It is noteworthy that many of the project’s initial planners and political supporters, starting with then minister of foreign affairs Karolos Papoulias, have returned to the limelight of Greece’s central political scene. Papoulias signed the first memorandum of understanding (MoU) on the Burgas-Alexandroupolis oil pipeline (BAPLine) along with Andrey Kozyrev back in November 1994.

The history

It is not accidental that the project actually has a history. Many plans and projects were proposed in the early 1990s and lines were drawn on the map, but in that period most of the diplomatic bureaucracy evidently failed to understand that even though the geopolitical rational for the project’s construction was sound, there was no viable economic underpinning which could help in its materialization. In addition to that, the BAPLine was erroneously advertised as a direct competitor to the Baku-Tbilisi-Ceyhan pipeline, even though the second Bosporus bypass will be primarily used by Russian oil interests that were adamantly opposed on geopolitical grounds to the Azeri-Georgian-Turkish project.

The major problem for the BAPLine’s early planners was that in the mid-1990s it had no economic raison d’etre. The BAPLine as well as all of the available counterproposals were simply too immature to be seriously discussed in the absence of increased exports on the Russian and Kazakh side.

Kazakh exports actually started only in October 1998, almost concurrently with the steady rise in Russian oil exports. These two factors, along with Turkey’s decision to minimize oil exports via the heavily congested strait, especially after the infamous Nassia oil tanker accident in 1994, contributed to the Bosporus’s eventual choke-off.

The chances

Prior to the September Athens summit, there was considerable speculation on the project’s chances even after Sofia’s 2005 MoU. The BAPLine’s odyssey, now in its 12th year, was basically gridlocked due to:

1. US diplomatic opposition that came primarily as a reflexive response in defense of BTC’s materialization;
2. The absence of oil export surpluses, which could not be serviced via the Bosporus, an economic fact of life that resulted in a Russian policy of procrastination; and  
3. Primarily Bulgaria’s equivocal policy that ― up to September 2006 ― tried to promote itself as the major transit hub for Russian and secondarily Kazakh oil in Southeastern Europe by supporting the construction of the BAPLine project via Greece as well as its own Bulgarian-Albanian project (AMBO), with the ultimate aim of constructing both.
   

After the Athens summit, the only major difference lies with Russia’s decision to push things forward. Washington’s opposition, although diminished, remains. The same is true of Bulgaria’s recalcitrance and Sofia’s inability to understand that there is simply not enough oil to satisfy the construction of both the BAPLine and the AMBO at the same time.
There is no reason why Bulgaria may be stalling the BAPLine’s construction in order to force Moscow to opt for a project that:

• Is almost double the cost of the BAPLine’s construction;
• Faces a series of political obstacles, since it passes through Albanian-contested territories inside the Former Yugoslav Republic of Macedonia (FYROM) ― i.e. Tetovo and Presevo ― and 
• Does not serve Russia’s strategic priorities in Southeastern Europe, as it is trying to diversify its (primarily gas) export pipeline dependency away from its former communist bloc satellites, such as Bulgaria, and its former co-constituent Soviet republics, such as Ukraine.
  

The Major  Bosporus Bypass Pipelines¹

These priorities, following the continuation of Russian-Turkish antagonism in post-Soviet Transcaucasia, demanded that Russia ― as well as Kazakhstan ― diversify its oil export routes away from Turkey. This geostrategic calculation provided Athens with the benefit of patience. It also created a window of opportunity that grew and will continue to grow wider due to the rapid emergence of an economic parameter: the choke-off of the Bosporus strait as a de facto oil export route for Russian and Kazakh crude.

Congestion and the Bosporus strait

Despite all the geostrategic realignments over the last 12 years during which the BAPLine has been on the table, the only reason why every interested party currently acknowledges that the clock is ticking is purely economic and has been accurately forecast since the late 1990s. Back in 2000, according to an International Energy Agency (IEA) study on the Black Sea, the Bosporus strait serviced around 1.6 to 1.7 million barrels per day (mb/d) of primarily Russian and Kazakh crude². According to IEA estimates, by the end of 2005 the total volume of oil transiting the strait would surpass the abovementioned choke point by around 500,000 barrels per day, namely more than two thirds of the BAPLine’s initial throughput capacity, currently estimated at 700,000 b/d³.

