Energy 26 June, 2017 11:17 am   
COMMENTS: Mateusz Gibała

Southern Gas Corridor like Nord Stream 2? Let’s be cautious about facts from the Kremlin

Amnesty International Polska, Helsinki Foundation for Human Rights, Alliance of Associations Polish Green Network and CEE Bankwatch Network organized a press briefing on the upcoming visit of Azerbaijan’s president Ilham Aliyev to Poland. The event was titled “Does Poland need a visit from the president of Azerbaijan – the worst regime in Europe?” The organizations talked about human rights, which are not observed in Azerbaijan and about the Southern Gas Corridor, for which Baku hopes, and which will allow even more Russian gas into Europe. But is it really the case?’s editor, Bartłomiej Sawicki comments on the issues. a

Experts from NGOs divide their arguments against the Southern Gas Corridor into two groups. The first one is about human rights, which in their opinion are being abused. This has been confirmed by international human rights organizations. “Azerbaijan remains a deeply authoritarian state and in 2015 further aggressive actions took place,” says Freedom House’s report. Whereas according to the Human Rights Watch, president Ilham Aliyev’s government “wants to eliminate all criticism caused by the economic crisis.” “At least 25 critics of the government have been unfairly incarcerated, including political activists and bloggers. In 2016 restrictive regulations have been adopted, which make it impossible for NGOs to act independently. Reports about tortures and other forms of abuse have been cropping up all year,” writes the Human Rights Watch. During the briefing, the experts stressed that by implementing energy projects with Azerbaijan, West European companies, the European Commission and some EU Member States, support and sustain Aliyev’s oppressive regime. The organizations’ press release states that “the oppressive regime is getting stronger thanks to the money from oil and gas production.” Europe wants to import the Azerbaijani gas through the planned Southern Gas Corridor, claiming that it would allow it to diversify gas sources. At the same time it supports the Azerbaijani regime without even mentioning human rights or democratic principles,” said the release.

The other set of arguments presented by the NGOs relates to the European section of the Southern Gas Corridor, i.e. the Trans Adriatic gas pipeline and its usage by Gazprom, after Russia and Turkey reached an agreement on the construction of Turkish Stream. According to the organizations, the pipeline, which is to diversify Europe’s gas supply, de facto seals Russia’s dominance over the European gas market. The activists believe that Russians have already made a deal not only with Ankara, but also with Greece and Western corporations to pump Gazprom’s gas into the southern route. “The evidence collected by the meeting organizers, shows that the Southern Gas Corridor, contrary to its objectives, may seal Russia’s domination over the European gas market. This is an example of yet another unnecessary, even harmful pipeline that has no significance when it comes to the security of gas supply to the EU,” said the release.

Human rights and economic cooperation 

The organizations reminded that it was certain that during the Azerbaijani President’s visit in Warsaw, at the end of June, the engagement of Europe’s financial institutions in bankrolling the Southern Gas Corridor would be discussed.

The organizers of the press conference asked an open question – what was Poland’s goal in hosting “Europe’s last dictator”. They received a response from the Polish Foreign Ministry on the Warsaw visit. “The answer was terse and lacked details, it only talked generally about the goals of the cooperation. This made us believe that the visit will pertain to regional and economic cooperation and not the internal situation in both countries,” said Katarzyna Wencel from the Helsinki Foundation for Human Rights. She added that the Chancellery of the Polish President, with whom Aliyev will meet, has not released the session’s agenda yet. She also reminded that despite being a member of the Council of Europe, Azerbaijan does not respect the sentence of the European Court of Human Rights.

Aleksanda Zielińska, campaign coordinator at Amnesty International Polska, said that NGOs find it very hard to do their job in Azerbaijan. “In Azerbaijan people are sentenced to prison for posting unfavorable comments on social media. Tortures to extort confessions have become commonplace. People are accused on the basis of fabricated evidence that supposedly proves they committed economic or drug crimes,” Zielińska stressed.

She added that a small group of independent media was harassed and accused of tax fraud and their permission to broadcast was taken away on the basis of the alleged crime. “In addition, new legislation was introduced, which allows the courts to fine people, or send them to prison for up to three years for offending the president,” said Zielińska. She added that banks were obliged to check where the independent organizations had their funds from. “The activities of NGOs can be suspended on the basis of general and unclear regulations. Protests and public gatherings are impeded under the guise of <offending public morality>.NGOs are also a target of cyber-attacks from the authorities,” Zielińska continued.

