The Role of the Caspian Sea countries in European Energy Diversification

The collapse of the Soviet Union led to both an end of an ideological clash and the emergence of new geopolitical interests among great powers.To obtain sustainable energy resources is one of the new political challenges of powerful states. However, the strategic dimension of energy is not a new issue in international politics. “It has been widely discussed at least since the 1973-4 Arab oil embargo”.

The Role of the Caspian Sea countries in European Energy Diversification - Geopolitica.info

“After the Arab oil crises, new energy cooperation and partnerships emerged and this process accelerated after the Cold War”(Yergin 2012, p. 267). In other words, powerful countries like the United States, Russia and China realized that sustainable energy resources can accelerate and strengthen their economic and military interests. In light of this,many countriesstarted to use their political, economic and even military power in order to obtain and provide cheap and alternative energy sources. Meanwhile, the importance of energy resources led to the emergence of new conflicts and competitions amongst great powers.Europe is a major region of international energy politics due to its energy dependency and interest, yet also because it is the headquarters of the IAEA and IEA.  The four main areas of these organizations – Energy Security, Economic Development, Environmental Awareness and especially Engagement Worldwide – makes the region a prominentglobal energy centers. The IEA is working with both member and non-member states, providing them with authoritative  recommendations and statistics. Meanwhile, it has a strong relations with other international energy organizations such as OPEC, IRENA and IEF. Thus, these strong partnerships and engagements make Europe one of the major energy regions.

In addition to the new political challenges, “the end of the Cold War sparked an emergence of new energy rich countries in the international sphere. Russia and newly independent Caspian Sea countries, Azerbaijan, Turkmenistan, Kazakhstan, have become new and significant energy actors in international politics, due to having abundant energy reserves”(Yergin 2012, p. 44).However, theRussian government has effectively used the disunity of member states for its own advantage and established huge energy dependency relations with numerous European countries. At the same time, Moscow has monopolized the pipeline projects of the Caspian Sea to restrict alternative access of the EU. Thus, as stated by ZeynoBaran“the EU relies on Russia for more than 30 percent of its oil imports and 50 percent of its natural gas imports”(Baran 2007, p. 132).

Nevertheless, the energy politics of the EU began to change after the gas crisis between Russia and Ukraine in 2007. The EU has realized that high dependency, lack of energy diversification and disunity between member states are the main obstacles that prevent member states from implementing strong energy policies. In light of this, the main research question for this paper is: isRussia the main obstacle which prevents the EU from establishing alternative energy relations with other regions, especially the Caspian countries, or are there other internal and external reasons? This will be explored by developing various sub-questions. To investigate the EU’s internal side:How successful was the European Union in its energy policy agenda during the period between 1991-2007 in the Caspian Region? How did competing strategic, economic and commercial interests impact on the EU policy? To investigate the external reasons: does Russia need the EU more than the EU needs Russia? How can the Caspian resources influence the energy diversification of the EU?  How will strong EU cooperation with the Caspian states impact the strategic sphere of its partner United States? In this paper, I use two main methodologies, analytical and descriptive, to answer the questions. For analytical part, I seek to outline where the Caspian resources can be located within the present paradigm of the EU energy security. I make particular reference to R. Young’s Energy Security analyzing concepts of the energy security and EU foreign policy. For the descriptive part, I utilize international journal articles to provide comparative and statistical information.

The Energy Policy of the European Union and Challenges

To begin with, what is energy security? and How can one define it? Is there a definition?In his analysis of Energy Security,Daniel Yergin mentions that “although in the developed world the usual definition of energy security is simply the availability of sufficient supplies at affordable prices, different counties interpret what the concept means for them differently” (Yergin 2006,p.71).However, Nikolay Kaveshinkov explains it from a different perspective in his article ‘The Issue of Energy Security’. According to him, “energy security should be defined as the elimination of a threat that in the longer run the energy factor would become a potential barrier to the economic development of a country” (Kaveshinkov 2010, p. 589).Meanwhile, he mentions that energy security should be explained in terms of both supply and demand. Finally, IEA defines energy security as  “the uninterrupted availability of energy sources at an affordable price”(Bahgat 2006, p.965).

