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Nabucco Follies: State Department Shills for EU Pipeline to Carry Iranian Gas

Thursday, March 20, 2008

Last month, a remarkable transformation occurred in the controversial Nabucco gas pipeline project -- or at any rate in the public perception of the project in the English-speaking world. As recently as last fall, in fact, there was barely any public perception of the Nabucco project in the English-speaking world because there was barely any coverage of the project in the English language media. (For a rare exception, see "Iran-Turkey Gas Deal Gives New Hope for EU Nabucco Pipeline" on World Politics Review.) In the central European press, on the other hand, the project was widely heralded as a crucial component of EU energy policy -- which, however, was threatened by U.S. opposition. Nabucco is supposed to transport natural gas through Turkey and three Eastern European countries to the important European natural gas hub of Baumgarten an der March in Austria. The bone of contention? The fact that much of the gas was clearly destined to be supplied by none other than: Iran.

Last month, however, in one English-language media outlet after another Nabucco suddenly became a "U.S.-backed" project. Thus, the AFP ran a story with the headline "U.S. champions EU's Nabucco gas pipeline project." The AP described the project as "EU and U.S.-backed." And Krishnadev Calamur writing in World Politics Review not only described the project as quite simply "a U.S.-backed project," as if EU involvement were a secondary matter, but even went so far as to suggest that the U.S. was applying "pressure" on the EU to pursue it.

But if the U.S. were indeed pushing the EU to pursue the Nabucco project, it would be pushing on a wide-open door. As Austrian Chancellor Alfred Gusenbauer put it last September -- in response notably to U.S. objections to the project -- "We are going to do Nabucco no matter what." The consortium developing the project is led by the Austrian energy firm OMV, whose principal shareholder is the Austrian state. In early February, the German energy giant RWE became the sixth member of the consortium: thus signaling the trans-European importance accorded to the project, i.e. extending beyond the countries in the path of the new pipeline itself. It should be noted that no American firms are involved.

Nabucco has in fact long been central to EU thinking on diversifying European natural gas supplies in order to reduce dependence upon Russia. In 2004, the European Commission's Directorate General for Energy and Transport identified Nabucco as a "priority project." In 2005, the Commission's Trans-European Energy Network (TEN-E) program contributed nearly €5 million to the advancement of the project: the largest amount contributed to any TEN-E funded project since 1997. (See the list of TEN-E funded projects here.) In March 2007, under Germany's EU Presidency, the European Council designated Nabucco as a "priority project of European interest." In keeping with this designation, in September 2007 former Dutch foreign minister Jozias van Aartsen was named the official European Commission "coordinator" for Nabucco. Perhaps most indicative of the EU commitment to Nabucco, up to a third of the financing for the project is expected to be provided by the European Investment Bank (EIB). The explicit brief of the EIB is to raise capital for "projects furthering EU policy objectives."

And what exactly has the United States provided to "back" Nabucco? Words. Some of them from Assistant Secretary of State for European Affairs Dan Fried, and, most notably, a veritable torrent of words from Fried's deputy Matthew Bryza. Thus, following a meeting with EU Energy Commissioner Andris Piebalgs in late February, Bryza was widely quoted as saying that Nabucco "will be built . . . because it makes economic sense." In an interview some days later with the Hungarian News Agency (available here in full on the State Department Web site), Bryza went still further, speaking of Nabucco no longer as just a beneficent observer, but in the first person plural -- as if the United States was directly involved. "We have to achieve Nabucco," Bryza insisted. And he added: "Nabucco is viable, so what we hope all of the Nabucco countries with Hungary at the head of the line will do is demonstrate clearly that Nabucco is the top priority because it makes the most commercial sense for Hungary's consumers and for all consumers along its right of way." Asked whether Byrza meant to suggest that the gas transported via Nabucco would be cheaper than that of the rival Gazprom-led South Stream project, he replied with a staccato: "Yes. Yes, yes, yes."

