The Southern Corridor is alive and well

RICHARD MORNINGSTAR*

Since the early 1990s the United States has been a strong supporter of the Southern Energy Corridor (Southern Corridor), which brings energy resources from the Caspian and Central Asia to Turkey, Europe and the rest of the World. That support began with the Baku-Tbilisi-Ceyhan oil pipeline and continues today with the Shah-Deniz gas project off the coast of Azerbaijan, the Trans-Anatolian Pipeline (TANAP) and the Trans Adriatic Pipeline (TAP). 

American policy towards the Southern Corridor has been consistent for more than 20 years through Democratic and Republican Administrations and has received bipartisan support from the Congress. There are several bases underlying this policy. First, the United States has supported increases in the supply of oil and gas from diversified sources and multiple pipelines. Second, American policy encourages the sovereignty and independence of countries in the region, particularly those emerging from the former Soviet Union. Third, the central role of Turkey as a transit country encourages Turkey’s to play a strong role within the region, with which it has strong historical and cultural ties. Fourth, regarding gas, the delivery of gas to Europe will enhance Europe’s energy security and provide another alternative for the purchase of gas.

The Baku-Tbilisi-Ceyhan oil pipeline has been in place for almost ten years and has brought major supplies of oil from Azerbaijan and to a lesser extent Kazakhstan and Turkmenistan to the rest of the world. Significant progress has been made with respect to gas. The Shah Deniz 1 project is presently delivering gas to Turkey through the South Caucasus Pipeline. The final investment decision was made regarding the Shah Deniz 2 Project this past December. In March the groundbreaking ceremony took place for the TANAP pipeline, which will transport gas across the breadth of Turkey. The TAP pipeline is also moving forward. The Southern Corridor project will transport 6 billion cubic meters (bcm) per year to Turkey and 10 bcm to Greece and Italy, with a spur to Bulgaria. Other countries will benefit through swaps. Most significant, the project is scalable. As more gas becomes available, whether potentially from Azerbaijan, Turkmenistan, the Kurdish region of Iraq, the Eastern Mediterranean, or at some point Iran, the pipeline system can be expanded to bring more gas to Turkey and to Europe.

Some questions have arisen as to the viability of the Southern Corridor as it relates to potentially competitive projects. Some have questioned whether the proposed Turkish Stream project poses a threat to the Southern Corridor. The answer is clearly no. There have been significant delays in the negotiations between Turkey and Russia on Turkish Stream resulting in the postponement of the commencement of construction.

Delays have resulted in large part from disagreements on price discounts that Turkey would receive on Russian gas. Botas has recently brought an arbitration proceeding against Gazprom to determine the issue. One can also speculate as to how much the delay has been caused by disagreements over Russia’s intervention in Syria. 

If the project does go forward, the first pipeline would only substitute for gas that is presently going to Turkey through the Trans Balkan pipeline. Additional pipelines as part of the Turkish Stream project are at best speculative and would face substantial financial and legal issues. Even if Turkish Stream were built, all of the gas from Shah Deniz 2 has been purchased through long-term contracts. In addition the strong relationship between Turkey and Azerbaijan would preclude Turkey from doing anything that would jeopardize Shah Deniz and TANAP. In addition, Nordstream 2 that will go from Russia to Germany under the Baltic, if built, would have little impact on the Southern Corridor, because it would replace much of the gas presently transiting Ukraine. There are many questions that remain regarding Nordstream 2. 

Some have raised the specter that that turbulence in the relations between the United States and European Union with Azerbaijan could spill over into the energy area. This turbulence has mainly related to issues regarding democracy and human rights. These are very real issues that have to be dealt with between the Governments involved, but to date they have not spilled over into the energy area. Whatever the relations between Governments at a given point in time, so long as Azerbaijan, Turkey and Georgia together with commercial participants maintain their commitment to the project, the Southern Corridor will in all likelihood move forward and supply additional volumes of gas to Turkey and to Europe.


*Richard Morningstar is the Founding Director of the Atlantic Council’s Global Energy Center and the former US Ambassador to Azerbaijan.