Open
Geopolitical Prospects
& Scenarios 2010
1st EGF Online Forum has taken place!
The Forum started 16 February, Tuesday at 12.00am (CET) and ran through till 20 February, Saturday 12.00am (CET).
The European Geopolitical Forum: Prospects and Scenarios 2010
At the end of December 1999, as the world prepared to usher in a new Millennium, in Europe and other parts of the planet, there was widespread concern that the so called “Millennium Bug” would strike, causing unforeseen disruption and havoc. Ten years on, in December of last year, for many in Europe, the Millennium Bug was just a shade in the memory as a far more ominous concern was pressing home – the prospect of another gas crisis. Although the fact that the Russia-Ukraine gas dispute of January 2009 – and its knock-on effect of leaving much of Europe without natural gas in the peak of winter – did not repeat itself during the record cold European temperatures of January this year, the very fact that European attention has become so focused on this theme demonstrateshow geopolitical developments in the European hinterlands have come to impact the day-to-day livelihood of all Europeans.
Energy Security and the EU-Russia energy relationship, is just one of the many core geopolitical challenges that face Europe’s political leadership at present. Others include:
- The stability of the Caucasus, which remains highly uncertain
- Navigating the right strategic partnerships in the Black Sea basin
- Making something of the EU’s “Eastern Partnership” agenda
- Promoting security, stability and trade through the Caspian to Europe
- Stabilising the Mediterranean south bank from threats of terrorism
- Enhancing the Arctic into a European agenda of strategic significance
Leading experts have shared their views on how such geopolitical challenges are likely to pan out during 2010 and beyond in an online session.
>To view Summary Document please CLICK HERE!
3 Pros
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Comments 40
Forum Leaders
As the Moderator of this first, unique online session, I am delighted to announce that the first European Geopolitical Fourm: Geopolitical Prospects and Scenarios 2010 has now started
Opening Remarks from the Moderator to follow
Marat Terterov February 16, 2010 11:02AM
Forum Leaders
Welcome everybody to the first European Geopolitical Forum online session. Its great that we are finally going online with our first event as this project has been in the pipeline for over a year and has involved much "shuttle diplomacy" on my part between Brussels, Moscow and London during this period. Therefore I am both impressed and relieved that we are finally getting off the ground and would like to express particular gratitude to everyone involved with getting us to where we are today
However, I dont want to make my opening remarks into a promotion for EGF (you can get to know EGF by dipping into the "about" section of the website), but would rather like to get straight into our discussions and welcome our first online expert participants
The aim of our first forum is to take a closer look at the "geopolitical map" of the greater European continent, examine some of its core challenges, and to assess as to how some of these challenges are likely to pan out during the next 12 or so months
Some of the issues we want to discuss during our first session include:
the stability of the Caucaus
geopolitical rivalries between the major powers in the Black and
Caspian Sea basin
the EU's "Eastern Partnership" oriented strategies
energy security related issues, which continue to underscore the EU-Russia energy relationship, as well as the broader consumer-producer discussion which stretches out through the Gulf all the way to China and Japan these days
...and I also want to examine the emerging role of the Arctic in the broader European strategic discussion
I know turn to introducing our panelists, who we tend to refer to as "Decision Makers" in EGF forum jargon February 16, 2010 11:19AM
Forum Leaders
We are joined from the UK by Kaweh Sadegh-Zadeh, an energy expert whose publications on the Russian gas sector are becoming increasingly evident in prestigious journals such as OGEL. Kaweh is currrently working on some analysis considering the implications of the new China pipeline for Central Asia, and will share with us his views on how this will offset itself in the EU energy security discussion
we are also joined today by Marco Giuli, an expert from the Madariaga Foundation in Brussels. Marco is an economist who specialises in a range of geopolitical related activity and has a wide range of experience working with Russia, the Caspian and is also quite conversant in EU energy security debates
Joining us from across the "big pond" known as the Atlantic is Justin Dargin, an expert on global energy security, who has had stints with OPEC, the Oxford Energy Institute, several major Gulf based institutions and is now a resident scholar at Harvard University
we will also shortly be joined by Steffen Webber, an adviser to several Members of European Parliament (MEPs) in Brussels and, amongst his other areas of interest such as Pan-Baltic Cooperation, is the Parliament's lead expert on the Arctic
Danila Bochkarev, an expert on Russia as well as a Russian expert, from the Brussels based East west Institute, will also join us, as well Mehmet Ogutcu, a dynamic communicator, former Paris IEA official and Eurasia geopolitics expert, who will tune into the discussions from his travels
I believe most of the participants have now registered or are in the process of registration, and it is also possible that several other participants will join us during the course of this week's discussions
Again, a warm welcome to all participants of our first online session and dont forget that you can get fuller information on people's speaker bios by going to the participants section of the website February 16, 2010 11:40AM
Forum Leaders
So, just a few points of "house-keeping" and then on with the show...
