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Pipelines & Politics: Developments and Challenges

Pipelines & Politics: Developments and Challenges. Joseph Szyliowicz JKSIS, University of Denver. New Eastern Mediterranean Arab Spring: Unhappy Outcomes. Social disintegration in Iraq, Libya & Syria Rise of ISIS Strains on Jordan & Lebanon Challenges to Turkey.

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Pipelines & Politics: Developments and Challenges

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  1. Pipelines & Politics: Developments and Challenges Joseph Szyliowicz JKSIS, University of Denver

  2. New Eastern Mediterranean Arab Spring: Unhappy Outcomes • Social disintegration in Iraq, Libya & Syria • Rise of ISIS • Strains on Jordan & Lebanon • Challenges to Turkey

  3. New Religious Challenges • Sunni vs. Shiite • Sunni revolt in Syria & Iraq • Salafi vs. Moderate muslim majority • How long will the conflict last? • A modern Reformation? • Religious wars • Intra and Interstate conflict

  4. New Patterns ofInterstate Relations • Alliances • Iran (Hezbollah, Assad Regime) • Israel - Cyprus - Greece • Israel - Gulf states - Egypt & Jordan • Conflicts • Israel - Turkey • Turkey-Cyprus-Syria • Russia, the US, EU

  5. Implications for NG Development • Prices, Technological development • Non-investment in gas fields • E. Mediterranean gas will be developed • Timing, amounts, routes, patterns -- all dependent on geopolitical developments

  6. Current Activity • Cyprus LNG plant • Israel FPSO unit • 16bcm via pipeline • $6.5B investment • 2018? • Greece -- feasibility study • Israeli - Cypriot gas • Use existing—Greece-Italy pipeline • Part of S. corridor for Caspian gas • NB—none involve Turkey

  7. Geopolitics of Caspian Gas • Caspian routes influence development of Eastern Mediterranean fields • Key Players • Turkey • Azerbaijan • Small country (8 million), dangerous neighborhood, strategic location • Enhance security and power (economic, military} • Role of natural gas • 7% worlds reserves (IEA) • Shah deniz field, 1999, 9 BCMA • International consortium (Azerbaijan, France, Turkey, Iran, Russia) • Shah Deniz 2 (2013 $25B, adds 16 BCMA) • International consortium (Azerbaijan, France, Turkey, Iran, Russia, Norway)

  8. Pipeline Politics: Nabucco vs. TAP • How get Azeri gas to market? • Which markets? • long distances, many countries • 2 Major Contenders • Nabucco • TAP

  9. Pipeline Politics: Nabucco vs. TAP • Nabucco • 4000 Km Turkey-Bulgaria,Romania, Hungary, Austria, 30 BCMA • Minimize European reliance on Russia • Especially East and Central states • Scaled down to Nabucco West • 1300 km, 10BCMA, later 25BCMA • Trans-Adriatic Pipeline (TAP) • 867 kms, 10BCMA, later 20BCMA • 2018 supplies to Georgia, Turkey • 2019 Europe

  10. Why TAP? • Cost Structure -$2B vs $13B • Chicken & Egg problem • Investors & Customers require Azerbaijan guarantee • Azerbaijan won’t commit w/o funding guarantee • Shah Deniz II established project criteria (commerciality etc) • TAP Administrator stated Azerbaijani foreign policy not an issue • But Political Considerations inevitable

  11. Foreign Policy Strategies of Small States: The Azerbaijani Case • Conflict with Armenia • Russiapowerful neighbor • Iran-increased regional role • Critical ally -- Turkey • Close cultural, political, economic ties • Azerbaijan pragmatic • Azerbaijani investments in energy projects • PETKIM • Aliagarefinery • Reliable Energy Supplier

  12. Theory and Practice • Bandwagon vs. balancing • Choice depends on internal politics • Georgia balances (wants NATO membership) • Kazakhstan bandwagons • Enhances options

  13. TAP as Foreign Policy Issue • Russian Interests • Protect gas trade • Minimize flow of Azerbaijani gas to Europe • Developed expensive South Stream as alternative to Nabucco • EU Interests • Enhance its energy security • Especially highly dependent Central & SE countries • US interests • Help EU • Weaken Russia • Strengthen its influence in the Azerbaijan end the Caspian Region • Winner— Russia

  14. Why this Outcome? • The Role of the EU • No integrated policy • No adequate guarantees to Azerbaijan • Divided — Germany concerned with Russia,Greek economy • The Role of the US • Inadequate Support

  15. The US FPDMS • Many Models • “Realists” vs. Idealists • Domestic Factors • Pressure groups • Freedom support act 1992 • Conflict over US involvement in region • Azerbaijani Polity - stable semi-authoritarian regime • Outcome — Inadequate policy = Russian victory • Policy reappraisal needed • Pay serious attention, recognize strategic importance of Azerbaian and Region • Work to increase local gas production • Work to maintain stability while promoting human rights

  16. Energy Geopolitics • Global Level • Gas market evolving • Emergence of new actors • US • Regional level • Caspian • National • How to achieve energy security? • Impact on foreign policy • EU-Ukraine US-Iraq; Russia-Azerbaijan

  17. Pipelines Politics • Creates rivalries and interdependencies • Increased interdependence • Theory— increase cooperation, benefits for all • “peace pipelines” • Creates/enhances disputes — lead to conflict, constrains FP • amicability between states • Increased political risk -- no one willing to invest money, time, effort • Source of power for suppliers & transit countries • Security major issue

  18. The Challenge • Develop gas production and distribution in ways that promote peacef • ulrelations between states and enhances mutual well being • Work to ensure that “peace pipelines” emerge in the Caspian and the Eastern Mediterranean • US major player • Long term strategy required

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