Election Bazaar in Iraq ongoing

“democracies make elections, elections don’t make democracies”

The counting of Millions of votes cast in Iraqis elections is going on to choose the right ones from more than 6,000 candidates from 86 political groups to gain seats in the 325-member assembly. Some violence occurred – 38 citizens were killed and around 100 were wounded in result of bombings. The country’s electoral commission called it a “glorious day” and a victory for Iraq. While election hype and afterwards PM selection and government coalitions are taking headlines some other aspects before, during and after elections may have more effect for the future of Iraq.

Comments from West have praised democratic development and even the UN Security Council Monday hailed parliamentary elections in Iraq as an “important step” toward strengthening the country’s national unity. From my point of view democracy played minor role in elections and the outcome probably will be splitting ethnic/religious entities instead of national unity.

Background information related to Iraqi elections as well later the results can be found from following link , which includes an interactive map with Province Overview/Details, Political Coalitions, Seats Distribution and later with Winning Candidates of Iraqi elections 2010 made by Alsumaria Iraqi Satellite TV network.

The De-Baathification Campaign

The anti-Baathist campaign in Iraq was strong having its influence to selection alternatives. The Accountability and Justice Commission successfully banned hundreds of candidates from the March 2010 elections for alleged Baathist ties. Unlike the barring of candidates, which was of questionable legality, the February 2008 Accountability and Justice Act actually says that Baathists are not allowed jobs in the Interior and Defence Ministries. Many southern provinces that are controlled by Prime Minister Nouri al-Maliki’s State of Law list have also created their own committees to weed out former regime members in the local governments.

Parliamentarian Saleh al-Mutlaq and his Iraqi National Dialogue Front, who were part of former Prime Minister Iyad Allawi’s Iraqi National Movement are the most prominent of those banned. U.N. mission in Iraq sent a letter to the Election Commission calling on it to reject the banning of candidates. Parliamentarian Mutlaq said that he would appeal his case to the courts. United Nations asked Accountability and Justice Commission to reverse its decision. They replied by telling the U.N. to stop interfering in Iraqi affairs.

Vice President Joe Biden criticized Accountability and Justice Commission and said that it wasn’t being impartial and suggested that banning candidates should be postponed until after the election. Head of the Accountability and Justice Commission Ali al-Lami rejected the idea. Government spokesman later said that the U.S. was interfering in Iraq’s internal affairs.

Press reported that of the 511 banned candidates, 72 were from former Prime Minister Iyad Allawi’s Iraqi National Movement, and 67 were from Interior Minister Jawad Bolani’s Unity of Iraq Alliance. Later Accountability and Justice Commission reinstated 59 candidates saying that there were errors in their paperwork. On January American commander of the U.S. Central Command General David Petraeus said that the Accountability and Justice Commission was working at the behest of the Iranian Revolutionary Guards’ Qods Force. Commission responded by accusing Petraeus of working with Baathists.

And where goes the oil money?

The key element to understanding the future development of Iraq is the struggle about oil income, which same time draws lines between central government and regional/local authorities. On December 2007 the Basra branch of the Fadila party reflected local regionalism sentiment and made an unprecedented demand for a one-dollar fee per locally-produced barrel of oil to be set aside for the governorate in a special fund. Basra holds maybe 60 to 70% of Iraq’s oil (currently producing more than 1,000,000 bpd) and despite remarkable oil income has one of the lowest standards of living in the country. Despite a failed referendum initiative in January 2009 the Maliki government indicated its preparedness to give Basra 50 cent per barrel of oil. When news about this broke last May, it was immediately followed by demands from Kirkuk, Iraq’s second biggest producer (maybe 600,000 bpd) for a similar half-dollar per barrel fee. The new article 43 of the budget was accepted and went even further: So one dollar will be paid to the relevant governorates for 1) each barrel of produced oil; 2) each barrel refined oil (the biggest refineries are in Bayji in Salahaddin province and Dura near Baghdad) 3) each 150 cubic metres of produced natural gas. And not only oil, but also, 20 dollars will be paid for each foreign visitor to the “holy sites” in the governorates!

Related to oil income struggle between Kurds and central government one interesting detail is that in budget some money has been set aside for the interesting separate heading of “oil exports via Turkey”. These funds are intended to enable the Kurds to at least cover the operating costs of the foreign oil companies (DNO and Genel) that briefly began exporting from Kurdistan last year but received no payment since Baghdad does not recognize their contracts, thereby forcing the the Kurdistan Regional Government (KRG) to make any payments from its own purse.

The new election law could lead to troubling divisions over oil revenues. The law has created conditions for even greater Kurdish control over Kirkuk and oil resources in northern Iraq. Other oil-rich regions of Iraq, such as the largely Shia south, will also have a basis to agitate for oil revenues to flow to regional governments. With the Iraqi central government still relying on oil for more than 90 percent of its national budget, the long-term viability of the country is called into question even if elections signal short-term success.

Occupied oil field

One small episode related interests in Iraq politics and oil took place on December 2009, while Iranian soldiers occupied an oilfield called al-Fakka on the Iraqi side of the border with Iran in the Maysan governorate. Episodes like the Fakka incident ultimately serve as political theatre that will deflect attention from the more fundamental question about Iranian influence – at the level of high politics in Iraq, and through a constitution that works in Tehran’s best interest. One can only speculate about the possible explanations for the Fakka occupation itself, which may range from everything like local issues in the Maysan area via internal disagreements on the Iranian side of the border to the possibility that Tehran would like to test Maliki.

