The South Caucasus, Turkey, and Israel – Emerging Energy Corridors From the Caspian Sea

Energy security is at the heart of important new developments in the wider Middle East region; and Israel is becoming a significant player in many scenarios, both for the transport of oil and gas across the region and as a gas producer and exporter in its own right. Jameel Zayed unravels the bewildering complexity of these new developments.

Monday, 1 August, 2011 - 15:52
London, UK

Azerbaijan’s Absheron Peninsula, in the Caspian Sea, is the oldest oil-producing region in the world. Over 2500 years ago, oil that oozed naturally from beneath its depths was extracted for export to the ancient kingdoms. 

The peninsula then became a shrine for the Zoroastrian fire-worshippers, who built fire temples over its gas-pockets. By the 19th century, Baku, Azerbaijan’s capital, was known as the ‘Black Gold Capital’, and under Soviet occupation, produced over 70% of all oil drilled in the Soviet Union. The Caspian Sea, which lies above one of the world’s largest groups of oil/gas fields, once lay mainly within the Soviet Union. Since its collapse in 1991, the successor states in the region have become of major strategic importance, as well as a complicating factor in transporting reserves from the landlocked Caspian. The Caspian is now bordered by numerous post-Soviet states: with Russia to the north, the Central Asian states of Kazakhstan and Turkmenistan to the east, Iran to the south, and Azerbaijan to the west. The South Caucasus states of Azerbaijan, Georgia, and Armenia link the Caspian to the Black Sea, which exits into the Mediterranean via Turkey’s Bosphorus and Dardanelles Straits.


The Middle East possesses over half the world’s proven oil reserves, with natural gas reserves concentrated in Russia (25%), followed by Iran and Qatar (each with around 15%). While the Middle East continues to be the world’s most important source of these fuels, the question of diversifying supply sources is becoming more important for everyone. In particular, Europe is keen to reduce its reliance on Russian gas imports, currently at 25%. However, Europe is becoming more rather than less dependent on gas imports in general, and by 2015, it will import 75% of its gas needs.


Turkey, an oil-less state lying within close proximity to 70% of the world’s oil and gas reserves, is keen to become Europe’s fourth main energy supply artery to Europe, following Norway, Russia, and Algeria. Currently, around 4% of the world’s daily oil consumption is shipped through Turkey’s narrow straits, presenting a dangerous path for oil tankers, and making Istanbul, which sits over the Bosphorus Straits, weary of a looming spill catastrophe.


Recent deals between the South Caucasus states and Turkey aim to solve this problem, by exporting oil and gas originating from across the Caspian, in Kazakhstan and Turkmenistan, transported to Azerbaijan, which, along with Azeri oil, will then transit Turkey for supply elsewhere. The proposed project, the Nabucco Pipeline, (named after an opera by Verdi based on the biblical story of Nabucodonosor/Nebuchadnezzar) is scheduled to open in 2017. It will provide Europe with supplies of Caspian, Middle Eastern, and Egyptian gas – potentially almost twice as much as Russia provides.




















Map showing the proposed pipelines


This pipeline, while supported by the Anglo-American powers, does not serve Russian interests, as it completely bypasses Russia. In response, Russia has proposed another route, the South Stream Pipeline, due to open in 2015. This project will bypass Turkey, crossing the Black Sea straight to the historic region of Thrace in Greece, and on towards the rest of Europe. Though Russia maintains that the South Stream project is not in competition with the Nabucco Pipeline, the two projects are currently wooing each other’s potential customers.


Turkey is also engaged in another lucrative pipeline project, the Baku-Tbilisi-Ceyhan (BTC) Pipeline. In operation since 2006, it already provides Turkey and Georgia with a significant income from transit fees. This project, has been heralded as ‘The New Silk Road of the 21st Century’. It serves to link Azerbaijan’s Baku, with Georgia’s capital Tbilisi, down through Turkey to its southern port of Ceyhan. Ceyhan is now gaining immense significance as a port, helping fulfil Turkey’s aspirations as an energy corridor. In addition to Azeri oil, Ceyhan also handles oil from Iraq’s largest export line in Kirkuk, and the BTC route bypasses Russia while enabling easier Western access to the reserves of Kazakhstan and Turkmenistan.


