Statements by U.S. Officials
U.S. Special Envoy for Eurasian Energy Richard Morningstar and U .S. Senator Dick Lugar
Press Availability at Nabucco Signing
Rixos Hotel, Ankara
July 13, 2009
Senator Lugar: Let me thank each one of you for coming to join us this morning. This day is a day of celebration for those five countries and six companies who are going to bring about the Nabucco Pipeline initiative here which is a very constructive one for not only Europe but for the world in my judgment. I’ve been deeply interested in the fact that energy is the heart of the ability of nations to be able to serve their people at higher standards of living viable to offer proper defense of their territory. That is so important that our European friends with whom we have been allied in NATO, with whom were friends in the EU have those opportunities. The Nabucco Pipeline has been mentioned for the past seven years at least as a potential alternative to uncertainty in this area. It is exciting for those of us who have watched progress of Nabucco. Who have tried in some instances to help the process come along. I will mention specifically in the last couple of years I’ve visited Kazakhstan, Turkmenistan, Azerbaijan in addition to Turkey, Romania, Germany, the E.U. headquarters as well as in United States to discuss prospects and how we could be helpful in the United States. So when I received word about four days ago that President Gul had invited me to come to this celebration, I said “let’s stop everything” and this is important - important in terms of our relations between theUnited States and Turkey and likewise with the other nations that are participating and equally importantly as a statement that good business principles, competitive situations for energy are going to invigorate Europe, are going invigorate foreign trade generally in the world and certainly are going to strengthen our friends. And so I am honored to be with Ambassador Morningstar and with our Ambassador, Ambassador Jeffrey as we celebrate, along with others, a remarkable day. You have thoughts you would like to express?
Morningstar: Maybe just a few thoughts. First of all for me it’s a very much of an honor to be with Senator Lugar. Our energy policy in this part of the world has been bipartisan since the beginning of the 1990s when we were talking about the Baku-Tbilisi-Ceyhan line and it’s an example whereby working together in a bipartisan way we can accomplish a lot. This is a very significant achievement today. It will help to cement ties between Turkey and Europe. It will help Turkey continue to be a leader in this region and it’s a very significant step. I think we also need to remember it’s a step. There will be further steps along the way before Nabucco becomes a reality, but this agreement today will give the project impetus, it will create confidence among its supports and will lead I believe to its ultimate successful conclusion.
Question: Can you just say what the further steps are? What’s next?
Morningstar: First the determination as to how the project would be financed. There will have to be a clarification on where gas is going to come from. We look forward to an agreement between Turkey and Azerbaijan to gas pricing and transit. Ultimately I think gas from Azerbaijan will be a necessary condition to this project although there will also be possible sources from other countries. I had a very interesting trip in Turkmenistan just this past week. So these are the kinds of things that are going to have to be worked on. And that’s normal. I can remember ten years ago at the time of the Istanbul Declaration in connection with Baku-Tbilisi-Ceyhan. That was also one major step along the route and it took a few years after that before that was finalized. And so we have to recognize that there is still a lot of work to be done. Let’s celebrate today and this is a very major, a very major step.
Question: Do you have confidence that the project will supplied and also the Turkish energy Minister suggested that Iran may pressure for its participation. What are your feelings on this?
Morningstar: I’ll start first and then turn it over to the senator. First of all yes I think there will be supplies and there are potential sources of supplies in Azerbaijan and Turkmenistan and in Iraq. With respect to Iran and Russia, first with respect to Iran I think our policies have been very clear on that. We don’t believe today that Iran should be involved. We have reached out to Iran and so far we have not received any positive response. We have really no idea what the events of the past few weeks will have on potential further discussions. We hope that we will be able to engage and resolve difficult issues that we have including the nuclear issue. If that is of the case and if we can normalize relations then one of the great benefits to Iran would be to participate more with respect to the energy sector and I hope that that would be an incentive for them to consider taking the steps necessary to normalize our relationship. With respect to Russia, 50 percent of the gas that would be part of the Nabucco Pipeline is open to competition from any country. Russia can bid on that gas from the standpoint of a third party country. We will see if they have any interest in doing so.
