"Pipeline politics" to shape the future in Southeast Europe

[Guest Gabriela Preda]

Happiness is multiple pipelines," read a bumper sticker that circulated in the 1990s. The energy game has not changed much since then, but some of the players have. Now, more than ever before, Southeast Europe is in the spotlight. The future of the region increasingly hinges on transporting oil and gas to the energy-hungry West.

 

The competition between various pipeline projects is quickly getting tougher. More lobbyists are at work, more agreements are being signed, and more high-level meetings are being held to discuss the regional energy situation, along with the other key issues affecting the Balkans.

 

Energy issues have been at the focal point of several key events in recent weeks. To begin with, Bulgarian lawmakers gave the thumbs up to a major pipeline project, designed to connect the Bulgarian port of Burgas with Alexandroupolis in Greece. The pipeline will transport oil from the Russian terminal at Novorossiysk, bypassing the congested Bosporus straits. It will have an initial annual capacity of 35 million tonnes, which could be later expanded to 50 million tonnes. The Russian companies Rosneft, Transneft and Gaspromneft will acquire a combined stake of 51%. The Greek corporations will get 24.5%, while the Bulgarian ones will hold the other 24.5%.

 

According to various sources, various American companies – such as Exxon Mobil or Chevron -- are interested in gaining stakes as well, presumably by acquiring the percentages of the Bulgarian and Greek companies. If this is the case, common economic interests may bring the United States and Russia closer.

 

Some analysts see the Burgas-Alexandropoulis pipeline as the first major economic step forward into the region by Russia since the end of the Cold War and the breakup of the Soviet Union. Moscow, these analysts argue, is now striving more aggressively to become a significant player in one of the most sensitive regions in Eurasia. Some even tie Russia's role in the Kosovo status process – specifically, its decision to stand in the way of supervised independence – as being linked to its efforts to gain a more solid footing in the Balkans.

 

Certainly Moscow has been busy cultivating "friendships" with various countries in the region. In Greece, for example, a high-level delegation showed up recently to promote the image of a strong Russia with a healthy energy sector and billions of dollars to invest in foreign markets . An influx of Russian investments has the potential to boost tourism in Greece, as well as elsewhere in the region. Russia also is in a good position to woo countries that, for one reason or another, feel slighted by the West – Serbia, for example.

 

Meanwhile, Washington has also been visible. George Bush paid the first visit to Albania by a sitting American president, and also travelled to Bulgaria. Energy issues were high on his agenda. A US-registered company, the Albanian-Macedonian-Bulgarian Oil Corporation (AMBO) is planning to build a second regional oil pipeline, one which will compete directly with Burgas-Alexandropoulis. The project was first conceived by the Halliburton Energy Corporation and has received the backing of the US government, which conducted a feasibility study.

 

The AMBO pipeline will run 912km, transporting 35 million tonnes of oil annually. It will connect, for the first time, the Black Sea with the Adriatic -- and, to a wider extent, Central Asia with the Italian peninsula and beyond. The project is expected to be completed by 2012. It will, according to advocates, help create the necessary conditions for a balance in the prices of oil in the world market.

 

With both Moscow and Washington continuing to demonstrate interest in Southeast Europe, a new player – the EU – has entered the game. Recently, the European Commission gave conditional approval to a joint application by Greece and Italy to link their natural gas grids via a pipeline across the Adriatic. Construction of the pipeline is expected to begin in 2008 and to be completed in 2011. Its expected annual capacity is 8.8 billion cubic metres of natural gas.

 

Brussels has also expressed interest in a third regional oil pipeline project, this one connecting the Romanian Black Sea port of Constanta to Trieste, an Italian port on the Adriatic. The pipeline will pass through Serbia, and some analysts fear that the negotiations on Kosovo's status will affect the project and its viability. In any case, five Southeast European countries -- Croatia, Italy, Romania, Serbia and Slovenia -- pledged to boost co-operation on the 1,856km-long pipeline, which will be capable of carrying around 40 million tonnes of oil annually in its first phase, with the capacity to grow to 90 million.

 

EU Energy Commissioner Andris Piebalgs has signed onto the project, amid increasing concern in the bloc that the necessary infrastructure must be built to link EU markets with oil-rich regions. The EU's move has stirred discontent in the Kremlin, since Moscow has been excluded from the project – even though the EU currently receives half of its crude oil and natural gas deliveries from Russia.

 

The more proactive approach from Brussels represents a departure from the past, during which the Europeans were content to let Washington do most of the worrying about Moscow's influence. Increasingly, the EU is concerned with taking control of its energy future. With global demand for oil expected to increase by 41% over the next quarter-century, this should be no surprise.

 

What are the potential effects on Southeast Europe of this heightened interest? Many regional analysts see a coming era of stability and a fruitful investment environment. Along with the energy sector, many other industries could benefit, such as tourism, transport, commerce and real estate, not to mention the actual business of pipeline construction. All this could inject much needed capital into local communities. The Balkans could again find itself enjoying worldwide attention, though for far different reasons than during the 1990s.

 

Some analysts, however, take a less rosy view. They fear that power politics could force various antithetical political units into possible conflicts -- sparking yet another upheaval in the region. After all, they argue, a large part of the political turbulence in the area over the past decades has been related to energy ambitions and the desire to achieve dominance over the proposed routes for oil and natural gas. Could history repeat itself? Conceivably, an empowered Russia could seek control over most of the key energy corridors, renewing the old strategic antagonism between Moscow and Washington. From this point of view, Russia's attempted derailing of the Kosovo status process represents an ominous harbinger.

 

The Balkans are almost fated by geography to play an integral role in the new energy landscape that is being shaped in the 21st century. The region is close to Russia, the Middle East and Western Europe, and thus serves as an obvious point of contact for all. Its emerging role certainly brings with it potential perils. At the same time, it could position Balkan countries to take greater control of their future.