As forum moderator, I will generally be logging on to check progress of our forum discussions, pose further questions and remarks, predominatnly in the mornings and in the late evenings, and will also be logging on for shorter intervals during the day
I expect you will do something similair as we are all busy people and the idea of this type of forum (as opposed to traditional conference participation) is that we can do this around our other ongoing committments and without having to travel
Therefore just work this around your schedule - sometimes we will respond to each others remarks very quickly, sometimes it may take several hours or longer, depending on where people are at the time.
The main thing is that we respect the Forum start and finish times, which are posted on the home pages of the EGF website (or should be at least), and get all our comments in by then
As "decision makers" you can make a comment at any time, and this does not have to be "filtered" by the moderator, so I look forward to your comments
Dip into the "Terms and Rules" section of the website - its all pretty straight forward: Chatham House Rules (ie, comments not to be cited in the press unless permission given by the speaker or EGF), no spam or junk comments, no drama if there is the odd spelling mistake or typo in your comments, its all live, more or less
if you want to bring in a friend as a "forum guest", no problem, just inform either me or our Forum Administrator, Irina, who would have already sent you a couple of welcome style messages upon
registration
also please feel free to use all the resources of the EGF website (publications, documents, news, etc) for your own purposes as these are all relevant to our discussion. Its all open access and will have a wide reach.
If you want to publish any of your stuff with us, we would very much welcome this and it would automatically lift your status as our forum participants
all my contact details are available on the website and you can also email, call or skype me when you need
forum guests can also make comments, but theirs should come through us first
February 16, 2010 11:58AM
Forum Leaders
I have already said quite a lot and would now like to give a firm voice to our experts, and want to begin by asking KAWEH:
European officials have long been courting the Central Asian energy producers and seeking to include the region into the context of the EU energy security equation. However they (the Europeans) do not seem to be very decisive. The Chinese and Russians seem to be far more proactive in the region.
What does your work on the Central Asia China (gas ?) pipeline suggest in that repsect ? are the Europeans being left behind in the race ? China now seems to be the leading player in the region, also leaving the Russian behind. What are your thoughts on all of this ?
February 16, 2010 12:08PM
Decision Makers
There is a lot of talk in Europe about the need to diversify gas imports in order to achieve a greater level of supply security. I see two main challenges.
The main difference and main disadvantage of the EU vis-à-vis Russia and China is that the Union is not able to act as one player. When the Russian or Chinese President make an agreement with Central Asian countries then Gazprom/CNPC follow quickly and start realising the project. When the EU comes to an understanding with Turkmenistan on the supply of 10 bcm, as in 2009, then this remains largely a political agreement. The EU can not prescribe to European companies what to do, so political agreements do not automatically turn into reality.
The other main challenge is the question on how to physically move the gas from the Caspian region to Europe. The fate of the Southern Corridor is still not decided upon and much will depend on what comes out of the negotiations between Azerbaijan and Turkey on future exports of Shah Deniz gas to Europe. Gas from Central Asia can only then be realistically move to Europe once it becomes clear what the export route to Europe from Azerbaijan will look like. Currently there are competing export options on the table with Nabucco looking into building a big 31 bcm pipeline and the ITGI and TAP projects targeting a slimmer around 10 bcm export option. However, negotiations between Azerbaijan and Turkey have not progressed significantly and it remains to be seen when a resolution is found.
In the meanwhile, China entered Turkmenistan in 2006 signed a supply contract, built a pipeline and started first exports in late 2009. It is hard to compete with China when it comes to project realisation.
February 16, 2010 16:08PM
Forum Leaders
Fair enough about China and Russian going in there and turning an agreement into a project, but you would think that a European (or US) energy major could do the same, as the likes of BP or BG in the UK are no less significant players than the Gazproms or CNPCs of this world, and dont really look to endorsement from Brussels before they look to access the (energy) reserves of a region like Central Asia. Hence I dont clearly understand the value added that Brussels is providing from high level energy diplomacy in the region for EU energy consumers.
I also wonder what MEHMET OGUTCU would think of this, as he is a frequent visitor to Central Asia, particulary to Kazakhstan and has a great feel for Kazakh energy ties with China
February 16, 2010 18:56PM
Decision Makers
National Oil Companies (NOCs) like Gazprom and CNPC on the other hand are used by their governments as foreign policy tools. As in the case of the new Turkmenistan-China pipeline this project, stretching all the way from Turkmenistan to China’s eastcoast, was not realised because it provided the most commercial route for gas exports from Central Asia. It was realised because the Chinese government decided that it is important from an energy security perspective.
IOCs again have no intrinsic interest in European energy security as such, but prefer the European market because it provides a healthy demand structure, political stability and high sales prices. As soon as the Chinese or Russian market offers more attractive terms IOCs will be more than happy to target these markets.
February 16, 2010 21:31PM
Forum Leaders
KAWEH, just on the point you make about the Chinese government supporting the Turkmenistan-China pipeline from a Chinese energy security standpoint, is this not the same as the position of Brussels and lets say the Nabucco project, in principle, since Brussels would also want to push Nabucco for largely the same reasons as the Chinese
The difference I guess is that China is successful in terms of project realisation, and Brussels is not, which comes down to your earlier point on lack of consenus on external energy policy in Brussels (ie, the famous German "nein" to Nabucco funding, or at least that was the way it was dressed up in the press)
it seems to me that the gas markets in these countries are generally prone to operate and be developed as monopoly markets, and this is the key issue, since once you get Gazrom or CNPC into the picture, there is little room for further competition (and there are historical and political issues here as well). this is off course different to the oil market, which although also dominated by NOCs, has witnessed much greater involvement from the IOCs (ie, Kz or Azeri).
