Viktor Yanukovych came first in the presidential elections in Ukraine, but Yuliya Tymoshenko has instructed lawyers to bring to the courts evidence of voting irregularities to put Yanukovych’s margin of victory under question. Even if the latter is able to muster a negative majority to oust her from office and form his own parliamentary majority, he may be forced to call new parliamentary elections. Nevertheless, he has already moved on the energy front through floating new proposals, if not yet able to offer them formally for legislative consideration. The elections in Ukraine change the odds also for other projects in the east-west energy corridor from Central Asia and the Caucasus to Europe.

BACKGROUND: An international energy conference was held in Batumi, Georgia, in mid-January, originally planned as a high-level summit. However, the timing ended up putting it just before the first round of presidential elections in Ukraine, and very late in the game President Viktor Yushchenko decided not to attend, in order to pursue his ill-fated campaign. Other heads of state subsequently cancelled for protocol reasons, and the meeting went ahead as a preparatory conference for the postponed, yet to be rescheduled, high-level summit. This conference identified two priority projects for further promotion: the reversal of the Odessa-Brody Pipeline for oil (OBP, sometimes now called Sarmatia) back to its originally intended southeast-to-northwest direction inside Ukraine, and the international White Stream natural gas pipeline. The results of the elections in Ukraine and the current situation hold implications for both these projects, as well as for the Russian-sponsored Nord Stream and especially South Stream natural gas pipelines.

The White Stream gas pipeline proposes a way for Caspian Sea basin natural gas that passes neither through Russia nor through Turkey on its way to Europe. It seeks to route the gas across Azerbaijan and Georgia to Supsa, then under the Black Sea, for delivery to the Balkan member-states of the EU, notably Romania (at the port of Constanta), and then from there further westwards. In particular, the EU feasibility study of White Stream projects that the gas pipeline, after making landfall in the Balkans, would extend overland to Italy along the route of the Pan-European Oil Pipeline. It would be possible for Azerbaijan alone to supply the 8 billion cubic meters per year (bcm/y) called for in White Stream’s first stage: construction could begin in 2012 and the pipeline could enter into service in 2015.

The other project discussed at Batumi is the reversal of the OBP and its extension into Poland to the port of Gdansk for export by way of the refinery at Plock. At the time of its conception, the OBP was intended to receive oil from Kazakhstan through the Georgian ports of Batumi and Kulevi to the Ukrainian port of Kherson. The decision was taken to pursue construction in the absence of supply guarantees; the pipeline lay empty from its completion in 2001 until 2004, when another decision was taken to reverse the intended flow so as to take Russian oil from the southern branch of the Druzhba pipeline towards the southeast inside Ukraine. This pipeline inside Ukraine was integrated into the Euro-Asian Oil Transportation Corridor (EAOTC) agreed among Azerbaijan, Georgia, Lithuania, Poland, and Ukraine in May 2008. Under the concept endorsed in Batumi, the EAOTC would be implemented by sending oil through the Druzhba pipeline to the Kralupy refinery in the Czech Republic while the work was under way to extend the OBP through Poland. That oil (like the first gas for White Stream) would come first of all from Azerbaijan, as President Ilham Aliev three years ago indicated its readiness to supply the crude necessary for the EAOTC project, including the reversal (or, actually, re-reversal) of OBP.

IMPLICATIONS: During the run-up to the election, Yanukovych promised to seek ways for Ukraine to “participate” in the Russian-based Nord Stream (Russia to Germany under the Baltic Sea) and South Stream (Russia to Bulgaria under the Black Sea) natural gas pipeline projects. This was, among other things, a reference to orders for pipeline production either by enterprises of the Interpipe Group (connected with his close associate Viktor Pinchuk) or, still more likely, the Khartsyzsk Pipe Plant (now part of the Metinvest Group, itself the major part of Rinat Akhmetov’s wholly-owned holding company System Capital Management). It was implicitly part of the deal with Germany that German industry would receive an order for the manufacture of the Nord Stream pipeline (Germany also becomes Russia’s monopsonistic gas distributor in northern Europe), but the Khartsyzsk plant is also close to state-of-the-art, its pipes having been used for the Blue Stream gas pipeline under the Black Sea from Russia to Turkey.

Yet observers suggest that Yanukovych would not wish to see South Stream built, because this would decrease the throughput of gas from Russia to Europe. But it is designed to transit the Turkish rather than the Ukrainian sectors of the Black Sea, so he cannot stop it on that account. Therefore he has in the last few days revived the idea of making Gazprom co-owner of the Ukrainian gas-transport system, perhaps inducing Russia to decrease the market prices that Ukraine is now forced to pay, and also seeking to induce it to help modernize the country’s system. Given that Gazprom has little capital to invest even in its own modernization, however, this does not seem a reasonable hope. Perhaps for that reason, he does not also exclude the participation of European companies in a consortium still to be defined. (In order to do any of this, it would be necessary to amend 2006 legislation written by Tymoshenko as prime minister, and for which his Party of Regions voted at the time.)

