THE BEGIN-SADAT CENTER FOR STRATEGIC STUDIES BAR-ILAN UNIVERSITY Mideast Security and Policy Studies No. 88
Eurasian Energy and Israel’s Choices
Ariel Cohen and Kevin DeCorla-Souza
© The Begin-Sadat Center for Strategic Studies Bar-Ilan University, Ramat Gan, 52900, Israel http://www.besacenter.org ISSN 0793-1042 February 2011
The Begin-Sadat (BESA) Center for Strategic Studies The BESA Center for Strategic Studies at Bar-Ilan University was founded by Dr. Thomas O. Hecht, a Canadian Jewish community leader. The Center is dedicated to the memory of Israeli Prime Minister Menachem Begin and Egyptian president Anwar Sadat, who concluded the first Arab-Israel peace agreement. The Center, a non-partisan and independent institute, seeks to contribute to the advancement of Middle East peace and security by conducting policy-relevant research on strategic subjects, particularly as they relate to the national security and foreign policy of Israel.
Mideast Security and Policy Studies serve as a forum for publication or re-publication of research conducted by BESA associates. Publication of a work by BESA signifies that it is deemed worthy of public consideration but does not imply endorsement of the author's views or conclusions. BESA Colloquia on Strategy and Diplomacy summarizes the papers delivered at conferences and seminars held by the Center, for the academic, military, official and general publics. In sponsoring these discussions, the BESA Center aims to stimulate public debate on, and consideration of, contending approaches to problems of peace and war in the Middle East. The BESA Memorandum series consist of policy-oriented papers. The content of the publications reflects the views of the authors only. A listing of recent BESA publications can be found at the end of this booklet.
International Advisory Board Founder of the Center and Chairman of the Advisory Board: Dr. Thomas O. Hecht Vice Chairman: Mr. Saul Koschitzky Members: Prof. Moshe Arens, Ms. Judy Ann Hecht, Ms. Marion Hecht, Mr. Robert Hecht, Prof. Riva Heft-Hecht, Hon. Shlomo Hillel, Mr. Isi Leibler, Amb. Yitzhak Levanon, Sen. Joseph I. Lieberman, Mr. Robert K. Lifton, Maj. Gen. (res.) Daniel Matt, Rt. Hon. Brian Mulroney, Maj. Gen. (res.) Ori Orr, Mr. Seymour D. Reich, Amb. Meir Rosenne, Mr. Greg Rosshandler, Amb. Zalman Shoval, Amb. Norman Spector, Mr. Muzi Wertheim
International Academic Advisory Board Desmond Ball Australian National University , Ian Beckett University of Kent , Eliot A. Cohen Johns Hopkins University , Irwin Cotler McGill University , Steven R. David Johns Hopkins University , Yehezkel Dror Hebrew University, Lawrence Freedman King's College, Patrick James University of Southern California , Efraim Karsh King's College , Robert J. Lieber Georgetown University , Barry Posen Massachusetts Institute of Technology , Jasjit Singh Centre for Strategic and International Studies
Research Staff BESA Center Director : Prof. Efraim Inbar Research Associates: Dr. Efrat Aviv, Dr. Yaeli Bloch-Elkon, Prof. Stuart A. Cohen, Dr. Gil Feiler, Prof. Jonathan Fox, Prof. Hillel Frisch, Prof. Eytan Gilboa, Col. (res.) Aby Har-Even, Dr. Tsilla Hershco, Dr. Mordechai Kedar, Prof. Avi Kober, Dr. Yaakov Lifshitz, Prof. Ze'ev Maghen, Prof. Amikam Nachmani, Mr. Amir Rapaport, Dr. Jonathan Rynhold, Maj. Gen. (res.) Emanuel Sakal, Prof. Shmuel Sandler, Dr. Danny Shoham, Dr. Shlomo Shpiro, Dr. Max Singer, Prof. Gerald Steinberg Director of Public Affairs: David Weinberg Program Coordinator : Hava Waxman Koen Publication Editor (English) : Ilana Hart Publication Editor (Hebrew) : Alona Briner Rozenman EURASIAN ENERGY AND ISRAEL’S CHOICES
Table Of Contents
INTRODUCTION ...... 1
ISRAEL ’S CURRENT ENERGY SUPPLY ...... 3
CASPIAN /C ENTRAL ASIAN ENERGY RESOURCES ...... 5
EXISTING OIL & GAS PIPELINES FROM THE CASPIAN AND CENTRAL
ASIA ...... 7 Existing Oil Pipelines...... 8 Existing Gas Pipelines...... 9
CASPIAN /C ENTRAL ASIAN OIL & GAS PIPELINE PROJECTS OF INTEREST
TO ISRAEL ...... 10 Nabucco and Trans-Caspian Gas Pipelines...... 11 South Stream and Caspian Coastal Pipeline ...... 12 Blue Stream II, Samsun-Ceyhan and Medstream Pipelines...... 14
GEOPOLITICS OF THE CASPIAN AND SOUTH CAUCASUS ENERGY
CORRIDOR ...... 16 The Russia-Georgia Conflict: August 2008 and Beyond...... 16 Nagorno-Karabakh: A Frozen Conflict...... 18
TERRORISM ...... 20 Azerbaijan: Emerging Sunni and Shia Threats ...... 20 Eastern Turkey: The PKK ...... 21
GREAT POWER ENERGY COMPETITION IN THE CASPIAN REGION ...... 22
THE IMPORTANCE OF CASPIAN /C ENTRAL ASIAN ENERGY TO ISRAEL ..28
RECOMMENDATIONS FOR ISRAELI ENERGY POLICY ...... 32
CONCLUSION ...... 34
Eurasian Energy and Israel’s Choices
Ariel Cohen and Kevin DeCorla-Souza ∗
INTRODUCTION
The recent boom in Caspian and Central Asian oil and gas developments is changing the geography of the Eurasian energy map, opening up significant opportunities for new, more secure energy flows to Israel. This paper refers to “Eurasian” energy, instead of Caspian energy, as most analysts recognize "Eurasia" as the cluster of states that are products of the disintegration of the communist bloc during 1989–1991. ‘‘Eurasia’’ is a malleable geographical concept bridging, in some sense, the countries of Asia, the Middle East, and Europe. 1
Israel’s energy position is unique. Israel imports nearly all of the oil and gas that it consumes but it cannot increase imports from its energy-rich Arab neighbors without creating a strategic vulnerability. As a result, Israel must diversify both the geography of its energy suppliers as well as the types of fuels it consumes.
Oil and gas from Eurasia can play an important role in Israel’s goal of energy supply diversification. Of particular importance is the emergence of the “Southern Corridor,” an energy export route composed of three key production and transit countries – Azerbaijan, Georgia, and Turkey – that lie at the crossroads of Europe, the Caspian, the Middle East, and Russia. The European Union and the US, concerned with breaking Russia’s dominance of Caspian export routes and reducing Europe’s dependence on a Russian-controlled energy supply, have succeeded in the past decade in building the Baku-Tbilisi-Ceyhan (BTC) oil and South Caucasus gas pipelines
∗Ariel Cohen is a senior research fellow in Russian and Eurasian Studies and International Energy Policy at the Katherine and Shelby Cullom Davis Institute for International Policy at The Heritage Foundation. Kevin DeCorla-Souza is an energy analyst at Science Applications International Corporation. MIDEAST SECURITY AND POLICY STUDIES from the Caspian, and hope to further develop the Southern Corridor by advancing the Nabucco gas pipeline project to bring Azerbaijani, and possibly Iranian, Iraqi, and eventually Turkmen gas to the European markets.
Figure 1. Map of Central Asian Oil & Gas Exporters, the Caspian, and the Southern Corridor
R ussia
Ukraine Caspian Asian Oil & Gas Exporters Kazakhstan
Black Sea G eorgia Uzbekistan Kyrgyz. Azer. Southern Corridor Caspian Turkmenistan Sea Tajik. Turkey Arm.
Cyprus Syria Afghanistan Israel Iraq Iran
Egypt Saudi Arabia
Source: DeCorla-Souza 2010
This paper will highlight the challenges and opportunities to Israel posed by the numerous east-to-west oil and gas pipeline projects currently being developed across Eurasia. The paper will explain Israel’s current energy supply situation and present the country’s energy security goals. It will review the immense energy resource base being developed in the Caspian and Central Asia and the existing pipeline infrastructure that is already bringing these supplies to Western markets. It will further review several planned pipeline routes currently under development and assess the relevance of those projects to Israel’s goal of energy diversification. This paper will evaluate the security of these strategic pipeline routes amid the active and frozen conflicts of the South Caucasus, the region’s growing terrorist threats, and the emerging great power competition over control of Eurasia’s energy resources. Finally, it will examine the importance of Caspian and Central Asian resources from geopolitical and energy perspectives and recommend policy actions to help Israel
2 EURASIAN ENERGY AND ISRAEL'S CHOICES navigate the constantly shifting politics and security of the Eurasian pipeline map.
ISRAEL ’S CURRENT ENERGY SUPPLY
Surrounded by unfriendly and unreliable neighbors, Israel is an energy island. Despite its proximity to major oil and gas exporters in the Middle East, Israel cannot import resources from these countries due to ongoing political disputes. As a result, Israel has had to look farther afield to meet its energy needs: to Russia, the Caspian, and even as far away as the Americas. In 2007, the latest year for which data is available, Israel’s energy consumption totaled 12.9 million tons of oil equivalent, of which petroleum products contributed 8.2 million tons, or about 63 percent (see Figure 2). Electricity made up most of the remaining final energy consumption, with most power produced at coal-fired power plants. Natural gas contributed only marginally to Israel’s energy balance in 2007 but the share of natural gas has increased significantly since 2008 when Egypt began exporting gas to Israel under a long-term agreement. Figure 2 presents the breakdown of Israel’s final energy demand by source in 2007, the year before Egyptian imports commenced.
Figure 2. Israeli Final Energy Demand by Source, 2007
Coal 22% Petroleum Electricity 63% 31%
Petroleum 3%
Natural Gas 6%
Hydro 0.01% Renewables 6%
Source: International Energy Agency
Israeli oil consumption averaged about 250,000 barrels per day (b/d) between 2002 and 2007, the latest year for which data is available. 2
3 MIDEAST SECURITY AND POLICY STUDIES
Oil import data by country for Israel is not available from the government or the International Energy Agency. However, an investor presentation from Oil Refineries Ltd., owner of the 180,000 b/d Haifa refinery – the larger of Israel’s two refineries – indicates that the Caspian and Russia accounted for 89 percent of the plant’s crude oil imports in 2006, the year after the BTC pipeline opened, with the remaining supply coming from Africa, Western Europe, and the Americas (see Figure 3).
Figure 3. Haifa Refinery Crude Imports by Source, 2006
Source: Oil Refineries Ltd. Presentation, November 2007
In 2007, Israel indigenously produced about 2.3 billion cubic meters (bcm) of natural gas, all of which was consumed in the electric power sector. 3 Production began with the startup of Noble Energy’s Mari-B offshore gas field in 2003. 4 Israel’s gas consumption expanded significantly in 2008 when imports from Egypt commenced via a 100- km subsea pipeline from gas fields in the northern Sinai Peninsula to Ashkelon. Under the 20-year contract with Egypt’s East Mediterranean Gas (EMG), Israel receives 1.7 bcm annually. 5 The deal to send gas to Israel was slammed by the Muslim Brotherhood, the opposition party which holds about one-fifth of the seats in the Egyptian parliament. Should Egypt’s octogenarian president Hosni Mubarak pass away, his ruling party may be replaced, threatening the
4 EURASIAN ENERGY AND ISRAEL'S CHOICES reliability of future gas exports to Israel. 6 Thus, despite Egypt’s abundant gas reserves, dependence on Egyptian gas is a strategic vulnerability for Israel.