In short, energy security is not only reliable and sustainable supplies but is also available at areasonable price.For the European Union, energy security hasnot been the main strategy of foreign policy since the mid-2000s. “The looming threat to energy security has not automatically led to member states developing a genuine ‘common’ energy policy” (Keukeleire&MacNaughtan 2008, p.222). In other words, the lack of attention and concern of EU member states to energy issues prevented them from establishing and implementing coherent and strategic energy policies. Stephan Keukeleire and TomDelreuxdiscuss critically three main obstacles and strategies to the EU in their book ‘The Foreign Policy of The European Union’

According to them, “the first challenge is the EU’s growing import dependence” (Keukeleire&MacNaughtan 2008, p.223). Although the percentage of energy importer countries varied significantly, every year their dependence rates are increasing considerably. “According to European Commission statistics, the EU dependency rating  has increased from 47.2 to 53.7 percent since 2002” (Ec.europa.eu, 2014).In the light of this, critics point out that due to  high energy consumption and demand in the world market, this dependence rate will be higher in the near future. In addition, European countries import their energy resources from different countries that influence their foreign policy priorities. Each of the member states has independent energy relations with different countries, and their position and policy toward energy exporter countries differentiate. Thus, high energy dependency is not only making security of EU countries vulnerable and weak, but also it impacts foreign policy priorities of its member countries.

Secondly, critics claim that the EU does not have reliable energy partners because energy rich countries are either undemocratic and authoritarian states-like Russia- or unstable places like the Middle East. In other words, because of energy interest, some European countries undermine traditional values of the European Union and overlook undemocratic regimes. “Even Saudi Arabia’s violent oppression of the unfolding revolt in Bahrain in 2011 did not lead to any serious reaction from the EU and its member states”(Keukeleire&MacNaughtan 2008, p.225 ). In the light of this,Youngsargues that “the standard critical view was that where the West did focus on such values it was only as a cloak for pursuing oil interests” (Youngs 2009, p.11).

Some European countries imported their energy resources from the Middle East. Although, the Middle East is very rich in its oil and natural gas resources, there is always conflict between countries which makesthis region an unreliable energy partner. For example, there has been conflict between Israel and Palestine since the beginning of the Cold War, and also, during the 1990s, the war between Iran and Iraq in the 1980s, then Iraq invaded Kuwait which led to the Gulf War. After that, in 2003, the U.S invasion of Iraq. In short, the common point of most experts isthe EU should increase diversification of energy sources to response energy shocks and disruptions.

The last and the most important challenge of the European Union is the absence of internal unification that prevents the EU from implementing a common ‘external energy policy’. This idea is also supported by both experts and the Commission. According to Amelia Hadfield,  “each EU member state places a different emphasis on the role of energy within its own national foreign and security policy’’(Hadfield 2008, p.237).This is also one of the main reasons of high energy dependency because instead of establishing energy relations under the EU, member states prefer to establish bilateral relations with exporter countries. At the same time, they do not want the EU commission to interfere their national energy relations. “Even energy policy was not formally incorporated within the scope of the Common Foreign and Security Policy (CFSP) and no legal base existed for the development of common external energy policy”(Youngs 2009,p.22). In the same vein, Bauman argues that, “during the gas disputes between Ukraine and Russia,  the common approach of the EU failed due to some bilateral actions of member states like Germany”(Baumann 2010, p.78)In other words, most of the experts and also the EU politicians believe that the disunity among members and ineffective collective responsibility are more significant obstacle than Russia. “At the end of 2006, Commission president Jose Manuel Barroso declared that energy had been until recently a forgotten subject in the European agenda”(Youngs 2009,p.24).

What are the main reasons of these problems?