Taking this into account, what scope do you see for IOC participation in the gas markets in the Central Asian energy producers into the medium term ?
I would also like to take MEHMET OGUTCU'S thoughts on this - I believe he should be able to join us either later today or tomorrow, as he's actually speaking at a security conference in Brussels today
February 17, 2010 12:33PM
Decision Makers
However, the government policy is so far to award only service contracts for onshore developments. IOCs are not interested in service contracts and have so far been unsuccessful in accessing Turkmenistan's onshore reserves on other terms.
It remains to be seen whether Turkmenistan will be able to develop its challenging giant South Iolotan field simply through service contracts as under the current development plan. If things go wrong IOCs might be welcomed, but until then the country will remain off limits. February 19, 2010 13:49PM
Forum Leaders
coupled with the political ties, approach to business culture, they seem to be really ahead of the game vis a vis the Europeans. Will European energy majors therefore always be behind the "eight ball" in the region ?
in the 90s and early 2000s they would have been most welcome, no ?
further, when it comes to Russia and China in Central Asia, who is winning the race between them (if we can call it a race) ? In september I was in Poland for an r/t on Central Asian energy (Krynica Forum) and one Russian expert (K Simonov) spoke of "Russia leaving the region and China arriving". This view was endorsed by a Kazakh expert. What are your thoughts ?
February 16, 2010 19:05PM
Decision Makers
China catapulted itself into the Central Asian energy game through the construction of the Kazakhstan-China oil pipeline and the Turkmenistan-China gas pipeline.
At the same time the Nabucco consortium is still trying to figure out how to build a pipeline large enough to transport significant amounts of Caspian gas to Europe whilst keeping the project commercially viable.
On the China vs Russia bit I would say that Russia’s main concern is to make sure that Caspian gas will keep flowing through Russia to Europe. An alternative route to Russia would mean that Caspian gas would suddenly compete with Russian gas for European market space and loosen Gazprom’s position in its main export market.
The new Chinese influence in Central Asia is of course a setback for Gazprom, but it is still better to see gas flowing eastwards rather than westwards via an alternative route.
Russia’s main advantage over China is that it can offer better netback prices to Central Asian suppliers. The distance to the market is shorter and Russia can charge lower transportation tariffs since the Soviet-era pipeline infrastructure has already been paid for. China on its behalf is offering large amounts of soft loans to Central Asian producers in exchange for energy supplies. I believe a modus vivendi will be found between the two sides.
February 16, 2010 21:32PM
Forum Leaders
OK, KAWEH, it seems that Russia and China are set to be the dominant players in the Central Asian gas market into the near term and this is a reality that European decision makers will have to live with
But do you think this is something that they should really worry about, more from a market perspective than a political one ?
that is, gas demand in Europe is down, prices have come down, there's plenty of LNG on the market, etc - what do you think ?
this is also likely to have an impact on some of the other major gas projects involving Russia - at the Russian Gas Society Annual Gas Conference last November, a number of Western IOC execs stated that they could not see themselves pushing the FID (Final Investment Decision) Button on multibillion euro projects like Shtockman or Nord Stream in the current demand/price environment
also, I am not really an expert on the EU's "green energy" strategies, but this is also something to factor in
what do you think ?
February 17, 2010 12:44PM
Decision Makers
The emphasis is on 'pushed backed' as the volumes will still be needed, only later than expected.
From an European security of supply perspective it would of course be better to have direct access to Central Asian gas. However, this is not critical but a 'nice to have' option. Next to Russian gas, there is a lot of available LNG supplies in the market, due to the shale gas revolution as described by Justin. There will be even more LNG once large volumes of Australian production becomes available post 2015.
I believe nevertheless that the Southern Corridor will be realised, as I expect Azeri gas to flow to Europe via Turkey. The only question is which pipeline option will be realised. When it comes to Central Asian volumes the picture becomes more blurred and I don't see it happening in the medium term. February 19, 2010 15:34PM
Forum Leaders
Forum Leaders
I also want to ask MARCO:
What are your thoughts, if any, on the development of the EU's Eastern Partnership Program, and I mean this both from the perspective of a program/set of projects funded by European governments/EU institutions, as well as a concept which has broader objectives with certain geopolitical ramifications (ie, bringing the six countries of the inner-CIS "closer" to Europe) ?
Russia, from what I understand, is not too concerned about this program not due to the geopolitical ramifications that it may well have, but rather due to the fact that Moscow percieves this to be a highly innefectual venture at the policy level. I was having words with Igor Ivanov (ex-Russian foreign minister) recently, and he suggested that the Europeans do not really seem to have a clear objective of what they are trying to achieve
your thoughts ?
also, on Georgia, you recently published some material on this country, how is the country generally coping with the (latter phases ?) of the global recession these days, and would you say that further "brinkmanship" can be expected from the man at the helm in Tbilisi ? Do you think Moscow is interested in another round of bellicosity ?
