Azerbaijani President Ilham Aliyev and European Commission President José Manuel Barroso have signed a Joint Declaration on the Southern Gas Corridor. How would you comment on this document?
This move by the EU was long expected, since the planned Nabucco pipeline needs to be filled. The signing of the Joint Declaration certainly documents the political willingness of both sides to cooperate on gas and in other relevant areas. As such, it gives a positive signal to potential foreign investors in Azerbaijan, not only in the energy business. With respect to the core aim of Barroso’s visit, however, namely gas delivery to Europe and the filling of Nabucco (or now the Southern Corridor) Pipeline, the document is not concrete enough to provide grounds for a new, serious recalculation of the pipeline. One should not forget either that Azerbaijan's gas reserves are relatively small and that, as it catches up economically, Azerbaijan will use a growing portion of it for its own needs.
Are you sure that Turkmenistan will join the Nabucco project?
To put it simply, not at all. Turkmenistan might change its mind for political reasons at almost any time, as we all know. "Neutrality" only drives Turkmenistan to avoid saying a frank and open "no" to the EU. But more striking are the economic reasons - the Caspian is deep and long and still does not belong to anybody for sure, but China is close and property rights are clear along the way. And China's energy demand has tremendous growth rates. So why sell gas all the way to Europe at high transport costs?
And if Turkmenistan won't join, what will be Nabucco’s future?
Nabucco was born for political reasons, and it will only exist for political reasons. The price paid for the pipeline is a political one - and how much the EU is prepared to pay for independence from Russia depends on many players within and without the EU, including Russia, Iran and Iraq. There might be a "small solution" Nabucco that allows the EU not to lose face if supply stays small, or a "joint southern corridor" together with Russia in some parts or trunks of the pipeline. With respect to economic reasoning, of course, a joint solution is the one that makes sense. But as I said - those long-term energy projects do not follow economic reasoning, and it is political prices that are and will be paid.
Russian Prime Minister Vladimir said that the South Stream project had better chances than Nabucco. What is your opinion on this?
I am quite critical here, since Russia has just the same problems filling the pipeline as the EU does - if not even greater ones, since it has neglected the development of its own new fields and related infrastructure, shows growing internal demand for gas, and oil production peaks are over. So within the next few years only a substantial shift to coal or substantial energy saving could free substantial amounts for export. And the strategy to use cheap Central Asian gas for its own supplies is more or less exhausted.
Some experts say that Russia may use political means of pressure on Azerbaijan, Turkmenistan and Kazakhstan to prevent the Nabucco project coming to fruition. Do you agree with them and how successful could Russia be inapplying political pressure?
As an economist, I had better not comment on political means of pressure, there are simply too many of them and I am sure several of them could be applied to these countries by Russia. However, the times of "pipeline policy" with respect to Turkmenistan and Kazakhstan are over even for Russia. And with respect to political means, the EU has a strong incentive to keep an eye on it. This has been documented last but not least with Barroso’s travel to Azerbaijan and Turkmenistan.