The first reason is the differences between power and capabilities of member states that impact both their foreign and energy policy priorities. Small member states fear the power games of great ones. Meanwhile, for the largest states, “EU composed of powerless member states with little capabilities to offer” (Keukeleire&MacNaughtan 2008,p.123).  Moreover, divergent levels of capabilities leads to the second problem: different interests among member states. In other words, due to their power and capabilities, member states are following different foreign policy interests. Some members of the EU – France, the UK – have different agendas because they have nuclear weapons. Due to these reasons, they want to maximize their power capabilities and establish bilateral relations with third party countries in terms of economic, security and energy policy. Other reasons are political will and strategic culture. Meanwhile, because of different interests, capabilities and strategies, member states do not have strong political unity to establish a common EU approach.

Finally, critics claim that the last reason is the differences between energy dependency and preferences of states. As it has been mentioned before, the energy dependency of states is different from one toanother. For example, “although Latvia, Lithuania and Slovakia are obtaining 100 percent of their imported energy from Russia, Sweden, Spain and the UK have a low dependency on Russia”(Youngs 2009,p.79). Also, member states have different energy preferences like, nuclear power plants, that some of them prefer to change their energy from natural gas and oil to nuclear but others are against this idea. “For instance, France and Finland, prefer nuclear energy, whereas others such as Germany opted to close nuclear power plants (Youngs 2009,p.225).

The Caspian Sea

“The Caspian is the largest salt lake in the world”(Encyclopedia Britannica 2014). But, because of scientific  controversies about this idea, it is called the Caspian Sea. Five nations border the Caspian’s shores: in the southwest by Azerbaijan, in the south by Islamic Republic of Iran, in the northeast by Kazakhstan, in the southeast by Turkmenistan and in the northwest by Russian Federation.After the collapse of Soviet Union, three border countries of the Caspian Sea- Azerbaijan, Turkmenistan and Kazakhstan- became independent states. Meanwhile, due to its rich energy resources and geopolitical importance, the region gained the interest of foreign oil and natural gas companies and great powers. However, these newly independent states had weak governments and economies.This led to powerful countries in the region, such as Russia and Iran, intending to monopolize on the Caspian’s energy resources and strengthen their political influence over these three countries. Due to its strategic geography and rich energy resources, the Caspian Sea gained the attention of the United States. Washington immediately recognized the independence of these states and intended to spread its political influence over them.Thus, the Caspian Sea has become the ‘new power game’of great powers.

Although, the European Union did not present themselves as being particularly interested in the region’s geopolitical importance and energy resources.In his article,Ensuring European Security in Russian Near Abroad: the Case of the South Caucasus,Lussac explains that“for a long time, some EU actors have been reluctant to promote European activism in the South Caucasus due to Russia’s longstanding influence there” (Lussac 2010, p.608). This idea is also supported by other experts. Similarly,Youngs claims that “European foreign policy struggled to gain a meaningful foothold”(Youngs 2009,p.102). However, it does not mean that the EU was inactive in the region during those times. Rather, European programs were mainly intended to spread the idea of democratization and rule of law. In other words,Lussacargues that at the beginning of 1990s, the EU did not want to compete with Russian energy interests. But, how did European activities start to change from democracy to energy politics? What are the main reasons that have prevented the EU from utilizing of oil and natural gas resources of theCaspian Sea?

Russia

However, before to pass the importance of the Caspian energy resources, it is important to mention briefly about the relationship between the EU and Russia. This way, it will be clear why Russia is very significant for the EU. Also, the question will be asked: does Russia need the EU more than the EU needs Russia?

The relation between Russia and the European Union is very special because before the end of the Cold War, some of its member states especially the Baltic countries were the members of the Soviet Union. After the collapse of the USSR, they joined the EU and Russia has become the main‘successor’ of the USSR. After that, the EU launched several  programs  to establish and develop mutual relations with the Russian government.Amelia Hadfield claims that, “the centerpiece of the EU-Russia relationship is the Partnership and Cooperation Agreement”(Hadfield 2008, p.233).However, in his article ‘Towards Strategic Partnership’, Abellan explains that “PCA is fundamentally limited, acting primarily as an ambitious normative framework”(Abellan 2004, p.14). Besides spreading democracy and rule of law, using rich energy resources of Russia was the particular purpose of the EU. Nevertheless, Javier Solana – High Representative for the EU Common Foreign and Security Policy- “argued that to develop the partnership with Russia was the most important and the most challenging task that the Union faces at the beginning of the twenty first century”(Hadfield 2008, p.234).