February 16, 2010 12:17PM
Forum Leaders
Have you managed to log on over on the other side of the Atlantic ?
Can you give any impressions on the so called "shale gas" revolution which has been taking place in the US recently, as there is interest in assessing how this may develop in the EU gas market context in the near term, especially with respect to how this may affect Europe's relations with its core producers/suppliers of gas, ie, Russia, Algeria, etc
I dont envisage any drastic alterations in supply-consumer patterns in the near term, but in the longer run ?
is there a shale gas discussion going on in Qatar ?
also, your recent work on Arab integration is somethink I would like to compare to the EU context. What have been the main successes of Arab integration thus far, would you say, and what are the main shortcomings ? are they mostly political ?
February 16, 2010 12:23PM
Decision Makers
The shale gas revolution in the US is known as a "game changer." It is known thus because shale gas, once considered much too expensive to be commercially viable, has since become feasible to exploit thanks to innovative technologies such as horizontal drilling and alternative methods of fracturing rock.
To put it in perspective,U.S. shale-gas output grew from less than one billion cubic feet a day in 1998 to reach approximately five billion cubic feet daily last year. In 2009, the U.S. overtook Russia as the world's largest natural-gas producer. This occurred principally as American suppliers tapped into unconventional gas reserves (i.e. shale) resources, while Russian natural gas demand plunged during Russia's precipitous economic decline.
The issue with shale gas is that, as of yet, it is nearly impossible to predict how it would impact the precarious geopolitical balance predicated on natural gas production in the longterm. However, what is certain is that, major US shale gas production could significantly disrupt Gazprom's plan to break into the American market to extend its market share.
The most discernible impact from American shale gas production has been the drop of gas imports into the US which has caused an LNG oversupply in the EU. This had definite repercussions for Qatar as it was able to redirect some of the extra gas to its other consumers in the Gulf and East Asia.
It is likely that the impact of American shale gas on the EU will be indirect, as it causes the international price of LNG to fall, Qatar will grant discounts in the longterm EU contracts, and Gazprom, remaining quite rigid in its pricing formulation, will lose market share. The drop of import demand in the US will free up more LNG globally to be shipped to the EU, making it much more competitively priced.
In terms of Arab integration, the main success has not been political, rather it has been more along the lines of economic coordination proceeding apace. The Gulf Cooperation Council (GCC) has followed the EU in putting economic considerations first, while allowing political issues to be relegated to the rear. However, the GCC members tend to be much more jealous of their sovereignty, making political integration a much more difficult prospect than forging a common market. February 17, 2010 16:08PM
Forum Leaders
We know that Iran has a lot of gas reserves, as does the rest of the Gulf, but with the exception of Qatar, most of these reserves remain under ground (or under water) for a whole host of reasons
Although the so called "shale gas revolution" is thus far a North American phenomenon, I see two relevant issues coming out of it for the European energy security discussion:
1/ Apart from being less likely to penetrate the US gas import market, you say Gazprom will lose market share (in Europe, I imagine). is this due to the fact that excessively large volumes of gas production in the US will result in a further glut of LNG on the European gas market further negatively impacting on European gas demand ? you dont see Gazprom adjusting its pricing structure to European gas consumers in order to compete more effectively ?
Although Gazprom is not known for its rapid responses to market signals, one has to bear in mind that European gas supply contracts tend to be long term, be politically as well as commercially motivated, and that these currently form the backbone of the European gas trade
2/ You talk about innovative drilling technologies used to extract gas from shale in the US. Do you not see such technologies also coming into the picture in the Eurasian gas market in the near term, which could liberate previously unforeseen gas reserves from countries like Ukraine, which according to BP is currently a "geologist's mecca" (for potential future shale gas exploitation), which could ultimately change the nature of the prevailing EU-Russia energy partnership
your thoughts ?
February 18, 2010 13:16PM
Decision Makers
Very good response. In order to answer your questions, the markect share to which I was referring is not just in Europe, but also referenced Gazprom's plan to take as much as 10 percent of the U.S. market by 2020 through LNG sales from its Arctic deposits. Thus, Gazprom appears to now effectively be shut out of the US market for some time, and is destined to lose its European share as long as there is a glut which emanates from the lack of US demand.
I see Gazprom's market share eroding further as it is still refusing to show adequate short term price flexibility to its European customers. For example, In July, 2009, Qatari LNG prices in the U.K. fell as low as $75 per thousand cubic meters compared with Gazprom prices between $210 and $220 per thousand cubic meters for EU countries under long-term deals. It makes sense that EU countries would take advantage of the LNG glut and buy more from Qatar at favorable deals. I see this trend continuing as more LNG import terminals are constructed across the continent. This have more than a purely economic dimension, given that the EU has set a political goal of diversifying its natural gas dependence upon Russia.
Gazprom will have to adjust its prices in the longterm if it wishes to compete, but with Turkmenistan beginning to charge higher prices, it may no longer offer it the arbitrage opportunities that it used to.