Indeed, Israel has sought to diversify its supply. In June 2009, Israel published a pre-screening tender for the construction of a liquefied natural gas (LNG) terminal with an annual import capacity of 4 bcm. The terminal, to be located in Ashkelon, would allow Israel to import natural gas from a growing number of LNG suppliers from around the world. A final tender for the terminal is expected to be published in the second half of 2010 and if the project moves forward, the terminal would be ready by 2013. 7
The LNG effort and worries over Egyptian supply may soon become a moot point, however. New mega offshore discoveries in the Eastern Mediterranean have enough natural gas to make Israel self-sufficient in natural gas production for decades to come and might even turn Israel into a gas exporter. Noble Energy, the company drilling in the region, says that as much as 850 bcm of natural gas could lay offshore Israel. The company’s Leviathan field, discovered in 2010, is estimated to hold some 450 bcm of natural gas, and the nearby Tamar field, found in 2009, is estimated to contain about 240 bcm. 8 The Tamar field could begin producing as early as 2012.
CASPIAN /C ENTRAL ASIAN ENERGY RESOURCES
The countries of the Caspian/Central Asia region – Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan – have moderate proven oil reserves of about 38 billion barrels. However, estimates of this region’s possible reserves – a less precise measure of in-ground resources that includes estimates of undiscovered reserves that could potentially be found through extensions of existing fields and new discoveries – indicate that the Caspian could hold as much as 202 billion barrels of crude oil, making it a potential energy superpower (see Table 1). By comparison, Saudi Arabia, the world’s largest reserve holder, has proven reserves of 267 billion barrels. The Caspian region’s total oil production in 2008 was about 940 million barrels or nearly 2.6 million barrels per day (b/d).
5 MIDEAST SECURITY AND POLICY STUDIES
Table 1. Caspian/Central Asian Crude Oil Production and Reserves (billion barrels) 9 2008 Annual 2009 Proven 2005 Possible Production Reserves Reserves Azerbaijan 0.32 7.0 32.0 Kazakhstan 0.52 30.0 92.0 Turkmenistan 0.07 0.6 38.0 Uzbekistan 0.03 0.6 2.0 Caspian 4 0.94 38.2 164.0 Russia 3.57 60.0
Source: US Energy Information Administration
Kazakhstan is the region’s largest oil producer and reserve holder, with the production of 1.4 million b/d and proven reserves of 30 billion barrels in 2008. Oil production is centered on several large onshore fields near the northeast portion of the Caspian Sea, including the massive Tengiz and Karachaganak developments. The Kashagan oil field, the largest oil field outside the Middle East, is located offshore in the Caspian Sea. The field holds an estimated 1.236 billion tonnes of liquids and 1.371 cubic kilometres of gas in place (17.78 billion barrels of oil and oil equivalent) and is expected to come online in 2013. Azerbaijan’s major oil fields are located offshore in the Caspian Sea in a series of deposits known as the Azeri- Chirag-Guneshli (ACG) fields. These fields accounted for about 80 percent of the country’s oil output of 875,000 b/d in 2008.
In addition to oil, the Caspian region holds significant proved and possible natural gas reserves (see Table 2). The countries of the Caspian/Central Asian region produced about 165.6 bcm of natural gas in 2007. As of 2009, proven reserves of natural gas stood at about 7,762 bcm.
Turkmenistan is the Caspian region’s largest natural gas producer and reserve holder with an annual production of 70.5 bcm and proven reserves of 2,633 bcm in 2007. The largest fields are in the Amu- Dar'ya basin in southeast Turkmenistan, with half of the country’s natural gas reserves thought to be located in the giant Dauletabad- Donmez field. 10 In 2006-2007, two large fields – South Yolotan and Osman – were found in Turkmenistan’s Murgab Basin, north of
6 EURASIAN ENERGY AND ISRAEL'S CHOICES
Dauletabad, although reserve estimates for these fields have varied wildly. 11 Substantial reserves have also been found on the Uzbek side of the Amu-Dar’ya and Mugrab basins, which hold more than 95% of the country’s 1,841 bcm reserve base. Azerbaijan’s gas production comes almost entirely from the offshore Shah Deniz natural gas and condensate field, which began production in 2007, and from associated gas production from the offshore ACG fields. Azeri production was about 9.8 bcm in 2007.
Table 2. Caspian/Central Asian Gas Production and Reserves (billion cubic meters) 12 2007 Annual 2009 Proven Production Reserves Azerbaijan 16.2 850 Kazakhstan 11.3 2,408 Turkmenistan 70.5 2,663 Uzbekistan 67.6 1,841 Caspian 4 165.6 7,762 Russia 653.3 47,592
Source: US Energy Information Administration
EXISTING OIL & GAS PIPELINES FROM THE CASPIAN AND CENTRAL ASIA
From the beginning of the Caspian oil discoveries in Azerbaijan in the mid-19 th century, all energy exports from the Caspian and Central Asia have flowed through the Russian Empire to consumers in Europe or, after the 1917 Bolshevik Revolution, into the Soviet Union. During World War II, Baku produced more than 70 percent of the Soviet Union’s fuel supply, and the capture of the Caspian oil fields was the goal of Hitler’s 1942 summer offensive, which ended at Stalingrad – the battle that became the turning point of the War. 13
The second Caspian oil boom, which began shortly after the fall of the Soviet Union and included the entry of Western oil companies into the region, has resulted in several new export routes. The first of these routes was initially dominated by Russia but this has given way to a US and EU-backed alternative known as the “Southern Corridor,”
7 MIDEAST SECURITY AND POLICY STUDIES composed of a string of countries to the south of Russia: Azerbaijan, Georgia, and Turkey. Projects in the Southern Corridor offer Israel an opportunity to eventually connect with oil and gas systems supplying European and world export markets via the Mediterranean Sea.
Existing Oil Pipelines
Substantial exports from the Caspian began with the opening in 1997 of the 100,000 b/d Baku-Novorossiysk pipeline (also known as the Northern Route Export pipeline) to transport early oil from Azerbaijan’s Caspian oil fields to Russia’s Black Sea coast. In 1999, the 145,000 b/d Baku-Supsa pipeline (also known as the Western Export Route pipeline) opened, allowing booming Azeri production to flow to Georgia’s Black Sea coast. A rail route has also provided export capacity from Baku to the Georgian port of Batumi.
Figure 4. Existing Eurasian Oil Pipelines
Note: The BTC pipeline has been in operation since 2005 Source: US Energy Information Administration
Prior to the breakup of the Soviet Union, Kazakhstan’s only oil export route was the Atyrau-Samara pipeline, which interconnected with the Russian pipeline system operated by state monopoly Transneft. This
8 EURASIAN ENERGY AND ISRAEL'S CHOICES line has been upgraded over the years and has a capacity of about 600,000 b/d. 14 In 2001, however, Kazakhstan began pumping oil from the massive Tengiz oil field to Novorossiysk through the 700,000 b/d Caspian Pipeline Consortium (CPC). The CPC, whose shareholders include a number of major international oil companies, such as Chevron, Mobil, LUKoil, Royal Dutch Shell, Rosneft, and BP, is the only Russian oil pipeline not wholly owned by Transneft.
Russia lost its monopoly on Caspian oil exports in 2005 with the opening of the 1-plus million b/d Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which runs from Azerbaijan through Georgia to a major oil port on Turkey’s southern Mediterranean coast. The BTC pipeline was heavily supported by the Clinton and George W. Bush administrations and allowed Azeri oil to bypass Russian soil and Turkey’s congested Bosporus straits. In 2007, Kazakhstan began shipping roughly 100,000 barrels per day by tanker across the Caspian 15 Sea to the BTC pipeline’s origin outside Baku.
Existing Gas Pipelines
Prior to 1997, all Caspian and Central Asian natural gas was exported via Russian pipeline systems. Since 1969, the primary export route for Central Asian gas has been Gazprom’s Central Asia-Center (CAC) pipeline system, which runs from Turkmenistan via Uzbekistan and Kazakhstan to Russia. An eastern branch originates in eastern Turkmenistan and a western branch originates in the Turkmen Caspian Sea region. Both branches meet in western Kazakhstan, where they run north and connect with the Russian pipeline system. The CAC system has a maximum capacity of 55 billion cubic meters per annum (bcm/a) and is used primarily by Turkmenistan and Uzbekistan. Despite considerable natural gas reserves, Kazakhstan is a net importer of natural gas and exports very little of its production due to lack of infrastructure. 16
Similarly, Azerbaijan was a net natural gas importer until 2007 with the startup of the Shah Deniz field offshore in the Caspian Sea. The main export route for Azeri gas is the 8.8 bcm/a South Caucasus Pipeline (SCP), also known as the Baku-Tbilisi-Erzurum pipeline,
9 MIDEAST SECURITY AND POLICY STUDIES which runs parallel to the BTC oil pipeline, from Azerbaijan through Georgia, before connecting with the Turkish pipeline system near Erzurum. 17 The SCP may mark the early stage of projects aimed at supplying Caspian gas to Europe without traversing Russia, including the Turkey-Greece-Italy Interconnector, whose Turkey-Greece leg has been operational since 2007, and the strategic Nabucco pipeline project, which will be discussed in greater detail in the next section of this paper. 18
Caspian/Central Asian countries are not the only exporters with a presence in the Turkish market. Russia, which supplies over 60 percent of Turkish gas consumption, and Iran have both been courting growing Turkish demand. Iran has been interconnected with the Turkish pipeline system since 2001 via the East Anatolian natural gas pipeline, which runs from Tabriz in northern Iran to Erzurum in eastern Turkey. The pipeline has a capacity of at least 10 bcm/a, although the line has been underutilized since 2006. 19 This pipeline would be the key supply point for potential Iranian participation in the Nabucco pipeline to Europe, which currently is not in the cards for political reasons and because of the lack of available Iranian gas.
Gazprom’s Blue Stream pipeline, which entered into operation in 2003, carries gas from Russia beneath the Black Sea to Turkey and is expected to reach its full 16 bcm/a capacity sometime sometime in the near future.20 This line transports gas from the massive Zapolyarnoye gas field, which is located in northern Russia’s Yamal-Nenets Autonomous Region, and holds an estimated 3.3 trillion cubic meters of natural gas. 21 In 2004, Gazprom announced that the field had reached its design capacity of 100 bcm/a. 22
CASPIAN /C ENTRAL ASIAN OIL & GAS PIPELINE PROJECTS OF INTEREST TO ISRAEL
Israel’s strategic priorities include developing good diplomatic and economic relations with Caucasus and Central Asia countries, preventing Iran from increasing its influence in the region, and participating in energy projects, including oil and gas imports to Israel. Competing natural gas pipeline projects from the Caspian
10 EURASIAN ENERGY AND ISRAEL'S CHOICES production basin to European demand centers are of potential interest to Israel, provided energy can be transported safely and reliably. An additional challenge for Israel is to adequately assess which pipeline is most likely to be economically and geopolitically viable. In the gas sector, the main choice is between two proposed pipelines: a Russian- controlled South Stream pipeline and the EU-supported Nabucco, which will bypass Russia. The reliability of Turkish transit would be critical here.