A similar lack of concern was expressed at the Nahrainnet website, which is frequently mislabeled a “Sadrist” website but in reality seems more like an Iranian-inspired pan-Shiite website that seeks to bring ISCI and Sadrists together over issues like support for the Huthis in Yemen. More in an article of Gulfanalysis.

Oilfields for sale

International oil industry is making its share with partitioning Iraq. The second licensing round for Iraqi oilfields was carried out recently by the oil ministry in Baghdad. On the one hand, the contracts won by foreign companies will prove controversial because Iraq remains in the middle of a chaotic process of political transition and has yet to agree on a legal framework for the oil sector. On the whole, the mostly unsuccessful first and partially successful second licensing round have ended up producing an outcome that seems more sustainable than if all the contracts on offer had been immediately awarded to foreign companies as planned. If that had happened, the whole package would have been attacked both for selling Iraqi oil on the cheap and for marginalising the domestic oil industry.

In the event, a more balanced picture emerged, even if some of the failed offerings from round one (including Zubayr and West Qurna Phase 1) have since been awarded to foreign companies in separate deals (led by Italian and US firms respectively). In addition to Rumayla which was awarded to a Sino-British consortium in the first round in June, the successful bids in the second round include most notably the giant project West Qurna Phase 2 (in Basra; awarded to a consortium led by Russia’s Lukoil and also including Norway’s Statoil in a smaller role) and Majnun (Basra; Shell), plus Halfaya (Maysan; CNPC), Gharraf (Dhi Qar; Petronas), Badra (Kut; Gazprom) and Qayara and Najma (near Mosul, both to Sonangol of Angola). The new agreements also include partnership stakes for Iraqi state oil companies, and the “leftover” fields that were not awarded will be developed by the Iraqis themselves as well (Middle Euphrates, East Baghdad, and a group of fields near Kirkuk).

The first licensing round for Iraqi oil produced surprises and what many analysts describe as a “meagre” outcome: Only one out of eight oil and gas fields was awarded, the giant Rumaila field in the Basra area where a service contract was won by a consortium of BP and the Chinese CNPC.The two last weeks have seen considerable confusion about the Iraqi oil ministry’s position concerning oil exports from Kurdistan, where the regional authorities have signed a number of exploration and drilling deals with foreign oil companies without consulting Baghdad.

Ongoing energy struggle across Eurasia via an embattled energy corridor (and a key pipeline) that runs from the Caspian Sea to Europe through Georgia and Turkey — and the Great Game of business, diplomacy, and proxy war between Russia and the U.S. that has gone with it. On the other hand, the Turkish leadership draws ever closer to Iran, which provides 38% of Turkey’s oil and 25% of its natural gas. Ankara and Tehran also have geopolitical affinities (especially in fighting Kurdish separatism). Together, they offer the best alternative to the Caucasus (Azerbaijan, Georgia) in terms of supplying Europe with Iranian natural gas. Iraq has also discussed northern export routes through Turkey, including linking up to the Azeri-Turkish Baku-Tbilisi-Erzerum (BTE) line, the planned Nabucco (Iran-Europe) pipeline, and the ongoing Arab Gas Pipeline (AGP) project. The proposed AGP pipeline would deliver gas from Iraq’s Akkas field to Syria and then on to Lebanon and the Turkish border sometime in 2010, and then on to Europe.

Votes for sale

For many voters it seems to be too insecure to wait that their selections on election days would bring some change for their living conditions. According Uruknet some of the nation’s poor, the right to vote does not mean having a say in who leads the country; it means having something to sell to make desperately needed cash. With intensive campaigning now under way in what is shaping up to be a highly competitive ballot, votes have become a precious commodity, a fact not lost on many ordinary people who care little for politics but who struggle to make ends meet.

“Elections are a beautiful opportunity to get some money,” Ahmad Salam said. “There are lots of people willing to sell their votes, and lots of people who want to buy them.” A mechanic by trade working in the impoverished Sadr City slum of north-eastern Baghdad, Mr Salam has taken on the role of an election agent with a difference. He collects votes and then offers them en masse to whichever party is prepared to make the highest bid, taking a commission for his efforts. “I have 100 people who have given me their vote to sell,” he said outside the small garage where he is employed as a casual worker, earning a few dollars a day. “None of them cares who wins, none of them thinks it makes any difference, so they give me their vote, and I sell it.” According to Mr Salam, some of the poorest voters were prepared to take as little as US$5 (Dh18) to guarantee their allegiance in the election booth. Most charge more, between $20 and $100, depending on the number of voting-age adults in their family.

One other example is Zuhair Aqeel, also an election agent, who collects votes and sells to the highest bidder. “I have done this work in every election since the first in 2005. From the last elections I earned enough to buy a small taxi which has given me a good living. “This year I hope to do even better and I think I will be able to get one of the candidates to promise me a job in a government office or as an administrator in the police or army. If I get that, I will be comfortable; I’ll have a stable salary and a stable life.”

Federation option?

The basic question, related also to sharing of oil incomes, is if Iraq is heading now more towards a confederation or a federation. The Kurds want the former, with the only role of the central government to send them some regular development money. The Kurdish autonomy is well accepted by other Iraqis but think that at least in the oil sector there should be a role for the central government. The presidency council allows the Kurds to go on with their contradictory position of demanding confederation (and threatening with secession) even though they know that even the most optimistic geological estimates will leave them as the junior partner in terms of oil reserves.