Nearly simultaneous data on the IEA side all but confirm the American projections. In its Turkey 2005 Review, the IEA noted that crude oil export volumes via the Bosporus could easily reach 2.6 mb/d for 2005, from nearly 1.7 mb/d in 2000, continuously rising up to 3.8 mb/d by the end of this decade, an increase of more than 50 percent for the 2005-2010 period⁴.

Apart from any geopolitical maneuvering that indirectly enhanced the necessity of the first Bosporus pipeline, i.e. the BTC, the danger of a major accident and/or terrorist attack against one or more of the perilous vessels sailing through the city of Istanbul is both clear and increasingly present. On March 12, 2005, a Turkish ship carrying seven large LPG (liquefied petroleum gas) cargoes sank. The cargo was left at the bottom of the Sea of Marmara for over 48 hours and luckily enough no one got blown up⁵. 

The Sofia declaration

By signing the Sofia declaration, Moscow was terminating a highly rumored flirtation, primarily by Transneft officials, with the Turkish anti-BAPLine project, which envisions the construction of a 198-kilometer pipeline linking the Black Sea coast (Kiyikoy) to the city of Ibrikbaba in the Gulf of Saros on the Aegean coast. That project, which is estimated to cost around US$550-600 million and projected to carry up to 1.2 mb/d, constitutes the safest and cheapest of all of the alternative bypasses of the Sea of Marmara. It lacks, however, one critical element: Russia’s approval, which would provide more than 75-80 percent of all the oil expected to be transported via the second Bosporus bypass.

The geostrategy

This is a quintessentially geostrategic decision that is based on Russia’s threat perception vis-a-vis Turkey’s role in Chechnya’s insurgence back in the 1990s and Turkish foreign policy in post-Soviet Transcaucasia. Turkey, partly drawn by chimeras of its Ottoman past, and partly motivated by an American need to consolidate the economic independence of Georgia and Azerbaijan, never accepted Russia’s attempt to re-establish itself as the uncontested hegemonic power in the region.

Turkey was a protagonist in the construction of the BTC pipeline and is actively lobbying in favor of Georgian and Ukrainian admittance into NATO. Russia has been fighting both prospects for the better part of the last decade and a half. It had and will continue to have no interest whatsoever in increasing either its own export dependence on a geostrategic competitor or further enhancing Turkey’s regional influence.

The end of Russia’s procrastination

Apart from the practically unavoidable Turkish choke-off, a more complex geostrategic equation precipitated Russia’s decision to lobby hard on the Greek-Bulgarian front. This equation is defined by two major political-diplomatic parameters that could also account for Russia’s dynamic promotion of the BAPLine over the previous six months.

The first political-diplomatic parameter is that the complete operationalization of the BTC oil pipeline last June and the near completion of the Baku-Tbilisi-Erzurum (BTE) gas pipeline constitute in every account the most severe blow to Moscow’s influence in Transcaucasia since the disintegration of the USSR, as they provide Azerbaijan and potentially Kazakhstan with a means to terminate their dependence on Russian-controlled oil and (secondarily) gas export pipelines. Given the fact that these hydrocarbon exports account for 48.6 percent of Azeri state revenues and around 30 percent of Kazakh state revenues6, the effective termination of Russia’s export pipeline monopoly could eventually signify the equivalent to a declaration of economic independence.
For Azerbaijan the benefits are far greater and much more tangible. BTC attests to the significant curtailment of Russian influence over Baku that is less keen ― probably due to Russia’s backing of Armenian Karabakh ― to join NATO than its Georgian neighbor. The pouring of petrodollars into Azerbaijan’s economy could alleviate the socioeconomic strains for over 25 percent of the Azeri population directly affected by the 1988-1994 conflict with Armenia. Unfortunately, these petrodollars are more likely to be used to rebuild Azerbaijan’s military forces for another bloody conflict with Armenians inside the Karabakh enclave. BTC’s existence also increases the probability of the deployment of US troops in both Georgia and Azerbaijan as security guarantees vis-a-vis the pipeline’s protection.