Figure 5. Proposed Nabucco and South Stream Pipeline Routes
Source: BBC News
Nabucco and Trans-Caspian Gas Pipelines
The EU and US-backed 31 bcm/a Nabucco pipeline would connect production from the Caspian region to Europe via the Southern Corridor through Azerbaijan, Georgia and Turkey. 23 Exports from Nabucco to Israel have not been discussed but would be feasible if a spur line is constructed connecting the Turkey portion of the pipeline with Israel. A key concern with the Nabucco project is that, at the time of writing this report, it is not clear which countries would be the suppliers, apart from Azerbaijan. The website of the consortium building the 3,300 km Nabucco project specifically identifies Iran, Iraq, and Egypt as participants in the pipeline. 24 If these countries end up supplying Nabucco, it could potentially complicate Israel’s use of the line, in addition to US objections over Iran's participation. The first phase of the Nabucco project – the 2,000 km section between
11 MIDEAST SECURITY AND POLICY STUDIES
Ankara and the Baumgarten gas storage hub in Austria – is scheduled to break ground in 2011. The line is expected to enter into service in 2014 with an initial operating capacity of 8 bcm/a; its gas will come from the existing South Caucasus pipeline from Azerbaijan and the East Anatolian pipeline from Iran. The second construction phase, from 2014-2015, will include the construction of pipeline expansions along these routes and the installation of new compression stations to increase the pipeline capacity to 31 bcm/a. 25
The Nabucco project could be further bolstered if a Trans-Caspian natural gas pipeline were built, allowing supplies from western Turkmenistan and potentially even Kazakhstan to reach Western markets without traversing Russian territory. This project has been discussed since the 1990s but has not been able to move forward due to Russian and Iranian opposition to the project and legal disputes over demarcations of territorial boundaries in the Caspian Sea. 26 In 2008, Austria’s OMV and Germany’s RWE – two Nabucco participants – launched a joint venture to review gas transport infrastructure options that could provide Europe with gas from the eastern side of the Caspian Sea. 27 However, on April 24, 2010, Gazprom and the Austrian OMV signed a partnership agreement, which will allow Gazprom to use the Baumgarten, or Central European Gas Hub (CEGH), as the terminal and distribution center for the South Stream project. OMV has transformed the Baumgarten hub into a parity joint venture with Gazprom and proposed using a part of the Nabucco pipeline’s capacity for transporting Russian gas to Baumgarten. This indicates that key European partners are hedging their bets and, at the time of this writing, are not fully committed to Nabucco. 28
South Stream and Caspian Coastal Pipeline
Russia’s Gazprom has proposed a pipeline to Europe that is widely seen as a rival to Nabucco. Gazprom’s 63 bcm/a project – known as the South Stream pipeline – would run from the Russian Black Sea coast, under the Turkish-controlled waters of the Black Sea, to Bulgaria before splitting and moving on to major demand centers in Europe. The precise source of the gas to fill the South Stream project
12 EURASIAN ENERGY AND ISRAEL'S CHOICES has not been announced, and analysts question whether Russia has the production capabilities to fill the line.
Gazprom held talks with Azerbaijan over supplies from the second phase of the country’s Shah Deniz gas field, supplies which are currently slated for the Nabucco project. The South Stream pipeline takes a more northern route than Nabucco and a significant portion will be under water, making a spur line to Israel more difficult – and certainly more expensive – to achieve. If the South Stream is achieved at the expense of the Nabucco project, Israel will have fewer feasible Caspian gas supply options.
The South Stream project could be supported by the Caspian Coastal pipeline, which would involve the reconstruction of a Soviet-era pipeline along the coast of the eastern Caspian Sea, allowing an increase in gas exports from Turkmenistan and Kazakhstan of about 30-40 bcm/a. This supply would expand exports through the Central Asia-Center pipeline and could potentially supply Gazprom’s South Stream project. The Caspian Coastal project would also soak up supply that could be used to support the Trans-Caspian Gas and Nabucco pipeline projects.
However, the Caspian Coastal pipeline’s construction has been pushed back amid the global collapse in energy prices, the financial crisis, and the difficulty of Russia and Turkmenistan to agree on the price of gas supplies under their existing supply agreement. 29 Russia unilaterally halted imports of contracted Turkmen gas in April 2009 due to the inability to resell that amount in Russia and Europe. The explosion of a pumping station along the pipeline further strained the situation. Turkmenistan blamed the explosion on Russia, claiming it shut the valve on its end causing pressure to build up, while Moscow strongly denied the accusation. This breach of contract caused Turkmenistan a significant loss of revenue. 30 Total sales of Turkmen gas to Russia fell to just 11.3 bcm/a in 2009, down from an average of 45 bcm/a in preceding years. Russia reportedly resumed imports in January 2010 at a fraction the pre-crisis level. 31
13 MIDEAST SECURITY AND POLICY STUDIES
Blue Stream II, Samsun-Ceyhan and Medstream Pipelines
In 2005, Russia officially announced plans to expand the Blue Stream pipeline with a second line from Russia to Turkey – a move that some suspected was designed to saturate the Turkish market in order to derail the Nabucco and Turkey-Greece-Italy pipelines. 32 After negotiations with Turkey dragged on, Russia in 2007 replaced the Blue Stream II project with the South Stream project, which would bypass Turkey, running beneath the Black Sea to Central and Western Europe. Blue Stream II was largely forgotten until 2009, when Vladimir Putin revived the project on a state visit to Ankara, proposing that the pipeline extend further south to supply any of the following countries, singly or in combination: Syria, Lebanon, Israel, and Cyprus. 33 The proposed Blue Stream II is expected to have a capacity of 10 bcm/a. 34 However, the gas supply source for Blue Stream II (as with South Stream) has not been identified, and observers question Gazprom's ability to take on a third multi-billion dollar pipeline. 35 Between Russia’s three major export projects – Nord Stream (Gazprom’s gas pipeline beneath the Baltic Sea to Germany), South Stream, and Blue Stream II – only Nord Stream has identified a supply source. Furthermore, Russian Prime Minister Vladimir Putin is reported to have said the Blue Stream II pipeline may not extend to Israel as originally projected due to the recent discovery of gas off Israel’s coast. 36
The final, southernmost extension of Blue Stream II would have included the Mediterranean pipeline (“Medstream”) project – an ambitious plan to transport oil, natural gas, water, electricity, and fiber-optics from Turkish coastal city Ceyhan to Israel via five subsea pipelines (see Figure 6). From Israel, oil would then be transshipped via the Trans Israel Pipeline (TIP) to the Red Sea port of Eilat, where it would be loaded on tankers and shipped to India and East Asian countries. 37 The route is attractive for Asian consumers because it allows them to bypass the Suez Canal. Israeli, Indian, and Turkish officials met regarding the Medstream project in 2008 and feasibility studies of the pipeline were expected to be completed by the end of 2009. 38 However, the project was pronounced “dead in the water” by
14 EURASIAN ENERGY AND ISRAEL'S CHOICES some analysts after Turkey’s ruling AKP blamed Israel for the January 2009 conflict in Gaza. 39
If the Medstream Project moves forward, gas would originate in Russia via Blue Stream II and oil would originate in Russia via the proposed Samsun-Ceyhan pipeline, as well as from the Caspian via the Baku-Tbilisi-Ceyhan pipeline. In theory, Azeri natural gas could also supply the Medstream pipeline from Erzurum via the Turkish pipeline system or via a spur line from the proposed Nabucco project. However, no plans to this effect have been publicly announced.
Figure 6. Turkey-Israel Infrastructure Corridor (Potential Medstream Route)
Source: http://whatreallyhappened.wikia.com/wiki/Oil_for_Israel
An important component of the Medstream project is the construction of the Samsun-Ceyhan pipeline (also known as the Trans-Anatolian pipeline), which would run from Samsun on northern Turkey’s Black Sea coast across central Turkey to the oil terminal at Ceyhan (see Figure 6). Ceyhan is already a major outlet for Azeri oil, as the terminus of the BTC pipeline, and for Iraqi oil when the Kirkuk- Ceyhan crude oil pipeline is in operation. Designed as a bypass to the Bosphorus Strait, the 1.5 million b/d Samsun-Ceyhan pipeline would receive Russian and Kazakh oil shipped by tanker across the Black
15 MIDEAST SECURITY AND POLICY STUDIES
Sea and deliver it to Ceyhan for further export to international markets. Russia supports this project, which had a “first-stone-laying” ceremony in 2009 and is scheduled to be completed in 2012. 40 Moscow reaffirmed support for the project when it signed an energy security agreement with Ankara in May 2010, making the project a priority for both nations. 41 When complete, the project will be a major connection point for Russian and Kazakh oil, feeding into the Medstream project.
GEOPOLITICS OF THE CASPIAN AND SOUTH CAUCASUS ENERGY CORRIDOR
Israel’s interests in Southern Corridor energy exports are understandable due to the proximity of the proposed transit projects and the abundant business opportunities they represent. However, political risks in the Southern Corridor are high, due to the region’s simmering insecurity, including the conflict between Russia and Georgia over the latter’s provinces of Abkhazia and South Ossetia, which were recognized by Moscow as independent in the aftermath of the 2008 war. There is also the ongoing dispute between Armenia and Azerbaijan over Nagorno-Karabakh and the occupation of Azeri territories and the spread of Islamic fundamentalism into the Northern Caucasus and Azerbaijan.
The Russia-Georgia Conflict: August 2008 and Beyond
The brief but intense events that unfolded in August 2008 damaged international energy interests in the Southern Corridor and boosted Russia’s clout. Although the conflict was formally ended by the peace plan brokered by French President Nicolas Sarkozy, Russia did not implement many fundamental components of this agreement, and the debate over the self-proclaimed “independence” of the Georgian provinces of South Ossetia and Abkhazia has not yet been resolved. In the wake of the 2008 war, only Russia, Venezuela, Nicaragua, and the South Pacific Island-nation of Nauru recognized the secessionist territories. 42 The simmering conflict is liable to flare up again, and there is a high probability that the issue will further impact international energy interests in the region.
16 EURASIAN ENERGY AND ISRAEL'S CHOICES
During the August War, Moscow’s response went beyond fighting in South Ossetia, as Russian forces destroyed key military and civilian infrastructure in Georgia and caused thousands of causalities. Russia’s attacks on Georgia’s military bases and capabilities clearly weakened the country’s ability to defend itself in future conflicts. More importantly, the obliteration of Georgia’s nascent military power and heightened insecurity of its borders have made some NATO members – particularly those in Western Europe – less willing to extend a Membership Action Plan (MAP) to Georgia, which would be the last formal step on the way to possible future NATO membership. The conflict has also raised serious questions about NATO membership for Ukraine. 43 Thus, Russia has essentially prevented NATO from providing a security umbrella over the “Southern Corridor.” By keeping NATO out of the South Caucasus, Russia reserves the right to intervene militarily in the region without fear of a treaty-obligated allied response under Article Five of the NATO Charter. 44
The US seems to have acquiesced to Moscow's effective prevention of NATO membership for Georgia. As American Vice President Joe Biden stated during his visit there in July 2009, the US will not provide a “physical security guarantee” to Tbilisi.45 Future instability in Georgia’s breakaway provinces or another war could further strengthen Russia’s hand in the region at the direct expense of Georgia’s sovereignty and the safety of energy transportation projects in the Southern Corridor.