The hot spot for development Kurdish autonomy is Kirkuk, which has been subjected to two successive policies of ethnic modifications during the past four decades: a planned and systematic arabization policy and ethnic modification in favour of the Arabs by the previous regime between 1968 and 2003; then a planned kurdification and ethnic modification in favor of the Kurds. For Iraqi Turkmens to be recognized as the third main ethnic community in Iraq, with rights and duties equal to those of the Arabs and Kurds in Iraq, namely: the recognition of the Turkmen language (Turkish) as the third official language of the country; the effective participation of the Turkmen community at all levels of power in Iraq, by the inclusion of their political representatives in the supreme institutions which govern the country, such as the Presidential Council, Government Council, Parliamentary Presidency, Supreme Council of Justice, Chief of Staff of the Army, of the Police and of the Security. Turkmens have been excluded from these institutions since the invasion of Iraq, as the political power, under the Anglo-American occupation, from 9th April 2003, has been attributed on an ethnic-sectarian basis and exclusively to the parties who collaborated with the Occupiers (Kurds, Shiites and Sunnis). More e.g. Uruknet.

The incorporation of Kirkuk into the Kurdistan Regional Government (KRG) is seen as likely. Arabs, Turcomen, and other ethnic groups that left Kirkuk following the 2006 sectarian violence will no longer be eligible voters in Kirkuk. In 1957, Kurds made up about 48 percent of Kirkuk’s population; they are now almost certainly well over 50 percent. Shia members from the southern provinces also have an incentive to support a future Kirkuk petition, as this would help secure Kurdish support for a southern Shia region where substantial oil revenues would go directly to the regional government.

Same time with election mess the Slaughter of Iraqi Christians has started. Christian families are leaving the northern Iraqi city of Mosul in their droves to escape a concerted campaign of violence and intimidation. Chaldean Bishop Emil Shimoun Nona has said that Mosul is experiencing a “humanitarian emergency” and that “hundreds of Christian families” left the city Feb. 24 in search of shelter, leaving behind their homes, property, commercial activities, according to Asia News. The situation “is dramatic”, he said, and warned that Mosul could be “emptied completely of Christians”. lack of security is due to a political vacuum in Mosul, with Arabs running the city and not sharing power with the Kurds. He said he remains hopeful that peace could return after the elections.

My guess is that ethnic/religious groups will strengthen their positions as result of elections, the self-governance/autonomy of provinces will increase at cost of central government and if the country can avoid total splitting the future of Iraq will be that of federation/confederation.

My Conclusions

From my point of view there is some base for following conclusions related to Iraqi elections 2010 and events around them:

• Elections showed some tendency towards democracy in Iraq especially if compared to some traditional allies of western powers in Arabic world

• After successful licensing round for Iraqi oilfields with multiple winners there is good change to develop Iraqi energy field, sustainable economy and get wealth for further development

• The role of occupying forces is declining and Iraqi people (or at least leading tribes) are taking development work more to their own hands; as consequence the stability of Iraq probably will increase

• Coming deals regarding government, sharing revenues and administration will reflect the fragmentation of politics along sectarian and ethnic fault lines.

• Iranian influence, its amount still unclear, will reflect how internal issues are intertwined with regional ones.

• The final results will indicate whether Iraq has moved away from the sectarian climate of 2005 or will it continue with a slightly more national-sounding rhetoric.

• The challenge for nation building is that Kurds, Shiites and Sunnis probably have their religious or ethnic identity, however it is questionable if they share an Iraq identity. This may result Iraq splitting into three entities/states a bit similar way like Bosnia after Dayton. The outcome may well be a confederation/federation of these strong entities.

Ukraine: End of Orange Revolution, start of Stabilisation

“We can say goodbye to our democracy, our independence and our sovereignty” (outgoing President Yushchenko predicts a future with either Ms Tymoshenko or Mr Yanukovych as President)

“I’m quite happy because whoever is chosen today will be hated tomorrow by the majority of the country.” (Andrey Kurkov)

Ukraine’s Russian-leaning opposition leader, Viktor Yanukovych is on course to become the country’s president, with early results indicating he had a lead of several points over his bitter rival, Yulia Tymoshenko, the prime minister. Describing yesterday’s vote as a “turning point in our country’s history”, he added that he would pursue policies that helped all Ukrainians – and would not favour one geographical area. “We don’t need to find enemies in our country. We need to unite together,” he declared. In contrast to 2004, international observers said there was no major evidence of fraud. Despite fair elections PM Tymoshenko insists that she will challenge the results of the presidential election.

With more than 97% of votes counted, Mr Yanukovych had a 2.6% lead over his rival, PM Yulia Tymoshenko. According to the results, “against all” received 4.4 percent. Preliminary estimates showed about a 69 percent turnout. Sunday’s elections had been given a “positive assessment” by the election observation mission led by the Office for Democratic Institutions and Human Rights ODIHR) of the Organisation for Security Co-operation in Europe (OSCE). The OSCE hailed the process as “professional, transparent and honest,” saying it should “serve as a solid foundation for a peaceful transition of power. There looks to have been less interference from the US this time than happened in 2004, when a number of Washington-backed NGOs took an active part in events in Kiev.

The outcome

Before 1st round I wrote and article “Ukraine – choosing a new Way”

I described Ukraine’s challenges – created mainly the disastrous regime of outgoing President Yushchenko – and prognosticated that Ukraine is now selecting more pragmatic and balanced approach with its foreign policy. I also predicted right the 1^st round outcome but bet wrong the final 2^nd round. One reason can be that after 1^st round President Yushchenko went really mad – changing voting regulations, naming Stepan Bandera (nazi-collaborator and chief of the Organization of Ukrainian Nationalists, OUN) as Hero of Ukraine and proposing to vote “against all”. These actions were maybe enough to increase the support for Mr. Yanukovich and decrease the popularity of Ms. Tymoshenko.