Although, following the collapse of the Soviet Union, Russia had a weak economy and was struggling with a political transition, rich energy resources of the country strengthened its economy and provided a more or less smooth transition. Therefore, both oil and gas resources and pipeline projects have become national power and new foreign policy tools of Moscow. In his ‘Russia and Europe’s Mutual Energy Dependence’ article, Paillard, claims that “Russia used its energy resources, just as it used missiles in the 1980s to disorganize NATO”(Pillard 2010, p.78). However, Kaveshinkovclaims that it is the easiest way to explain power of energy but the question is “how the peculiarities of the energy industry and the domestic regulatory regime influence the goals and practice of external energy policy”(Kaveshinkov 2010, p.587). He mentions that energy should not be explained only from the perspective of politics.

According to statistics, “Russia accounted for 40 per cent of the growth in world oil production between 2000-2007” (Youngs 2009,p. 79). Russia has become the biggest energy trade partner of Europe. According to statistics of the European Commission: “in 2007, 44.5% of total EU’s gas imports (150bcm), 33.05% of total EU’s crude oil imports, and 26% of total EU coal imports came from Russia. In total, around 24% of total EU gas sources are originating from Russia” (Ec.europa.eu, 2014). The energy dependency rate of countries differentiate from each other and can be divided to three groups, law, medium and high dependent on the level of the Russian energy dependency. Spain, the UK and Sweden are among the less dependent countries. France, Germany and Italy comprise the second group. “The last group with high dependency on Russian energy, including Finland, Latvia, Lithuania and Slovakia that obtaining 100 per cent of their imported energy from Russia”(Youngs 2009, p.80). However, this dependency is not bilateral. In his article ‘The Prism of Interdependence’, Proedrou claims that, “Russia is dependent on the EU with its vast market power and potential.” In other words,  there is a mutual vulnerability between both sides and this claim is supported by the Commission. According to the statistics of the Commission,“in terms of overall trade, the Russian Federation is the third biggest world trade partner of the EU”(Ec.europa.eu, 2014).

Until the gas dispute between Ukraine and Russia in 2006, the EU has been trying to improve energy relations and partnership with Russia. The EU launched several civil society, political and especially economic programs to establish strong relations with the Russian government. In addition, before the dispute, most of European countries believed that with this partnership they would assure sustainable and cheap energy. As mentioned before, Russia energy has been a new weapon to dominate over other countries, especially in Europe. Russia believes that with these means, it can influence political and foreign policy decisions of the EU countries. Indeed, this policy had been successful until 2006 since Moscow could limit the critics of the member states. According to ZeynoBaranadvantages of energy interest blinded the EU members.

“The July 2006 shutdown of the Lithuanian pipelinedrew little protest outside of Poland and the Baltic states. The response from most western European countries was rather muted during that time” (Baran 2007,p.132).

Diversification of Energy Resources and the Importance of Caspian Energy    

The beginning of 2006 was a turning point of the EU’s energy policy. First, due to high prices, Moscow cut gas supplies to Ukraine which influenced negatively energy flows to the EU member states. In the same year, due to so called technical excuses,energy to Lithuania  was stopped by Russia. “Moscow then more than doubled gas prices to Georgia, and in 2007 cut gas supplies through Belarus in relation to another pricing dispute, this time with President Lukashenko”(Youngs 2009, p.3). The last example of Russian energy aggression is a second gas crisiswith Ukraine which led to huge protests.