Even beyond Azerbaijan, BTC’s prospective utilization by the Kazakh government indirectly galvanized Russia’s oil diplomacy in a direction that would pre-empt BTC’s emergence as a major export pipeline (MEP) for Kazakh oil. Even though such a prospect is highly unlikely for the Tengiz-Chevron reserves, currently channeled via the Tengiz-Novorossiysk or CPC (Caspian Pipeline Consortium) pipeline, BTC is already being presented as a strong candidate for Kashagan’s oil potential that is most likely to start exporting in serious quantities (early oil) by 2012 at the earliest. That ‘third’ bypass will be nearly exclusively serviced by the Kashagan production and Russia would most certainly prefer to channel it via the CPC, especially since ExxonMobil and Shell, which control an equal 18.52 percent share in Kashagan’s consortium, are major participants in the Tengiz-Chevron and CPC JVs.

The economic and diplomatic costs

Geostrategically speaking, the cost of a ‘second BTC’, this time provisioned by Kashagan crude, will be most probably too heavy to bear for Moscow, given the fact that it considers Kazakhstan and its large Russian and Russian-speaking minority, which constitutes up to 38 percent of its population, well within its own ‘Monroe Doctrine.’ This is exactly why Astana, the capital of Kazakhstan, is not likely to play any leading role in BTC’s long-term survivability to the level of becoming its co-guarantor as the Azeris, Turks and Americans will most certainly wish for.

Even though its export commitments to BTC were first announced last June, the volume and the speed of Astana’s participation remain to be seen in practice. Astana is not likely to cover up to 40 percent of BTC’s throughput of 1 mb/d by 2015. In all probability, for the short (two to three years) to medium term (five years), Astana is not likely to openly antagonize Moscow and will probably limit its BTC contribution to no more than 20-25 percent of its total throughput.

In sum, the BAPLine’s materialization enhances the long-term dependence of Kazakhstan on a Russian-controlled export pipeline system that should reach the Aegean and could also operate as the main export pipeline for Kashagan’s production by 2012-2014. This is exactly why the Russians have been trying to force the Tengizchevroil (TCO) shareholders to commit CPC’s projected doubling of its throughput capacity by 2010 as a survivability guarantee for the BAPLine’s prospective expansion and longevity. This was clearly stated by none other than Transneft’s president, Semyon Vainshtok, more than six months before Russian President Vladimir Putin’s visit to Athens. Speaking at a conference in London, Vainshtok emphasized that ‘the CPC can be expanded only if the decision is taken on the parallel development of the Burgas-Alexandroupolis pipeline.’⁷

The case of Ukraine

The second political-diplomatic parameter is that the Russian-Ukrainian gas spat of January 2006 ― that seriously curtailed by around 30 percent the flow of Russian gas to several of Moscow’s clients in Central and Eastern Europe for the better part of 48 hours ― has galvanized Moscow’s proactive energy diplomacy.
Regardless of who was to blame for exactly what happened 10 months ago, Washington, along with several of its European allies, starting with Poland, lost no time in launching a systematic public diplomacy campaign with the aim of presenting Russian gas exports to the eurozone economies as untrustworthy.

On a regional level, this effort was focused on Washington’s attempt to block Russian plans that proposed the utilization of the projected Greek-Turkish pipeline system so as to export around 16 billion cubic meters per year (bcm/y) to Italy by the beginning of next decade via a Greek underwater connection (the Poseidon Project)⁸.

US Secretary of State Condoleezza Rice was clear on Washington’s opposition to that specific Russian project when she visited Athens back in March 2006. Gazprom’s participation in the BAPLine project by means of its incorporation with Sibneft added another factor of urgency to Russia’s energy security interests vis-a-vis Greece. On the Greek side, Gazprom’s direct involvement in the BAPLine provided an additional state guarantee on Moscow’s side, thereby facilitating the end of Russia’s previous procrastination.

