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Wednesday, May 24, 2006

GUAM (no, not THAT one) Rises to Challenge Neo-Soviet Russia

Just listen to how worried Kremlin shil Alexei Makarkin, deputy director general of the Center for Political Technologies, sounds in this opinion piece from RIA Novosti about the rise of the Soviet slave states to challenge Russia's energy blackmail tactics. Russia has alienated the entire world and it isn't even fully neo-Soviet yet.

The regional association of Georgia, Ukraine, Azerbaijan and Moldova (GUAM) has been redefined this week at its summit in Kiev the Organization for Democracy and Economic Development - GUAM. The word "democracy" ties it to a similar project, the Democratic Choice Community, although GUAM incorporates Azerbaijan that is not a member of the Community and is not seen in the West as a beacon of democracy in the post-Soviet space. U.S. Congressman Alcee L. Hastings, the president of the OSCE Parliamentary Assembly, announced on behalf of the International Election Observation Mission that the recent parliamentary elections in Azerbaijan "did not meet a number of OSCE commitments and Council of Europe standards for democratic elections." (NB: Alcee is a convicted criminal, a former federal judge impeached for bribery). However, oil consumers appear to be extremely tolerant to oil producing countries on serious matters. The democratic identity of the new association looks like a questionable declaration designed for Western partners, but the economic aspect appears to be much more interesting.

Azerbaijani President Ilkham Aliyev said the energy issue would be dominant at the Kiev summit, but his Ukrainian colleague, Viktor Yushchenko, later said: "Azerbaijan has unique oil producing capacities, while Ukraine has unique oil transit facilities. Why don't we unite them?"

In other words, GUAM members intend to create an energy alternative to Russia. But will it be viable?

Aliyev said GUAM states constituted "a natural corridor between Asia and Europe, between the Caspian basin and Europe." He said the creation of an efficient transport infrastructure would guarantee the successful economic development of the organization for years ahead. But real politics takes into account not only strategic plans but also immediate future, which is fraught with problems.

Yushchenko plans to deliver Ukrainian energy "to and across the Caucasus." But in this case his country will have to compete with Russia, which is located closer to clients and can offer better terms. So, Yushchenko's plans look very much like the ideas of Yuliya Tymoshenko, the former premier of Ukraine who suggested joining forces with Gaz de France to build a gas pipeline from Iran as an alternative to Russian gas supplies to Europe. Her idea was buried by the deterioration of West-Iran relations and the high costs of the project.

New oil projects involving Azerbaijan and Ukraine are unlikely now. Last year, the Baku-Tbilisi-Ceyhan pipeline was commissioned, with Georgia acting as the transit country for a fee. But even before that experts pointed out that Azerbaijani oil reserves would not suffice for the ambitious project.

Oil has been produced in that South Caucasus republic since before the 1917 revolution, and the once rich oilfields have become depleted. This project can be profitable only if Kazakhstan joins it, which Americans encourage by insisting on the construction of the trans-Caspian pipeline. But what does this have to do with Ukraine?

Ukraine's main energy resource is gas, but it was not discussed in relation to Kiev-Baku cooperation at the summit. It had seemed a serious issue for discussion, as gas deliveries to Europe from the Azerbaijani Shakh-Deniz field by the Baku-Tbilisi-Erzurum pipeline are expected to start next year.

Alexander Medvedev, deputy CEO of Russian energy giant Gazprom, said about this situation several years ago that the reserves of the first stage of the Shakh-Deniz field were below 7 billion cu m, out of which 4 billion would be delivered to Turkey and Georgia, leaving less than a half for Europe, which is incomparable to Russian gas deliveries. Therefore, Azerbaijani gas can become an asset for adjacent Georgia, but not for Ukraine.

Energy partnership within GUAM looks a hypothetical issue. Who needs the organization then? It will most likely act as the discussion alternative to Russian projects in the former Soviet republics, including the Common Economic Space, as proceeds from the agreement to create a free trade zone reached at the GUAM summit.

Europe is apparently not ready to admit post-Soviet newcomers but is considering interim variants of pro-Western coalitions, such as GUAM. However, there is a long distance between the declaration of intent and practical energy projects, which depend on the possibilities of neighboring Azerbaijan and Georgia and other members of the organization.

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