Between Stsilloy and Charybdis: fighting for energy corridor

The European Union has loudly announced a new project of regional integration under its auspeces. The drafters of the project say that this informal association would include six republics of the former USSR: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. Who would benefit from the Eastern Partnership, the partner states or the Old Europe — the long run will show. Is the program a pro-Atlantic geopolitical project or only a tool for monitoring of the transit of energy resources supplied to the EU? The views of experts and politicians in this regard are still diametrically opposite.

Competition in the Baltic-Black Sea region

The project Eastern Partnership was proposed by Sweden and Poland in August 2008. First of all it should be considered within the framework of the EU-Russia dialogue while bearing in mind the efforts to strengthen the U.S. position in the Baltic-Black Sea region.

Geopoliticians traditionally described the Caspian-Baltic-Black Sea region as a whole, which historically has important economic and transit value. Today when the predominant energy is dependent on hydrocarbons, the struggle for influence acquires a special meaning. The "United States National Security Strategy For The Next Century " is formulated as follows: "Ensuring the safety of the new energy transportation routes from the Caspian Sea, which will bring the prosperity of the newly independent states in the Caucasus, maintenance of the transition to democracy around the world».

For the Russian Federation, the choice is obvious between the following alternatives: either in the form of Euro Assimilation association «The EU - Russian Federation», or their own civilizational project «Great Russia», which was dominating in the foreign policy of our Eastern neighbour since the late 90's. First of all it envisages the creation of their own integrated economic, political and military space, including the former republics of the USSR, as well as possibly some of the South-Eastern European states.

A set of techniques used by the Russian diplomacy is not innovative however quite effective.

The Minister of Foreign Affairs of Russia Sergey Lavrov said in January 2005: «The main argument of Russia in diplomatic routs is the Earth's natural gas, oil and electricity». This dependence on Russian supplies of hydrocarbons allows it to dictate its conditions to countries in Eastern Europe and the EU. Central Asian republics, which have their own production of oil and natural gas, such as Azerbaijan, Kazakhstan, Turkmenistan, in their turn dependent on the transit pipelines, controlled by «Gazprom».

Another advantage of the Kremlin is oil dollars earned during the global price increases for energy resources. The notorious «stabilization fund» of Russia makes it in the context of the global financial crisis an attractive creditor. However in addition to «the financial loop», which the ideologists of the Soviet Union called «a tool of neo-colonialism», Moscow imposes on debitors its vision of foreign policy and is actively buying up companies related to energy and oil refining. A so-called «finlandization» of the Russian satellite countries is taking place.

In addition, Russia controls the processes in the post-Soviet space through a variety of integration projects, such as the political-military organization of the CSTO (Collective Security Treaty Organization, the SCO (Shanghai Cooperation Organization), Commonwealth of Independent States, Eurasian Economic Community and the Union State of Russia and Belarus, and others.

The success of the EU and U.S. in the integration efforts of the former USSR in the region is less obvious. Pro-Western bloc GUAM (Georgia, Azerbaijan, Ukraine, Moldavia), established in 1995 was not able to implement any major energy projects as alternative to Russian ones. There is no progress in the establishment of a claimed Caspian-Black-Baltic Sea energy space and the Euro-Asian Oil Transportation Corridor (EANTK). Once Uzbekistan has left the organization the value of GUAM has significantly decreased.

The fate of the Odessa-Brody-Gdansk pipeline remains unclear due to the lack of the necessary quantity of the Central Asian oil fill and due to the high cost of the transit. The declaration of the need to continue the construction of a pipeline to the Polish city of Plock was removed from the final version of the Eastern Partnership programme.

Partnership or dictatorship?

The inclusion of Belarus into the Eastern Partnership which happened at the last stage, is a desire for complete coverage of the Baltic-Black Sea region of integration within the EU initiative. Without the participation of the Minsk officials the energy integration of the participants and the control of existing and potential routes of transit of oil and gas, would be difficult. Therefore in December it was announced in a memorandum of the European Commission that «democracy, good governance and stability» in the associated states are secondary and are important in so far as they can provide political stability, continuity of state power and, accordingly, compliance with commitments made under the programme commitments. The proposed thesis confirms the invitation into the Eastern Partnership of Armenia and Azerbaijan, where the situation with democracy and human rights is traditionally difficult.

Arguments of the supporters of the ogeopolitical mission of the Estern Partnership to «change Donor» and «to withdraw» the six Baltic-Black sea region countries from the area of influence of the Kremlin are not particularly serious. Simple arithmetic dictates that the maximum annual amount of the EU subsidies for each country participating in the Eastern Partnership will be of a maximum of 20 million euro (European Commission allocated to this programme 600 million Euro to be spent over five years). This is a very modest sum, in prticular bearing in mind that the EU will enhance its support for Ukraine, Azerbaijan and Moldova as a promising transit route of hydrocarbons, bypassing Russia. For comparison, it is worth mentioning that due to the energy preference of Moscow the Belarusian budget receives up to one third of revenues.