Yushchenko signed a decree in May 2009 to implement the reversal of the OBP back to its originally planned southeast-to-northwest direction. In December that year, in the run-up to the first round of the election, Yushchenko predicted that the EAOTC would lie dormant, without the OBP being reversed back to its originally intended flow, if either Tymoshenko or Yanukovych were head of government. This is probably so. Although the Pryvat Group behind the OBP supported Yushchenko and Tymoshenko together during the Orange Revolution, its principals fell out with the latter in 2008. Ukraine’s original 2004 decision to reverse the flow of oil to west-to-east came only three days after a visit to Moscow by Prime Minister Viktor Yanukovych, but in November 2006 the latter publicly endorsed Yushchenko’s new proposal for an extension to Kralupy in the Czech Republic, as a first stage towards realizing the Plock-Gdansk flow. Today, however, Yanukovych has no apparent reason to favor the (re)reversal of the OBP when the Adria pipeline (running from Croatia’s port of Omisalj on the Adriatic Sea to Hungary) is itself a candidate for reversal to an east-to-west direction, giving the southern Druzba pipeline (running through Ukraine and from which OBP at present descends) a new export outlet on the Adriatic Sea.

CONCLUSIONS: In this fluid context, White Stream seems to be the major project in the EU’s Southern Corridor strategy that has the best prospect for (relatively) unhindered development. One variant of this project includes the pipeline’s interconnection with the domestic Ukrainian pipeline system en route to the Balkans. Yanukovych’s presidency would make this variant unlikely; the project could nevertheless proceed. By the time Azerbaijan’s gas begins to reach Romania, development of gas resources from Turkmenistan (offshore or onshore sites to be identified) and/or Kazakhstan (offshore Kashagan deposit) could make it feasible to consider additional White Stream strings bringing the project up to 24-32 bcm/y later in the decade, not excluding still further expansion in the further future. Its advantage is that it crosses neither through Turkey nor Russia, removing both potential geo-economic bottlenecks. It is worth noting that the White Stream project was included in May 2009 (Prague Summit) as part of the EU’s Southern Corridor strategy alone with the Nabucco pipeline and the Italy-Turkey-Greece Interconnector (ITGI).

Competing with White Stream are various liquefied natural gas (LNG) and compressed natural gas (CNG) projects for crossing the Black Sea from Georgia. Indeed, Azerbaijan already last year signed a memorandum of understanding (MoU) with Bulgaria for the export of 1 bcm/y as from 2011 with an eventual target of 8 bcm/y. CNG technology has not been used for such large-scale transportation before and its tankers are more expensive than those for LNG. But CNG does not require expensive gasification and de-gasification infrastructure. The Batumi energy conference in January discussed specific projects for construction of CNG terminals although not LNG. Industry analysts are currently at work calculating and verifying costs of transport, which will likely govern which technology may be chosen in the long run. In view of Europe’s long-term growth in demand for natural gas, it is not to be excluded that more than one technology and more than one route are developed and implemented as time goes by.

AUTHOR’S BIO: Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, is a senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, and also consults privately in Eurasian energy security and other fields.

 

 

MOSCOW APPOINTS COMPROMISE CANDIDATE TO LEAD TROUBLED DAGESTAN

Kevin Daniel Leahy

The Kremlin has sprung something of a surprise by re-embracing the influential Magomedov clan in its efforts to bring stability to the republic of Dagestan. The head of this clan, Magomedali Magomedov, steered Dagestan through a difficult post-Soviet transition phase before finally being replaced in 2006. It is not entirely clear what lies behind the Kremlin’s change of heart regarding the utility of the Magomedov clan. It seems likely, however, that this sudden volte face is related somehow to the Kremlin’s failure to convince Dagestan’s truculent political elite as to the merits of its preferred candidate: Magomed Abdullayev.

BACKGROUND: On February 8 the Kremlin took many observers by surprise by announcing Magomedsalam Magomedov as its nominee to lead the republic of Dagestan. Magomedov’s candidacy was duly confirmed by Dagestan’s People’s Assembly on February 10. Magomedsalam Magomedov is the son of Magomedali Magomedov who led the republic from 1987 until 2006. The Kremlin would appear to be gambling that the younger Magomedov will be as politically astute as his father who earned a reputation as a conciliator and a discreet behind-the-scenes operator during his near-twenty year tenure.

The decision to appoint Magomedov signalled an end to a protracted presidential vetting process in Moscow. In November 2009 President Dmitri Medvedev was presented by Boris Gryzlov, a leading figure in the United Russia party, with a list of five candidates, including Magomedsalam Magomedov. Of the five names on this list, most media attention centred on Magomed Abdullayev, a deputy prime minister in Dagestan’s government. When Abdullayev was dispatched to Makhachkala last autumn to advise President Mukhu Aliyev, numerous observers speculated that he was being groomed by Medvedev to replace Aliyev. Medvedev and Abdullayev are known to one another from their time as students in the faculty of law in St. Petersburg University in the late 1980s and early 1990s. Medvedev’s chief of staff, Sergei Naryshkin, was reportedly a strong advocate of Abdullayev’s candidacy.

