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Turkey, Greece and the Emerging Global Energy System

By John Sitilides1 <>, Executive Director, The Western Policy Center

Sacramento, CA. 6 August 1997

Sacramento, CA (8/6/97) -- The Clinton Administration's decision to allow the construction of a natural gas pipeline through Iran and Turkey is the latest indication of the enormous influence of energy politics and profits in the geostrategic framework of the Middle East, Central Asia and Southeastern Europe. It also reflects an expanding American interest in strengthening Turkey's central position, and the need for Greece to confront its growing isolation, in this emerging energy network.

Of the three countries involved in the Turkmenistan-Iran-Turkey pipeline, Turkey is by far the biggest winner. Its rapidly expanding industrialization and urbanization bases are desperate for greater energy supplies. As the largest foreign investor in Turkmenistan, which sits atop 14 trillion cubic meters of natural gas, Turkey will be positioned to compete with Russia as one of Europe's major energy distribution sources.

Turkey's influence will be strengthened in the fledgling nation and throughout Central Asia, the birthplace of Turkic history. Moscow previously redirected all Turkmen exports, dependent on the Russian pipeline grid, to Ukraine and the Caucasus region in order to monopolize the supply of natural gas to Europe. A reactivated Russian-Turkish rivalry will help Washington check Russian domination over the region's energy supplies.

Turkey came under fire in Washington last year when it signed a 23-year, $23 billion natural gas pipeline deal with Iran, just after President Clinton signed a U.S. sanctions bill prohibiting large energy investments in Iran or Libya. The new deal allows Turkey to retain the benefits of those arrangements, reap huge profits in transit fees, and avoid sanctions the U.S. may levy on European companies which construct the 788-mile pipeline segment in Iran.

White House officials insist that the pipeline decision is simply "a powerful reaffirmation of our relationship with Turkey and not a change in our relationship with Iran." But this show of support also encourages Iran's first participation in a major international project in 18 years, invigorates new European and global investment in Teheran, generates hundreds of millions in annual Iranian transit fees, and opens opportunities to ship Iranian natural gas in the pipeline network.

As Washington swallows these policy costs, a distinguished group of former national security, foreign policy and military officials from the Carter, Reagan, Bush and Clinton Administrations has been assembled by U.S. oil companies in an expensive lobbying and public relations campaign to change current U.S. policy in Azerbaijan, a once-marginal country until the discovery of 200 billions barrels of oil.

The lobbyists' prominent campaign, which benefits Turkey as a pipeline conduit, is testament to the sheer power of the U.S. energy industry, the decisiveness with which it acts to promote its interests, and the extent to which American foreign policy is reprioritized to maximum advantage as external developments dictate.

While Turkey has many reasons to celebrate, Greece's own position in the emerging energy network, and its impact on Greek-Turkish relations, warrants serious concern.

Greece has been involved in discussions with Bulgaria and Russia for several years, attempting to reach a decision on constructing a short, 200-mile pipeline linking the Black Sea port of Burgas to Alexandroupolis, in Thrace. The Trans-Balkan pipeline would meet an important international interest, in helping establish a secure and stable distribution system based on multiple routes. It would provide an expanded energy supply out of vast Caspian Sea oil and gas reserves, worth an estimated $5 trillion, through Russia or Georgia, across the Black Sea and into a stable pipeline network through Bulgaria and Greece, and onward to Western markets.

Turkey has objected loudly to any additional Black Sea oil traffic, in part to diminish Russian competition, but also because of the genuine threat of environmental and social disaster posed in the narrow and twisting Bosporus Straits. The Trans-Balkan pipeline would divert tanker traffic away from 12 million Turks in Istanbul, a factor which Greece should employ to win Ankara's support. The transit and refining fees available to Greece would be highly lucrative, and Athens would solidify its position as a strategic component of the world's next great energy system.

Yet, as multinational corporations swarm into Azerbaijan, Turkmenistan and other underdeveloped Caucasus and Central Asia nations, investing billions of dollars in pipelines, refineries and associated infrastructure, the Trans-Balkan pipeline remains but a hopeful concept. There has been little concerted effort in Athens to finish discussion with Bulgaria and Russia, offer American or Western companies investment or partnership incentives, and complete the pipeline.

Financial considerations must also be coupled with recent strategic developments. As sovereignty questions regarding the Aegean Sea remain disputed, Athens should consider the consequences of Turkey's extending new pipelines beyond its domestic market.

Current Turkish planning ends the natural gas pipeline at the Mediterranean port of Yumurtalik, near Syria. If Ankara exports natural gas to Europe through Bulgaria or Romania, Greek-Turkish competition in the Balkans, without resolution on outstanding bilateral issues, will likely intensify. If Turkey extends the pipeline to its Aegean coast, multinational interests seeking ventures in Turkey may pressure Athens to heed Ankara's allegation that 12-mile territorial waters would transform the Aegean Sea from a maritime corridor into a Greek lake.

Questions regarding the extent of territorial waters and the rights of coastal states, to ensure safe navigation on the high seas and in international airspace, will be at the forefront of international interest in the region. With billions of dollars potentially at stake, attempts to settle unresolved issues by revisiting international treaties or insistence on negotiations will be more forcefully imposed on Greece and Turkey. Energy-related interests may also drive forward the need for joint Greek-Turkish exploration of the Aegean seabed, which will further establish the Aegean Sea as an international body of water which happens to contain a few thousand Greek islands.

The impact of the White House decision exceeds the three pipeline countries. Turkey's regional prominence is further consolidated by Washington's investment in Ankara as a major partner for American economic and geopolitical power projection in the Middle East, Central Asia and Southeastern Europe. Greece maintains the opportunity to forge such a partnership in the Balkans and the Black Sea region, but has little time within which to act before neighboring developments overtake its ambitions.

The Simitis Administration has advanced Greece on a strategic economic program focused on international trade, foreign investment, low inflation, public debt and deficit reduction, and a streamlined bureaucracy. Further integration with the European Union, along Maastricht provisions, will reinforce the economy's fiscal bearings and bring long-term financial benefits to the Greek economy. The national program will be incomplete, however, without Greece's prompt and concerted participation in the energy framework.

At the very least, its current marginalization in regional planning and development projects bodes poorly for Athens. The global economic market is undergoing rapid transformation in various sectors, especially energy. Turkey's ability to exploit its geostrategic position has been furthered by Greece's apparent indecisiveness in similarly capitalizing on emerging opportunities, or establishing cooperative partnerships with its neighbors.

Prime Minister Simitis recently stated that the probability of oil under the Aegean Sea is the main reason for securing Greek sovereignty over the continental shelf. Much can be accomplished before the shelf is finally, if ever, delineated, and hopes of oil discovery and export are realized.

Athens has already taken far too long to build such a short pipeline of small investment and tremendous potential returns. It should act swiftly to end further dithering in Bulgaria, push the issue to the forefront of Russia's energy policy debate, and emphasize the achievement of American interest in multiple energy pipelines out of Central Asia.

Greece should close the Trans-Balkan pipeline deal, commence construction, and actively exploit its valuable financial, geopolitical and strategic benefits. The longer it stays off the energy map, the further the regional balance of power will be tilted in the years ahead.

1[The Western Policy Center is a public policy corporation monitoring U.S. geostrategic interests in southeastern Europe.]