Emil Huseynov, director of the Azerbaijani Institute for Reporters’ Freedom and Safety, said that NGOs in Azerbaijan did not have enough support from Europe, even though the country belongs to the Eastern Partnership. “Aliyev is using his position in Europe thanks to energy resources, similarly to the USSR. Oil and gas are used as a political tool. Contracts signed in 1999 with companies like Eni, Shell and BP are to be extended,” he said. He reminded that Aliyev’s family members were employed in domestic oil companies and that USD 50 billion of profit from oil contracts ended up in the pockets of the president’s relatives. The SOCAR concern is used to enable this. “The oil and gas contracts de facto destroy NGOs by strengthening the regime,” Huseynov stressed. He said that Poland was at the forefront of opposing Russia and protesting the situation in Ukraine. He pointed that Azerbaijan was in a similar situation and NGOs needed support from Europe, including Poland. “Poland and Europe should not place any trust in Aliyev, because it legitimizes his actions in the country,” said the guest from Azerbaijan. He stressed that European organizations such as the European Commission, investors and the European Bank for Reconstruction and Development (EBRD) should not support Aliyev’s regime. “As the leader of Central and Eastern Europe, Poland should not only talk about business contracts, which is natural, but also put Aliyev under pressure,” he pointed.

The arguments made by human rights organizations cannot be denied. When doing business with various countries, Europe should pay attention to the level of respect for civil liberties. However, energy supply is a critical sector of the economy. The location of energy sources across the world does not take into consideration the criterion of human rights, yet buyers may decide where they want to make their purchase. This is why, while attending to energy security, buying oil or gas, one should remember about human rights. Azerbaijan is a member of the Council of Europe and it seems that this forum is the best place to put pressure on the country or the government, which has issues with complying with human rights. At the same time, one should acknowledge what alternative in case of gas Europe has. According to BP’s Statistical Review 2016, Russia’s participation in the European gas market is at about 45%, Norway, which is the second biggest gas supplier to Europe has 31% of the market. Norway cannot ensure Europe’s security of supply on its own. This is also about the diversification of sources and routes of the natural resource. It should be remembered that by buying gas and oil from Russia, Europe de facto supports Vladimir Putin’s reign and the Kremlin’s policy whose goal is to trample over NGOs in Russia. Billions of dollars from oil and gas sales go to the budget, which, among others, finances the militarization of the country which is talking more and more assertively about its peaceful coexistence with NATO. This money, among others, enabled Russia to attack Georgia, annex Crimea and support the military conflict in eastern Ukraine. Balancing interests when human rights are involved is never easy. However, when it comes to gas, which is treated in the EU as a transition fuel on the block’s way to zero-emission economy, it is worth remembering about the alternative that is even worse than Azerbaijan. Nevertheless Emil Huseynov’s appeal is important – business contracts are natural, but Poland as a regional leader and initiator of the Eastern Partnership, should also hold talks about human rights with the government in Baku.

Trans Adriatic gas pipeline – Gazprom’s southern entry point, or Russian propaganda?

Anna Roggenbuck, expert at CEE Bankwatch Network, stated that the construction of the Gas Corridor is very important for Azerbaijan. “It will quadruple gas exports, which will allow Aliyev to repair the regime’s budget after oil prices significantly went down,” the expert stressed.

European institutions for the past two years have not approved financial support for the Southern Gas Corridor, which includes three pipelines: SCP (South Caucasus Pipeline), TANAP (Trans-Anatolian Pipeline) and TAP (Trans Adriatic Pipeline), all of which are constructed in the direction of Italy. This is an EU Project of Common Interest, which means it has financial and political support. Yet, the European Bank for Reconstruction and Development has not made a final decision on granting a loan for the project. Ksenia Manyushis, Principal Banker for Natural Resources at EBRD, said at the beginning of the year that the Bank was still deliberating about the TAP loan, but the process had not been concluded yet. However, the lack of decision does not stem from the issue of human rights abuse, but from the size and complexity of the project and the number of interested parties. The issues EBRD is concerned with are related to technical matters, such as the installments schedule and a guarantee for the loan.