In re. to your second question, I do see a migration of US drilling techniques to Europe. Europeans have seen how the US was able to unlock huge stores of gas by innovative drilling techniques and technological advances. At least three European energy giants are developing or purchased interests in gas shale projects in the U.S. — Norwegian oil company StatoilHydro, the U.S. unit of British oil company BP Plc and French company Total. Buying the American technology will save the European companies the need to develop it on their own, which could take many years. It will only be a matter of time before we see the advanced US drilling technology being used to unlock complex European gas, and because these EU energy companies are major players in their own right, they can probably get the projects up and running between 3-5 years.
The migration of US drilling technology in the EU, the rise of Qatari LNG, and the rapid expansion of American shale gas production will decisively change Russia's position as a price leader in the EU within a decade. I am not saying that Russian gas will no longer be needed, it will, but the lever of diversification will gives the Eu a level of discretion that they have not seen before. February 18, 2010 22:28PM
Forum Leaders
1/ Gazprop's position as the market leader is under serious threat,
2/we will be seeing diversification in the market (although it may not just be about diversification of supply routes)
3/ and - as the President of Eurogas asserted at a high level energy conference in Moscow in November - profound changes are taking place in the European (and global) gas industry: Gazprom will have little choice but adjust its business towards these changes February 21, 2010 00:26AM
Forum Leaders
sticking to energy for the moment, but switching from Central Asia to the European far north, STEFFEN, can you give us a bit more of an idea of what role you think the Arctic will play in EU energy security iin 2010, if any ?
I know our Norwegian friends are very bullish on the region, as is the trans-Atlantic community, also our Russian friends (Russian companies like Lukoil and needless to say Gazprom, have notable plans for the region's widely assumed energy reserves), but what is the view from the EU institutions in Brussels ? is there a plan or a program of action for the Arctic ? either in an energy security context or other forms of strategic policy dialogue ?
February 16, 2010 19:11PM
Decision Makers
thank you for starting this forum!
You name indeed one of the geopolitically most interesting regions with the Arctic! A part of the world that until not long ago seemed to be eternal Ice - not only in geological terms - is opening up and thus attracting interest by investors, NGOs and political forces.
Most obvious with regard to classical energy resources - it is estimated taht about 25% of the worlds remaining gas resources are to be located in the Arctic - but also with respect to shifting world trade routes and classical concepts of security the Issue is often coined as a new Great Game or a Race for the Arctic.
In that context it is noteworthy to consider the changing tools and balances of power in Brussels.
It is indeed an interesting time to be in Brussels right now with not only new Parliament and Commission, but also a new division of powers by the Lisbon Treaty. Thus we are facing a situation where the EU is having ongoing trilog's on the interpretation of Lisbon in the several procedures of the Union (and thus also with regard to the External Action Service) while the Union is also confronted with bigger expectations from inside as well as outside. Much will depend on how the main figures will develop their new powers, in particular Lady Ashton and President Rompoy of course.
In that context the EU is about to position itself as one of the players in the Arctic Region. The membership negotiation with Iceland will do its part as well.
So attention might slightly shift from the focus on the East...Russia, Caucasus, Central Asia to some extent to the north, of course not totally.
The EU will try to diversify on routes but also on sources of energy..and thus the Norwegian Fields in the Barents Sea and around Svalbard might play a crucial role in a midterm perspective...IF yes if the demand will be estimated as sufficient enough in 10 till 15 years time, to start the processes to exploit those resources!
We should bare in mind that Europe embarked on a very ambitious agenda to become energy efficient..and some would like to understand that to be energy independent! With an decreasing population demands are likely to decrease as well.
Concluding I can tell you that folks in the Parliament and the Commission as well as in certain member states are working on strategies for the Arctic and we can be pretty sure to state that in due time there will be an EU Policy on the Arctic, not only on Energy but also other issues of importance to Europe.
It seems rather likely that the EU will try to act as a partner and stakeholder to avoid and balance conflicts of interests on the Region, but depending on demand and pressure from the industry and other stakeholders the EU is also likely to take a firm stand towards other interests.
Personally I believe that the Issue of the North East and North West Passage will be the first on the table, together with partially conflicting claims on the exclusive economic zones.
February 19, 2010 11:30AM
Forum Leaders
I would love to hear more from you about what you think will be the key elements which will comprise an EU Arctic strategy and how far away we may be from seeing such a strategy developed and implemented. However this is for future sessions and for the moment thanks again for introducing this important topic to our audience, as well as other forum participants in such a clear and concrete manner February 21, 2010 00:38AM
Decision Makers
thanks for having opened the forum.
On EaP: To evaluate a European policy, it is necessary to take into consideration the origin and the budget. Unfortunately many commentators presented the EaP as a European response to the assertiveness showed by Russia in August 2008. Indeed, the initiative was proposed by Sweden and Poland months before, reflecting much more an internal intergovernmental game than a consistent policy vis-a-vis Russia. At that time, many countries traditionally committed to the EU enlargement (notably Sweden and Poland) tried to counterbalance the incoming French presidency's focus on the Mediterranean dimension of the European Neighbourhood Policy (ENP). To give some idea of the resource-shifting, France succeeded in guaranteeing for the southern neighbours two thirds of the 12 Bn EUR earmarked for the ENP between 2007-2013. This internal European game severely impacted the quality of the initiative, which not only lacks a strategical and long-term view, but risks several overlappings with other initiatives such as the Black Sea Sinergy.