Tensions ran high ahead of the vote, with both candidates accusing each other of planning large-scale ballot fraud and vowing to send their supporters into the streets to sway the outcome of any legal disputes over the count. The positive assessment of international monitors however gives limited background to contest the result.

Stabilisation

Mr. Yanukovych and his team may be an old-style party team, however this past can be seen also as an experience needed to bring order and stability to country. In contrast to 2004, Yanukovych’s potential presidency is no longer viewed among Western Ukrainian voters as an existential threat to Ukraine. Earlier Party of Regions even managed to came third in the local election to the city council of Ternopil in March 2009 gaining about 10% and surpassing Tymoshenko’s bloc (which called for a boycott of the election) and Yushchenko’s “Our Ukraine.” Yanukovych’s personal support in the West of Ukraine rose to the same level. At the same time, the less intense animosity to Yanukovych now and disillusionment with his main alternatives means that the West of Ukraine will grudgingly accept him as a new president just the way it accepted Kuchma in 1994. One may claim that the ongoing political confrontation between the Orange leaders has become a far greater threat to Ukraine’s statehood than any of Yanukovych’s election promises could ever be.

According to the 2001 census, 67.5 percent of the population declared Ukrainian as their native language and 29.6 percent declared Russian. Ethnic Ukrainians make up 77.8% of the population while the share of ethnic Russians is 17.3%. So it is clear that the new President has considerable support also outside predominantly Russian regions. This situation may ease tensions between different ethnic and religious groups, not only between Ukrainians and Russians but e.g. between central government and the (Trans-Carpathian) Rusins as the Crimean Tatars.

One of his first tasks is to unblock frozen IMF aid for its ailing economy. Yanukovich supports the idea of starting talks with Russia and the EU on the possible creation of a gas transportation consortium in order to increase the reliability of Russian gas transit to Europe. Improving Ukraine’s investment climate could attract foreign companies who could help Ukraine to develop its vast oil and gas reserves and strengthen its energy security.

In foreign policy the outlines of the new Yanukovych era are clear. He will improve Ukraine’s strained relations with the Kremlin tilting country back towards Russia’s sphere of influence, after the relentlessly pro-European course set under President Yushchenko. He will rule out Nato membership and extend the lease on Russia’s Crimea-based Black Sea fleet. It expires in 2017. He also believes in European integration – economically if not politically.

Energy aspect

The election may also be the final nail in the coffin of GUUAM (Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova) Group which was founded 1999 with help of US to foster favourable conditions conducive to economic growth through development of an Europe-Caucasus-Asia transport corridor. GUUAM was dominated by Anglo-American oil interests, ultimately purports to exclude Russia from oil and gas deposits in the Caspian area, as well as isolating Moscow politically. First Uzbekistan withdraws from it leaving behind a stump GUAM. Then Georgia started its aggressions with false idea of western support leading today’s situation. Moldova was aiming towards Nato and EU but after conflict in Georgia it started to look other alternatives. Political attitudes of Azerbaijan and Russia have approached each other. Now Ukraine as last fortress of GUAM is taking distance from its earlier Nato ambitions. More e.g. in article “Is GUUAM dead?”

Constructing the White Stream pipeline underneath the Black Sea was supposed to be the main energy project of GUAM bloc; it was also designed as an alternative to EU’s Nabucco. The idea of White Stream is to pump natural gas from the Caspian region to Ukraine and further to Romania, from where it can be marketed to Europe. On May 28, 2008, the European Commission identified the project as a “Project of Common Interest” and furthermore accepted it as a “Priority Project.” However the last Georgian energy summit on January 14-15 2010 in Batumi to discuss the construction of pipelines bypassing Russia failed and got downgraded as no high-ranking officials who said they would attend the meeting ended up coming. White Stream has some similarities with Nabucco – both are more political project and both are missing the gas supply. With new President in Ukraine also political backing is dispelled.

Ukraine’s role of a major European gas hub is also at risk because South Stream could almost halve its transit earnings. Russian newspaper Kommersant reported on Tuesday that Viktor Yanukovich had invited Gazprom to participate in upgrading the Ukrainian gas pipeline system. Gazprom has made early comment that the pipelines needed upgrading and the company would be interested in participating, however any investment would not replace the need for Gazprom to develop the South Stream pipeline. I agree – politicians are coming and going and chancing their minds in between but pipe will stay a halve century if not more.

My Conclusions

• The most positive result were fair and free elections. I expect that in domestic politics attitudes between regions/groups identifying more with Ukrainian nationalism and the Greek Orthodox religion, and predominantly Russian and favourable to the Soviet era will ease.

• It appears obvious that in foreign policy one of the top priority in the political agenda of new President will become the restoring of cordial relations with Russia.

• I hope that the EU and Ukraine will rapidly reach agreement on a new Association Agreement (including comprehensive free-trade agreement) that added to better investment climate will help modernise the Ukrainian economy and enable it to return to pre-recession growth rates.

Summa summarum

• Free and fair elections will revise the policy both with internal and foreign affairs of Ukraine. Nato membership will be ruled out, European integration will continue economically if not politically, relationship to Russia will improve. Ethnic tensions may be reduced and more united country with new President has better possibilities match economical challenges.

balkan

Is it Time to Bury Nabucco?

Latest developments during last weeks related the EU’s policy of diversifying Europes’s energy supplies give a clear indication that EU’s pipedream – Nabucco – is vanishing while the rival Russia’s South Stream gets a boost both on the ground and updated aims. European Commission has tried enhance Nabucco already some nine year with modest or even backward success. Now is maybe the right time to reconsider EU’s energy plans in new context.

