against an additional trans-Caspian connection so far. The countries involved in the Nabucco project haven’t enough influence to change the attitude of the Central Asian country. The initiative of the top EU and US representatives, that would define the project as pivotal, is also required. According to Hungarian Economy Minister the project should be open for the entry of third parties, i.e. the entry of Russian Federation which is capable of securing stable supplies. (12) Since the Russian Federation usually claims control interests in projects, the possibility of its entry remains questionable as this wouldn’t be beneficial in this instance.

Russian power game is the most distinctive in the case of the countries of Austria and Hungary both of which are the members of the Nabucco consortium. Russia’s effort to set them against each other is successful. Separate contracts signed with both countries are the proof. In the Austrian case the Russian president signed an agreement according to which the gas tanks in Baumgarten, originally supposed for Central Asian gas, would be open for Russian gas as well as its storage and further transit. (13) Recently, Hungary has upheld Russian plans for the extension of the Blue Stream gas pipeline from Turkey which would terminate in this country. In return for this Russia promised the construction of larger tanks in Europe. The EU has the right to ask Austria whose part has it taken in terms of energy policy. Austria has found itself yet in a more difficult situation, because in contrast to Hungary, it has already signed some agreements with Russia. In order to strengthen the position of Hungary and maintain its support of Nabucco the EU could propose to the consortium the division of storage capacities between both countries. Thus Budapest wouldn’t be deprived of the advantages offered by the Russian side.

Similar strategy, however, of smaller scale, has been conducted in connection with Bulgaria and Turkey. Both countries have got the Kremlin’s promise that they will gain the status of regional distribution centres if they uphold Russian projects. Exactly the strong support of Nabucco at the conference mentioned should dispel the dreads concerning its future.

Following the conference in Budapest, further meetings were held on the 21st September, 2007, in Baku and Ashgabad. The British Energy Minister Malcolm Wicks met the Turkmen President Berdimukhamedov and his Azerbaijan counterpart Aliyev. It had been the first visit of a British Minister to Turkmenistan in the period of the last nine years. It attested to the negligence of this region from the European viewpoint. (14) The discussions were held predominantly on the suggested linkage of Turkmen gas supplies with Azerbaijan from which they could flow into Europe through Nabucco. The acquisition of stable supplies is vital for the project and the Turkmen side is still interested in the project despite the agreements signed with the Russian Federation. (15) It is the increase of diplomatic pressure that could definitely bring the Central Asian country to act in favour of trans-Caspian gas pipeline.

Also the Austrian Economy Minister Martin Bartenstein paid a visit to Baku on 20th September, 2007. He officially opened an OMV branch in this country and signed with his counterpart a Memorandum of Understanding concerning gas supplies to Baumgarten through Nabucco.

The situation regarding Nabucco has hotted up and at least the EU, which has a vested interest in its realisation, has confirmed its priority and the will to finish the project. It has been forced by the events of last moths in the course of which some consortium members have begun to consider alternative routes. The gas pipeline would step up also the energy security of the Slovak Republic which is linked with the distribution centre in Baumgarten. Moreover, according to the Energy Strategy of the Slovak Republic issued in September 2007 there is a plan to increase the capacity. Nabucco is a project carrying new gas to Europe and in contrast to other projects it won’t impinge upon the capacity of the Slovak branch of the Russian gas pipeline. At present, our country may purchase also foreign gas. In Baumgarten, the gas price, which is higher than Russian one, is meanwhile the limiting factor. The EU has the right to diversification and so has Russia irrespective of the fact to what degree both parties perceive themselves to be reliable partners.

The position of Austria still remains a question. On one level it signs contracts with Russia on the utilisation of Baumgarten, on another level it plans to use the same tank for Caspian gas. Hungary is another member sending contradictory signals as to the project during the last months. Sometimes it seems that these countries have decided to play the Russian game and have supported several projects at the same time although a simultaneous realisation is not feasible.

Russia counts on the promises of future supplies which it is not able to keep. The increase of the gas extraction in order to cover the growing demand on the world markets has been stagnating in the recent years and the country wants to aim at projects leading to South East Asia, which is a region with the highest potential from the long-term point of view. It is ironic that Russia will be capable of covering the growing demand in Europe if the imports from Central Asia grow as well and, moreover, this gas may be stored exactly in Baumgarten. It means that Europe will obtain Caspian gas, however, via Russia.

(1) Hungary chooses Gazprom over EU, International Herald Tribune, 12 March 2007, http://www.iht.com/articles/2007/03/12/news/hungary.php

(2) Hungary now firmly backs Nabucco project, The Turkish Daily News, 12 September 2007, http://www.turkishdailynews.com.tr/article.php?enewsid=83231

(3) Commissioner Piebalgs recalls European commitment to Nabucco project in a conference held in Budapest, 14 September 2007,   http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/
1338&format=HTML&aged=0&language=EN&guiLanguage=en

(4) Baev, P.: Selling „Energy Security” in Budapest and Prague, 6 March 2006, http://www.jamestown.org/edm/article.php?article_id=2370843

(5) Ševce, P.: An oil map of Central Europe 17 August 2007 http://www.despiteborders.com/clanok.php?subaction=
showfull&id=1187469649&archive=&start_from=&ucat=2,3,9&

(6) Crooks, E.: RWE and GdF eye Nabucco pipe, The Financial Times, 17 September 2007 http://www.ft.com/cms/s/0/84cba822-64b6-11dc-90ea-
0000779fd2ac.html

(7) Socor, V.: Gazprom broadens, deepens inroads into European Union’s internal markets, transporting systems, EDM, 21 March 2006, http://jamestown.org/edm/article.php?article_id=2370893

(8) Grib, N.: Gazprom Can’t Wait to Get to the UK, Kommersant, 6 October 2006, http://www.kommersant.com/p710792/r_1/Gazprom_Get_UK andGasunie likely to join the Nord Stream project, 29 June 2007,  http://www.gasandoil.com/goc/company/cnr73067.htm

(9) Dempsey, J.: Turkey aims to pressure Europe over gas pipeline, The International Herald Tribune, 5 April 2007,  http://www.iht.com/articles/2007/04/05/business/pipe.php

(10) Dempsey, J.: EU pipeline project loses momentum, The International Herald Tribune, 26 June 2007,  http://www.iht.com/articles/2007/06/26/business/EUgas.php

(11) according to some European diplomats the US tactics is to wait up for the arrival of more reformatory politicians in Iran and direct its supplies in the form of LPG to world markets, source: http://www.bbj.hu, 21 September 2007. http://www.bbj.hu/main/news_31347_letter+from+europe%253
A+guessing+game+focuses+on+european+energy.html

(12) Hungary now firmly backs Nabucco project, The Turkish Daily News,12 September 2007, http://www.turkishdailynews.com.tr/article.php?enewsid=83231

(13) Dempsey, J.: EU pipeline project loses momentum, The International Herald Tribune, 26 June 2007,  http://www.iht.com/articles/2007/06/26/business/EUgas.php

(14) UK Energy Minister’s visit builds bridges to the Caspian, 16 September 2007,  http://www.gnn.gov.uk/Content/Detail.asp?ReleaseID=314821&
NewsAreaID=2