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LOOKING AHEAD

September 10, 2006††(the date of publication in Russian)

Konstantin Cheremnykh

ACHILLES' ROUTE

The construction of Burgas-Alexandroupolis oil pipeline is quite beneficial to Russia, Bulgaria and Greece, not challenging the transit interests of major regional players

The distance of two hundred eighty kilometers, twice shorter than the railway line from Moscow to St.Petersburg, looks as tiny as a child's little finger on a classroom globe. Besides, this track is not crossing any impassable swamps or quicksand, as the territory has been cultivated for centuries; besides, the only state border divides two friendly peoples of civilized background. Both of those peoples have special centuries-deep spiritual ties and common interests with Russia. Today, this age-long relationship is supplied with an extremely favorable economic situation.

Nevertheless, a direct oil pipeline connection between Burgas (Bulgaria) and Alexandroupolis (Greece), a shortcut and the least costly way for Russia and its businesses to the markets of other countries and continents, remains merely a map pencil-line for over thirteen years since it was originally proposed.

For thirteen years, politicians of the three countries would frequently meet and discuss the transport corridor scheme. It is advantageous to all parties, but various obstacles interfere one after another: first, the fight of LUKOIL and YUKOS for Bulgaria’s oil refineries; later, the contention between LUKOIL and Transneft, the latter insisting – for eighteen months Ц on an alternative trans-Turkish route, the so-called Thracian Corridor, connecting the port of Kiyiköy on the Black Sea and Ibrikhaba on the Aegean coastline. Add the parliamentary elections in Bulgaria, interrupting the work on the project for another entire year.

Some authors also point at an unfriendly influence from US State Secretary Condoleezza Rice, whose disapproving remarks vis-à-vis Russia's "energy monopolism", during her visit to Athens in March, could contribute to the stall of the project. In fact, she was speaking of Russia's monopoly in gas trade; in other, even more touchy issues, like Russian arms supplies to Venezuela, Moscow wouldn't really care about views of this or another State Secretary. Therefore, references to Mrs. Rice's ominous spells do not seem convincing enough; indeed, it's easier to shift blame overseas than to admit a failure of accord among the sides of your own.

Eventually, a sword of state will rises above this Gordian knot. On September 4, the Russian delegation, headed by the President and including top figures from five contending corporations, signs a trilateral agreement on energy partnership with the leaders of Greece and Bulgaria. During forty five minutes, as Bulgaria's President says, the sides manage to accomplish a lot more than for a dozen years. Now, they just have to reach accord on sharing. They nearly succeed Ц still, the final agreement is said to be postponed again, though only till the end of the year. Again, uncertainty is filled with rumors and hoaxes.

CAN WE DO WITHOUT TURKEY?

Russian President Vladimir Putin has expressed the state will clearly enough, firmly reminding that exactly the same distance had been surmounted within just two months in the construction of the Trans-Asian oil pipeline across a primeval East Siberian taiga. At the next press conference, held during the same tour but in the far distant South Africa, Putin would stress, again, that he does not intend to go in for "political tourism", repeatedly addressing the business faction of his team over the priority of national interest.

Greek and Bulgarian officials displayed political correctness vis-à-vis Turkey, their close neighbor Ц and a centuries-old rival. Meanwhile, a number of Russian media carelessly declared that "Turkish interests are ignored", neglecting due delicacy in matters of history and religion.

As a matter of fact, Turkey has been trying to reduce transit of ecologically dangerous cargo along the Bosphorus, which cuts though the largest megapolis of the country. Otherwise, even under a most intense transatlantic influence, Ankara would hardly accept the idea to pump oil from Baku to the Mediterranean port of Ceyhan Ц in spite of substantial costs and unpredictability of Kurdish rebels.

Gasprom's CEO Alexei Miller, another star of the Russian team, took up not only the issue of the on-land oil pipeline project, but also of the underwater branch of the functioning Blue Stream gas route to supply South-Eastern Europe. The prolongation of this Russian-Turkish gas line, stretching along the Black Sea's bottom, implies nothing but transit benefits for Turkey. Therefore, media speculations over a clash between Athens and Ankara should be viewed as both irresponsible and unwise.

CAN WE DO WITHOUT UKRAINE?

The Russian visit to Athens was also seen by some observers as an insidious attempt on Ukraine's interests. According to Kiev, if Russian oil flows from point B to point A, it will surely miss point O (the proud city of Odessa), from which it is supposed to continue on to Brody (Lvov Region), then marching northward to the glorious Polish port of Gdansk Ц with an outspoken blessing from the US White House, and especially from its Vice-President.