Senator Lugar: Well I happen to agree with Ambassador Morningstar on both points. It seems to me that there are first of all skeptics regarding whether there be enough gas to fill Nabucco to begin with. Leaving aside Russia and Iran, I think our answer is that there will be (enough gas). It’s fundamental to have a pipeline that a country can have some confidence that there is in fact going to be business achieved there. And likewise the questions about the financing of it are irrelevant - the five countries and six firms have to think through how the financing will go in their countries so that they are able to maintain their share. And that will not be easy but it’s fair to say that those looking further along to see Nabucco as a pipeline in which there could be other pipelines that’s coming as additions to it that other countries in Europe beyond the five we are celebrating with today to be supplied. And others have already thought through that too. Now the Russian participation in this case comes on a competitive basis. It is not on the basis of any degree of economic or political threats of shutting off the tab or whatever it becomes really as their business partner and that’s a very different kind of operation. But Nabucco has formulated all sorts of alternatives that have not been available in this part of the world.
Question: What exactly does Iran need to do to normalize relations with the U.S.? And to what extent do the relations have to be normalized for let’s say Iran’s participation in the Nabucco project?
Senator Lugar: Let me tackle that first on this occasion. I would say that the United States has been clear as have many European countries that we must engage in negotiations about the nuclear project underway in Iran. It is one thing for countries to work with others for peaceful purposes of and the use of nuclear energy. It is another for a nation in a concerted attempt to attain weapons and to have the rockets still fire the weapons some distance and to hit other countries with nuclear power. And therefore to stimulate competition among other countries in the Middle East who are very nervous about their own security at that point. And create a nightmare for the United States as well as our European partners. It is not acceptable for a government that has been so threatening, and for terrorism in the Middle East to proceed in that way. And I would just say that I believe that the election situation may be a complication and that the Iranian regime is now much more involved in attempting to solve its own internal problems. There is a need for the rest of the world to come into negotiations and reduce (the threat of Iran) promptly.
Question: Do you believe the Russian South Stream project will be realized?
Senator Lugar: Well I think it’s possible the South Stream project will occur. It’s not foreordained but I would look at the situation in which the growing economies in Europe are going to require more energy from sources so, at least looking at it in an optimistic framework, Nabucco could very well flourish and it will take some years for this to occur. It may take another year or two for the business arrangements, the financing and the certainly the supplies. We are not talking about an event that’s going to occur in the next few months. And so I would just say that it could be that there would be many sources. And as I have already indicated maybe Nabucco will flower out in additional directions likewise. The important thing is to get this project underway so there is hope and vitality in European countries so they have the energy to do the job in terms of better serving their people.
Morningstar: I might add on that. And I certainly agree with everything that Senator Lugar said. And whatever happens with South Stream we should be moving ahead with Nabucco. We don’t propose South Stream or their countries in Europe that are supporters of that project along with Nabucco. We have some doubt with respect to ultimately as commercial liabilities that extremely going to be an expensive project and there are serious questions as to where the gas is going to come from but you know let’s see where it plays out. I don’t think it does any good to politicize these issues and to talk about you know well one project is a bad project and it should take place and the others the only one that should take place but that where we are with respect to South Stream.
Question: How long it would take Iraq to come out with gas supplies?
Senator Lugar: I think that the negotiations with Iraq will be successful if Iraq itself is successful in the short run in its constitutional framework that is how the northern part of Iraqi Kurdistan is related to the rest of the country and perhaps the elections that are going to occur in January will bring some greater clarity to that. But it’s important that the countries in the Nabucco Project have some certainty as to who they can contract with and that has not been altogether there thus far, so we are watching rapidly the evolution of democracy and of the constitutional certainty and we would hope that even the passage of the hydrocarbons law in Iraq in the near future would clarify the situation for them as well as for outside investors or customers.
Question: Can I return to Russia and the idea of Russia as one commercial partner among many in Nabucco ? Do you see in Russia a willingness to actually act in a way that they could be a helpful partner here or is there a spoiling role that they could play for the Azerbaijanis?