Abdullayev’s supporters highlighted his independence from the clan system that underpins Dagestan’s political structure. As an ‘outsider’, it was argued, Abdullayev would be well positioned to mediate among Dagestan’s competing clans as an honest broker. Other political commentators cast doubt on the suitability of Abdullayev’s candidacy, however, pointing out that a career spent entirely in the cloistered world of academia did not in any way prepare him for the ruthless nature of Dagestani politics.

Ultimately, it was this lack of managerial experience, not any deficit of high-level political support in Moscow, which caused him to be overlooked in favour of Magomedov. Mukhu Aliyev was also on Gryzlov’s list but was evidently not the Kremlin’s preferred choice. Aliyev, it would seem, had damaged his prospects of securing a second term by resisting Moscow’s appointment of an ethnic Russian as the republic’s chief tax inspector early last year. Aliyev had also reportedly quarrelled with a senior member of the Russian cabinet and had failed to prevent the embarrassing debacle surrounding the municipal elections in Derbent last October. Even so, there was speculation that the Kremlin, concerned about Abdullayev’s inexperience, might turn to Aliyev as a compromise candidate. Instead, Medvedev opted for another compromise candidate, Magomedsalam Magomedov, holder of a PhD in Economics and a former speaker of Dagestan’s Peoples Assembly. But how strong are Magomedov’s credentials for this post and what challenges will he face in his capacity as president?

IMPLICATIONS: Magomedov’s appointment will affect the ethno-political balance of Dagestan’s political system. Whereas Aliyev was an ethnic Avar, Dagestan’s largest ethnic group, the 45-year old Magomedov is an ethnic Dargin. Under Aliyev, the role of chairman of the People’s Assembly was given to a Dargin, while the post of prime minister was delegated to an ethnic Kumyk. Because it would be unacceptable to other ethnic constituencies to have representatives of the Dargin community occupying the two senior-most political positions in the republic, the role of parliamentary speaker will be assigned to a politician of a different ethnic heritage, most likely an Avar.

In this context, it should be noted that Magomed Abdullayev is an ethnic Avar; although managing Dagestan’s fractious, poly-ethnic parliament is arguably a more burdensome task than fulfilling the role of president. This is not to trivialize the job facing President Magomedov. Apart from Dagestan’s underperforming economy, Magomedov is faced with a rebel insurgency that is becoming increasingly assertive.

On January 6 a suicide bomber killed seven policemen and injured twenty in an attack on a traffic police station in Makhachkala, Dagestan’s capital city. ‘They should simply be eliminated,’ said President Medvedev, referring to the perpetrators of such attacks, ‘it [the process of elimination] should be done firmly and systematically, that is to say regularly… because underground banditry, unfortunately, still exists.’

Led by the so-called ‘Jamaat Sharia’, an organization which fights under the banner of Doku Umarov’s Caucasus Emirate, rebel forces have consistently targeted representatives of the pro-Moscow administration, including policemen and politicians. Indeed, there has been a marked escalation in rebel activity in recent months as Dagestan’s elite found itself preoccupied with the prolonged presidential contest. Magomedov will also be faced with a particularly tense situation in the Caspian port city of Derbent.

In October 2009 an election to choose the mayor of Derbent degenerated into a dangerous standoff between the supporters of two rival candidates amid accusations of intimidation and electoral fraud. The principals in this ongoing controversy are Felix Kaziahmedov, mayor of Derbent since 2000, and Imam Yaraliyev, a former prosecutor general of Dagestan. Both are etnhic Lezgins. Yaraliyev cried foul on the day of the election when electoral officials failed to turn up at fourteen of the thirty-six designated polling stations.

There were also reports of police using intimidation and violence to deter citizens from voting. Although Kaziahmedov was declared the winner, Dagestani courts have annulled the results of the election – a decision publicly welcomed by Medvedev – and fresh elections are scheduled for October 2010. Resolving this standoff will be a priority for President Magomedov. However, such is the animus between Kaziahmedov and Yaraliyev that the president will be obliged to bring all his reported powers of conciliation to bear in order to defuse this row.

CONCLUSIONS: Magomedsalam Magomedov stands at the head of one of the most powerful clans in Dagestan. His father’s legacy gives him access to an abundance of contacts that extend to representatives of every ethnic constituency at every level of Dagestani politics. These contacts will serve him well in his efforts to preserve the republic’s precarious ethno-political balance. However, it is difficult to dispel the impression that Magomedov is not the Kremlin’s ideal choice to lead the republic. The rapid political advancement of Magomed Abdullayev since his return to Dagestan in 2009, coupled with the impressive list of Moscow power-brokers reputed to be well-disposed toward him, suggest that Abdullayev’s candidacy was the subject of serious deliberation in the Kremlin.

In the final analysis, it was probably Abdullayev’s lack of political experience that militated against him; entrusting this strategically significant republic to someone so inexperienced was deemed to be too great a risk – at least for now. A spell in the speaker’s chair, or perhaps in some prominent government post, would raise Abdullayev’s profile and broaden his political experience. Come the end of Magomedov’s first term, perhaps Abdullayev, still only 48, will represent a more realistic presidential contender in the eyes of his countrymen.

AUTHOR’S BIO: Kevin Daniel Leahy holds a postgraduate degree from University College Cork, Ireland.