Russia will propose including the South Stream gas pipeline to pump natural gas from Russia to the Balkans and onto Europe in a list of EU priority projects, a Gazprom deputy CEO said Tuesday. “We are drafting an application for inclusion of the South Stream project into the list of EU priority projects, and we see no grounds why this application should be rejected,” Alexander Medvedev told journalists during a break at an international energy conference in Berlin.

Earlier Nabucco got its priority status in EU as the aim was to diversify supplies away from Russia.  Now Gazprom is to make a presentation to the European Parliament to promote South Stream later in 2009. The EU Energy Commission says Gazprom would have to prove South Stream represents “added value” for Europe to become a priority, earlier the EU has already accepted Gazprom’s Nord Stream as a priority project.

Boost to South Stream

On May 15 South Stream project got a boost two step closer to reality. As I mentioned in my previous article in addition to Italy’s ENI, Gazprom signed memoranda of understanding with Greek natural gas transmission company DESFA, Serbia’s Srbijagas and Bulgarian Energy Holding.  What I didn’t knew then was that at a meeting in Sochi, attended by Russian Prime Minister Vladimir Putin and Italian Prime Minister Silvio Berlusconi, Russia’s Gazprom and Italy’s ENI agreed to double the planned pipeline’s capacity to 63 billion cubic meters from previous plan 31 bcm/y.  So at same day the establishment of joint ventures for the construction of South Stream pipeline was finally provided with a formal basis and the project doubled estimated gas flow. This Gazprom’s move strengthens their competitive advantage over Nabucco and at the same time affirm its dominance in the field.

The pipeline would cross the Black Sea at 2.000m depth and from there to the city of Barna, in Bulgaria and from there its north part will reach Austria after crossing Serbia while its south part will extend to Greece and Italy.

Signed contracts are boosting also regional economy. The Greek section of South Stream will cost between 700 to 1000 Mln Euros, the section in Serbia is estimated cost some  700 Mln Euro, costs in Bulgaria  depend if gas is going existing or totally new pipeline. Further investments related to final route(s) of pipes are possible also in Croatia and Slovenia.  After the gas flows the transit fees can be remarkable in transit countries.

Desperate search for gas by Nabucco

The economic viability of the Nabucco project has long been questinable. EU has only committed a small fraction of the €7.9 billion ($10.6 billion) needed to build the pipeline. The basic question is where the gas for Nabucco (ultimately targeted at 31 billion cubic meters per annum) will come from. If there is no good answer coming soon the today’s and tomorrow’s potential investors are looking better alternatives.

But despite the recent progress on Nabucco, it all still looks to many analysts like a case of too little, too late. “I believe Nabucco still looks very problematic,” says Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. “It might work, or it might not, but I don’t think it’s going to work quickly.” He argues that the pipeline probably won’t be viable until around 2020—much later than the 2014 starting date currently being advanced.

Nabucco’s supply base has been vanishing with latest developments.  Original idea was to get gas from Azerbaijan, Turkmenistan and Kazakhstan.  Gazprom’s newfound willingness to offer cash on the barrelhead for Turkmen and Kazakh gas led to Kazakhstan’s permission to construct a new pipeline that will feed gas from Central Asia into Russia’s export network.  The United States Senate offers verbal support, but Washington is no closer to brokering the tradeoffs that would be necessary for Nabucco to get off the ground.  Same time Gazprom is ready to buy all the gas from the second stage of an offshore Azeri development and Azerbaijan stll lacks a direct gas link to Europe and has been unable to agree with Turkey on terms for the transit of larger planned volumes.

Ongoing sanctions against Iran made an extension line from Turkmenistan to Turkey a non-starter.  They also meant that no Western government could countenance even an informal arrangement where Iranian gas might compensate Turkey so that more gas flowing through Nabucco would reach other European markets.

Nabucco tinkering with Middle East dreams while South Stream works on the ground in Europe

A couple of days after Sochi meeting four UAE and European companies told an oil and gas contracts between them and the Kurdish Regional Government (KRG) to supply gas from Iraq’s Kurdistan region to kick-start the Nabucco pipeline project to supply Europe.

The Iraqi government on Monday 18th 2009 rejected an $8 billion Kurdish plan calling new contracts illegal.  The KRG, which has clashed with Baghdad over draft oil legislation, has countered that the deals are legal and comply with Iraq’s constitution. In Iraq gas normally has been a side-product in oilfields so increasing gas production has been related increasing oil production.  Whatever the legal output will be a strong estimation is that gas starts flow for export after 2020.

Schroeder’s view

Speaking at a business meeting in Russia’s Kaliningrad on Monday, Schroeder, who chairs the Nord Stream shareholders’ committee, said that Russia cannot be blamed for recent gas shortages at the EU.

“When we get Russian gas, the problem is not the supplier, but the fact that 80 percent of the pipeline is located in the Ukraine. We should look for independence not from Russia, but from such transit schemes,” he was quoted by RIA Novosti as saying. “Both Nord Stream and South Stream allow to avoid unstable transit countries,” Schroeder added.

My view

As Nabucco’s supply base has vanished and its economical reliability is going same way while South Stream is gaining distance on the ground it is time to revise European Commission’s pipedreams. Does EU want be dependent on Russia’s gas (South and Nord Stream), Ukraine’s transit (today’s lines), Turkey’s blackmail combined middle-East as supplier (Nabucco)?