Senator Lugar: Well I don’t want to spoil the celebration today by characterizing any country in a spoiling role. But let me just say that when I visited the leadership of Ukraine in September 2005, I remember vividly a conversation first of all with President Yushchenko and then with Prime Minister Tymoshenko . And both took me to the map of Middle East and they said we are going to have a shut off of service from Russia come the end of the year, how can you help us? And they were drawing lines in Turkmenistan and to Kazakhstan. This is September and you are talking about the end of December, this is a pretty short time frame which indeed it was. But both leaders in the Ukraine were certainly correct in their assessment and the effect was awesome. Not just for Ukraine, but for Germany and for the other countries that were being serviced. Because 80 percent of that gas was being sat on underneath Ukraine soil and some of that service was stopped. That was a dramatic event in the history of the world regard the energy and this is why when I was asked to speak at the NATO Summit that winter in 2006 in Latvia I talked about the fact that the attacks in the future our nations might not come just from aircraft or armies. Maybe that’s likely to happen, maybe what you ought to do if you really want to be aggressive is just turn off the tap in the middle of winter; freeze the elderly, stop industry. And I said if NATO means something toall of us, we are going to think what article 5 means under those circumstances. When it doesn’t have armies, aircraft and so forth, when it’s a question of energy various foreign ministers said and visited me privately and said this is a real problem, but we don’t talk about this publicly. This is an existential problem for our countries that privately you try to work it out. But privately working out hasn’t worked and this is why it’s been very important not to as an obstacle to Russian aspirations but to simply say it’s not acceptable to simply determine service, to have strange events that bring these conclusions. Both the Ambassador and I have said optimistically that Russia may well want to participate in Nabucco. As a customer or supplier or how the case may be, on a business basis bidding along with everybody else. That’s a very different situation then than one in which there is an existential problem for a country in the end of service and so I don’t want to characterize the current Russian attitude as either being helpful or harmful. The Russians I’m told by the energy minister of Turkey were informed about 8 days ago or so that this celebration was going to occur. So at least this has been an upfront announcement and they will be making comments or adjustments as they see appropriate.
Morningstar: To add a little bit, I certainly agree again with everything that Senator Lugar said. To your question can Russia participate as a partner as opposed to all feeling like we have to have a controlling interest, we’ll see. We are trying to engage with Russia in the energy area. We want to find areas that we can cooperate with. We don’t want to see this as a zero sum games. Zero sum games in the context of the present global financial situation can be very expensive. So, we are hoping that we can find places where we can cooperate in a constructive way. We’ll see what happens.
Question: What role could Turkmenistan play?
Senator Lugar: I think they are a logical supplier and suspect they have really some urgency in terms of negotiating with Nabucco, because given the explosion in their pipeline; they have lost billions of revenue in recent months and are still waiting as I understand for resolution of who will pay for repair of the pipeline. In the meanwhile without activity in that pipeline to Russia. So, but it appeared to me that given the reserves that Turkmenistan has, that it will be a supplier to Nabucco and whether they are represented here today or not their presence is certainly felt and their participation will be welcomed.
Morningstar: I can add even maybe some more recent news from Turkmenistan. I was there on Friday and Saturday as a matter of fact and I came Ankara on a flight that left at 4:15 in the morning from Ashgabat on early Saturday morning so, I think I finally recovered from that. But, I did meet on Friday with President Gurbanguly Berdimuhamedow. And he announced publicly that day and reiterated in his meeting with us that he was very supportive of Nabucco and wanted to see Turkmenistan be a part of that. There again are many steps that have to take place before that happens and we have to work diligently to accomplish those steps including increasing production within Turkmenistan and creating a situation where pipeline or interconnector across the Caspian becomes a reality. Turkmenistan and Azerbaijan can reach an agreement on how transit can take place. I might say that the relationship between Aliyev and President Berdimuhamedow, their relationship has strengthened significantly over the last year, both say how much they admire and respect each other and will work towards solutions of these issues, so yes, they really want to be involved but you know again we have to work diligently to accomplish the steps necessary to make that happen.
Question: Just one more question on that. Did you talk with the President about the issue of the Caspian Sea, how it’s divided up? Because I understand that the Caspian states still haven’t actually reached agreement.