A few weeks after Rice’s visit to Athens, an elite team of Russia’s energy security establishment, led by Gazprom’s CEO and General Secretary of the Russian Ministry of Energy Alexei Miller, descended upon the Greek capital. It consisted of all participants on the Russian side of the BAPLine consortium, namely TNK-BP, Rosneft, and Sibneft/Gazprom.

The September summit

At the beginning of July a first draft agreement for the final intergovernmental contact, which defines the national shares of the future ‘Transbalkan Pipeline Consortium,’ was presented by the Russians to the general secretary of the Greek Ministry of Development, Yiannis Stefanou. Putin asked for the September 4 summit on August 10. The summit’s major result, apart from the evident Russian effort to speed things up, was summed up in 11 words calling for the ‘completion of the intergovernmental negotiation by the end of this year.’

Bulgaria’s President Georgi Parvanov actually stated that the project has reached the ‘now-or-never phase’ of its long-protracted history. Is it true that Odysseus is actually seeing Ithaca? Is the die finally cast? A few minutes after Parvanov’s ‘encouraging’ statement, the Bulgarian prime minister nearly got drawn into an open verbal confrontation with President Putin over the principle of equality. Parvanov, who shares the ultimate decision-making authority with his Socialist prime minister, Sergey Stanishev, was referring to a 2002 trilateral agreement that awarded 33.3 percent of the future consortium to each participating country.

The Russians are currently demanding something in the order of 67 percent of the future consortium and Athens is trying to balance the situation by proposing a 50 percent share for the Russian side and an equal share for the Bulgarian and Greek companies.  

In a final analysis, the geopolitical and geoeconomic momentum is most certainly in favor of the BAPLine’s materialization. Yet the hardest part of the negotiation will begin in earnest after the October 22 presidential elections in Bulgaria. The Athens summit can be characterized as the beginning of the end for the project’s tumultuous history. Nevertheless, the proverb which is most suitable for characterizing the exact state of the ‘business’ is neither Roman nor Greek. It is most likely British, since it is known that ‘the devil lies always in the details.’ There are less than three months to exorcise him.

1) Map drawn from the Energy Information Agency (EIA), US Department of Energy, Country Analysis Briefs: Southeastern Europe, http://www.eia.doe.gov/emeu/cabs/seeurope.html (March 2005).
2) International Energy Agency/IEA, Black Sea Energy Survey, Paris (OECD/IEA: 2000), p239.
3) For the EIA estimates, over the 2003-2005 period see, EIA, Country Analysis Briefs: Turkey, www.eia.doe.goc/emeu/cabs/turkenv.html (May 2004), and EIA, World Oil Transit Chokepoints, www.eia.doe.gov/emeu/cabs/ choke.html#BOSPORUS (November 2005).
4) IEA, Energy Policies of IEA Countries: Turkey 2005 Review, (IEA/OECD: 2005), p79.
5) ‘Turkey Tightens Tanker Restrictions for Strategic Straits,’ FSU Oil & Gas Monitor, 16/3/2005, p10.
6) On Azeri statistics, International Monetary Fund/IMF, Country Report: Azerbaijan 2005 (Washington DC: January 2005), p30. On Kazakh statistics, IMF, Country Report: Republic of Kazakhstan 2005, Selected Issues (Washington DC, July 2005), p12.
7) ‘Transneft Links CPC Expansion to Burgas-Alexandroupolis Pipeline,’ FSU Oil & Gas Monitor, 22/2/2006, p6.
8) Theodore Tsakiris, ‘The Southern Gate: The Geostrategic Ramifications of Ukraine’s Natural Gas Bypasses on SE Europe,’ Global Pipeline Monthly, Vol.2/Iss. 4 (April 2006), pp1-8.

By Theodore George Tsakiris
Theodore George Tsakiris is an international and energy security specialist, as well as a research fellow at the Hellenic Center for European Studies (EKEM).
Hellenic Center for European Studies website: www.ekem.gr