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Italy may impede Turkish-Azeri efforts for EU gas corridor

Turkey and Azerbaijan realize EU's gas corridor dream, but serious questions remain unanswered.

The sun-parched west Anatolian plain is not the likeliest of settings for the realization of a 20-year-old plan for a gas pipeline linking the gas-rich countries of the Caspian with European markets.

But it was here that the presidents of Turkey and Azerbaijan formally commissioned the first delivery stage of the 1,850-kilometer (1,149-mile) Trans-Anatolian Natural Gas Pipeline (TANAP) — in the process realizing the European Union's long-held dream of the Southern Gas Corridor.

A dedicated pipeline link connecting the gas-rich states of the Caspian basin with the gas-hungry markets of Western Europe provides much-needed competition to the Russian gas on which the continent is increasingly dependent.

At full capacity, TANAP — which is being developed by a consortium led by Azerbaijan state oil company Socar together with Turkey's state gas importer Botas and UK oil giant BP — will deliver 31 billion cubic meters of gas per year (cu m/yr) to consumers in Turkey and across Europe, making Azerbaijan one of Europe’s main gas suppliers and Turkey a major transit route.

Speaking at the ceremony for the commissioning of the first stage, Azerbaijan's President Ilham Aliyev reminded the 1,000-plus dignitaries present of the speed with which the project has been realized, having been proposed only in 2011 following a decade of talks that saw rival projects fall by the wayside.

"When other projects failed, Turkey and Azerbaijan decided we will do this together, and we succeeded creating TANAP to bring Azeri gas to European markets," Aliyev said. Sentiments were echoed by Turkey’s President Recep Tayyip Erdogan. "When TANAP was first announced, many called it a dream. But we have proved them wrong," Erdogan said, promising that the line will make its first gas delivery to Europe in June 2019.

That promise of TANAP bringing Caspian gas to European markets to compete with Russian imports continues to attract strong support from Brussels. In February this year, EU Vice President for Energy Maros Sefcovic said, "It [TANAP] has a strategic importance for European energy security. We all stand to gain from this 'bridge' between the EU market and the Caspian region."

In March, the EU's own financing vehicle, the European Investment Bank, signed off on 932 million euros ($1.15 billion) in loans for the TANAP to ensure its timely completion.

Construction of the 31 billion cu m/yr capacity TANAP pipeline itself is progressing on schedule.

The first delivery stage, commissioned by Presidents Aliyev and Erdogan, will start delivering up to 6 billion cu m/yr of Azeri gas to Turkey this month.

Construction of the second phase, which will carry an additional 10 billion cu m/yr of Azeri gas to the Turkey Greece border, is, as stated by Erdogan, on target for completion by next June.

However, plans for the first delivery of gas to Europe next year are already under threat. The next phase of the Southern Gas Corridor — the Trans-Adriatic Pipeline (TAP), which will carry gas delivered by TANAP through Greece and Albania and across the Adriatic to Italy, from where the gas can be transited to gas-hungry consumers in Central and Northern Europe — is facing serious delays.

Construction of the overland sections of the TAP, which is being developed by a consortium led by Socar and BP, is nearing completion.

But work on the final 105-kilometer (65-mile) section across the Adriatic has yet to start and is facing further delay thanks to Italy's newly elected, Euro-skeptic coalition government, whose Environment Minister Sergio Costa has dubbed the TAP project "pointless" and launched a formal review.

Without approval from Italy, the final section of the TAP and the Southern Gas Corridor will not be laid, threatening a $40 billion chain of investments that stretches from Azerbaijan's BP-operated Shah Deniz gas field, through pipelines in Azerbaijan and Georgia, and across Turkey, Greece and Albania with the TANAP and the TAP, to the Italian coast where the receiving station for the TAP is already under construction.

"Either the Italian government has to change its mind or a new export route has to be found," says independent Caspian energy analyst John Roberts.

Other export options do exist. Existing gas transit lines through the Balkans could be repurposed, and with the addition of planned "interconnectors," they could allow Azeri gas from the TANAP to be transited to markets in Southeast and Eastern Europe.

Also in attendance at the TANAP commissioning ceremony were Presidents Petro Poroshenko of Ukraine and Aleksandar Vucic of Serbia, both of whom expressed their country's readiness to buy Azeri gas transited through the TANAP.

That is not an interest stemming from any altruistic motive but rather the need to access alternatives to gas from Russia, which currently has a monopoly on supply to both countries.

In the case of Ukraine, the need is somewhat urgent, with Moscow — which in 2014 illegally annexed the Ukrainian province of Crimea — continuing to use gas supplies as a means of applying pressure on its neighbor.

In April, Russian gas exporter Gazprom announced that it would drastically cut gas transit through Ukraine, potentially leaving Kiev with a major energy shortage.

"We have seen how energy can be abused by Moscow to further its own domestic and foreign agendas and to pressure its neighbors," complained Poroshenko.

Italian intransigence could yet prove to be Kiev's salvation. Even if Italy relents and allows the TAP to be completed, the TANAP has 15 billion cu m/yr of spare capacity that could be used to carry gas to the Balkans and beyond.

Nothing is ever so straightforward in the complex world of gas transit, however, and Gazprom also has designs on using those existing Balkan transit lines.

Moscow wants to use them to carry gas from its new TurkStream gas pipeline currently being laid across the Black Sea to Turkey, a line designed solely with the aim of bypassing Ukraine and pressuring Kiev to toe Moscow’s line.

Gaining access to those lines would require permission from Ankara, which as a close ally of Azerbaijan and a major sponsor of the TANAP looks certain to find its loyalties divided.

Turkey goes to the polls on June 24 for parliamentary and presidential elections, though Erdogan and his Justice and Development Party appear less than certain to emerge victors.

Whoever does emerge as the victor will need to choose wisely.

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