Friday, 27 April 2012

Richard Morningstar in Baku - Reliable or Uninspired?

Seeking to fill a gap in the Baku embassy which has hindered US policy in the region for months, the Obama Administration has nominated Richard Morningstar, longtime Caspian hand and current Special Envoy for Eurasian Energy, as ambassador to Azerbaijan. He is likely to fare better in the nomination process than his predecessor Matt Bryza.

Bryza was sent to Baku in February 2011 after the White House gave him a recess appointment, a temporary fix to circumvent congressional opposition from Senators representing constituencies with large Armenian-American populations (Bryza is regularly accused of being too close to Azerbaijan and Turkey, and correspondingly biased against Armenia). His appointment ended in December, and he has since taken up the think-tank and conference circuit.

Charge D’Affaires Adam Sterling has been minding the shop in the absence of an ambassador. This is becoming the usual state of affairs – since Obama took office, the embassy has been run by a lower-ranking diplomat for the better part of two years. The perceived slight has provoked consternation in Azerbaijan, which was used to being assiduously courted by the US under the Bush Administration.

Wednesday, 25 April 2012

Hungarian Surprise Exposes Crisis of Confidence in Nabucco

Below is my latest article for Natural Gas Europe, original here:

In a surprise late-game announcement, Hungary has apparently switched its support from Nabucco to Gazprom’s rival South Stream pipeline, leaving the once-mighty pipeline consortium looking weaker than ever. If, as rumoured, Hungary’s MOL is pulling out of the project, it may – as analysts are already predicting - be a ‘terminal blow’.

The news emerged on 23 April at an event hosted by the European Policy Centre in Brussels, at which one of the speakers was Hungary’s controversial, Eurosceptic Prime Minister Viktor Orbán. When asked to comment on a 17 April meeting with Russia’s Gazprom at which two sides discussed giving South Stream “national significance status”, Orbán focused his response on the woes of Nabucco.

“Nabucco is in trouble”, he said, and that although he did not have all the details, “what I have seen is that even the Hungarian company MOL is leaving the whole project”. His comments prompted a flurry of articles saying that MOL was pulling out of the pipeline to bring gas from Azerbaijan’s Shah Deniz field to Europe. A decision on either a southern or central European route will be made by June – if a central European route is chosen, the contest will be between BP’s South East Europe Pipeline and a shortened version of Nabucco.

Thursday, 12 April 2012

Untangling Turkey’s Gas Pricing Knot

Leaked figures on the cost of Turkey’s gas imports, and sharp hikes in domestic electricity and gas prices, have refocused attention on the country’s energy strategy. With economic growth beginning to slow, the high price of imports may become an increasing burden. Analysis of the leaked figures suggest that, despite Turkey’s commercial stand-off with Iran, the real problem lies to the north.
On 1 April the government hiked domestic gas prices by 18.7%, with electricity prices (which are linked, since most power plants are gas-fired) rose 9.3%. The rises were intended to stop losses occurring at state energy firm BOTAŞ and followed three consecutive rises in gasoline prices last month.
Energy Minister Taner Yıldız, taking what some called a “defensive” stance on the issue, sought to deflect anger from both the opposition and the wider public by insisting that he too was displeased by the price hike but that it was unavoidable in the current climate. He said that the prices rose due to a weak lira and increasing oil prices on the back of geopolitical tensions, which had a knock-on effect on natural gas prices.
Most significantly, Yıldız asserted that the price rises would be even higher without the – still unspecified - discount obtained from Russia at the end of last year. That discount was obtained after Turkey gave permission for Gazprom’s giant South Stream pipeline to cross Turkey’s Black Sea waters.