Transit Options for Caspian Oil and Gas in New Geopolitical Conditionalities Liana Jervalidze Expert on Energy and Regional Issues Istanbul, Turkey June 26-27 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Content Retrospective analysis of BTC/BTE conditionalities (regional and International). The West in search of alternative routes for Caspian resources (Kazakhstan, Turkmenistan, Uzbekistan, Iran). Challenges to the southern corridor development: new geopolitical conditionalities (Ukraine, Turkey, China) Conclusions 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Retrospective analysis of BTC/BTE conditionalities 1996-2002: international dimension President Clinton administration directly involved in the negotiations, EU supportive; Russia weak, unable to effectively counterbalance the process; Weak international energy market: low prices; The Caspian countries weak, inexperienced, desperate for investment; Multiple transit options through Russia, Iran and Turkey supported 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Existing oil and gas pipelines in the South Caucasus: TBC,BTE, Baku-Supsa 11/12/2018 Caucasian Energy Security and Turkey

Retrospective analysis of BTC/BTE conditionality 1996-2002: regional dimension Azerbaijan, Georgia and Turkey establish a strong strategic partnership to foster the south Caucasus version of transit; War in Chechnya makes northern Caucasian route too dangerous; Iran remains under sanctions, so the southern route towards eastern markets not functional; Azerbaijan and Georgia gain stability under president Aliev and president Shevardnadze; Regional countries including Azerbaijan are in financial difficulties and accept PSA s as major contract form; 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey New geopolitical conditionality after BTC/BTE completed 2006: international dimension US very much involved (but after financial crisis it may become more domestic policy oriented) , EU supportive but Russia politically and economically strong enough to protect its interests; Volatile international energy market with financial crisis and downfall of energy market; Multiple transit options offered and supported by different international and regional players with China emerging as a major player in the eastern Caspian; 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey New geopolitical conditionality after BTC/BTE completed 2006: regional dimension Russia politically and economically strong able to control its southern borders; Iran in turmoil after presidential elections, remains under sanctions, not clear how long instability will last; Russia and Turkey close partners on Black Sea security issues; Turkey a weak part of Azerbaijan, Georgia, Turkey transit chain; Emergence of China in the Eastern Caspian as major player on production and transit; Western transit option not exceptional, strong competition on transit routes; 11/12/2018 Caucasian Energy Security and Turkey

Challenges to Southern Route Development: BTC/BTE will not function in full capacity Eastern Caspian countries’ resources will not transit westward through alternative routes; Reasons: EU fails to sign a gas transit agreement with Turkey; The Status of the Caspian is not resolved, thus the building of Trans –Caspian pipelines stalled; As a result of stabilization of Iran major part of the resources will transit through Iran towards south eastern markets; Growing Chinese and Indian markets will take the major part of eastern Caspian countries oil and gas depriving the South Caucasus Corridor and western markets; 11/12/2018 Caucasian Energy Security and Turkey

Challenges to Southern Route Development: EU fails to sign a gas transit agreement with Turkey: Negotiations on the development of Shakh Deniz phase two stalled; The Caspian countries including Azerbaijan actively consider other options of transit for their gas including Iran, Russia, and China; Russia and Iran offer transit options across their territories. With the option through Iran depending on negotiations with Iranian authorities on nuclear and other issues 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey EU fails to sign a gas transit agreement with Turkey: existing and projected pipelines through Turkey towards EU, Nabucco and TGI 11/12/2018 Caucasian Energy Security and Turkey

Challenges to Southern Route Development: The status of the Caspian is not resolved. Trans-Caspian pipelines fail to be built. 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Challenges to South Caucasus Transit development : outlets towards China, Kazakhstan China oil pipeline 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Challenges to South Caucasus Transit development : outlets towards China, Turkmenistan, Uzbekistan, Kazakhstan China gas pipeline 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Challenges to South Caucasus Transit development : outlets towards Iran, pending on developments in Iran 11/12/2018 Caucasian Energy Security and Turkey

New Geopolitical Dimension: Russia/Ukraine gas crisis 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey New Geopolitical Dimension: all existing or potential westward transit routes endangered Ukrainian transit route endangered because Russia/Ukraine gas crisis Azerbaijan/Georgia/Turkey transit route endangered: because of stalled negotiations on gas transit with Turkey Because of Russia / Georgia military conflict and after the conflict tensions Conclusion: Transit countries can create serious problems to producers and consumers 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey If all existing and potential westward transit routes are endangered where is the solution? Russian option avoiding transit countries, North Stream 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey If all existing and potential westward transit routes are endangered where is the solution? Russian option avoid transit countries, South Stream 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey If all existing and potential westward transit routes are endangered where is the solution? Azerbaijani and Georgian option: minimize the number of transit countries, White Stream 11/12/2018 Caucasian Energy Security and Turkey

Caucasian Energy Security and Turkey Conclusions Westward transit option is not exclusive for the Caspian oil and gas any more; Competition for the transit routes is increasing Azerbaijan / Georgia / Turkey strategic energy corridor chain will not survive if EU and Turkey fail to sign a gas transit agreement; If South Caucasus Energy Corridor fails to strengthen and develop all efforts of EU to receive alternative energy resources through alternative transit routes will also fail; 11/12/2018 Caucasian Energy Security and Turkey

Thank You for Attention 11/12/2018 Caucasian Energy Security and Turkey