Shayan Ghajar

Amidst the ongoing debates on initiating a new round of sanctions on Iran, a massive project to link Caspian region natural gas sources to Central and Western Europe has gone largely unmentioned. Plans for a new pipeline spanning from the Caspian to Central Europe were finalized last month in a conference with Turkish officials and construction will begin in 2011. The majority of the pipeline’s natural gas supply, evidence shows, is likely to come from Iran.

The pipeline, named Nabucco, is a bid by European nations to break their dependency on Russian energy by diversifying their sources of natural gas imports. The project would link at least seven nations via the pipeline. It has attracted financing from both the European Investment Bank and the European Bank for Reconstruction and Development, as well as the Trans-European Energy Network. Mirek Topolanek, then president of the European Union, said in 2009 that the success of the Nabucco project is a “test of European solidarity.” What is often left unsaid, however, is that without Iranian involvement, Nabucco is likely to fail.

Nabucco will span from the shores of the Caspian to a natural gas transportation hub in Austria, 3,300km in distance. When it is completed, the pipeline will have cost at least $10.69 billion and will pump 31 billion cubic meters of gas per year (bcm/y), a significant fraction of Europe’s overall natural gas consumption. Nabucco has shareholders from Germany, Austria, Hungary, Romania, Turkey, and Bulgaria, as well as a French company (pending approval) and potential investments from Poland, Azerbaijan, and Kazakhstan. Many of Europe’s largest energy corporations, most of which are linked financially with their respective governments, have billions of dollars staked on the success of the Nabucco pipeline.

Nabucco’s raison d’être, and what makes it so attractive to European and American policymakers alike, is that it offers a viable alternative to Russian natural gas, which dominates Europe’s imported natural gas market. Russian disputes with Ukraine over transport and pricing of natural gas led to a crisis in early 2006 in which Russia stopped all shipments of its gas through Ukraine, some 80% of its supply to European markets. The instability of Russian supplies due to recurring disputes with Ukraine are one of the major reasons European states have sought alternative sources, as well as the geopolitical implications of the European Union’s heavy energy dependence on Russia.

Without Iranian involvement in Nabucco, however, Russian natural gas would have to comprise the bulk of Nabucco’s gas flow, thereby leaving the EU dependent, still, upon Russian energy.

Iran holds 16% of the world’s natural gas reserves, second only to Russia. John Daly of OilPrice.com, points out that Nabucco’s use of Azerbaijan’s natural gas as its primary source leaves a deficit of 23 bcm/y remaining out of its projected output—in short, the pipeline would be inoperable. Azerbaijan’s Energy Minister Natiq Aliyev has also acknowledged the infeasibility of the Nabucco project without Iranian involvement, as have other heads of state, oil analysts, and executives.

The United States, on the other hand, has spoken out numerous times against Iran’s involvement in the project. Matthew Bryza, then U.S. deputy assistant secretary of state for European and Eurasian affairs, said that the United States would be opposed to Nabucco if it included Iranian natural gas. Azeri gas, said Bryza—apparently unaware of the assessments of Azerbaijan’s energy ministry—would be enough for the pipeline to function.

On the other hand, every conceivable analyst, businessman, or politician watching or involved in the project has stressed the necessity of including Iranian gas in the pipeline. On March 9, Turkish Energy Minister Taner Yıldız urged Iran’s inclusion in the Nabucco project, and spoke of plans to ship Iranian natural gas to Turkey for export to Europe, which would likely be by means of the Nabucco pipeline.

OMV, an Austrian company investing and extremely involved in Nabucco, urged Iran’s involvement last month. OMV’s principle shareholder, it must be noted, is the Austrian state itself. Even Nabucco’s chief rival, Russia’s state-owned Gazprom, has highlighted the impossibility of Nabucco without Iran: Prime Minister Vladimir Putin said in March 2009, “Nabucco cannot be carried out unless Iran joins the project.”

As early as 2007, Austrian Chancellor Alfred Gusenbauer (German language), in response to American pressure to exclude Iran from linking with Nabucco, said “we will build the Nabucco pipeline regardless.”

It appears that Europe and Nabucco may indeed be ignoring America’s protests outright and covertly including Iran in Nabucco already. The Turkish news site Today’s Zaman, which is closely tied to Erdogan’s ruling Justice and Development Party, reports that Iran has been hidden in the wording of Nabucco’s plans and agreements. The plans refer to the construction of three entry points and one “optional” entry point. Today’s Zaman cites unnamed sources within Nabucco as saying that the obscure language seeks to avoid naming source nations while leaving a space available for Iran. On Nabucco’s site itself, a publicly available map of planned construction clearly shows a branch of the pipeline leading directly to the Turkish-Iranian border.

If Europe wants to break its dependency on Russian energy, Iran is simply the only viable option. European officials and businesses are well aware of this, and have billions of dollars at stake from some of Europe’s most powerful national governments, energy consortiums, and banks. In short, while many European nations speak out in support of harsh sanctions on Iran—such as Austria and Germany—these same nations have staked their energy security on Iran and may soon be shoring up the Islamic Republic’s shaky economy with yet another source of oil revenue.