To sum up, paradoxically the Eastern partners - or some of them - turned out to be more disappointed than Russia with reference to the EaP.
On Georgia: the macroeconomic fundamentals are not so worrying, though the country has been considerably hit by the crisis. Notwithstanding, Georgia is suffering much more the systemic implication of the global crisis: among these, I would highlight the change of the US administration, the falling prices of hydrocarbons, and the weakness of Europe. Both factors contributed to the loss of geopolitical relevance experienced by Georgia in the aftermath of the August war.
First of all, the Obama administration is not intended to spend serious political capital in the CIS. Washington considers the role of Russia as of paramount importance with reference to more urgent dossiers such as Iran and Afghanistan. Also, the messy Ukrainian politics and the Saakashvili's folly in 2008 determined a sort of "Ukraine-Georgia fatigue" in the US.
Secondly, as for hydrocarbons prices, the dynamics which came from the crisis turned out to be detrimental for investments in ambitious diversification projects from which Georgia would benefit thanks to its geographical rent. Even if in the EU many voices start lobbying for EU-funded big infrastructural investments, eventually backed by ad hoc common bond issuance based on the EIB model, these investments are more likely to foucus on the internal EU interconnectivity than on diversification. But this is only intellectual speculation so far, as no movement in this direction is visible yet.
February 16, 2010 22:33PM
Forum Leaders
Well, thanks to both MARCO AND KAWEH for their overnight comments. I wanted to re-read your comments this morning, on a "fresher" brain, before replying. Both sets of responses are very interesting and raise a number of issues
First to MARCO, I really like the way you approach the EaP topic !
Very clear and very sad, for the Europeans, but also very normal, and the inter-governmental rivalries within the Union, in the manner that you describe the budgetary rivalries, gives us a much better insight into the type of "lack of consensus" in European external policy decision making that KAWEH referred to when addressing European energy diplomacy in Central Asia.
So where does this place EaP for now ?
If the program has been deprived of the type of budget that the Swedes and particulary the Poles would have hoped for, and the French managed to absorb a greater part of the budget for the Med South Bank countries, does this deprive EaP of any "policy teeth" it may have originally had ?
What about the projects themselves - have any of these achieved any tangible benefits to the recipient countries, would you know ?
I guess EaP potentially has a "geopolitical super-structure" within the context of its particular ramifications vis a vis Mosow, but in reality, given the way you have deconstructed the topic, the geopolitics get bogged down in the EU's inability to act with one voice (on external policy issues at least) or, to coin Claud Mandil's phrase, the Union is in need of far greater "solidarity" February 17, 2010 12:02PM
Decision Makers
The developments of the EU-Ukraine free trade area (FTA) negotiations are probably much more interesting as for their potential for modifying many geopolitical balances. The new Ukrainian administration, wrongly identified as the "pro-Russian" side of the Ukrainian political panorama, will probably go ahead with the negotiations. It has to be noticed that the FTA is incompatible with any Russian-sponsored prospect for a custom union between Russia, Ukraine, Belarus, and Kazakhstan (the project originally known as Edinoe Ekonomichestvo Prostranstvo). A EU-Ukraine FTA implies the potential for significant trade diversion, with huge effects on the cross-border trade flows between Russia and Ukraine and on the grip on power held by many regional constituencies in Ukraine.
In this context the EaP - whose main tools are association agreements similar to agreements between the EU and countries such as Chile - looks much more like an instruments to keep at bay any prospect for EU membership, which finds no mention in the document. The disappointment of Mr Yushchenko at the time the EaP was launched is much more justified than the Russian disappointment. He might have been not very pleased of getting nothing more than what has been achieved by Belarus or Armenia.
The biggest EU countries realized that to raise the possibility of the EU accession in response of the emergence of some sign of democracy has been a dangerous mistake. As a foreign policy strategy, it was much more consistent with the interest of the US republican administration than with the European interests. February 18, 2010 20:39PM
Forum Leaders
On Georgia, MARCO, yes, I also like what you are saying, particulary the point about "THE LOSS OF GEOPOLITICAL RELEVANCE OF GEORGIA" given the current external environment, as well as THE LEVELS OF GEORGIA (AND UKRAINE FATIGUE) IN THE US.