Security and energy in the South Caucasus are inexorably linked. Many speculated that Russia’s disproportionate use of force in Georgia was designed to cast doubt on the security of the strategic pipeline corridor linking the energy resources of the Caspian with Western markets. 46 The BTC oil pipeline was shut prior to the start of the August War due to an explosion at a pump station in eastern Turkey. However, this did not stop Russian forces from targeting the pipeline. Russian jets dropped more than 50 bombs in the vicinity of the BTC pipeline south of Baku but failed to damage the buried line. 47
Overall, the BTC shutdown had a minimal effect on world oil markets. Despite the restriction of oil flow from Azerbaijan during the
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August War, oil prices continued to fall due to the bursting of the financial bubble and steadily worsening global economic outlook. The long-term effect of the August War has been to cast doubt on the security of future energy projects in the South Caucasus, particularly the proposed Nabucco gas pipeline. By causing instability in the Southern Corridor, Russia has effectively increased Nabucco’s security risk, making the project less palatable to investors and creating an advantage for Gazprom’s competing South Stream pipeline, which increases Turkish dependence on Russian gas.
Nagorno-Karabakh: A Frozen Conflict
The Armenian-occupied and disputed territory of Nagorno-Karabakh is another potential flashpoint in the Southern Corridor that could threaten Israeli interests in Caspian oil and gas. Azerbaijan and Armenia are still technically at war over Nagorno-Karabakh, but a ceasefire has kept the region in de facto control of Armenia since 1994. In the short term, the threat of the conflict resuming is low. Armenia, which has been heavily armed with the help of Russia, still has a significant military advantage over Azerbaijan despite Baku’s large increase in military expenditures, which have been fueled by surging oil and gas earnings over the past several years. 48
Much like a second Georgian war, a resumed conflict between Azerbaijan and Armenia would cast doubt on the security of energy projects in the Southern Corridor. Should the Nagorno-Karabakh conflict erupt into all-out war between Azerbaijan and Armenia, Azerbaijan’s energy exports (its source of hard cash revenues) would become a strategic target for Armenia. 49 In such a scenario, Armenia would likely target the BTC pipeline or Azerbaijan’s Sangachal Terminal – where oil and gas from Azerbaijan’s offshore fields are stored and processed before export. 50 A successful attack on the processing plants at Sangachal would shut down Azeri exports for a much longer time than a direct attack on the pipeline, putting billions of dollars of Western investments at risk. Thus, an attack on the BTC or Sangachal would also increase the political risk on the proposed Nabucco gas pipeline, the Trans Caspian gas pipeline, and other energy projects in the region.
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Nonetheless, violations of the 1994 ceasefire increased in 2008-2009, and the departure of the US and Russian envoys to the Organization for Security and Cooperation in Europe (OSCE) Minsk Group – the body responsible for Nagorno-Karabakh negotiations in 2009 – has made the prospect for peace increasingly unclear. 51 A resumed conflict between Azerbaijan and Armenia would directly impact US strategic interests in the South Caucasus.
In the meantime, both the Turkish-Armenian and Azeri-Russian rapprochement have opened new opportunities for the Karabakh settlement. In October 2009, Turkey and Armenia signed accords to establish diplomatic relations, reopen their shared border, which had been shut since the Armenian occupation of Nagorno-Karabakh in 1994, and create a joint historical commission to investigate the massacre of Armenians by Ottoman Turks during World War I.52 Despite support from both Washington and Moscow, the protocol was delayed due to domestic opposition in both Turkey and Armenia. At the time of publication, the Turkish-Armenian negotiations remain stalled, vanquishing hopes in Washington and producing deep resentment of Ankara in Baku. 53
Moscow’s support of the Turkish-Armenian agreement is curious in light of its past desire to keep conflicts in the Southern Caucasus frozen. It is unclear how strongly Moscow actually supports the rapprochement. A resumed conflict between Azerbaijan and Armenia would benefit both Russia and Iran at the expense of Western interests. Russia would benefit if more Russian weapons are sold to both sides and if Russian or CSTO peacekeepers are called in to support or enforce a ceasefire between Baku and Yerevan. Increased Russian military involvement and presence would further augment Moscow’s leverage and influence in the region. 54 Moscow already enjoys strong influence in Armenia due to historical ties and the latter’s political and economic isolation from its neighbors. Meanwhile, Iran stands to gain if Azerbaijan remains preoccupied with the conflict over Nagorno-Karabakh rather than turning its attention to interacting with Iran’s Azerbaijani minority, which reportedly numbers 25 million and has complained of rights abuses. 55
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The West would rather see Armenia and Azerbaijan reach a peaceful compromise over Nagorno-Karabakh, thus limiting Moscow and Tehran’s leverage in the region and allowing the countries of the South Caucasus to integrate economically with the West. However, NATO and the EU are doing little to promote military and economic integration, leaving a vacuum to be filled by Moscow and Tehran.
TERRORISM
Azerbaijan: Emerging Sunni and Shia Threats
Azerbaijan has a majority Shia Islamic population, but its traditionally secular government and elites make it resistant to radicalism. Nevertheless, Islamist ideology has gained ground in recent years due to disillusionment with the current government and increased levels of poverty despite booming oil and gas revenues. External factors play a role as well, such as the penetration of Hizballah and the sponsorship of Islamic schools by Middle East donors and foundations connected to radical Sunni circles, which also support al-Qaeda and other terrorist organizations.
Of particular concern is a radical Wahhabi movement that has taken hold among the ethnic Sunni Lezgin minority in northern Azerbaijan, which receives sponsorship from wealthy Saudis, Kuwaitis, and natives of other Gulf States. 56 The Wahhabi movement has been active in the North Caucasus – Chechnya and Dagestan – for over a decade and has grown in Azerbaijan alongside Lezgin nationalist sentiments. 57 In 2007, Azeri security forces detained a group of Wahhabi militants armed with grenade launchers and automatic weapons that was planning to launch an attack on the US and British embassies in Baku, as well as the Baku offices of several major oil companies. 58 In recent years, authorities have also detained several dozen suspected militants accused of attending training camps outside of the country.
The rise of Wahhabi radicalism in Azerbaijan could endanger energy infrastructure in the region. Energy assets have become a popular target for terrorists in the Middle East because they are high-value
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Western investments; if successfully attacked, this could impact economies around the world. In February 2006, Saudi forces foiled an al-Qaeda attack on the Abqaiq oil gathering and processing facility through which two-thirds of the country’s oil output flow.59
Radical Shia groups sponsored by Iran and Hizballah are another potential concern in Azerbaijan, particularly in southern Azerbaijan along the border with Iran. Baku has repeatedly accused Tehran of interfering in its internal affairs. In 2002, Azeri authorities shut down many extremist Shia madrasas (religious schools), sponsored by Iran, which glorify the theocratic regime in Tehran, but a number of schools reportedly remain in operation. 60 In 2006, 15 Azeris who received training from Iranian security forces were charged with plotting violence against Israelis and Westerners. In 2008, surveillance operations, which were instituted as a result of that case, detected links between local militants and Hizballah operatives, which helped Azeri security forces foil a plot to blow up the Israeli Embassy in Azerbaijan. The foiled plot was reportedly designed and directed by Hizballah and Iranian intelligence as revenge for the alleged Israeli assassination of Imad Mughniyeh, chief operations officer of Hizballah, who died in a car bombing in Damascus. 61 Even though Baku has announced that it is revising its US policy, chances of a terrorist attack motivated by anti-American and anti-Western political views have not diminished.
Eastern Turkey: The PKK
The Kurdish Workers Party (known as the PKK) is a Marxist ethnic separatist organization. Established in the 1970s, its goal is to create an independent Turkish state in southeast Turkey, where the Kurdish population is the majority, as well as in the territories of Iran, Iraq, and Syria. 62 The PKK has engaged in armed conflict against the Turkish state and in terrorist attacks, including suicide bombings and the kidnapping of Western tourists, resulting in more than 40,000 deaths. 63
The PKK explicitly threatened the BTC pipeline after its completion in 2005 and successfully attacked a pump station along the line in
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August 2008, shortly before the conflict between Russia and Georgia broke out. Some analysts suspected Russian involvement in that attack. The BTC was pumping 850,000-950,000 barrels of crude per day before the attack, which shut the pipeline for two weeks. Although some 200,000 b/d of Azeri oil exports were redirected via the Baku-Supsa and Baku-Novorossiysk pipelines to Black Sea ports, the shutdown caused an estimated financial loss of over $1 billion. 64 The PKK has also claimed responsibility for attacks against the East Anatolian gas pipeline between Iran and Turkey. 65
In 2009, Ankara attempted to end the conflict with the PKK with a peace plan that would have included Kurdish language education, restoring Kurdish place names, and more freedom to use the Kurdish language in election campaigns, but the plan was derailed by nationalist parties in the Turkish parliament. The failure of the peace plan reinvigorated the PKK as it resumed its lethal operations. In July 2010, the group claimed responsibility for an attack on a natural gas pipeline connecting Iran and Turkey, which shut down the pipeline for at least six days. 66
GREAT POWER ENERGY COMPETITION IN THE CASPIAN REGION
The Southern Corridor is of high importance to the West because it provides a corridor free of Russian control for oil and gas exports from the Caspian Basin – a region that includes Azerbaijan, Kazakhstan, and Turkmenistan. Historically, all energy exports from this landlocked region have flowed through the Russian Empire to end markets in Europe. This arrangement has benefited Russia in two ways. First, as the sole export route for Caspian energy until the opening of the BTC pipeline in 2005, Russia has wielded significant economic and political leverage over the Caspian Basin countries. Second, Russia has been able to increase the total volume of energy resources under its control, allowing it to secure monopoly power over gas supplies as well as political leverage in Eastern and Southeastern Europe. Moscow has also managed to expand its market share and political clout in Western Europe.