Power play has many aspects – I have touched only gas.  Searching and increasing use of renewable energy sources, increasing nuclear energy, decreasing consumption etc are all as part of a whole.  However from my point of view need of gas will be the at least the same if not bigger than today in EU and Europe for next two-three decades.

I would like to see EU to change priority status from Nabucco to South Stream.  Nabucco could still be kept alive in case to wait stabilisation in middle-East.  Besides whole the time there is improvements in liquefaction plants and tankers to increase the share Liquefied natural gas/LNG compared to gas supplied via pipes.  Selecting South Stream now could secure its smooth implementation before 2015; help EU focus other aspects of its energy sources and policy and improve EU-Russia relationship with its geopolitical consequences.

Sources and more about topic:

• EU’s big Choice – Nabucco or South Stream

• Gazprom-DESFA Agreement South Stream Signed

• Russia to propose EU include South Stream in priority projects

• South and Nord streams to secure EU’s gas stability – Schroeder

• Gas Pipelines: South Stream Gets a Boost

• Russia and Italy sign gas supply deal

Battlefield of Power Politics – Northern Black Sea

While my special interests are laying in Balkans I keep an eye on Northern Black Sea – Caucasus, Ukraine and Bessarabia.Events there sure have their impact also in Balkans – if not direct so at least through their geopolitical, security or economical consequences.Today’s Caucasus with its surrounding regions is a frontline of power politics where U.S. and Russia are searching the limits of their sphere of influence.EU – without vision, strategy nor independent will and muscle – is trying preserve some foothold there as well its member states more or less depending their history, interests and priorities.

Last year was highlighted by conflict in Georgia.Separatist regions around the globe had waited Kosovo’s unilateral declaration of independence (UDI). Throwing international law to garbage western powers showed that independence gained by violence could be possible and even acceptable; South Ossetia and Abkhazia implemented their project first with help of Russia who following U.S. example could get rid rebuff of UNSC.

An other battlefield was and still is energy.Last year’s highlight was Gas crisis which had its effect also in most parts in Europe.Few months ago an agreement was made between Russia and Ukraine;my estimation is that if not even this weekend then later this year conflict is back.

What’s up 2009

Since Georgia is now parcelled up as frozen conflict I expect this year some interesting developments especially in Moldova and Ukraine if we speak about states.Speaking about issues related to the whole Caucasus – energy is the top one and it includes much more than only gas transit via Ukraina.Besides energy giants also U.S. military-industrial complex has some interests in region and with Nato’s helping hand some tensions could be provided to secure company profits also during recession period.

Moldova

In 1992 Moldova and Transdnistria aka Pridnestrovie fought a brief, bitter war which the separatists won, with the assistance of a contingent of locally-based Russian troops left over from the Soviet Red Army. Cease fire left Russian troops in place as peacekeepers and Transdnistria has since then acted de facto as independent – although not recognized – state.Conflict was frozen nearly ten years, then started first serious try to find sustainable solution. In the Spring 2003 Dimitry Kozakin – a special envoy of Russian President Putin – started to broke deal between local stakeholders. His plan known as “Kozak plan” was ready and preliminary agreed to sign on November 2003 but western powers put some pressure towards Moldova and everything was cancelled by President Voronin’s rejection.

2004-2008 “outsiders” like U.S., EU, OSCE as well Ukraine and Russia made some attempts to launch new negotiation process but without success. (More in my article “Transdnistrian numbergame”)

It will be seen this year if the “Kozak plan” still is valid for further examination, if yes, it will consolidate Moldova’s neutral position as the plan included the change of the Moldovan state’s structure – creation of the federation where Transdnistria and Gagauzia would be granted extensive rights including the right to block the undesirable bills.Moldova will have general elections on Spring 2009 so of course it is possible that the state can take new course e.g. towards Western Powers. In that case Russia might be more inclined to formally recognize Pridnestrovie’s separation from Moldova.

Ukraine

On October 25th 2008, in Mukachevo, the 2nd European Congress of Transcarpathian Rusyns took place; decision on declaration of “Rusyn statehood” and “reconstruction of republic of Subcarpathian Rus”, proclaimed in 1938, was accepted there. A meeting demanding to recognize this republic was held at the building of Mukachevo City Council. (AXIS 30.10.2008) The Office of Public Prosecutor of the Transcarpathian area has brought a case against leaders of Rusyns organizations on suspicion in attempt against territorial integrity and inviolability of Ukraine.

Besides such a criminal case has been brought in the Crimea regarding ” The Popular front Sevastopol-Crimea-Russia” which was created in August, 2005, and unites 12 public associations of the peninsula. Investigation is going on of its activity in connection with the “appeals to revision of territorial integrity of Ukraine” and similar case will be also in Donetsk republic.

SBU also considers necessary to expand powers of law enforcement bodies to more efficiently counteract to distribution of radical Muslim religious currents in the Crimea, Ukraine’s security services have also detained some mujahedeen who were going to Russia with an aim of recruitment of group of radical Islam fighters.

According the Security Service of Ukraine (SBU), separatist organizations in Ukraine do not possess serious threat for security of the country.As concerns the scale of the threat – these organizations are small and moreover, as a matter of fact, they are established from abroad and with external financing.

SBU’s estimation about importance of separatist movements is probably right, but I see the big divide between NW Ukraine – dominated by sc. Orange revolution parties and SE Ukraine – dominated by pro-Russian Viktor Yanukovich’s the Party of Regions.While ruling “Orange” coalition is seriously divided the pro-Russian opposition can win or lead ruling alliance in future, reconstruct better relations with Russia and minimize the impact of old parties of Orange revolution. So coming elections in Ukraine will decide if this huge country is seeking alliance more from Nato/EU or Russia and will the divine be so big that the whole country will split.