In principle I agree. However, I think this is a cyclical issue, kind of like the oil price graph over a period of time. I still cannot see how US policy makers, particulary on the right, would not love to continue exploiting Georgia's political geography and firm up on their foothold in this country. They need a strong geopolitical reference point in the Caucasus and its not going to be Armenia (for a whole set of reasons we can discuss) or Azerbaijan, and Russia controls the North Caucasus, so it has to be Georgia, in many ways (despite the current reduction of Georia's relevance and much uncertainty in Washington about further endorsement of the Georgian president
The problem with Georgia, for my part, is that the current regime is outwardly pro-Western, continues to score well in the eyes of many Georgian supporters in the West on counts of governance, business freedoms and Tbilisi continues to be a large recipient of Western (esp US) aid flows. Pro-Western policies (ie, Georgia's outreach to the West at the political level) in Tbilisi are always going to find a degree of support in Washington and in the European capitals, despite the Georgian president's "wreckless approach", which is widley perceived by many. This creates a dilemma for the West as you have to work with Tbilisi, even though you may not necessarily agree with some of the politics coming out of it, and hence further compounds the West's current cooler relationship with Moscow
do you have any thoughts on this, particulalry with respect to how this may impact on security in the region ?
February 17, 2010 12:20PM
Decision Makers
- Is the current Georgian government there to stay enough time to see another republican president enter the white house?
- Will an hypotetical next republican administration likely to have the same foreign policy priorities of the Bush's one with reference to the Caucasus and the post-soviet region? It has to be noticed that even within the Bush administration the views were quite divergent - with reference to the August war - between the Vice-presidency and the Department of State. We can not exclude that these inconsistencies played a role in persuading Saakashvili to undertake dangerous foreign policy moves.
Given the circumstances, Georgia will not enter NATO. The US are no longer pushing for the membership action plan, reinforcing the traditional opposition of important European NATO members such as Germany, France, Italy and so on. I doubt that Russia will go for further provocations.
To sum up, the big actors have all the interest in keeping Caucasus stable and avoiding addressing dividing issues such as NATO enlargement. In my opinion, the problem with Georgia is that its administration has been the outcome of a systemic panorama that is no longer there. All its foreign policy consideration were - and are - based on the assumption "West against the rest". But Tbilisi has to realize that the world of the "coloured revolutions" is gone, and will not come back soon. February 18, 2010 21:14PM
Forum Leaders
1/ the legitimacy (never mind the initial euphoria) of coloured revolutions has well and truly expired
2/ a more pragamtic position from the West towards any administration which takes the helm in Tbilisi
3/ Caucasus to remain stable, for the near term at least
This raises many other questions we will have to discuss later:
1/ what happens to the Frozen Conflict "statelets" - Abkhazia, S.Ossetia ?
2/ what happens with reformers in the region, given that the coloured revolutions have lost their legitimacy ?
3/ will the West now allocate less "geopolitical resources" into countries like Georgia ?
February 21, 2010 00:50AM
Forum Leaders
It may be a little too early to tell, but there was an article in the Russian daily "Kommersant" last week suggesting that Yanukovich would support a proposal for the privatisation of the Ukrainian gas pipelines operator, Naftogas Ukraine, and that this could subsequently lead to Gazprom taking control of this strategic Ukrainian enterprise
Yanukovich for his part has sent out signals suggesting that "I am no Russian stooge", which is something which many will off course debate, for better or for worse
DANILA: what are your thoughts on this ? February 17, 2010 12:51PM
Decision Makers
thank you for starting this forum!
You name indeed one of the geopolitically most interesting regions with the Arctic! A part of the world that until not long ago seemed to be eternal Ice - not only in geological terms - is opening up and thus attracting interest by investors, NGOs and political forces.
Most obvious with regard to classical energy resources - it is estimated taht about 25% of the worlds remaining gas resources are to be located in the Arctic - but also with respect to shifting world trade routes and classical concepts of security the Issue is often coined as a new Great Game or a Race for the Arctic.
In that context it is noteworthy to consider the changing tools and balances of power in Brussels.
It is indeed an interesting time to be in Brussels right now with not only new Parliament and Commission, but also a new division of powers by the Lisbon Treaty. Thus we are facing a situation where the EU is having ongoing trilog's on the interpretation of Lisbon in the several procedures of the Union (and thus also with regard to the External Action Service) while the Union is also confronted with bigger expectations from inside as well as outside. Much will depend on how the main figures will develop their new powers, in particular Lady Ashton and President Rompoy of course.
In that context the EU is about to position itself as one of the players in the Arctic Region. The membership negotiation with Iceland will do its part as well.
So attention might slightly shift from the focus on the East...Russia, Caucasus, Central Asia to some extent to the north, of course not totally.
The EU will try to diversify on routes but also on sources of energy..and thus the Norwegian Fields in the Barents Sea and around Svalbard might play a crucial role in a midterm perspective...IF yes if the demand will be estimated as sufficient enough in 10 till 15 years time, to start the processes to exploit those resources!
We should bare in mind that Europe embarked on a very ambitious agenda to become energy efficient..and some would like to understand that to be energy independent! With an decreasing population demands are likely to decrease as well.
Concluding I can tell you that folks in the Parliament and the Commission as well as in certain member states are working on strategies for the Arctic and we can be pretty sure to state that in due time there will be an EU Policy on the Arctic, not only on Energy but also other issues of importance to Europe.
It seems rather likely that the EU will try to act as a partner and stakeholder to avoid and balance conflicts of interests on the Region, but depending on demand and pressure from the industry and other stakeholders the EU is also likely to take a firm stand towards other interests.
