The energy politics in and around the Caspian and Black Sea continue to become increasingly complex as more energy from those areas becomes available, demand continues to remain high, and more and more parties with ever more complex interests get into the game.  Iran’s recent energy deals with Turkey and Azerbaijan epitomize the complexities  involved in making sense of regional energy politics in this part of the world.  The two recent Iranian deals with Turkey and the one with Azerbaijan highlight the  relationships between the multiple interests and issues of the players.

BACKGROUND: In February 2007, Ankara and Tehran announced two energy deals. After years of resisting Turkish proposals, Iran relented and allowed Turkey’s Petroleum Company, TPAO, the right to explore for oil and gas in Iran.  Second, and as was more recently confirmed, the parties agreed to transfer Turkmen natural gas through Iran to Turkey and then on to Europe.  Gas supplies for a second branch are supposed to come form Egypt and traverse Jordan and Syria.  Turkey’s share of gas is still unclear, but it is supposed to yield 31 billion cubic meters (bcm) of gas, and Turkey will also be allowed to develop three gas fields in Iran without a tender.  Finally Iran even offered Turkey cooperation in nuclear energy production.

For both Iran and Turkey, these deals are of considerable economic and strategic importance.  The most obvious point is that they help satisfy Turkey’s rising demand for oil and gas, and Iran’s desire to find customers to whom it can export free of the encumbrances of American sanctions.   Iran also would make a political statement, thereby indicating that it can escape from those externally imposed restrictions upon it. But there is much besides that going on.  If this pipeline deal goes through, it will represent part of the EU’s planned Nabucco pipeline that does not cross Russian territory.  Moscow has alertly made major deals with Turkmenistan and Kazakhstan to prevent the Nabucco pipeline or any alternative of a trans-Caspian pipeline.  So in this way, Turkmenistan and Kazakhstan stand to benefit along with Iran by opening up another route for energy exports.  But Iran also confirms that it is a major energy power that can and will operate independently of Russia and even compete with it, a fact clearly not lost on Moscow.

Turkey also gains considerably apart from satisfying its own demand and gaining access to potentially new sources of oil and natural gas.  Turkey has seen itself as being a pivotal player in energy, indeed as a hub connecting Europe with Asian fields.  Its desire to become an energy hub has been a major foreign policy goal of successive Turkish governments even before the AKP Party came to power in 2002.  It had therefore hoped to be the main conduit for Russian and Caspian energy going to Southern Europe and beyond.  However, Moscow has other ideas, because it is fundamental to its strategy that no third party can alone cut off Russian energy supplies.  Thus Moscow has moved to “bottle up” Caspian oil and gas sources and to reduce Turkey’s leverage by signing a deal with Greece and Bulgaria for the transit of Russian and Kazakh oil through the Burgas-Alexandropoulos pipeline that bypasses Turkey and goes directly to Greek ports in the Mediterranean.

IMPLICATIONS: Accordingly, Turkey has stepped up all its contacts with non-Russian gas exporters.  It has flatly refused to suspend construction of the Nabucco pipeline in the face of Russian deals, and is thus discussing the aforementioned pipeline deals that would possibly include a trans-Caspian pipeline that would connect to Azerbaijan’s Shah Deniz pipeline, and/or utilize existing Iranian and Turkish pipelines that could go directly to Turkey.  And now Turkey seeks to exploit Bulgaria’s hesitation in ratifying the Burgas-Alexandropoulos pipeline.  Despite the three-way accords among Greece, Bulgaria, and Russia, there had been no environmental impact study through the spring of 2007 and this sometimes takes years in Bulgaria.   Not even the fact that Russia signed a deal with ENI to build the pipeline through Bulgaria has dented Turkey’s resolve.  In the meantime, Turkey is building a third pipeline to Ceyhan to add to the Baku-Ceyhan and Kirkuk-Ceyhan pipelines.  It also intends to raise the throughput of the Baku-Ceyhan pipeline beyond current capacity of one million barrels/day, and Central Asian energy would be critical to that goal.  Thus the Iranian deals enable Turkey to continue pursuing its dream of being an energy hub with a direct link to Central Asia and to compete with Russia, even while keeping good ties to Russia.