Russia, in a counter-effort, has struck deals with these Central Asian states, in addition to Azerbaijan, to ensure that their reserves travel through Russia instead, draining the potential source for both the BTC and Nabucco projects. It is important to note that i) the British-owned BP has a 30% stake in the BTC Pipeline, ii) no Russian firms are involved, and iii) that 75% of its revenues go to Western firms. The collaborative projects between Baku and Turkey have also resulted in what has been referred to as ‘Azerbaijan’s economic miracle’, an extraordinarily rapid growth rate triple that of China.


In addition to the East-West energy corridor discussed above, a North-South corridor is also emerging, potentially offering an alternative to the Suez Canal passage for supplying Asia. Here Israel enters centre stage, having modified its older, south-north running Trans-Israel Pipeline (TIP). The TIP line was established in 1968 as a joint venture between the Shah-ruled Iran, and Israel, as a means to transport Iranian oil to Europe. After the Iranian Revolution of 1979 however, Iran severed links with Israel, and the project was terminated. In 2003, Israel reopened the TIP line under its completed ‘Reverse Flow’ project, enabling bidirectional transport of oil north-south as well as south-north. This modification enables carriers to dock at its Mediterranean port of Ashkelon and transport oil through the TIP line to carriers waiting at the port of Eilat. Both Eilat and Ashkelon have the capacity to deal with Russia’s supertankers, which the Suez Canal cannot, hence offering a new route through which to send larger shipments of Russian and Caspian oil down through Turkey, and Israel, and out to Asian markets.


Russia is also keen to exploit the North-South energy corridor, and talks of establishing another route are underway, starting at Russian ports in the north of the Caspian, to Iran in the Caspian’s south.


Israel, in addition to serving as a transit-country for Caspian oil out to Asia, is also making some historic finds of its own. Significant oil shale deposits have been discovered recently, which, if economically extractable, would put it centre-stage as a source of oil shale. Oil shale deposits are stored in rocks that yield oil upon heating, and, as a resource, it is actually more plentiful than liquid oil. However, due to high costs and the large amounts of waste produced, as well as environmental concerns, only a handful of countries have been able to achieve commercial successes with it, notable examples being China and Estonia and Canada. More significant are the finds of huge natural gas reserves discovered off occupied-Palestine’s coast, in the Levant Basin. The Tamar and Leviathin natural gas fields, discovered in 2009 and 2010, respectively, allow Israel to be self-sufficient in gas consumption for at least 20 years, with plenty to retain for export. This also eases Israel’s dependence on the heavily subsidised natural gas imports from Egypt, which currently account for 40% of its natural gas consumption. Furthermore, while Turkish-Israeli relations are prone to the occasional souring, Israeli-Greek relations are warming up, with Greece eager to partner up and help distribute Israel’s new gas finds on to Europe.


The emergence of the South Caucasus, Turkey, and Israel as strategic energy corridors from the Caspian to world markets is an important development whose consequences will become manifest over the next decade. It comes at a time when the Middle East region itself is in turmoil due to the Arab Spring, and Iraq is fearing the separation of Kurdistan, which is beginning to sign unilateral oil-contracts. Meanwhile, Russia has begun re-stationing a major naval presence off the Syrian port of Tartus. In the end, it is energy security that is shaping today’s politics and contributing substantially to the upheaval we are witnessing in the wider Middle-East.



Jameel Zayed is a final-year chemistry PhD student at Cambridge University, and is active with the Cambridge University Palestine Society. His family’s roots are in Beit Nuba, a village in the Latrun area now covered by Canada Park.

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