Can TANAP Pipeline Unlock EU Membership for Turkey?

Pipelines carry political consequences.

Now energy-rich Azerbaijan is dangling a massive political carrot in front of its western neighbor Turkey, as a new report asserts that Building the Trans-Anatolian Pipeline (TANAP) could boost Turkey’s chances of joining the European Union. It is an enticing prospect for Ankara, to say the least.

Gulmira Rzayeva of the Center for Strategic Studies of Azerbaijan (SAM), a research center sponsored by the Azerbaijani government, one of two analysts who wrote the “Strategic Imperative: Azerbaijani Gas Strategy and the EU’s Southern Corridor” report, published last month in the 5th issue of the “SAM Review Journal” said, “Turkey can achieve political gains with this pipeline; it can be an ace in terms of its European Union membership negotiations. With the finalization of this project, Turkey will have a whole new position within the region.”

Rzayeva and fellow author Theodoros G.R. Tsakiris, Senior Analyst and the journal’s editor for Iran and the Caspian Sea Region at the “Middle East Economic Survey” wrote that both TANAP and the Nabucco West natural gas offer significant value to both Azerbaijan and the government owned State Oil Company of Azerbaijan Republic (SOCAR). The authors concluded that TANAP is perceived as the more commercially viable project, which nevertheless lacks the solid political support that Nabucco West enjoys not only from transit states but also from the European Commission itself. Rzayeva noted, “TANAP completely changed the game. The new pipeline will be built parallel to the existing lines.  It will need to have a capacity of 30 to 60 billion cubic meters (bcm) per year.” In discussing TANAP’s projected $7 billion price tag Rzayeva said, “This is not a definite number. It could be more than this or less than this. The pipeline will be built in three stages. It will start with 16 billion cubic meters, continue with 20 billion to 30 billion cubic meters and at the end reach 60 billion cubic meters. This is a long-term perspective.”

Adding a further incentive to the project’s construction Rzayeva added, “It will also allow for the connection to Central Asian gas.”

As envisaged, the 1,240-mile long TANAP pipeline will transport natural gas from Azerbaijan’s Caspian offshore Shah Deniz field  through Georgia and will be sold and forwarded through Turkey. The project's first phase will see the sale of 6 billion cubic meters of the initial 6 bcm of natural gas to Turkey, with the remaining 10 bcm being transported onwards to Europe. Pipeline construction is expected to begin in 2014 and finish in 2018.

SOCAR currently holds an 80 percent stake in TANAP, Turkey's natural gas distributor Botas a 15 percent stake and Turkey's national oil and gas company TPAO the remaining 5 percent. According to the “Strategic Imperative: Azerbaijani Gas Strategy and the EU’s Southern Corridor” report, SOCAR would like to retain at least a 50 percent stake in the pipeline, but this could prove difficult if new partners come on board. Signifying potential change in the ownership percentages, BP’s president Bud Fackrell said that his company is following TANAP developments and that that BP wants to take part in the project by acquiring some of SOCAR’s shares.

Fackrell said in a statement that Turkey and Azerbaijan, by signing the TANAP agreement for the Southern Gas Corridor, will open a new European transport corridor and is “an important step.”

The geostrategic reality is that Azerbaijan needs Turkey as a transit corridor for its rising volumes of oil and natural gas. TANAP would both help to meet Turkey’s rising energy needs and provide lucrative transit revenues.

And the EU is desperately seeking to lessen its dependency on energy imports from the Russian Federation, and TANAP could assist that. According to the European Commission, Russia is the third trading partner of the EU and the EU the first trading partner of Russia. Because of its energy imports the EU runs a trade deficit with the Russian Federation, in 2011 exporting $135.6 billion of goods and services to Russia, while EU imports from Russia in 2011 cost $249.6 billion. The main EU imports from Russia were oil (crude and refined - $162.6 billion) and natural gas ($30 billion.)

It is lessening this dependency that the report’s authors see as bolstering Turkey’s EU accession chances. Furthermore, the EU ongoing recession means that an annual energy tab of $249.6 billion is something it can ill afford.

Finally, the political gravitas in Brussels towards Turkish membership has shifted with the electoral defeat of French President Nicholas Sarkozy, one of the most vociferous opponents of Turkish EU membership.

The irony is that Brussels may have overplayed its hand by forcing Turkey to wait so long as other members leapfrogged their way into the EU. Turkey’s European Union Minister Egemen Bag?s blamed the EU’s endless prevarication over its membership application for producing a precipitous drop in Turks’ confidence in eventually joining the EU, remarking in the wake of a recent poll that reported that the number of Turks who believed that Turkey would become an EU member within the next decade had decreased from 34.8 percent to 17 percent in the past 12 months, telling reporters, “The situation is not related Turkey’s credibility, but it is related to the EU’s.”

Accordingly, it looks like Brussels will be writing those checks to Moscow for some time to come, even though European energy companies are rushing to partner with Turkey and Azerbaijan to provide alternatives. And as for the Turkish electorate, currently enjoying a booming economy, Turkish EU membership has apparently definitely lost its luster.

By. John C.K. Daly of Oilprice.com