Nabucco: The Pipeline that Refuses to Die

By: Steve LeVine

What do big Eurasian energy pipelines have in common with U.S. military projects? Once they're proposed, they refuse to die -- they assume a life of their own, and haunt us until someone finally manages to drive a stake into their heart. And by that time, the chessboard has wholly changed, forcing everyone to adjust to a new set of rules..

So it appears to be with the proposed Nabucco natural gas pipeline, a 2,100-mile system intended to diversify Europe's energy supply away from Russia. Liquefied natural gas is lapping up on Europe's shores; other, cheaper proposed pipelines can transport Baku gas to the continent; and Russia itself, cognizant of massive changes in the global energy market, has moved the playing field some 4,500 miles east, to China. Yet Nabucco's diehard supporters, including the United States, refuse to get over the champagne days of the Baku-Ceyhan oil pipeline and its victory over Moscow.

In Istanbul today, Richard Morningstar, the U.S. State Department's Eurasian energy envoy, rightly made all the gestures of reading out a requiem for Nabucco. He suggested, without saying so explicitly, that the only way the pipeline can work is if an unlikely confluence of events occurs by March:Iraq would have to form a new government, and strike an energy-sharing deal with Kurdistan, so that Kurdish gas can go north. It's a set of conditionals that verge on Paul Wolfowitz's war-cost ledger sheet.

Yet, while obviously prepared to brandish the stake, Morningstar doesn't appear ready actually to hammer it in. "Nabucco is the best option for a new European pipeline," Morningstar told his audience, which is "why it is important to do everything possible to line up additional early sources of gas from Iraq and elsewhere."  Nabucco's other backers engaged in similar chatter, as Bloomberg's Andra Timu and Ercan Ersoy report.

When you're in a foreign land, don't speak the language, and wish to assess any present dangers, one useful tactic is to examine what the locals are doing. Take a look at Russia, for instance: as Jacob Gronholt-Pederson reports in today's Wall Street Journal, it is doing everything to nail down a huge natural gas supply contract with China. Their pricing dispute seems closer to resolution, as China appears prepared to close the gap by providing Gazprom with an enormous, multi-billion-dollar loan in lieu of a higher gas price.

Or consider the Turkmen, and the following episode last week at New York's Plaza Hotel during the annual United Nations General Assembly, recounted to me by an official who was present. Morningstar had been invited up to the presidential suite to visit with Gurmanguly Berdymukhamedov, the Turkmen president. Berdymukhamedov's aides had clearly prepared, having festooned the lavish room with Turkmen carpets. The topic, as usual, was Washington's desire that the Central Asian leader commit to shipping some of his nation's prodigious natural gas supplies through Nabucco.  But Berdymukhamedov had other ideas on his mind, and spoke almost exclusively of shipping gas south through Afghanistan and on to Pakistan. He said he and the leaders of those neighboring countries had agreed in principal on the matter, and asked for U.S. assistance to make it work.

Personally, I regard the Afghan route -- resurrected from Unocal's failed attempt to do the same thing in the 1990s -- as harebrained. As for Berdymukhamedov, he regards it as less harebrained than Nabucco.

Source: The Oil and the Glory with thanks to Steve LeVine