Personally I believe that the Issue of the North East and North West Passage will be the first on the table, together with partially conflicting claims on the exclusive economic zones. February 19, 2010 11:31AM
Forum Guests
Interesting and substantive discussion on energy, gas production and trade outlook and geopolitics, congratulations on a fortuitous start, Marat.
I have a bit of a neophyte (leading) question: not to throw off the debate here, but, as experts and avid followers of developments in the energy field what, if any, consideration do you give to peak oil?
According to some sources, many of whom are very credible, the world has already entered a period of decline of oil production and the reserves envisioned to come online will not be able to replace the production from depleted fields.
Others point to a reduction in demand, recession and a reverse of growth as we know it (i.e. backed by fossil fuels).
Regardless of what are considered to be the symptoms or the cause, it seems that we are headed towards a world in which the energy resources fueling our way of life are bound to decrease, forcing significant and painful changes along the way (part of the reason for this is that the path has been unsustainable all along, some argue). Some communities and societies will adapt better then others, but in general, the going will be increasingly tougher for the developed (i.e. Western) world (higher to fall from, harder to turn on a dime, bigger mass, higher expectations, would be just a few reasons).
What is your take on peak oil, its impact and possible solutions to alleviate the oncoming shock? What gives? Will it become a race to the bottom of every man for himself? Will existing structures we take for granted, such as the EU, the US, be able to hold together and emerge as survivor stories, or do you envision a more fragmented outcome?
Here are some examples of recent, pertinent articles on the peak oil topic:
Thanks and best,
Eugen February 19, 2010 20:41PM
Forum Leaders
our Forum has just about run its course, but I propose we leave it open for the rest of the weekend in case anyone wants to address Eugen's question.
JUSTIN, this is something you could probably respond to ?
Otherwise we can take up the discussion in future sessions
hope everyone has been having fun so far !! February 21, 2010 00:57AM
Decision Makers
Oil extraction is a matter of technology, if we look at the so-called "complex" oil, i.e. tar sands, heavy oil, ultra deep oil, etc, we can see that it is fairly prolific. Yes, the cost of extracting it is high, but if the market will sustain it, it will be produced. The amount of oil that is in complex form will last for many more decades after conventional oil production begins to collapse.
Way before this time, the world will have moved significantly from the reliance on petroleum in the transportation sector, at least in the developed countries. This is already happening. I am not certain of the situation in the EU, but in the US, mass produced electric cars are becoming a reality. Of course, as of yet, they are not the norm, but I give it another decade or so.
But I would not disregard this very real focus on GHG mitigation and energy diversification as so much talk, there are billions of dollars being funneled toward these enterprises that will begin to bear fruit in the mid-term.
That being said, in response to your question, if oil suddenly ran out tomorrow, then the collapse scenario could be viable, however, the reality is that this is more of a gradual process giving the world time to adapt.
I would recommend an interesting book. The Age of Oil: The Mythology, History, and Future of the Worlds Most Controversial Resource, (by Leonardo Maugeri)
It is quite readable, and discusses these concepts in depth. February 21, 2010 06:30AM
Forum Leaders
Thanks so much for your insights and thanks also to Eugen for developing the discussion further from the audience
Well, everyone its Sunday night and, as they say in football, we have ran our event into injury time, so I just wanted to express my sincerest gratitude to everyone for participating in this first EGF online "geopolitical brainstorming session".
I think we have had some truly quality interventions on a number of highly topical issues and I for one have learned a great deal about these issues from all of you. Its very useful to think these issues through and discuss them in such a setting, I feel.
We will make a short summary of the some of the key messages coming out of this first session, and post them on the website shortly
I am off to Moscow on Tuesday for an energy roundtable, note of which is posted on our website in case people want to have a look. I expect we will have our next session in March, and will be in touch with all of you shortly as you will all appear on our mailing list for future events
In the meantime, I wish everybody good night, thanks very much again for getting involved in the Forum, and looking forward to being in touch with everybody again soon
Marat
PS. feel free to send us any impressions, critiques, comments, etc which you may have about our first online event February 21, 2010 22:04PM
Forum Guests
True, our challenges related to the subsoil are not insurmountable. There are sufficient reserves awaiting to be mobilised through E&P investment. The difficult challenges are above the soil, the geopolitics being one of them. The global energy landscape is no longer how we came to know it. We are on the threshold of a new energy revolution.
The IOC vs NOC controvery is an interesting one but we should not lump all IOCs and NOCs in the same basket. Aramco, Petrobras and Petronas are on the way to becoming IOCs in the same way as Total and ENI had graduated from NOCs to IOCs. IOCs are also divided among themselves small-to-medium service companies, super-independents such as BG and super-majors. The "Seven Sisters" are now drawn from NOCs. Whether we shall see NOCs and IOCS cooperating under a new win-win arrangement or NOCs will gain more ground at the expense of IOCs which are seen as the flag-bearers of better project management, technology and finance are yet to be seen.
So much to talk about, but let me stop here for the time being and promise that I will be back with more comments in the near future.
Thanks, arkadashim, for initiating this Forum. February 28, 2010 22:25PM