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Russia’s control of Caspian energy began to crack with the opening of the Southern Corridor’s BTC oil pipeline in 2005 and the South Caucasus gas pipeline (SCP) in 2006. These projects allowed Azeri oil and gas exports to bypass Russia on the way to consumer markets in the West. Other Caspian producers, such as Kazakhstan, Turkmenistan, and Uzbekistan, remain largely dependent on Russian- controlled oil and gas export routes, although this dynamic has begun to chance since the opening of the Central Asia-China gas pipeline in 2009. When the second phase of this 1,833-km project is completed, sometime in 2011, it will deliver 30 bcm/a of natural gas from Turkmenistan to the Xinjiang Uygur Autonomous Region in western China, where it will be connected to China’s Second West-East gas pipeline. 67 Russia’s control of Central Asian resources may further deteriorate due to the proposed Trans-Caspian oil and gas pipelines, which would run on the bottom of the Caspian Sea, linking up with the BTC oil pipeline and the South Caucasus/Nabucco gas pipeline in Azerbaijan. Kazakhstan, the Caspian region’s largest oil exporter and reserve holder, currently relies on Russian pipeline routes for the majority of its crude exports, including the Russian pipeline network, operated by the state-owned Transneft, and the Caspian Pipeline Consortium (CPC) project, a pipeline developed by Russian and Kazakh governments and a consortium of national and international oil companies, which carries oil from western Kazakhstan to Russia’s Black Sea port of Novorossiysk. 68
Russia has aggressively worked to prevent a proposed Trans-Caspian oil pipeline, which would transport 150,000 to 400,000 barrels per day from Kazakhstan’s massive Kashagan oil field across the Caspian Sea to the BTC pipeline in Azerbaijan, allowing Kazakhstan to reduce its dependence on Russian export routes. 69 Some Kazakh oil – roughly 100,000 b/d – is already shipped to the BTC pipeline via a tanker-operated system across the Caspian, and plans are underway to expand these shipments. 70 Russia and Iran – another suitor of Kazakh oil – both oppose a Trans-Caspian oil pipeline and have thrown a roadblock at the project by challenging the legal status of the Caspian Sea. 71 Furthermore, Moscow is working to ensure that Kazakhstan exports its resources via Russian-controlled pipelines.
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In the early 2000s, Russia repeatedly blocked attempts to expand the CPC pipeline, arguing for higher pipeline tariffs and a restructuring of the consortium’s debt, but eventually reversed its position when alternative export options began emerging for Kazakhstan. By 2005, the Kazakhstan-China oil pipeline had been launched and Kazakhstan had begun making slow progress on plans for a Trans-Caspian oil export pipeline. 72 After excruciating negotiations, CPC pipeline shareholders finally agreed in December 2008 to double the capacity of the pipeline from 700,000 b/d to 1.4 million b/d by 2013 to accommodate rising oil output from Kazakhstan. 73 Increased capacity on the Russian export route leaves less supply available for the Trans- Caspian oil pipeline, making the project’s realization increasingly unlikely.
Further Kazakh oil exports to China could complicate oil supplies for Russia and the West. The 987-km Kazakhstan-China pipeline exported about 85,000 b/d of oil to China in 2007 and plans are underway to double the capacity on the line from 200,000 to 400,000 b/d by filling the line with crude oil from the Kashagan field. 74 Exports along this route are effectively locked up by internal Chinese markets, making less oil available for Western-oriented export routes.
Russia’s challenge to the US and EU-backed Nabucco gas pipeline has been even more forceful than its opposition to the Trans-Caspian oil pipeline. In recent years, in order to deny Nabucco a source of supply, Russia has offered to buy natural gas from Caspian producers, especially Turkmenistan, at prices close to those paid in the EU by Gazprom customers. Moscow has also proposed a competing project – the South Stream pipeline – designed to obviate the need for Nabucco (see Figure 5). 75 It turns out, however, that signing contracts is easier than ensuring their execution, as the Russian-Turkmen disagreement over the Caspian Coastal pipeline has demonstrated. Given the limited number of potential suppliers in the Caspian region, it is unlikely that there is enough gas to supply both Nabucco and South Stream. Although Turkmenistan is not identified as a primary supplier for Nabucco, many analysts believe the project will not be feasible without Turkmen participation, given the political and security challenges of supplying oil from Iraq and Iran. Barring an
24 EURASIAN ENERGY AND ISRAEL'S CHOICES about-face in Iranian foreign policy, the likelihood of Iraqi gas eventually being exported via Nabucco is higher than that of Iranian export. However, in either case the gas cannot be contracted to Israel under the current conditions of Iranian hostility, the technical state of war between Israel and Iraq, and Iraq’s compliance with the Arab Boycott. 76 This leaves Azerbaijan and Turkmenistan as the only potential Nabucco suppliers through whom Israel could contract gas. However, Israel may prefer Russian supplies if Turkey and its EU backers insist on pumping Iranian and Iraqi gas into the Nabucco project.
Russia has acted assertively to ensure that its South Stream project, which would flow across the length of the Black Sea to Bulgaria and further to Serbia, Hungary and Austria, has the upper hand over Nabucco. In 2007, Gazprom agreed to buy up new supplies of Kazakh and Turkmen gas at near European prices beginning in 2009 – a move that effectively doubled the price that Gazprom paid in 2008. 77 Russia, Turkmenistan and Kazakhstan also agreed to expand the existing northbound Caspian coastal gas pipeline, the Prikaspiisky pipeline, which will increase capacity to accommodate 10 bcm per year of Turkmen gas and equivalent quantities of Kazakh gas by 2010. This move will leave less Central Asian production available for the Western-backed Trans-Caspian gas pipeline that is necessary to fill Nabucco and will set the framework for greater cooperation between Russia and Caspian producers in order to fulfill the South Stream project. 78 Gazprom’s willingness to pay higher prices for Central Asian gas despite the resulting reduction in its profit margins on re- exports to Europe highlights the company’s willingness to sacrifice short-term profits for long-term control of the Central Asian gas supply and its European market share.
Despite the financial crisis and the crash in energy prices, Gazprom in May 2009 announced together with project partner Eni SPA of Italy that it planned to double the capacity of the South Stream pipeline to 63 bcm per year, up from the original capacity of 31 bcm per year. 79 Shortly before the plans were announced, Russian Energy Minister Sergei Shmatko told reporters that he thought that the South Stream project, currently slated to launch in 2015, would be realized before
25 MIDEAST SECURITY AND POLICY STUDIES the 31 bcm per year Nabucco project, which has an in-service date of 2014. 80 The South Stream project scored a major victory in October 2009 when Russia announced that Turkey had granted all of the permits necessary for Gazprom to construct South Stream infrastructure along the Turkish-controlled seabed beneath the Black Sea. 81 The agreement allows Gazprom to redirect the South Stream through Turkish rather than Ukrainian waters (at higher cost). It follows recent deals signed with Italy, Bulgaria, Greece, Serbia and Slovenia to start building the onshore European segments of the pipeline and gives the project a clear leg up over the Nabucco project.
Russia also seeks to acquire gas supplies from Azerbaijan, the Nabucco project’s key supplier. In June 2009, Gazprom signed an agreement to import 500 million cubic meters per year of natural gas from Azerbaijan and ship it by pipeline to Europe beginning in 2010. 82 Although the contracted amount is relatively small, Alexei Miller, Gazprom’s CEO, said that Azerbaijan also promised the company priority in buying gas from the second phase of Azerbaijan’s Shah Deniz gas field – the main source of supply that the EU hopes will fill the Nabucco pipeline. 83 Setting the framework for future Russian purchases from Shah Deniz II, the sale and purchase agreement for the Azeri gas deal, signed in October 2009, indicated that initial purchase volumes would increase subsequent to increases in Azerbaijan’s export potential. 84
The US and EU have thus far not effectively responded to Russia’s assertive actions in the Caspian, although both have continued to give strong verbal support for the Nabucco project, which has struggled to move forward amid numerous challenges. There are a large number of actors that need to be brought fully onboard for Nabucco to succeed, including multiple suppliers, transit nations, and customers across several regions, including Central Asia, the South Caucasus, and Europe.
In September 2009, Joschka Fischer, an adviser to Nabucco and former German vice chancellor and foreign minister, said the project had not yet received the necessary political backing to move forward. 85 While the EU as a whole supports Nabucco, some
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European countries and companies hedged their bets, choosing to support both Nabucco and Gazprom’s South Stream project. Suppliers from the Caspian and Middle East have not yet signed supply agreements with Nabucco, while Russia has inked several important gas deals with Caspian producers over the last few years that are likely to limit the available supply for Nabucco. In particular, the recent gas deal between Gazprom and the State Oil Company of Azerbaijan Republic (SOCAR) has raised questions about Azerbaijan’s commitment to supply the initial 8 bcm to the Nabucco project from Shah Deniz II. 86
European concerns were partially put at ease in July 2009, when Azerbaijan, along with Turkmenistan, affirmed that they had enough supplies available to fill Nabucco, although neither has since signed a supply agreement with the project. 87 A few days later, the governments of participating EU states signed an intergovernmental agreement with Turkey, authorizing the Nabucco project. Following the agreement, Russian state television echoed earlier statements from Prime Minister Putin that questioned the feasibility of the project. In May 2009, Putin had derided Nabucco saying, “Before putting millions of dollars into a pipeline and burying it in the ground, you have to know where the gas for this pipeline is going to come from.” 88 Gazprom’s CEO had voiced a similar sentiment in September 2009. 89
The geopolitical struggle for energy resources in the Caspian and Central Asia will determine the realization of gas projects of interest to Israel. If Gazprom’s South Stream project succeeds at the expense of Nabucco, Russia could consolidate its grasp on Caspian gas for decades to come and provide Moscow with enhanced energy clout and bargaining power vis-à-vis European capitals and Brussels. Given the strategic economic and political benefits at stake, Russia will continue to push South Stream regardless of the cost, which many experts expect to be at least double that of Nabucco. Russia is also likely to continue offering potential Nabucco suppliers, transit countries and customers better conditions than the non-Russian route alternative provides. As Gazprom and Transneft are state-owned entities, they are not just business entities but are used to implement state priorities.
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The US and EU are likely to stand in firm support of Nabucco but will have difficulty managing the myriad diplomatic and financial prerequisites necessary for launching Nabucco, particularly in the face of determined Russian attempts to cease the project. Moreover, unlike the BTC, Nabucco lacks strong American leadership and firm support from the transit countries involved. The BTC was realized due in large part to tireless efforts of the Clinton and Bush II administrations and the firm hands of Azerbaijan’s Heydar Aliyev and Georgia’s Eduard Shevardnadze, who championed the project. The Obama administration’s support for Nabucco is lukewarm by comparison. Nabucco is also facing a different Turkey than the BTC – the current Turkish AKP administration is both more suspicious of the US and more comfortable with Russia than its secular predecessors of the 1990s.
If Russia is unable to derail the Nabucco and Trans-Caspian pipelines economically and politically, it may resort to violence – by stirring up the simmering territorial conflicts in Georgia, Nagorno-Karabakh, or even around the delineation of the Caspian Sea – in order to heighten the security threats in the Southern Corridor. Iran, another Caspian littoral state, is Moscow’s ally in this regard. In July 2009, Russia and Iran held a joint military exercise in the Caspian Sea involving some 30 vessels, a signal that the two nations’ Caspian interests are beginning to align. Iran wants a greater stake in the Caspian’s energy riches – up to 20 percent if the Caspian Sea is legally classified as a lake – while Russia would like to block the Trans-Caspian pipelines designed to bypass Russian territory. 90
THE IMPORTANCE OF CASPIAN /C ENTRAL ASIAN ENERGY TO ISRAEL
Israel can benefit from projects designed to bring Caspian and Central Asian oil and gas to Western markets as they allow Israel to diversify supply and receive abundant energy at affordable prices. The EU and the US, concerned with breaking Russia’s dominance of Caspian export routes and reducing Europe’s dependence on Russian- controlled energy, have already succeeded in implementing the BTC oil and South Caucasus gas pipeline projects in the Southern Corridor. These accomplishments were made possible by the relatively
28 EURASIAN ENERGY AND ISRAEL'S CHOICES favorable geopolitical environment of the late 1990s and early 2000s: Russia was considerably weaker, Washington had a commitment and coherent diplomacy in the region, South Caucasian and Turkish leaders championed the projects, and British Petroleum played a key role as a private sector industry leader.
