The changing geo-economic environment around the Central Asian and South Caucasus hydrocarbon energy producers is reflected in a public flip-flop by a major European Union official this week.

At a news conference in Berlin, European Union Energy Commissioner Gunther Oettinger, who last November became the first EU figure to admit that the EU-sponsored Nabucco and Russian-sponsored South Stream gas pipeline projects were rivals, reversed course and declared they were not actually competing projects.

Nabucco seeks to make itself a Caspian gas pipeline through Turkey to Southeast and Central Europe. Russia seeks to lay the South Stream pipeline across the bed of the Black Sea to the Balkans, although its Prime Minister Vladimir Putin is ready to scrap the project if he can find another way to block Nabucco.

Saying that the EU positively evaluates Russia’s contribution to European energy security, Oettinger publicly asked Russia not to put pressure on Central Asian countries against participation in the Nabucco project. Oettinger said that the EU’s Southern Gas Corridor (SGC), a program adopted in May 2009 to channel natural gas to Europe from the Caspian Sea basin through Turkey and under the Black Sea, rather than through Russia, was simply the shortest route.

It was an odd performance, of which the main purpose may have been to conform to the new EU line that economics, not politics, will determine European preferences over natural gas pipelines from Central Asia. In this connection, a high-level Azerbaijani figure publicly disclosed last week that his government was working on two documents with Turkmenistan with a view towards facilitating the construction of a Trans-Caspian Gas Pipeline (TCGP).

The first document is a political declaration in which the two countries affirm that they are ready to assist in creating the SGC. The second would define more specifically the rights and responsibilities of the two countries with respect to the physical project construction, including legal provisions.

The latter document in particular signifies that there is definite and specific progress in creating the conditions for overcoming the territorial disagreement between Azerbaijan and Turkmenistan over delimitation of subsoil Caspian Sea mineral and energy rights sectors.

The press leak to the media comes three weeks after Azerbaijan’s parliament ratified a declaration that its government had signed with the EU on the SGC project.

There are hints that Russia is not the only player discontent with the specific pipelines that the EU has defined for inclusion in the SGC. These are: Nabucco; White Stream, which would go under the Black Sea from Georgia to Romania; and the Italy-Turkey-Greece Interconnector. For example, the British firm BP has suggested that it might prefer to evacuate 10 billion cubic meters per year (bcm/y) of gas from Azerbaijan’s Shah Deniz Two deposit by some route other than Nabucco.

The implication is that BP would like to build another string of the South Caucasus Pipeline (running from Baku through Georgia into Turkey), of which the throughput volume is 8 bcm/y but which is not filled entirely to capacity. BP has in mind to transit this gas to southern Italy through Turkey and the Trans-Adriatic Pipeline (TAP).

The reason behind this is the fact that BP’s other major partner in Shah Deniz, the Norwegian firm Statoil owning 25.5% of that development, also owns 42.5% of the TAP project, which is planned to transit Greece and Albania, then passing under the Adriatic Sea to reach southeastern Italy.

However, it is not certain that this idea by itself would be better received in Baku than the Nabucco route. That is because it does not make clear that Azerbaijan would own the gas for sale in addition to merely supplying it. For Azerbaijan has made it clear that it wishes not only to supply gas to Nabucco but also to sell gas to countries along the route to Austria (ie, Bulgaria, Romania, and Hungary).

Moreover, Azerbaijan also wants to be able to sell to adjacent countries in the region such as Albania, Croatia, the Czech Republic, Macedonia, Slovakia, and so forth. Indeed, these countries in general are those with the greatest gas dependence on limited number of sources.

This possibility could be implemented through a series of relatively inexpensive interconnectors to create a gas ring in the region. The European Commission (EC) adopted such a decision in principle nearly three years ago, calling it a “supergrid” project permitting members states to share electric power from different sources.

However, like so many policy initiatives born in Brussels, the implementation is the prerogative of the national governments, which may have their own motives for ignoring the suggestions or adopting them only in part. Moreover, due to industrial history in the energy sector, such interconnectors for a gas ring are much easier to implement in Southeast and Central Europe than among, for example, the founding members of the European Economic Community from the 1950s.

If the EU cannot find itself able to provide a window for funding such projects, then the European Bank for Reconstruction and Development (EBRD) should step in through its well-established cooperation with the Central European Initiative (CEI) and the CEI’s Secretariat as well as with the associated Central European Chambers of Commerce Initiative. Indeed, under the EBRD’s aegis, the CEI is already involved in five EU-funded projects, including a “transport axis coordination” project in Southeast Europe. The fact that Azerbaijan is able to make and stick to a demand to be the seller of its own gas in Southeast and Central Europe is in radical contrast to its relative powerlessness in negotiations with Western energy majors in the 1990s.

The emergence of the country’s relative autonomy and its capacity to assert its own interests with at least some success reflect the beginning of the unfolding of a new phase of energy geo-economics in the region, to which I pointed over a year ago.

[First published in Asia Times Online.]