Meanwhile, Iran is also making deals with Azerbaijan.  Again it demonstrates its resolve and ability to escape from American restrictions, but it also demonstrates its resolve and ability to compete with Russia in providing CIS states with energy or in shipping it to Europe.  Iran’s agreement with Azerbaijan on providing it with electricity came soon after Russia cut gas and electricity supplies to Azerbaijan.  These cuts, allegedly because Azerbaijan could now produce its own energy, were seen, however, as  political punishment for Azerbaijani support for Georgia.  What is surprising about this is that Azerbaijani-Iran relations had been troubled with issues of the treatment of the Azerbaijani minority in Iran, disputed borders, efforts by Tehran to raise threats to Azerbaijan if it hosted American forces, differences over Nagorno-Karabakh, and Baku’s overall pro-Western attitude.  Clearly, Iran saw an opportunity to benefit itself, make money, escape the American ring, and compete with Russia.

CONCLUSIONS: There are many  sides to these deals that arouse or should arouse observers’ interest.  First, it is noteworthy that American protests about dealing with Iran have been muted, if heard at all.  Obviously, Washington has accepted that these states’ competition with Russia and  acquisition of sufficient energy supplies possesses enough weight to mobilize against such protests.  Therefore, it has not raised loud complaints about these deals in public.  This fact alone should suggest to observers just how serious the East-West rivalry over Caspian and Black Sea energy outcomes truly is. 

Second, Iran has been threatening  energy sanctions to enemies and rewarding potential friends or neutrals with energy contracts, as in these cases.  It remains to be seen how potent either or both of these weapons are in relieving Tehran of the pressure to denuclearize, but there is clearly at least some room for it to maneuver in using the energy card.

Third, Turkey’s deals are testimony to its stubborn resolve to pursue the objective of being an energy hub, if not the energy hub tying Europe to Asia.  These deals also demonstrate its willingness to compete with Russia over access to Caspian energy sources despite their strong ties of friendship and economic partnership.  These deals also display its less than staunch attitude towards doing business with Iran, despite its obvious concerns about Iran potentially becoming a nuclear power.  Perhaps there is an angle of Islamic solidarity here, but it is more likely a declaration of cold hard interest, not just in acquiring energy, but also in keeping open ties to Tehran despite opposition to nuclearization, and its parallel willingness to  compete on energy with Russia.  Turkey’s steadfast position  regarding the Nabucco pipeline reflects its belief that its strategic benefit to Europe, which should pay off eventually in membership in the EU, is tied directly to its ability to play its envisioned role as the hub of European energy supplies from the Caspian.

These deals also show that the temptation of economic interest can, under appropriate circumstances, outweigh past enmities, e.g. in the Iranian-Azerbaijani case.  This deal also shows how CIS governments can exploit Russia’s rivalries with its neighbors even though they have been muted for some time and Russia has, until quite recently, stood by Iran.  Nevertheless, their energy interests are at odds with each other and Baku is able to exploit that fact for its benefit.  Washington’s attitude also suggests the importance it too attaches to securing the vital economic interests of states it wants as partners or allies. Security interests in and around the Caspian encompass struggles for political  and military influence over local governments, Iran’s nuclear proliferation and the struggles of exporters and consumers to obtain what they deem as reliable energy access, or in Turkey’s and Russia’s case, to become an energy hub.  Given the complexity of these issues and the numbers of players who are jockeying and contending for position, is it any wonder that so many deals are being struck that seem strange at first, but on second sight appear quite logical, if not compelling?

AUTHOR’S BIO: Professor Stephen Blank, Strategic Studies Institute, U.S. Army War College, Carlisle Barracks, PA 17013. The views expressed here do not represent those of the U.S. Army, Defense Department, or the U.S. government.