Prospects for the Trans-Caspian Gas Pipeline Under the Trump Administration

Photo: Kashagan oil field in Kazakhstan. Source: Wikimedia Commons.

BY RAHIM RAHIMOV

In his June 19 speech in Orlando, Florida, kicking off his 2020 presidential reelection campaign, Donald Trump mentioned his efforts to diversify energy sources for Europe: “I built up the military, imposed sanctions on Russia, and provided alternative energy sources for all over Europe that competed very, very strongly with Russia.” Earlier, in March and May, he had sent letters to the presidents of Turkmenistan and Azerbaijan, respectively, to voice support for the transport of gas from Turkmenistan to the West via the Caspian Sea.

The president’s messages are significant for the long-proposed Trans-Caspian Gas Pipeline (TCGP) project, which is intended to deliver gas from Central Asia to Europe, bypassing Russia, to diversify supply sources and transit routes for Europe. The pipeline is designed to carry natural gas from Turkmenistan to Azerbaijan for further transport through the Southern Gas Corridor (SGC). Incidentally, the White House granted an Iran sanctions waiver to the SGC in August 2018.

The proposal to build a trans-Caspian pipeline emerged in the late 1990s and early 2000s. But the uncertain legal status of the Caspian Sea and contested delimitation of rights to the seabed, with its rich oil and gas resources, had been flagged by both Moscow and Tehran to delay the project. President Trump referred to the Caspian Convention in his message to the president of Turkmenistan. During his Senate confirmation hearing, the newly appointed U.S. ambassador to Turkmenistan emphasized the diversification of Turkmenistan’s gas exports as a priority for his office. The littoral states did sign a treaty on the legal status of the Caspian Sea in 2018, but not all the Caspian states have ratified the convention. And environmental concerns remain a major tool that Russia can wield against implementation of the TCGP.

Even as the White House has been formulating an increasingly clearer position on the TCGP, European states and the EU have also been sending positive signals in support of it. The European People’s Party (EPP), the leading party in the European Parliament, on June 13 issued its "Position Paper on the External Dimension of Energy Security." In the document, the EPP resolutely supports the proposed trans-Caspian pipeline. Notably, however, in the same document the EPP opposes the Russia-led Turkish Stream and Nord Stream 2 pipeline projects, which are under construction and will carry Russian gas to Europe through the Black and Baltic Seas, respectively. The latter will bypass a Western ally, Ukraine, and eliminate its role as a transit country.

A few days later, on June 17, the Council of the European Union adopted a new EU strategy on Central Asia. The document supports the “implementation of joint energy and transport connectivity projects in which the bridging potential of the Black and Caspian Seas is fully used.” The EU and the government of Turkmenistan are keen on seeing the TCGP brought to fruition. Turkmenistan has invested billions of U.S. dollars in building an east-west pipeline to bring gas from its onshore fields to the Caspian coast. The pipeline remains idle because of failure to build the TCGP. A recent agreement to open the EU’s full-fledged delegation in Ashgabat is seen as a step toward resolving the impasse.

A Western ally, Georgia, which has been quite successful in implementing the Association Agreement with the EU, is promoting the TCGP. Georgia’s role might increase, as there are plans to divide the pipeline on the territory of Georgia, with one leg continuing through Turkey to Europe along the SGC and the other leg extending to Romania under the Black Sea, taking the place of the original White Stream project. Since the second leg would further involve Ukraine and Moldova, the council’s statement also alludes to the prospect of linking Central Asia with Eastern Partnership countries.

All the Euro-Atlantic signals and messages in support of the TCGP are coming among recent troubling developments with respect to Nord Stream 2. Although Germany favors the development of Nord Stream 2, needing a reliable energy source for its large economy, there is strong opposition to it from within the EU and the United States. Indeed, the United States has threatened to impose sanctions on companies involved in Nord Stream 2. However, the project has failed to get a permit from Denmark, with the result that the Nord Stream 2 consortium withdrew its application for the route through Danish territorial waters south of Bornholm, one of three alternative routes. The two other routes are more costly and still awaiting permitting. In this context, the withdrawal of Nord Stream 2’s application for a route through Danish waters signals pressure from the project’s sponsors, such as Russia’s Gazprom and its partners in Europe, rather than a realistic solution to the problem.

Russia is in a difficult position. It doesn’t have the necessary technology to build a deep-water pipeline, and any possible U.S. sanctions would forbid Western companies involved in the project from applying their technologies. These uncertainties and permitting difficulties are expected to further delay the rollout of Nord Stream 2. But the situation is still amenable to a compromise in case the Americans and Europeans clear the way for Nord Stream 2, while Russia agrees with the plan to build TCGP.

A small but important detail to support the concessions scenario is that while the EPP position document opposes the Turkish Stream, calling on the European Commission to abandon it, the document nonetheless requests “to thoroughly assess the compatibility of the Nord Stream 2 project with EU law and to ensure that all relevant EU legislation is fully respected.” In other words, the EPP didn’t rule out the implementation of Nord Stream 2, which leaves room for bargaining.

In the 1990s and 2000s, Euro-Atlantic unity was crucial to the success of offshore developments in the Caspian Sea and the construction of the Baku-Tbilisi-Ceyhan and South Caucasus Pipeline oil and gas pipelines, which today pass through Azerbaijan, Georgia, and Turkey to deliver energy resources from the Caspian Sea to Europe. Whether Donald Trump and the Europeans are able to follow up their positive messages and signals regarding the TCGP with real actions is yet to be seen.

So far Nord Stream 2 has failed to get all the necessary permits, in particular from Denmark. Changing the original route to circumvent the Danish obstacle would require still more permits. There is no assurance that those permits will be obtained, and if they are not, the project will take longer and cost considerably more than anticipated. U.S. sanctions, if the United States decides to impose them, would represent a major blow to the project. Under those sanctions, Russia would not be able to apply deep-water pipe-laying technologies, which Russian companies do not possess. On the other hand, if a Euro-Atlantic concession for Nord Stream 2 is obtained, a blessing for the TCGP might be extracted from Moscow.