According economic terms Ukraine is already practically bankrupt. Grimly forecast is that Kiev will not be able to pay its next instalment for Russian gas deliveries in coming days so triggering a new cut-off. Even if this particular payment is averted, there is still next one coming on April.

Energy game

After “Cold War” US has all the while expanded its influence post-Soviet territory with aim to guide those region’s natural resources under US companies.  As stakes have been control over the oil and gas of the Caspian Sea/Black Sea/Caucasus basin, and the control of multiple key energy pipelines criss-crossing the region.  Economical interests have been linked to political game e.g. Nato enlargement.  While EU has been more bystander Russia has during last couple of years weight down the scale in favour of its own interests by series of successful operations.

GUUAM (Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova) Group was founded 1999 with help of US to foster favourable conditions conducive to economic growth through development of an Europe-Caucasus-Asia transport corridor.  GUUAM was dominated by Anglo-American oil interests, ultimately purports to exclude Russia from oil and gas deposits in the Caspian area, as well as isolating Moscow politically.From its part GUUAM was designed to support sc. Silk Road Strategy Act – adopted by US Congress March 1999 – which outlines a framework for the development of America’s business empire through development of an Europe-Caucasus-Asia transport corridor.

Now GUUAM is coming to end of its short road.  Already earlier Uzbekistan withdraws from it leaving behind a stump GUAM.  Then Georgia started its aggressions with false idea of western support leading today’s situation. Moldova was aiming towards Nato and EU but after conflict in Georgia it started to look other alternatives.  Political attitudes of Azerbaijan and Russia have approached each other.  Russia again took the initiative acting as a mediator between Armenia and Azerbaijan to solve long term conflict of Nagorno-Karabakh. The last piece of GUUAM is Ukraine and also this last fortress has degenerated to stagnation.

The latest gas dispute made it clear that Ukraine is not reliable transmitter of Russian gas to Europe. This boosts EU’s Nabucco –plan to new level. The same is true also with Russia’s South Stream, Nord Pipe and plans to increase more Liquefied natural gas (LNG) production and transport facilities. When impleneted – probably until 2015 – the new line(s) are invalidating the significance of Ukraine as transit route of energy.

Individual countries in Balkans and central Europe are considering their positions between those two projects; some have already made their selection like Serbia who allied with South Stream. Romania is open to investing in the Gazprom pipeline South Stream, not just the EU Nabucco project, designed to reduce energy dependency on Russia, Romanian minister of economy Varujan Vosganian said on October 2008, contrary to the president’s statements. “Romania is ready to support any EU project, both Nabucco and South Stream,” the liberal minister, whose party is at odds with the country’s conservative President Traian Basescu, said, newswires report.

EU

The EU Commission has called on EU nations to provide more aid for Ukraine and four other ex-Soviet states as part of a proposed “Eastern Partnership” program aimed at making the bloc’s Eastern doorstep more stable. The new policy, to be launched at an EU summit in Prague in May, is designed to help Ukraine, Moldova, Georgia, Armenia and Azerbaijan come closer to the EU. Belarus may also be involved, if it resists Russian pressure to recognise Georgian rebels in Abkhazia and South Ossetia as independent states.

EU has said to have a “crucial strategic interest” in Northern Black Sea region. Unveiled by the European Commission last December, the “Eastern Partnership” foresees granting some 350 million euros ($448 million) in extra help between now and 2013 to the EU’s ex-Soviet neighbors.Negotiations about implementation of plan are still ongoing. Some EU member states have expressed reservations about the proposal.France, which pushed the EU’s Mediterranean Union project last year, is reported to fear that increasing funding to the bloc’s eastern neighbors would shift the EU’s strategic focus away from North Africa and the Middle East.

The plan aims to promote economic and political stability in the countries and reduce Russia’s influence in the region. It includes free trade agreements, visa waivers, financial aid and economic integration with the EU.In return, the eastern neighbors are expected to step up progress toward economic modernization, democracy, the rule of law and human rights. The “Eastern partnership” scheme is planned to be approved this Spring and launched in May if everything goes without further delay.

Eastern Partnership is interesting also from an othet reason.With EPp its possible to test sc „Third Way“ for EU allies those are not coming EU member-states in near future.If the outcome is promising so it could be applied with Turkey to avoid its membership.

Other topics

With new leadership in U.S. it is of course possible that the new “Détente” starts between Russia and U.S.This probably would increase the possibilities to find some kind of peaceful cooperation between Iran and western block to avoid bombing this old civilization back to stone age.Elections in Iran can support this outcome.

The Gas Exporting Countries Forum (GECF), organization of world`s leading gas producers, was established in Tehran in 2001 to foster the concept of a gas cartel. Yet it does not have same organizational level as OPEC but some developments can take place. Last Autumn Russia, Iran and Qatar have taken the decision to form a “big gas troika”. …The idea is that the three countries will work on joint projects across the entire gas chain from geological exploration and production to distribution and marketing of gas.  This cooperation combination could come remarkable player in Middle East politics too.

Gas flows, everything ok or…?

After three weeks dispute Russian gas is heating European homes. Talks ended agreement, it was even signed, bills are paid, prices fixed, EU monitors are checking implementation and everything seems to be ok next ten years. I would not like to be bird of ill omen but I must state to have serious doubts and fear that on the end of year 2009 the situation is the same as three weeks ago.

I base my gloomy forecast to three main factors related to Ukraine, which are

• Financial situation,
• Questions related to domestic policy, and
• International policy.