Southern Corridor export routes pass through Turkey before continuing on to markets in Europe, making Turkey a major energy transportation hub. If subsea oil and gas pipelines are built connecting Israel with Turkey via Cyprus, as the current Medstream project envisions, Israel may be able to tap into the Western-backed Southern Corridor projects as well as the Russian energy projects, such as Gazprom’s Blue Stream II and the Russian-backed Samsun-Ceyhan oil pipeline. If the choice between Western-backed and Russian- backed projects exists, and Turkey is not hostile, Israel is more likely to go with Nabucco-Medstream due to its EU geostrategic orientation. However, if Blue Stream II is the only project built, Israel may have little choice but to join it.
Access to Southern Corridor energy resources is important for Israel for two primary reasons: to supply growth in natural gas consumption and to help diversify the energy supply away from existing sources. Tapping into natural gas pipelines in the Southern Corridor would allow Israel to increase its import and consumption of natural gas, a cleaner burning fuel that can help reduce its dependence on more polluting coal and petroleum based products. Israel is highly dependent on petroleum products to meet its energy needs; in 2007 more than 60 percent of the country’s total primary energy consumption was met by petroleum based fuels. 91
Israel’s electricity generation sector is largely reliant on coal-fired power plants, which produced about 70 percent of the country’s nearly 54,000 gigawatt-hours (GWh) of power consumption in 2007. 92 Increased natural gas supply would enable Israel to meet new electricity demand through cleaner burning natural gas, or to phase out dirty coal plants in order to meet the country’s climate change goals. More natural gas-fired power may also allow Israel to phase out
29 MIDEAST SECURITY AND POLICY STUDIES its oil-fired power plants, which accounted for about 10 percent, or nearly 6,000 GWh, of the generation in 2007.
Increased natural gas-fired power generation may also impact Israel’s transportation sector, which could see a significant boost in the use of electric vehicles if Project Better Place proves successful. 93 Moreover, as metro and light rail lines are built for Tel-Aviv, Jerusalem and other areas, the demand for electricity for transportation will increase. Ample and affordable gas supply may allow public transit agencies and the owners of large vehicle fleets to invest in natural gas-fueled vehicles, such as buses and trucks. Beyond these developments, the Israeli automotive sector will remain dominated by petroleum products for the foreseeable future.
A second major benefit of access to Southern Corridor oil and gas is supply source diversification. Israel currently imports much of its natural gas from Egypt under long-term contract. Egyptian supply has been reliable and inexpensive to date but if natural gas is to play a larger role in Israel’s future energy mix, additional sources are needed to achieve supply diversification and ensure its energy security. Of particular concern is the succession of Egyptian President Hosni Mubarak. Mubarak’s son, Gamal, has been groomed for the presidency but his election is not certain. The Muslim Brotherhood, a transnational Islamist movement, has been gaining seats in the Egyptian parliament and some members may be hoping for a repeat (with some modifications) of the Iranian Revolution of 1979, when weak secular democratic politicians undermined the shah’s regime, clearing the way for the rise of an Islamic regime. A succession crisis in Egypt could place Israeli-Egyptian relations – including gas imports – at risk. 94
Nevertheless, giant natural gas discoveries offshore in the Eastern Mediterranean may make gas supply diversification a moot point for Israel. Israel already produces about 2.3 bcm/a from offshore fields and the country could become self-sufficient, or even a gas exporter, as early as 2012, when the first new fields are expected to come online.
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Greater diversification benefits from Southern Corridor projects may come in the oil sector. Due to the historic Arab hostility toward the Jewish state, Israel is in a de jure state of war with many oil and gas producing Arab States; is in a de facto state of war with Iran; and has no ambassador from Venezuela. Traditionally, Israel has had to look farther afield – to Russia, Central Asia, and as far away as Mexico and South America – for oil imports. 95 All of these imports have arrived in Israel by tanker.
Access to pipeline projects in the Southern Corridor might help Israel expand its net of potential oil suppliers, possibly reducing overall costs due to proximity, and would for the first time give Israel access to pipeline import infrastructure. An oil or gas pipeline, such as Medstream, that is laid on the bottom of the Mediterranean is harder to disrupt than a tanker, which can be rocketed, torpedoed, shelled or bombed from the air. Furthermore, projects such as the Samsun- Ceyhan pipeline may help Israel increase the security of its Russian oil imports by bypassing the narrow and crowded Bosporus straits.
Beyond the primary benefits of increased oil and natural gas supplies and energy diversification, Southern Corridor energy projects may provide Israel with potentially lucrative business opportunities as a transit country. In particular, Israel is considering expanding transshipment of crude oil produced in Russia and the Caspian to India and countries in East Asia, via the Eilat-Ashkelon reversible oil pipeline, which is operated by the Eilat-Ashkelon Pipeline Company (EAPC). The company operates a 42-inch reversible pipeline linking the Mediterranean with the Red Sea. 96 This project allows oil supplies to avoid expensive transit tariffs and congestion through the Suez Canal. Essential for the success of this plan is the development of the Medstream pipeline, which would run from the oil storage hub in Ceyhan, and may benefit from the Samsun-Ceyhan pipeline, which would carry oil across Turkey, from its Black Sea coast to Ceyhan, bypassing the Bosporus and the Suez Canal.
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RECOMMENDATIONS FOR ISRAELI ENERGY POLICY
The Southern Corridor energy route and the establishment of Turkey as a major energy transport hub offer new and complicated choices for Israeli energy policy and security, including an increase in import volumes and a shift in the structure of the country's energy imports. By tapping into oil and gas pipelines in the Southern Corridor, Israel can supply its growing energy demand and diversify its existing sources of supply, increasing its energy security. Business opportunities and diplomatic benefits of increased interconnection with Caspian hydrocarbon sources are evident.
How Israel takes advantage of these emerging energy routes raises important questions and considerations for the country’s energy policy. There is increasing great power competition over Caspian and Central Asian energy resources, with the EU and US backing exports to Europe through the Southern Corridor, and with Russia pushing alternate routes across its own territory (or in Turkish territorial waters) in order to maintain control over the region’s energy flow and also a market share in Europe. Meanwhile, on the other side of the Eurasian land mass, China is paying greater attention to the oil and gas bonanza taking place on its western flank while increasing its exports from the region.
Geopolitical instability, fueled in part by an assertive Russia and a diminished US interest, further complicates the development of Eurasian energy routes. Tensions between Russia and Georgia remain high in the wake of the 2008 War; the conflict between Azerbaijan and Armenia over Nagorno-Karabakh remains unresolved as military spending by both nations continues to increase; and Turkish- Armenian rapprochement seems to be getting nowhere. Regional separatist movements and international terrorist groups continue to exist in the North and South Caucasus and in Kurdistan. They are likely to target energy infrastructure, increasing the political risk of new projects in the Southern Corridor.
Navigating the continually shifting politics and security of Eurasia will be a complex task for Israeli policymakers. There may be no
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“right” policy for Israel. It is more important for Israel to adopt a flexible policy designed to succeed in a dynamic environment. Such a strategy would advocate the following action:
Explore a Turkey-Israel energy interconnection. Surrounded by unfriendly and unreliable states, Israel was an energy island until the recent gas pipeline connection to Egypt. While the natural gas discovery off the northern shores of Israel will help change this situation, the country can still diversify its energy supplies and enhance its energy security by connecting with the emerging Turkish supply hub to its north. The Medstream pipeline, or a similar project to ensure a supply of Caspian oil and gas via Turkish oil and gas transit systems, should be explored. In the future, as Israel’s mega offshore gas fields are brought into full operation, Israel may even benefit from reversing the gas interconnection, allowing it to export gas to Turkey, or further on to Europe.
Today, it is difficult to talk about increasing Israel’s strategic dependence on Turkey as the relationship between Ankara and Jerusalem is deteriorating. If political tensions diminish, or if a different Cabinet is formed in Ankara after the slated July 2011 elections, Israel may quietly begin exploring relations with Turkish state-owned energy companies. If and when relations with Turkey improve, Israel may consider the underwater gas pipeline to Haifa and an oil pipeline extension from Ceyhan to Ashkelon, with a view of expanding the volume of EAPC for transshipments via Eilat.
Don’t take sides in the competition for Caspian resources… It is unclear which projects will eventually materialize in the Southern Corridor. The volumes of hydrocarbon exports will be dictated by Europe’s economic recovery and Israel has only limited leverage in affecting which projects ultimately succeed. Clearly, Nabucco, following a more southern route through Turkey, rather than Gazprom’s northern “South Stream” route beneath the Black Sea, offers greater opportunity for Israel. Nevertheless, Russia’s Blue Stream II project is directly seeking to supply the Israeli market and could prove very advantageous to Israel. Rather than pick sides between Russian and EU/US projects, Israel should maintain that
33 MIDEAST SECURITY AND POLICY STUDIES projects are not mutually exclusive and let the great powers compete for Israel’s support. However, Israel should strongly oppose the participation of Iran in any of the projects taking shape in the Southern Corridor, particularly the Nabucco project. The US will side with Israel on this point.
…But verify Russian supplies. Israel should not overtly take sides in the competition over Eurasian energy resources, but it should be wary of trusting Russia. Russia’s gas giant, Gazprom, has announced several ambitious and expensive pipeline proposals, including the Nord Stream pipeline, beneath the Baltic Sea to Germany, the South Stream pipeline, which would supply Europe from beneath the Black Sea, and Blue Stream II, which hopes to flow beneath the Black Sea, across Turkey, and on to Israel. Many analysts have questioned Gazprom’s ability to realize these projects, especially amid the global collapse in energy prices and the financial crisis. Furthermore, Gazprom has not identified the fields that would supply two of its projects – South Stream and Blue Stream II – and some observers question whether Russia has the resources to fill either of these projects. Gazprom’s ambitious projects may be a bluff, designed to de-rail Nabucco or other projects, competing to supply the European market. Taking this into account, Israel should view Russia’s pipeline plans with a critical eye.
CONCLUSION
As Israel joins the Organization for Economic Cooperation and Development (OECD) and looks confidently into the 21 st century as a Middle Eastern and Mediterranean economic powerhouse, its energy needs will only go up. The key policy approach to energy production is the diversification of geographic sources and fuels. Thus, Israel's ambitious plans to decrease the share of electricity produced in coal- fired plants by replacing it with domestic (off-shore) and imported natural gas, both piped and LNG, as well as renewables and nuclear, need to be carefully calibrated. Piped Eurasian gas, including from Russia and the Caspian, can play a significant role in this undertaking. All novel approaches to gasification come at a cost: LNG tends to be more expensive, while foreign piped gas amplifies geopolitical
34 EURASIAN ENERGY AND ISRAEL'S CHOICES dependencies on Egypt and Turkey, whose goodwill cannot be guaranteed in the long term. Moreover, it should be remembered that Soviet Russia had been hostile to Israel for the better part of the second half of the 20 th century, and though today’s relations between Moscow and Jerusalem have improved, an undercurrent of anti- Semitism unfortunately remains a feature of the Russian political discourse, though this is probably not enough to derail a gas project. The Caspian states that border Iran could potentially come under pressure from the Islamic Republic if they decide to sell gas to Israel. Nevertheless, 10 years from now, the majority of electricity produced in Israel could come from natural gas, both domestic and imported, and a good part of the latter may come from Eurasia. The decision to pursue Eurasian gas for Israel will be based on a combination of economic and geopolitical factors, as is often the case in major energy and infrastructure projects involving volatile regions.
