BACKGROUND: Numerous obstacles have prevented the Nabucco pipeline project from getting off the ground. Running across five countries, it requires a high level of coordination between suppliers, transit countries and consumers. All three of these elements have been problematic. Supply remains a question: while Azerbaijan has been a given supplier, it may not have enough gas to fill the entire pipeline. Hence, countries from Turkmenistan and Kazakhstan to Iran, Iraq and Egypt have been cited as potential suppliers. This array of potential suppliers may be an asset, but it is also a source of confusion. As for consumers, the target is clear, the EU. Given the prospected growth of natural gas demand in Europe and Europe’s growing concerns over diversification of supply, Nabucco and the EU should be a match made in heaven. But as an institution, the EU has failed to coordinate member states’ energy policies; some, like Germany, are even hostile to the project, preferring their own separate agreements with Gazprom at the expense of broader European energy security. Finally, disagreements between transit countries have taken their toll on the project. It is here that Turkey’s role has been paramount.  

In the past few months, Nabucco has received some political impetus. The latest gas crisis between Russia and Ukraine hastened the EU’s search for alternative energy supplies. At several summit meetings, European leaders have reaffirmed political support for the project. Although problems remain, the project is slated to be launched this summer.

The transit issue has been a major complicating factor, and one in which Turkey has not played a positive role. In fact, Turkey’s confusing and differing demands have been a great complication to the project. To understand Turkey’s position, one has to understand Turkey’s attempts to turn itself into a regional energy hub, rather than a simple transit country. The Baku-Tbilisi-Ceyhan (BTC), Kirkuk-Yumurtalik and the possible Samsun-Ceyhan pipelines boosted Turkish self-confidence and strengthened the country’s prospects of becoming an energy hub. Nabucco is also seen as an important part of Turkey’s geostrategic aims, as it will make Turkey a force in the European natural gas market. Yet Turkey’s own intransigence has, paradoxically, contributed to undermining that very prospect. Turkey has demanded the right to purchase 15 percent of the gas at discounted prices, to resell the gas that enters its territory, and voiced various claims regarding transit fees. Turkey’s insistence to continue to benefit from the flow of cheap gas from the Shah Deniz One field in Azerbaijan – which it currently buys at $120 per thousand cubic meters, well below market prices – has upset Baku and gas-producing companies.

Following the EU’s greater interest in the project, the countries working on the Nabucco project established national units of the Nabucco International Company (NIC). While such branch companies have been established in Austria, Hungary, Romania and Bulgaria, Turkish officials have yet to establish a Turkish branch of the NIC. The low point possibly came in February, when Turkish Prime Minister Recep Tayyip Erdogan made comments at a speech in Brussels that indicated that Turkey’s support for Nabucco and energy issues more generally had become a card for the negotiations on Turkey’s EU accession. This was subsequently denied. In sum, Turkey’s stance has slowed down the project’s progress. Nevertheless, this picture began to change in the first few months of 2009.

IMPLICATIONS: There are various reasons for the Turkish government’s lack of a cohesive policy on Nabucco. Most important has been the lack of a coordinated energy policy, and the absence of a foreign policy strategy linked to energy policy. Moreover, given Turkey’s large domestic energy problems, Nabucco was seen as a minor issue in some quarters, and to that one that did contribute significantly to supplying Turkey. In that sense, it is a politically driven project; the revival of the project appears to have coincided with growing pressure from the EU, and with the return of EU accession to the Turkish political agenda this year. In the last Turkey–EU Association Council meeting in Brussels, Nabucco and the energy chapter more generally were among the issues discussed, and the parties declared their full support to the project.

A change of policy hence appears to be under way in Ankara, providing for a more realistic approach to Turkey’s role in energy diplomacy generally, and the Nabucco project more specifically. Former Turkish Energy Minister Hilmi Guler announced that a treaty between the parties could be signed by the end of June, and that statement was reiterated by the newly appointed energy minister Taner Yildiz as well. Indeed, Yildiz’s appointment appears to signal a higher degree of commitment to the project. Well versed in energy affairs compared to his predecessor, Yildiz has a more realistic view of Turkey’s role in European energy supplies. In particular, Yildiz appears to find the prospect for Turkey as a ‘hub’ (that buys gas from producers and sells it on to consumers) unrealistic, favoring instead the building of Turkey as a transit country, which could provide long-term geostrategic benefits.

But inadvertently, other moves in Turkish foreign policy have created other problems. In particular, the Turkish-Armenian rapprochement has helped put into question Azerbaijan’s role as the major supplier of Nabucco. Indeed, Russia has long been courting Baku, offering to buy future production of Azerbaijani gas from the second phase of the Shah Deniz at European prices. And several factors forced Azerbaijan to consider this offer seriously. Baku has long kept its distance from Moscow because of Russian support for Armenia in the Nagorno-Karabakh dispute and its overall ambitions of dominance over the South Caucasus. Nevertheless, the Russian-Georgian war and the weakness of American and European responses to it – and of Western presence in the Caucasus more generally – has led Baku to feel increasingly isolated, and made a warming to Moscow difficult to avoid.

In this context, Turkey’s Armenia move further rocked the basis of Azerbaijan’s foreign policy. Turkey’s decision to ignore Azerbaijan’s interests during the rapprochement with Armenia created a feeling of disillusionment in the Azerbaijani public and leadership regarding ‘fraternal’ Turkey. Azerbaijani President Ilham Aliyev refused to attend a meeting of the ‘dialogue of civilizations’ in Istanbul, and instead paid a visit to Moscow. Aliyev made clear that in case of a Russian support in a series of issues including the Karabakh dispute, Baku would look positively to sell gas to Russia.

The Turkish government has since stepped back on the issue of opening the Turkish-Armenian border without preconditions. Fierce criticisms from Azerbaijan and from opposition parties in Turkey were the most apparent reasons for this policy shift. Prime Minister Erdogan made clear that the government would not take concrete steps on the border issue before progress toward a resolution of the Karabakh dispute. In early May, Erdogan paid a visit to Baku accompanied by five ministers, in order to restore relations with Baku. However, the damage done to the Nabucco project has not been totally undone, since Azerbaijan’s gas export decision remains unclear. 

On the other hand, Obama’s offer of a dialogue with Iran has increased the possibility of the inclusion of Iranian gas in the project; that possibility is still too remote to be seriously considered, however. Likewise, the prospects of Iraqi gas supplies also lie numerous years in the future.

CONCLUSIONS: Following the reshuffle in the Turkish cabinet, Ankara has indicated its willingness to compromise on many of the outstanding issues regarding Nabucco. Indeed, there appears to be growing Turkish enthusiasm about the project. Indeed, following the emergence of a financially more advantageous Russian option for Azerbaijani gas exports, Ankara can be expected to abandon some of its more exagerrated demands. Turkey may insist on reserving 15 percent of the gas for its own needs, but this time at market prices; but other demands are likely to be given up. Ankara realized that its stubbornness over advantegous prices is now blocking the entire vision for Turkey’s role as an energy transit corridor to Europe.

Nabucco’s fate will largely depend on geopolitical shifts in the Caucasus. Since Iranian and Iraqi supplies remain only long-term possibilities, Azerbaijani supplies are crucial. Moreover, an Azerbaijani rejection of the project would also wipe out the chances of receiving Kazakh and Turkmen supplies. While Ankara long served as an impediment to the project, the main question now lies with Baku’s role.