The fact that not everyone in Kiev is concerned about it, seems quite interesting, as the Odessa Ц Brody pipeline has been pumping "black gold" for three years in the opposite direction Ц from Russia's Druzhba pipeline via Brody to Odessa. The reverse design belongs to the Russian-British company TNK-BP, whose participation in the Russian team in Athens allows to hope for the reduction of Ukrainian transit costs to Europe by eight dollars per ton, compared to the Bosphorus transits.

The most bothering issue for Kiev analysts was the possible expansion of the Blue Stream, providing underwater gas deliveries to Europe. This option really challenges today's eighty per cent monopoly of Ukraine for transshipment of Russian gas.

Andris Piebalgs, the European Union's Energy Commissioner who would certainly avoid distressing Kiev, remarked that "Big Europe" is in favor of the Burgas-Alexandroupolis pipeline. Translation from the diplomatic language means: "except Poland".

Indeed, Poland's political leaders, dubbed as "paranoid twins" by British press, had been amusing and irritating the EU bureaucracy with their attacks on Russia and Germany, until it became no longer shameful to ignore their ambitions. Thus, major European consumers, not only Greece and Bulgaria, expressed their real interest in the success of the long-debated design.

THE APOSIOPESIS

Bulgaria's President Georgy Pyrvanov interrupted his speech at the press conference in Athens at the word "fatal", being reluctant to elaborate before the press over alternatives to partnership of Russia, Greece and Bulgaria in case they fail to accomplish the route pipeline from point A to point B.

The point of reticence, the aposiopesis of his presentation, was the Samsun-Ceyhan oil pipeline project, designed in Turkey to circumvent the Bosphorus, and emerging as an ambitious alternative to the Burgas-Alexandroupolis plan, in respect of the Kazakh-Russian oil flow via Novorossiysk and the Russian-Ukrainian route via Odessa. For Russia, this issue is no way crucial. But for the European Union, the choice of the Samsun-Ceyhan route creates additional possibilities for pressure upon Turkey, the welcome but unwanted candidate for EU membership.

Georgy Pyrvanov might as well have meant some other energy transit projects. In fact, the so-called trans-European oil line scheme with involvement of Romania, Serbia, Croatia, Slovenia and Italy was ignored by media, with the only exception for Vedomosti daily. This oil transit route amalgamates with the Nabucco gas pipeline design, initiated by Italian, Turkish and Austrian interests and favoring Iranian energy transit systems.

The Italian press was anxious about the outcome of Ankara talks dealing with transportation of Iranian natural gas across Turkey. Today, Italy is a very active party in the Middle East diplomacy. Massimo d'Alema, Italy's Foreign Minister, makes most respectful statements concerning Lebanon's Hezbollah, supported by Tehran. Indeed, it is the Italian project that is not advantageous to all the three parties in the Athens negotiations.

Only few observers indicated that Putin's visit to Athens was a very recent substitution for plans to call on Angola. Obviously, the plans changed due to certain attendant circumstances, and the recent Turkish Ц Iranian talks could well have played as a trigger.

NOW, OR NEVER

As one could expect, the talks in Athens attracted special attention in Azerbaijan, where the Baku-Ceyhan project is viewed in a package with an amended version of the Nabucco plan; where European political and economic trends are thoroughly analyzed; where neighborhood with Iran is a factor of specific importance, potentially even fatal. Azeri media had been aware of the Athens results before the talks were over. They were equally aware of the conditions, imposed on the partner sides of the Caspian Consortium, connecting Kazakh oil provinces with Russia's Novorossiysk, by its US shareholder Chevron.

The Burgas-Alexandroupolis project is thus still facing not only the rivalry of Rosneft and Transneft for supervision of the project, but also the contention between TNK-BP and an alliance of Chevron and Kazakh Oil & Gas Corp. (Kazmunaigaz). The debate may last for fifteen years more Ц but in this case, other interested parties are likely to take over, as Vladimir Putin pointed out quite directly.

Thus, Georgy Pyrvanov's remark "Now or never" was rather addressed not to corporate bosses but to Moscow which, according to the world press, has finally managed to subordinate private interests Ц or has it not?

The die is thrown. The enchanted line, connecting point B on the Black Sea with point A at the gateway to the Adriatic, will either become a triumph of a joint state-and-business interest, or turn a fatal Achilles' heel of the Russian colossus.

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