July has seen a sudden reversal of fortune in Caspian and Black Sea Basin pipeline politics. The Nabucco pipeline project has staged a noteworthy comeback, while a competing Russian-backed route, dubbed South Stream, now seems to be losing steam. Uncertainty surrounding future demand, however, raises the possibility that neither pipeline ever becomes a reality.
Two recent events have helped reshuffle the regional energy game -- the July 13 signing of a Nabucco transit deal, and the early July elections in Bulgaria. [For background see the Eurasia Insight archive]. The Nabucco signing ceremony -- involving Turkey, Bulgaria, Romania, Hungary and Austria -- signaled that after a long period of hesitation, the US- and European Union-backed project is at last gaining traction. Meanwhile, the Bulgarian election brought to power a man, former Sofia mayor Boyko Borisov, who is already on record as wanting to take Bulgaria out of the Russia-led South Stream consortium. Without Bulgaria on board, the South Stream project may well be dead. Russian officials have downplayed Borisov’s comments, however, attributing them to post-election "euphoria," Russia’s Kommersant business daily has reported.
A major factor that will likely determine which of the two pipelines gets built is connected with natural gas demand. The requirements for either project are daunting. Central Asian producers must be able to ship large quantities of natural gas through multiple countries before energy reaches its final destination. The more countries involved, the greater the degree of difficulty in realizing any given project. Projects like Nabucco and South Stream are doubly challenging, given the environmental concerns involved with constructing energy pipelines. [For background see the Eurasia Insight archive].
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