Morningstar: Well that’s still an issue and it’s sort of ironic in the sense that it is still an issue. I was actually trying to mediate that question in the late 1990s and nothing much has changed since then. I think the positive aspects are that the relationship between Turkmenistan and Azerbaijan is becoming quite strong that they are negotiating and looking at ways to resolve the issue. There are potentially political and commercial ways to come to solutions which may make the actual line a little less significant and we are hoping that those negotiations will continue and come to a fruitful solution and both countries want to see it happen and I think that the huge benefits to both Turkmenistan and Azerbaijan of Turkmen gas flow would ultimately lead to a solution.
Question: You just said 50 percent of the gas from Nabucco Pipeline is open for competition. So what’s happening with Azerbaijan gives me the idea that gas is going to come from one or more countries. So I’m getting a bit confused on how this gas, the supply would be found so, could elaborate a little bit on that?
Senator Lugar: There is clearly going to be a source country, such as Azerbaijan which I think that Azerbaijani gases are necessary I believe a necessary condition to Nabucco. But also no necessarily sufficient if that makes sense that there is also gas from other countries. But my understanding and maybe others can correct me is that 50 percent will be assigned to those potential source countries and then the other 50 percent will be basically open for bidding. But, I could be corrected on the issue.
Morningstar’s Assistant: I think you are almost there. But 50 percent is for the companies who are in Nabucco. So these are the five companies, they can book 50 percent of the capacity. They still have to go and find the gas to make the deals and so, but they get a right to the capacity and the other 50 percent, there is the right for open bidding so, anyone can bid on that capacity. But at the same time they have to make an agreement themselves.
Morningstar: I don’t think it’s a question of the 50 percent in fact one of the great benefits to Turkey as I understand it from the inter government agreement is that the gas can come back into Turkey if necessary. But there is no question that Turkey has its own needs for gas it has to be taken care of and so we are still going to be in negotiations that will take place regarding how much reserve gas ends up being sold in Turkey and how much goes on into the pipeline through to Europe, so these questions still need to be discussed and should be resolved and Turkey and Azerbaijan are working on these issues now.
Senator Lugar: I would just add one of the exciting features of the whole project is the growth of the GNP of Turkey of the recent years and therefore the demand for greater energy resources. And this underlines the whole idea not only for Turkey but for the other countries. In order to grow you have to have the energy in this world and therefore the coming together of the five countries and the support of the European Union to this and the potential as we say even down the trail for more countries to be involved leads us to optimism about the growth of these economies in Europe that are so important to each other but also to the United States and the rest of the world and the world trading system. So Turkey obviously is a transit country on the long pipeline, but it’s a very important economy and therefore we are interested in the United States and trying to be helpful where we can.
Morningstar: And this is also why it is important to develop Turkmen gas as well as Iraqi gas and there is also a lot of potential in Azerbaijan beyond sort of the conservative estimates that are out there, but that again is just potential. So, between these sources Turkish demand should be able to be satisfied.
Question: Iraqi Government Spokesman Ali Dabbagh said there isn’t any surplus gas in gas in Iraq, so they could sell it to them.
Morningstar: There are various opinions with respect to that issue and this is something that needs to be explored carefully. What will be the Iraqi demand for its own gas, how much gas is in fact available to be extracted, that’s still somewhat open to question, but all of these things have to explored and we are going to know the answers when companies get involved in more than Iraq and take the necessary steps
to determine what is available. And Senator Lugar said earlier also there will need to be a hydro carbon deal or at least agreements between the national government and the Kurdish government as to how these individual projects would be divided up and how the revenues will be divided.
Senator Lugar: I think an important feature in considering Iraq is that most energy estimates of capacity, oil and natural gas in Iraq are very optimistic about the amounts available. The question always is that that optimism needs to be matched by the governmental structure. The hydro carbon law comes from that government. In other words we are going to have lots of potential in a country but if its institutions, political and economic, don’t support the development of that, that becomes very troubling for the country and likewise for all the other countries that might be supplied. So, this is one reason why Iraq is very important to all of us and the evolution of this government we will watch and we will help.
Thank you for coming, we appreciate it.