Financial situation

The price of Russian gas to Ukraine almost doubled in situation of international financial turmoil where inflation in Ukraine has been over 50 % last year, its currency has lost most of its value compared to Euro, steel (one of the main export products) is down and the signs of better future are unseen in near future.

Domestic policy

Domestic political sphere is in stagnation, everybody is waiting new elections which outcome with great possibility is not bringing any solutions. Same time The Security Service of Ukraine (SBU) has finished pre-judicial investigation and directed to court the criminal case of two activists of association Popular Front Sevastopol-Crimea-Russia, has launched new operations against separatist Rusin movement (Subcarpathian Rusin parliament, Carpathian Ruthenians, Rusins of Carpathian Rus), has prevented recruitment of mujahedeens and is speeding its work on revealing streamsof financing of the extremist radical Muslim organizations. An of course the Russian population in East Ukraine and Crimea is ready to activate if needed.

International policy

Ukraine is in cross-swell of declining U.S. hegemony and rising Russian sphere of interest and the country itself is divided which direction is the best. One part of playground is the energy policy of EU, but also U.S. and Russia. The latest gas dispute made it clear that Ukraine is not reliable transmitter of Russian gas to Europe. This boosts EU’s Nabucco –plan to new level. The same is true also with Russia’s South Stream, Nord Pipe and plans to increase more Liquefied natural gas (LNG) production and transport facilities. When impleneted – probably until 2015 – the new line(s) are invalidating the significance of Ukraine as transit route of energy.

Alternative paths

I believe unforeseeable future in social developments so the scenario I described above is not predestined the alternative paths are possible as well. E.g. in next elections Viktor Yanukovich’s the Party of Regions can win or lead ruling alliance in future, reconstruct better relations with Russia and minimize the impact of old parties of Orange revolution.

It is also possible that despite results in election separatist movements are gaining more support and one compromise can be creation some kind of federation with strong minority rights which also can block Ukraine’s former western dreams.

The bottom line

Whatever happens, interesting year is starting in Ukraine.  To the end I take second opinion by Czech intelligence agency as follows:

The Security Information Service (BIS), state intelligence agency of the Czech Republic, have warned members of parliament of the country that gas dispute between Russia and Ukraine most likely will repeat and it is only a matter of time, Prague-based newspaper Pravo reports.

“We have received overwhelming information from intelligence and counterspionage services”, said the head of the Czech parliament’s lower chamber committee on security issues, Frantisek Bublan. He marked that these data testified to presence of commercial and political factors which could provoke the next gas conflict between Russia and Ukraine. “It is impossible to guarantee that both sides will come to an agreement and the situation will normalize”, noted Bublan, having pointed out that there was lack of transparency of the contracts concluded by Gazprom and Naftogaz. (Source: http://www.axisglobe.com 21.1.2009)

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Serbia’s European Perspective developing – energy deal with Russia signed

On Spring 2008 Serbia signed two strategic agreement. The one was a Stabilization and Association Agreement (SAA) with European Union and the second one was a preliminary energy deal with Russia. The first is since then suspended but the second one got some flesh on the bones on Xmas-week. Both deals are implementing Serbia’s European perspective although from different angels.

SAA paperwork

SAA could be described as a roadmap guiding Serbia’s way into EU. When implementation really starts it means starting long negotiations where some 80.000 pages of EU regulations are applied to Serbia’s legislation. During the process and especially afterwards with membership the carrots include e.g. access to EU’s structural funds and different (~500) development programmes. With these promises or visions EU is using its sc. “soft power” to integrate the key player of West Balkans under the influence of EU.

More about SAA & Serbia e.g. my articles “Montenegro and Serbia on the way to EU – maybe”  and “Two approaches from Balkans towards Europe”  and my Serbia’s NPI & SAA documents in my Document library

Serbia will come to an energy hub of West Balkans

Xmas eve Russian and Serbian Presidents and related companies from both sides signed an umbrella agreement including three parts:

• Under the contract for the sale of NIS, Gazprom will purchase a 51 percent stake in the company for EUR 400mn, and invest a further EUR 547mn in restructuring. The contract, adopted during a government conference call, states that the buyer will secure a loan of EUR 500mn, repayable over 14 years, in order to implement the investment.
• Second part includes construction the underground gas storage facility in Banatski Dvor that would be able to hold 300 to 800 million cubic metres of gas.
• Thirdly the Presidents signed an umbrella agreement providing political guarantees that Serbia will receive a stretch of the €10 billion South Stream gas pipeline project is planned to distribute gas from Russia through Serbia and Bulgaria, branching out finally to Western European countries.

Sure NIS was sold under today’s market prices.  However if the two other parts of deal will be implemented the deal will be win-win both to Russia and Serbia.

NIS would also provide Gazprom’s first refineries outside of Serbia. With a network of about 500 gas stations allocated in Serbia (including Kosovo), as well as in Bosnia and Herzegovina and Montenegro, Serbia’s oil monopoly is strategically significant in the supply of neighbouring regions as well. Also when South Stream is completed and fully operational (est. 2015), the pipeline would make Serbia an energy hub in the region.

More over global energy game in my article “Powerplay behind the new Cold War”.

Conclusion

While EU has used its “soft power” and promises to Serbia Russia has used hard currency. In regards of Serbia’s European Perspective this does not necessary mean any swift from pro-Western to pro-Eastern side. From my point of view the situation and its prospected development will allow to Serbia a more balanced approach to its future. While energy will be on the top of EU’s priorities Serbia will have same time more leverage with its negotiations over SAA and other relations with the EU.