35 MIDEAST SECURITY AND POLICY STUDIES
Notes
1 G. Gleason & M. E. Shaihutdinov, "Collective Security and Non-State Actors in Eurasia," International Studies Perspectives 6, 2005, 274–284. Online. Available at http://www.silkroadstudies.org/new/inside/teaching/Collective%20Security.pdf 2 "Israel Energy Profile," U.S. Energy Information Administration , 2010. Online. Available at http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=IS (accessed June 6, 2010). 3 "Natural Gas in Israel 2007," International Energy Agency . Online. Availabe at http://www.iea.org/stats/gasdata.asp?COUNTRY_CODE=IL (accessed June 6, 2010). 4 “Noble Energy, Inc. Announces Startup of Natural Gas Production From Mari-B Field Offshore Israel,” Gulf Oil & Gas , December 24, 2003. Online. Availabe at http://www.gulfoilandgas.com/webpro1/MAIN/Mainnews.asp?id=249 (accessed June 6, 2010). 5 A. Morrow & K. M. al-Omrani, “Opposition Slams Gas Sale to Israel,” IPS , February 28, 2009. Online. Availabe at http://ipsnews.net/news.asp?idnews=41408 (Accessed June 6, 2010). 6 G. Luft, “Energy Security Challenges for Israel Following the Gaza War,” Journal of Energy Security , 2009. Online. Availabe at http://www.ensec.org/index.php?option=com_content&view=article&id=178:energy -security-challenges-for-israel-following-the-gaza- war&catid=92:issuecontent&Itemid=341 (accessed June 6, 2010). 7 “Israel Govt. publishes $400m LNG terminal tender,” LNGpedia.com , June 14, 2009. Online. Availabe at http://www.lngpedia.com/israel-govt-publishes-400m-lng- terminal-tender/ (accessed June 6, 2010). 8 D. Wainer, “Leviathan Find May Spur Israel Gas Export, Delek Says,” Businessweek , June 3, 2010. Online. Availabe at http://www.businessweek.com/news/2010-06-03/leviathan-find-may-spur-israel-gas- export-delek-says-update1-.html (accessed June 6, 2010). 9 Proved Reserves as of January 1, 2009, from "International Energy Statistics," U.S. Energy Information Administration . Online. Availabe at http://tonto.eia.doe.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=5&pid=57&aid=6 (accessed November 3, 2009); Possible Reserves as of 2005, from “Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts,” U.S. Energy Information Administration , July 2005. Online. Availabe at http://www.eia.doe.gov/emeu/cabs/caspian_balances.htm (accessed March 30, 2010). 10 “Republic of Turkmenistan ,” United Nations Economic Commission for Europe (UNECE ). Online. Available at http://www.unece.org/operact/opera/sppled/tur.htm (accessed March 30, 2010). 11 “APS Review Gas Market Trends,” Entrepreneur , 2008. Online. Available http://www.entrepreneur.com/tradejournals/article/185436436.html (accessed March 30, 2010). 12 Proven reserves are reported as of January 1, 2009.
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13 V. Agayev, “World War II and Azerbaijan,” Azerbaijan International , Summer 1995, pp. 50-55. Online. Available at http://azer.com/aiweb/categories/magazine/32_folder/32_articles/32_ww22.html (accessed May 19, 2010). 14 “APS Review Oil Market Trends,” Entrepreneur . Online. Available at http://www.entrepreneur.com/tradejournals/article/182278090.html (accessed March 30, 2010). 15 “Oil - Kazakhstan Country Analysis Brief,” U.S. Energy Information Administration , November 2009. Online. Available at http://www.eia.doe.gov/emeu/cabs/Kazakhstan/Oil.html (accessed March 30, 2010). 16 M. Markey, “Topic Report: Caspian Sea Region Review,” Apache Corp. Topic Reports , August 25, 2008. Online. Available at http://www.apachecorp.com/explore/Browse_Archives/View_Article.aspx?Article.It emID=625 (accessed March 30, 2010). 17 “Shah Deniz Taps Primed,” upstreamonline.com , September 14, 2006. Online. Available at http://www.upstreamonline.com/live/article119108.ece (accessed March 30, 2010). 18 N. Katsis, “The Strategic Projects of DESFA in the Region of South East Europe,” DEFSA , June 18, 2009. Online. Available at http://www.iene.gr/3rdSEEED/articlefiles/Session_III/Katsis.pdf (accessd March 30, 2010). 19 “Caspian/Iraq Export Pipelines,” Middle East Economic Survey , Vol. XLIX, No. 52, December 25, 2006. Online. Available at http://www.mees.com/postedarticles/oped/v49n52-5OD02.htm (accessed March 30, 2010). 20 “Blue Stream Natural Gas Pipeline, Russia/Turkey,” offshore-technology.com . Online. Available at http://www.offshoretechnology.com/projects/blue_stream/ (accessed March 30, 2010). 21 P. Trafalgar, “Boom for Russia’s Gas-Export Pipelines,” The Russia Journal 139, 2001. Online. Available at http://www.russiajournal.com/node/5615 (accessed March 30, 2010); See also “Zapolyarnoye Oil and Gas Condensate Field,” Gazprom . Online. Available at http://old.gazprom.ru/eng/articles/article8884.shtml (accessed March 30, 2010). 22 “The Zapolyarnoye Field has been Brought to the Designed Capacity of 100 Bcm/yr,” Gazprom Press Release , October 2, 2004. Online. Available at http://old.gazprom.ru/eng/news/2004/10/14105.shtml (accessed March 30, 2010). 23 “Project Description/Pipeline Route,” Nabucco Gas Pipeline Project website . Online. Available at http://www.nabucco-pipeline.com/project/project-description- pipeline-route/project-description.html (accessed March 30, 2010). 24 Ibid. 25 “Project Timeline,” Nabucco Gas Pipeline Project website . Online. Available at http://www.nabucco-pipeline.com/project/project-timeline/main-page-project- timeline-20090126.html (accessed March 30, 2010). 26 A. Cohen, “Iran's Claim Over Caspian Sea Resources Threaten Energy Security,” The Heritage Foundation Backgrounder , September 22, 2002. Online. Available at
37 MIDEAST SECURITY AND POLICY STUDIES
http://www.heritage.org/Research/Reports/2002/09/Irans-Claim-Over-Caspian-Sea- Resources-Threaten-Energy-Security (accessed May 7, 2010. 27 “OMV, RWE Launch Caspian Pipeline JV," AFX News Limited , December 22, 2008. Online. Available at http://www.downstreamtoday.com/news/article.aspx?a_id=14357 (accessed March 30, 2010) 28 V. Socor, “Austria Joins Gazprom’s South Stream Project,” Eurasian Daily Monitor , April 30, 2010. Online. Available at http://georgiandaily.com/index.php?option=com_content&task=view&id=18455&It emid=132 (accessed May 7, 2010). 29 R. M. Cutler, “Moscow and Ashgabat Fail to Agree Over the Caspian Coastal Pipeline,” Central Asia-Caucasus Institute, April 8, 2009. Online. Available at http://www.cacianalyst.org/?q=node/5080 (accessed March 30, 2010). 30 S. Shuster, “East and West Scramble for Turkmenistan's Riches,” Time Magazine, November 29, 2009. Online. Available at http://www.time.com/time/world/article/0,8599,1941220,00.html (accessed May 19, 2010). 31 V. Socor, “Kremlin Renews Focus on the Contest for Turkmen Gas,” Moldova.org , January 4, 2010. Online. Available at http://economie.moldova.org/news/kremlin-renews-its-focus-on-the-contest-for- turkmen-gas-205246-eng.html (accessed March 30, 2010). 32 Z. Baran, “Security Aspects of the South Stream Project,” Hudson Institute: Center for Eurasian Policy , October 2008, pp.14. Online. Available at http://www.hudson.org/files/publications/BaranSouth%20Stream%20for%20EP.pdf (accessed March 30, 2010). 33 V. Socor, “Gazprom, Turkey, Revive and Reconfigure Blue Stream Two,” Eurasia Daily Monitor 6:154, August 2009. Online. Available at http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=35394&tx_ttne ws[backPid]=7&cHash=da2f573c7c (accessed March 30, 2010). 34 “Gazprom: Israel, Russia, Turkey to Meet Soon for Blue Stream II," Today’s Zaman , October 10, 2009. Online. Available at http://www.todayszaman.com/tz- web/news-189460-gazprom-israel-russia-turkey-to-meet-soon-for-blue-stream- ii.html (accessed March 30, 2010). 35 Socor, “Gazprom, Turkey, Revive and Reconfigure Blue Stream Two.” 36 “Gas pipeline may not go to Israel: Putin,” Fiza News , June 8 ,2010, Online. Available at http://www.fizanews.com/2010/06/08/gas-pipeline-may-not-go-to- israel-putin/ (accessed June 9, 2010) 37 “Turkey-Israel Agree to Start Works on Pipeline Project,” Hurriyet DailyNews.com . Online. Available at http://www.hurriyet.com.tr/english/finance/9460948.asp (accessed March 30, 2010). 38 “Turkish, Israeli, Indian ministers to meet for Med Stream project.” Hurriyet DailyNew.com . Online. Available at http://www.hurriyet.com.tr/english/finance/10428800.asp?gid=244 (accessed May 19, 2010).
38 EURASIAN ENERGY AND ISRAEL'S CHOICES
39 B. Faucon “Gaza Aftermath May Impact Israel Oil Pipe Development,” Dow Jones Newswires , January 20, 2009. Online. Available at http://www.rigzone.com/news/article.asp?a_id=71893 (accessed June 6, 2010). 40 “Turkey Happy with Russia’s Role in Samsun-Ceyhan Oil Pipeline,” Novinite.com , August 7, 2009. Online. Available at http://www.novinite.com/view_news.php?id=106604 (accessed March 30, 2010). 41 “Russia, Turkey Agree on $25 Billion of Nuclear, Oil Projects,” Bloomberg News , May 11, 2010. Online. Available at http://www.sfgate.com/cgi- bin/article.cgi?f=/g/a/2010/05/11/bloomberg1376-L2BASZ07SXKY-1.DTL (accessed June 7, 2010) 42 “South Ossetia,” Wikipedia . Online. Available.at http://en.wikipedia.org/wiki/South_Ossetia (accessed May 19, 2010). 43 J. Kucera, “Georgia: No Discussion of MAP for Tbilisi During NATO Meeting,”
Eurasia Insight , December 4, 2008. Online. Available at http://www.eurasianet.org/departments/insightb/articles/eav120408c.shtml (accessed March 30, 2010). 44 “What is Article 5?” NATO . Online. Available at http://www.nato.int/terrorism/five.htm (accessed March 30, 2010) 45 A. Cohen, “Biden Should Treat Poland with Respect,” The Foundry, The Heritage Foundation , October 21, 2009. Online. Available at http://blog.heritage.org/2009/10/21/biden-should-treat-poland-with-respect/ (accessed March 30, 2010). 46 M. Economides, “Scratch Russia Georgia War and You Find Oil and Gas Pipelines,” Energy Tribune, August 12, 2008. Online. Available at http://www.energytribune.com/articles.cfm?aid=963&idli=3 (accessed May 19, 2010). 47 D. McElroy , “Georgia: Russia Targets Key Oil Pipeline With Over 50 Missiles,” The Telegraph , August 10, 2008. Online. Available at http://www.telegraph.co.uk/news/worldnews/europe/georgia/2534767/Georgia- Russia-targets-key-oil-pipeline-with-over-50-missiles.html (accessed March 30, 2010). 48 J. C. K. Daly, “Growing Azeri Defense Budget Buildup - In Earnest or for Show?” Eurasia Daily Monitor 5:209, October 2008. Online. Available at http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5Btt_news%5D=34069 (Accessed March 30, 2010); See also R. Giragosian, “The Military Balance of Power in the South Caucasus,” ACNIS Policy Brief Number Two , April 2009. Online. Available at http://www.acnis.am/publications/2009/THE%20MILITARY%20BALANCE%20OF %20POWER%20IN%20THE%20SOUTH%20CAUCASUS.pdf (accessed March 30, 2010). 49 E. Karagiannis, Energy and Security in the Caucasus, New York: RoutledgeCurzon, 2002, pp. 45. 50 “BP Caspian - Sangachal Terminal,” BP website . Online. Available at http://www.bp.com/sectiongenericarticle.do?categoryId=9006674&contentId=7015 100 (accessed March 30, 2010).
