‘Too Many Chiefs, Not Enough Indians?’ – Energy Integration in the Black Sea Region
When a European traveller arrived at the Black Sea city of Trabzon in 1878 after months in the wild Anatolian interior, he asked a local if he could find some long-absent signs of civilisation in the city.“Of course”, the local replied, “Trabzon is Europe!”* Such a claim would be under scrutiny today: is the Black Sea region part of Europe at all, and if not where is it? And above all, how can Black Sea states – between Europe and Eurasia, with competing claims about their political identity – move towards full cooperation?
The last question was addressed at the Black Sea Oil and Gas Forum, held in Sofia in early March, where participants sought to discuss how regional cooperation could impact the growing band of oil and gas companies in the Black Sea.
The region is not lacking regional cooperation initiatives covering political and energy issues, and yet lacking in cooperation. Was this, asked Sohbet Karbuz of the Mediterranean Energy Observatory, a case of too many chiefs, and not enough Indians? And how could regional cooperation in the Black Sea be improved?
Jean-Arnold Vinois, senior adviser for energy to the European Commission, was blunt. He said that energy cooperation could only be achieved through legally binding rules and regulations, otherwise you just end up with talking shops (of which the region already has plenty). The EU, he said, already had those kind of legally binding rules and parties trying to operate outside the rules – such as Bulgaria with South Stream – should accept that fact. The EU represents 500 million customers, he said, and “if Bulgaria, with eight million, thinks it can work outside this, it is mistaken”.
Maybe so, but the EU is not the sole arbiter of energy markets in the Black Sea. As the South Stream drama itself demonstrates, Russia retains extensive capabilities as a spoiler and continues to draw other Black Sea states into bilateral deals which may be contrary to European priorities. It has little interest in putting itself under any energy framework which would constrain its freedom of action: one speaker noted its decision to withdraw from the Energy Charter Treaty in 2009.
Other states in the Black Sea region also have very different markets, priorities, and orientations: as speakers made clear, all of this has made it difficult to develop a common vision. Georgia, for instance, is in a marginal position, geographically and politically isolated from the centrifugal pull of European institutions and faced with its own domestic problems.
Although it has applied to join the Energy Community, which governs the Energy Charter Treaty, one conference participant insisted that President Mikheil Saakashvili had blocked plans to join until his party was unseated in October elections. If true, this is hardly encouraging for integrating the region.
A leading hope for enhancing cooperation is the Black Sea organisation for Economic Cooperation (BSEC), a regional body incorporating all the littoral states as well as six others in the Caucasus and Balkans (the group was also one of the conference sponsors). BSEC’s mandate is “fostering interaction and harmony . . . as well as to ensure peace, stability and prosperity”, but it’s fair to say that since its inception in 1992 it has not achieved much. It focuses mainly on low-hanging fruit like agriculture, culture, trade, and transport.
Nonetheless BSEC seems like the most appropriate vehicle for enhancing energy cooperation under a common, non-politicised body. Veneta Tzvetkova, head of Energy Markets and Infrastructure at Bulgaria’s Economy, Energy and Tourism, Ministry said that when Bulgaria headed BSEC’s energy group it sought to establish a common market for energy, but was unsuccessful due to the conflicting priorities of the regional states.
A BSEC representative at the conference said that the group is developing common infrastructure interconnections in the BSEC region and is planning an infrastructure investment fund, but he acknowledged that this is “very ambitious”, and the likelihood of BSEC overseeing the integration of regional gas infrastructure is very slim.
However the lack of regional energy cooperation is not just about differing political priorities. It also reflects the under-developed energy industry within the Black Sea itself. Integration will be driven by production, transit and export, all of which are still emerging in the Black Sea. If and when Romania, Bulgaria, Turkey and Ukraine discover and develop substantial offshore gas reserves, establishing commonalities will be easier.
This may involve common approaches to gas exports: new pipelines across Turkey to LNG plants were suggested at the forum, as were new European transmission systems and interconnectors in the Balkans. It may also involve joint development of cross-border gasfields, harmonisation of regulatory and legal frameworks, or moves towards cooperating on a common Black Sea gas market. Russia and Georgia are likely to remain outside of this framework, at least for the medium term. Russia’s attempt to maintain and expand its gas influence, and Georgia’s marginalisation and lack of reserves, place them outside the western-southern condominium which is likely to develop in the Black Sea.
The overall message is that energy collaboration is achievable in the Black Sea: but it must take place in the right sequence. Cooperation will be driven by market forces, and the ‘chiefs’ of the region will get nowhere without more Indians.
*From Charles King, Ghost of Freedom: A History of the Caucasus.
Alex Jackson is an analyst of political, energy and security issues in the Caspian region. He is based in London and can be contacted at ajackson320@gmail.com.