«Reform» of the Belarusian TEC outlined in a communiqué of the European Commission on 3 December 2008, apparently involves the participation of foreign investors in the privatization of the backbone network of pipelines and fuel and energy complex. As part of the agreement between Belarus and the Russian company Gazprom, the share of the latter in Beltransgaz in early 2010 will increase to 50%. In February 2009, in the course of the finalization of agreements on the Eastern Partnership, Gazprom bought another stake in Beltransgaz, thus bringing its share to 37.5%. It is unlikely that this fact can be regarded as a random coincidence. Given this situation, it is difficult to assume that the government of Belarus would accept a loss of control over Beltransgaz in favor of European partners, since the control of transit of gas is a powerful political argument and makes a substantial portion of revenues. Experts predicted that the transmission loss of the transit system of Ukraine and Belarus in connection with the construction of the gas pipelines «the Northern Stream» and «the Southern Stream», however the terms of putting them into operation was delayed in connection with the global financial crisis.

In connection with the participation in the Eastern Partnership programme the prospects for the construction of nuclear power plant in Belarus by the Russian company Atomstroiexport are uncertain. Firstly due to the fact that the state will depend on supplies from Russia of nuclear fuel.

Secondly, one of the conditions of accession of Armenia to the Eastern Partnership the European Union named the closure of the nuclear power plant built in the USSR (operational since 1980). Whether the technology used by the Russian nuclear ingeneers has changed since then?

The need for involvement of the Baltic-Black Sea region in the energy dialogue with the EU has become particularly apparent after numerous «gas wars» between transit countries (Belarus, Ukraine) and the Russian Federation. The effects of the suspension of transit of gas reflected in the EU, which, in turn, had little impact on the situation. Even the accession of Ukraine to the «Energy Charter», which protects the rights of energy from third-party conflicts did not help.

 Signed in Brussels on 23^rd March, documents on cooperation between Ukraine and the European Union, international banks and investors to modernize the Ukrainian gas transport system has drawn sharp reactions Kremlin. European Union within the framework of the Eastern Partnership plans to bring to this project, approximately 2.5 billion Euro to increase the capacity of transit through Ukraine. The Kremlin threatened with termination of the intergovernmental consultations with the Ukrainian Prime Minister, with the refusal to grant credit and to cut cooperation with the EU energy companies, which have interests in Russia. In the meanwhile the American expert Vladimir Socor said that even before the financial crisis in the Russian Federation there was «a growing imbalance between oil production and export capacity of its infrastructure. The production is increasing dramatically, and the construction of domestic pipelines and offshore oil terminal is moving a snail's pace »(2004). In other words, the funds allocated for the modernization of its own energy infrastructure. The significant losses incurred by Gazprom in the last quarter, indicate further deterioration of the situation.

In the framework of the Estrern Partnership the EU puts forward to the associate States almost the same requirements as to those who appy to the full membership in the European Union. It includes the harmonization of the national legislation with the EU regulations, acceptance to the World Trade Organization, which prohibits discrimination against foreign investors and economic entities in access to domestic markets. In doing so, the EU assumes no obligation to subsidize the economy participants of the EP, however does not promise the EU membership, even in the long run. In fact, the project Eastern Partnership envisages the lowest level of regional cooperation among similar programmes. Even assuming that the openness of markets and the EU countries would be mutual within the EP, it is difficult to talk about the mutual benefit, taking into account the completely different investment potential of the parties of the programme.

Prospects for Development

The Eastern Partnership programme means the architecture of relations with the participants «from a scratch». There is no continuity of the EU foreign policy in the region, which was the case in the last 15 years. This satisfies the existing political regimes of the associated states, gives them an opportunity to legalize and to traffick the illegally acquired material and financial assets.

The EP Programme does not imply a unified regional policy development, and striving to realize the concept of «movement with varying speed». That is, the interaction of the EU with each of the participants will be carried out in a bilateral manner.

Joining the Eastern Partnership would enable these countries to use this as an argument in bargaining with the Russian Federation, which remains the main donor of the hegemony and the part of Baltic-Black Sea region, which was not included on the right of full membership in the EU.

Thus, the European Union will have the opportunity to influence the institutionalized state transit of the energy resources, and in the long run the diversification of gas imports from the Caspian oil bypassing Russian gas and oil network.

Sergey Martselev, political analyst

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