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51 S. Abbasov, “Azerbaijan: With Departure of Two Karabakh Mediators, Future of Talks Unclear”, Eurasianet.org , August 6, 2009. Online. Available at http://www.eurasianet.org/departments/insightb/articles/eav080609a.shtml (accessed October 1, 2009). 52 R.Tait, “Turkey and Armenia sign landmark accord... eventually,” The Guardian, October 11, 2009. Online. Available at http://www.guardian.co.uk/world/2009/oct/11/armenia-turkey-deal-off (accessed May 19, 2010). 53 “Turkish-Armenian rapprochement might cause breakthrough in Nagorno- Karabakh,” Sunday’s Zaman , October 29, 2009. Online. Available at http://www.sundayszaman.com/sunday/detaylar.do?load=detay&link=182043 (accessed March 30, 2010) 54 “Russia Steps Up Efforts on Nagorno-Karabakh,” Radio Free Europe Radio Liberty, October 29, 2008. Online. Available at http://www.rferl.org/content/Russia_Steps_Up_Efforts_On_NagornoKarabakh/1336 149.html (accessed March 30, 2010). 55 A. Vatanka, “Azerbaijan-Iran Tensions Create Obstacle to Caspian Resolution,” Eurasianet.org , January 29, 2003. Online. Available at http://www.eurasianet.org/departments/business/articles/eav012903.shtml (accessed March 30, 2010). 56 A. Geybullayeva, “Is Azerbaijan Becoming a Hub of Radical Islam?” Turkish Policy Quarterly, Spring 2007, pp. 109. Online. Available at http://www.turkishpolicy.com/images/stories/2007-03-caucasus/TPQ2007-3- geybullayeva.pdf (accessed March 30, 2010). 57 A. Kotchikian, “Secular Nationalism Versus Political Islam in Azerbaijan,” Jamestown Foundation Terrorism Monitor 3:3, February 2005. Online. Available at http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5Btt_news%5D=27525 (accessed March 30, 2010). 58 L. Yevgrashina, “Analysis: Azerbaijan Plot Shows Radicals’ Threat Has Teeth,” Reuters , November 8, 2007. Online. Available at http://www.reuters.com/article/latestCrisis/idUSL08191665 (accessed March 30, 2010); See also A. Cohen & K. Kushnir, “Azerbaijan,” in Ilan Berman, ed., World Almanac of Islamism , American Foreign Policy Council, 2010. Online. Available at http://almanac.afpc.org/azerbaijan (accessed January 21, 2011). 59 “Saudi Arabia: Explosion Near Oil Refinery,” Stratfor , February 24, 2006. Online. Available at http://www.stratfor.com/saudi_arabia_explosion_near_oil_refinery (accessed March 30, 2010). 60 Geybullayeva, “Is Azerbaijan Becoming a Hub of Radical Islam?” pp. 114. 61 S. Rotella, “Azerbaijan Seen as a New Front in Mideast Conflict,” LA Times , May 30, 2009. Online. Available at http://articles.latimes.com/2009/may/30/world/fg- shadow30 (accessed March 30, 2010) 62 B. Fein, “Unveiling PKK,” The Washington Times , January 3, 2008. Online. Available at http://www.washingtontimes.com/news/2008/jan/03/unveiling-the-pkk/
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63 “Kurdistan Workers Party,” Federation of American Scientists. Intelligence Resource Program . Online. Available at http://www.fas.org/irp/world/para/pkk.htm (accessed May 19, 2010); See also “PKK’s ‘Surrender’ Tests Turkey Plan,” BBC News , October 19, 2009. Online. Available at http://news.bbc.co.uk/2/hi/8315088.stm (accessed March 30, 2010). 64 “Update: Baku-Tbilisi-Ceyhan Pipeline Seen Back Sooner Than Previously Expected, BP Has Cut Production by at Least 500,000 b/d from Azeri Oilfields,” U.S. Department of Energy: Energy Assurance Daily , August 8, 2008. Online. Available at http://www.oe.netl.doe.gov/docs/eads/ead080808.pdf (accessed March 30, 2010). 65 “PKK Claims Responsibility for Gas Pipeline Explosion in Eastern Turkey,” People’s Daily Online , August 22, 2006. Online. Available at http://english.peopledaily.com.cn/200608/22/eng20060822_295403.html (accessed March 30, 2010). 66 I. Watson & Y. Comert, “Kurdish rebel group claims responsibility for gas pipeline blast,” CNN , July 21, 2010. Online. Available at http://edition.cnn.com/2010/WORLD/meast/07/21/turkey.pipeline.blast/#fbid=KE9 mIzfvSr2 (accessed July 30, 2010). 67 “Central Asia-China Gas Pipeline.” China National Petroleum Corporation (CNPC) website. Online. Available at http://www.cnpc.com.cn/en/aboutcnpc/ourbusinesses/naturalgaspipelines/Central_A sia%EF%BC%8DChina_Gas_Pipeline_2.htm (accessed May 19, 2010). 68 “Kazakhstan Country Analysis Brief,” U.S. Energy Information Administration . Online. Available at http://www.eia.doe.gov/emeu/cabs/Kazakhstan/Oil.html (accessed March 30, 2010). 69 “Kashagan Partners Eye US$4-bil. Trans-Caspian Oil Transport System to Connect to BTC Pipeline,” IHS Global Insight .Online. Available at http://www.ihsglobalinsight.com/SDA/SDADetail6096.htm (Accessed March 30, 2010). 70 “Kazakhstan Country Analysis Brief,” U.S. Energy Information Administration. Online. Available at http://www.eia.doe.gov/emeu/cabs/Kazakhstan/Oil.html (accessed January 20, 2011);See also “Kashagan Partners Eye US$4-bil. Trans- Caspian Oil Transport System to Connect to BTC Pipeline,” IHS Global Insight . Online. Available at http://www.ihsglobalinsight.com/SDA/SDADetail6096.htm (accessed January 20, 2011). 71 “Kashagan Partners Eye US$4-bil. Trans-Caspian Oil Transport System..." 72 “Russia, Kazakhstan Agree to Double CPC Oil Pipeline Capacity by 2012.” IHS Global Insight , May 8, 2008. Online. Available at http://www.ihsglobalinsight.com/SDA/SDADetail12462.htm (accessed May 19, 2010). 73 “CPC agrees on pipeline expansion, BP exit terms,” Reuters , December 17, 2008. Online. Available at http://uk.biz.yahoo.com/17122008/323/update-1-cpc-agrees- pipeline-expansion-bp-exit-terms.html (accessed March 30, 2010). 74 “Kazakhstan Country Analysis Brief."
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75 V. Socor, “Russia to Increase Purchase Prices for Central Asian Gas: Outlook and Implications,” Eurasia Daily Monitor 5:50, March 2008.Online. Available at http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=33464 (accessed March 30, 2010). 76 M. A. Weiss, “Arab League Boycott of Israel,” CRS Report , April 2006. Online. Available at http://fpc.state.gov/documents/organization/65777.pdf (accessed May 8, 2010) 77 Socor. “Russia to Increase Purchase Prices..." 78 “Turkmenistan to Launch Russia Gas Pipeline in 2010,” Reuters , July 15, 2008. Online.Available at http://uk.reuters.com/article/oilRpt/idUKL1563346520080715 (accessed March 30, 2010). 79 “South Stream Pipeline Capacity to be Doubled,” Oil & Gas Journal , May 21, 2009. 80 Ibid. 81 J. Gronholt-Pedersen, “Russian Pipelines Win Key Approvals,” Wall Street Journal , October 21, 2009. Online. Available at http://online.wsj.com/article/SB125605250259596613.html (accessed March 30, 2010). 82 “Gazprom Seeks to Rattle EU with Azerbaijan Gas Agreement,” Oil & Gas Journal , June 30, 2009. 83 Ibid. 84 “Gazprom and SOCAR sign purchase and sale contract for Azerbaijani gas,” Gazprom Press Release , October 14, 2009. Online. Available at http://www.gazprom.com/press/news/2009/october/article69312/ (accessed March 30, 2010). 85 “Nabucco Needs More Support, Fischer Says,” Hurriet Daily News , September 8, 2009. Online. Available at http://www.hurriyetdailynews.com/n.php?n=nabucco- needs-more-support-fischer-says-2009-09-08#(accessed March 30, 2010). 86 “Russian-Azeri gas deal a blow to Nabucco.” EurActiv.com ., April 1, 2009. Online. Available at http://www.euractiv.com/en/energy/russian-azeri-gas-deal- blow-nabucco/article-180852 (accessed May 19, 2010). 87 “Caspian Gas Producers Affirm Supplies for Nabucco,” Oil & Gas Journal , July 10, 2009. 88 “EU Nations, Turkey Sign Nabucco Gas Line Treaty,” Oil & Gas Journal , July 14, 2009. 89 A. Cohen’s personal notes, meeting with Alexei Miller, September 2009, Moscow. 90 A. L. Kaveh, “Russia and Iran Join Hands,” Asia Times Online , July 30, 2009. Online. Available at http://www.atimes.com/atimes/Middle_East/KG30Ak01.html (accessed March 30, 2010). 91 “2007 Energy Balance for Israel,” International Energy Agency . Online. Available at http://www.iea.org/stats/balancetable.asp?COUNTRY_CODE=IL (accessed March 30, 2010). 92 Ibid.
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93 Project Better Place. Online. Available at http://www.betterplace.com/global- progress/israel/ 94 A. Cohen, “Egypt on the eve of regime change,” Voice of America News , July 20, 2010. Online. Available at http://www1.voanews.com/russian/news/Egypt- Goverment-Change-2010-07-20-98850559.html (accessed July 31, 2010). 95 D. Engber, “Where Does Israel Get Oil?” Slate Magazine , July 14, 2006. Online. Available at http://www.slate.com/id/2145704/(accessed March 30, 2010). 96 Reverse Flow Project, EAPC . Online. Available at http://www.eapc.co.il/reverse- flow.html
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