Tuesday, January 27, 2009

EU Must Spend for Russian Alternative

By Maria Golovnina

ALMATY, Jan 26 (Reuters) - Fear of angering Russia may stop Central Asian producers from committing gas supplies to Europe unless they receive solid EU guarantees that the Nabucco pipeline project is well worth taking that risk for.

The energy-rich region, seen by Moscow as part of its sphere of interest, is in the spotlight as an alternative source of energy after Russia's gas conflict with Ukraine deprived Europe of natural gas supplies for two weeks this month.

But analysts said Central Asian producers would be reluctant to make any promises on paper unless Brussels presented them with a set of concrete incentives and guarantees on Nabucco's timing, transit arrangements and financing. "All those countries that would contribute to Nabucco would have to jeopardise their relationship with Russia," said Tanya Costello, a director at Eurasia Group in London.

"I don't think Turkmenistan has enough commitment from the EU that it's really going to happen, that you can really consider taking that risk."

Many hope that this week's Nabucco conference in Hungary, due to be attended by European Commission President Jose Manuel Barroso, would help Europe come up with a more unified position.

EU External Relations Commissioner Benita Ferrero-Waldner toured the Caucasus region ahead of the conference last week, putting special emphasis on her meetings in Azerbaijan -- one of the potential big Nabucco suppliers.

"Azerbaijan intends to receive concrete proposals from participant nations on matters of Azeri and Central Asian gas transportation," Azeri Foreign Minister Elmar Mamedyarov told reporters in Baku ahead of the Hungary meeting.

Russia, however, has aggressively defended its geopolitical turf in the region, promising to raise the price it pays for Central Asian natural gas to European levels from this year.

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