Prospects and limitations of Southern Corridor

Two news reports about progress in implementing the Southern Transportation Corridor idea have been posted lately. Firstly, the EU Council of Ministers approved the European Commission’s mandate to negotiate with Azerbaijan and Turkmenistan construction of a trans-Caspian gas pipeline. This pipeline is supposed to carry Turkmen natural gas through Azerbaijan, Georgia and Turkey to Europe. Secondly, France’s Total declared it had discovered a large gas deposit called Apsheron in the Azerbaijani section of the Caspian Sea shelf. The amount of the reserves discovered has not been reported but preliminary estimations point to some 300bn to 350bn cu m of gas and 40m to 50m tons of gas condensate.

However, there are serious doubts that the above-mentioned news means real progress of Southern Corridor. Azerbaijan and Turkmenistan try to convince all consumers of their capacity to sharply increase production and to supply gas throughout decades. But there is no real, internationally recognized evidence of serious growth in their reserves. For instance, Turkmenistan’s assessment of its own natural gas reserves seriously differs from the competent data provided by BP statistical reviews. It will be interesting to see next summer BP’s reaction to new discoveries in Azerbaijan. In any case, too many projects claim Azeri gas (in addition to Nabucco, these are ITGI, TAP, AGRI, White Stream and Russian proposals); definitely, there will not be enough resources for all of them.

There are also many questions about the EU’s real eagerness to ensure construction of a trans-Caspian pipeline in defiance of Moscow’s opinion. The Caspian Sea has not been delimitated by the coastal countries yet. We may probably observe a large-scale “war of interpretations” of the international law regulating activities in the Caspian Sea. This case is rather confused; in particular, it is not clear whether the international maritime law and the corresponding UN convention of 1982 be applied to this sea-lake.

A lot will depend not only on relations between Moscow and its Caspian neighbors or between Moscow and Brussels. Complicated relations between the smallest Caspian states that are far from being ideal, will have great importance. There is still a dispute between Baku and Ashkhabad over the Kyapaz deposit known as Serdar in Turkmenistan. Yet, relations between these states have improved. Meanwhile, Iran hinders Azerbaijan to develop fields on the disputable area between these two countries simultaneously accusing Baku of militarization of the Caspian region and military cooperation with the USA. There are disputes concerning the civil rights of a large community of about 20m ethnic Azerbaijanis in Iran.

Besides, Iran is a main potential threat to export plans of Azerbaijan and Turkmenistan in the next 10 to 15 years.  Due to its reserves, Tehran can quickly change the layout of forces on the European (and not only European) gas market, if its relations with the West are normalized. Such conflicts and fears prevent Caspian states from reaching a consensus and, thus, reduce chances of such ideas as the trans-Caspian pipeline to be implemented.

By Stanislav Mitrakhovich, NESF leading expert