“Aliyev expects that apart from political support, he will also receive a loan from the European Bank for Reconstruction and Development. This is an important pipeline for the EU because of supply diversification and the need to become independent of Russian gas. However, EU’s argumentation is starting to fall apart. Russia will be able to use the additional possibility of gas transmission through TAP and earlier through Turkey, once the first Turkish Stream line will be constructed. Gazprom announced it was interested in using TAP to transmit gas from Russia thanks to the Poseidon project, which will connect Greece with Italy. TAP also confirmed the possibility of gas transmission from Russia. Italy’s Eni informed about signing a deal with Gazprom on using the pipeline,” said Anna Roggenbuck. She also added that the EU will not have any impact on the unused capacity of the Corridor. Currently, already 10 bcm of gas have been contracted for clients in Europe. The project provides for the possibility of expansion and gas deliveries from the region of the Caspian Sea. However, this would require consent from Turkey and Azerbaijan, so the EU will have a big problem here. The expert also stated that the project cost EUR 45 billion, and 10 bcm was only 2% of Europe’s annual gas demand.

However, this argumentation is full of holes and in one instance contradicts itself. It is true that Russia and Turkey signed a deal to construct one line of Turkish Stream with an annual capacity of almost 16 bcm. However, the resource will be sold on the Turkish market only.

While Ankara agreed to construct the second line with the same capacity, Russia said that it first needed “cast-iron guarantees” from the EU that the Member States will buy Russian gas. So far, the Commission has not offered such guarantees, because it is not interested in letting additional Russian gas into the Southern European market. The regulations of the Third Energy Package, which stopped the South Stream pipeline project play a role in this as well.

Russians did voice their interest in the Poseidon project; however, apart from general declarations there are no details regarding this. At the beginning of the year, Gazprom and Eni signed a memorandum of understanding on cooperation regarding Russian gas supplies to Italy. Thanks to Turkish Stream and Poseidon, Russians would be able to increase their presence on the Southern Europe’s gas market. According to a press release published on Gazprom’s webpage, “the document reflects the parties’ interest in analyzing the prospects for cooperation in developing the southern corridor for Russian gas supplies to European countries, including Italy (…)”. However, the document is not binding and the ‘supplies’ have been described as “updating the contracts for Russian gas deliveries to Italy”.

The agreement to construct Poseidon, which is a section of the ITGI (Interconnector Turkey-Greece-Italy) was signed at the beginning of 2016. Yet, it was a non-binding memorandum and the final investment decision on the project is still to be made.

What is more, in the context of the Southern Gas Corridor, Russians are juggling with facts, agreements and figures, which, as it turns out, have little to do with reality. One example is the alleged proposition from SNAM on giving Gazprom access to TAP. The problem is that the moment Russians released this information, Italians denied it. Continuing on with the arguments made by the organizations protecting human rights, it is true that TAP did not exclude the possibility that in the future Russian gas will be transmitted via the pipeline. However, there is one condition. Even if the European Commission silently allowed for this to happen, the infrastructure would have to be expanded, as in the first phase it would need to transmit up to 10 bcm of gas. This is where the argumentation contradicts itself. On the one hand, there is a claim that TAP may serve Russians to transmit their gas from the south to Europe, on the other – that the capacity has been already reserved by European companies, mainly Italy’s ENI, which wants to import ca 8 bcm through this route.

The expansion of the corridor does not depend on Russia, it hinges upon the question whether Western companies will strike a deal on increasing supplies from Azerbaijan and from Central Asia in the future. Turkey and Georgia should be interested in expanding transmission pipelines because it means concrete profits for them in the form of transmission fees.

Ilham Aliyev will fly into Poland at the end of this month. Apart from talks with the Polish President, Andrzej Duda, he will participate in the Polish-Azerbaijani Economic Forum on 27 June. In its search for diversification of energy sources Europe, and Poland as well, should on the one hand buy gas supplies, on the other use the Eastern Partnership and Council of Europe to improve Azerbaijan’s any other former USSR state’s human rights record. However, this is not a reason to give into the Kremlin’s game, which is counting on breaking up the Eastern Partnership and not letting the former USSR republics near the EU in any form, whether on the economic, or human rights level.