The problem with all this enthusiasm, however, is that if Nabucco does indeed "make sense," the virtually universally held and more or less openly expressed opinion of the key European decision-makers is that it precisely does not make sense without the inclusion of Iranian gas supplies. The recent English-language reports, in keeping with the spin provided by Bryza, identify Azerbaijan or, more vaguely, the "Caspian region" as the sources of the Nabucco gas. Symptomatically, the above-cited AFP and AP reports fail altogether to mention Iran. But as a Feb. 5 report in the Financial-Times-Deutschland points out, this putatively "U.S.-backed" model of "Nabucco without Iranian gas" makes "little sense," "since all the central Asian states taken together dispose of less than one-fourth of the natural gas reserves of Iran." Indeed, it was precisely the prospect of being able to tap into Iran's vast natural gas reserves that motivated the Nabucco project from the start. In a January 2006 interview with Deutsche Welle, the managing director of OMV's natural gas division, Otto Musilek, noted that "the largest natural gas reserves in the region are in Iran" and that Iran would be a "principle supplier" for Nabucco. "Europe needs access to the second-largest gas reserves in the world," Musilek stressed.

Next Page: OMV helps Iran develop the South Pars gas fields . . .

Hardly surprising, then, that in April of last year OMV signed a letter of intent for a €22 billion deal with the Iranian government to develop Iran's South Pars natural gas fields. Referring to the South Pars deal and making the obvious connection to Nabucco, a June 2007 information sheet produced by the research service of the German Bundestag notes:

OMV's plan to cooperate with the Iranian gas company in exploiting Iranian natural gas reserves has led to friction with the United States, which reject economic cooperation with Iran. But despite the political risks, the exploitation of the Iranian reserves is of great significance for the Nabucco project.

But apparently Matthew Bryza and the U.S. State Department are supposed to know better than the governments and firms actually involved in the Nabucco project. Asked by the Hungarian News Agency whether gas would be supplied by Azerbaijan or Iran, Byrza responded with yet another stream of words, beginning with a categorical "Azerbaijan for Nabucco" and then continuing: "There's enough gas in Azerbaijan to fill the Turkey-Greece-Italy pipeline and to launch the Nabucco pipeline, and to fill the first few phases of Nabucco and perhaps to fill all of Nabucco. Perhaps. We're still working on that." Seemingly realizing momentarily the incoherence of this response, Bryza pressed on to still more hazardous pronouncements, encouraging Hungarians to "follow your wallet rather than following geopolitical pressures," before concluding: "Do what makes economic sense and Nabucco will be realized with Azerbaijani and a little more gas perhaps from Iraq or elsewhere in the Caspian, but not from Iran."

This judgment will undoubtedly come as a surprise to Otto Musilek. Or, for instance, to Reinhard Mitschek, the OMV coordinator for the Nabucco project, who, while allowing that Nabucco can be initiated with gas from Azerbaijan, has specified that the Azerbaijani gas will only be sufficient to fill barely one-third of Nabucco's capacity. As for the rest, as Mitschek delicately put it in a recent interview with the German daily Handelsblatt, Iranian gas "cannot be excluded."

Asked by the Hungarian News Agency to explain just why the United States appeared to be so intent on seeing Nabucco implemented, Bryza, in effect, gave up the game: "it is the policy of our European allies who are EU member states, the EU has said this is a priority project. So great, we support our allies in realizing their priority project. . . . [T]here is a desire to help our EU and NATO allies realize their own strategy."

The fact of the matter is that Nabucco was conceived as a means of transporting Iranian natural gas to Europe. The maps tracing the planned route of the pipeline do little to hide this, as they clearly depict one of its branches ending at the Turkish-Iranian border. Indeed, the very 2004 Energy Directorate report that serves to identify Nabucco as a "priority project" for the EU is more explicit: accompanying maps show the planned branch of the pipeline actually extending into Iran.

2004 Planning Map, European Commission (detail)

It is only now that Nabucco is, in effect, being "re-marketed" to the American public as something it was never intended to be: a means of transporting primarily non-Iranian "Caspian" natural gas. Just why the U.S. State Department would engage in what amounts to a disinformation campaign designed to confuse the American public about the real intentions behind Nabucco is a question that Bryza or his boss, Daniel Fried, might care to answer.

And if they do, they should also address the following matter. Circles cannot be squared. The pursuit of Nabucco is obviously incompatible with express U.S. government policy of attempting to isolate Iran economically. If the U.S. government has abandoned this policy, then the American people surely have a right to know.

John Rosenthal is World Politics Review's translations editor. He writes on European politics and transatlantic relations.

Photo: Deputy Assistant Secretary of State for European and Eurasian Affairs Matthew Bryza (State Dept. photo)