In other words, these examples, especially within Lithuania, increased and warned the EU to evaluate its energy relations with Russia since thenext energy victim would be its member states.For some critics, it is a very significant issue and the EU should not undermine it. For instance, in her article ‘EU Energy Security’,Baran claims that the unjust manipulation and interruption of energy supplies is as much a security threat as military action is”  (Baran 2007,p.133). In the light of this, “in late 2006, the Commission proposed plans to move towards sub-regional energy markets in the Caspian basin, Caucasus and Central Asia, through a new EU-Black Sea Synergy initiative” (Youngs 2009,p.105). The aim of this proposal was to increase EU engagement with region countries and integrate their energy resources to the European market. After these energy flow issues, the Commission started to give priority to energy security. In 2006, a French diplomat had a message: “Brussels was willing to support new gas transportation infrastructures between the Central Asian producing states and the EU, bypassing Russia” (Lussac 2010, p.619). But before that, the initial energy step of European countries was to include the Southern Caucasus in the ‘European Neighborhood Policy’(ENP). “When Azerbaijan was indeed included in the ENP, Commissioner Benita Ferrero-Waldner declared that “this offer reflected the country’s geo-strategic location and energy resources” (Youngs 2009,p.104).

Also, Central Asian states were included in the Development and Economic Cooperation. This led the EU to increase its energy relations with countries in the region. However,  energy policy of the EU was complicated at that because the EU implemented two different cooperation programs dividing the countries in the region into two. Due to that, “Kazakhstan reacted badly to being excluded from the Neighborhood Policy.”(Youngs 2009,p.105). Despite these complications, the EU approach started to change positively in 2006. For example, although the partnership meetings started with South Caucasus countries at the beginning of the 2004, the significant decision occurred in 2006. During the second Baku Initiative ministerial meeting the EU and Caspian countries decided to establish new ‘Energy Road Map’ to improve mutual energy partnership and cooperation. In addition to that one European diplomat identified as the main energy related priority “the need to lead Central Asian states (Turkmenistan and Kazakhstan) towards membership of the World Trade Organization (WTO)”  (Youngs 2009, p.112).

The Importance of Caspian Energy

Although, the Caspian Regioncannot be considereda new Middle East, these countries have several political and economic advantages for the EU. Firstly, they are the source of sustainable alternative energy. According to the International Energy Agency, “it is the world’s largest undiscovered reservoir of energy resources.” In his,‘EnsuringEnergy Security’, Daniel Yergin claims that “ the first principle of energy security is diversification of supply.”(Yergin 2006, p.76). This view is also supported by Hadfield in his EU-Russia Energy Relations article. He mentions that “Europe must put its external instruments at the service of more secure and competitive energy.”In contrast to them, Noel P. explains energy security from different perspective in his ‘Beyond Dependency’. He does not support the idea of diversification. According to him,“the most efficient solution to the Russian gas problem lies not in the development of an external energy policy but in further restructuring of the EU’s internal gas market.” Nevertheless, G. Bahgat claims that “the potential for energy self-sufficiency within the EU is limited.” Although,Baran also supports the idea of strong internal market, she claims that “diversifying oil and gas supplies would not only decrease Russian’s influence but would also loosen Moscow’s grip on Europe’s neighbors” (Baran 2007,p.135).Therefore, there are two possible solutions of energy dependency but in terms of energydiversification, the Caspian countries can be the key to diversification. Meanwhile, for energy resources, they can be distinguished from each other. For instance, Azerbaijan is important not only for its natural resources but also its geostrategic location.

Especially, its location is a key aspect of pipeline projects since Azerbaijan is part of South Caucasus and the traditional Silkroad; meanwhile it has borders with Georgia, Armenia, Iran, Russia and Turkey. In addition, after the 2001 terror attacks, its location has become a crucial transportation route to Afghanistan.According to former U.S. Special Envoy for Eurasian Energy and former U.S. Ambassador to Azerbaijan Richard Morningstar, “Azerbaijani natural gas is absolutely essential to the development of the Southern Corridor. Furthermore, “Turkmenistan was also positioned in the top 15 of world gas reserves”(Youngs 2009,p.102.).Nevertheless, according to report of Congressional Research Service, despite Turkmenistan’s desire to export more of its gas, thus far, its orientation seems to be toward the east and not yet toward Europe. On the other hand, critics explain that the main reason for this attempt is Russia, because the Russian government prevents Turkmenistan from competing directly with Russian natural gas.Kazakhstan shares the most important part of Caspian oil and natural gas reserves. Due to its rich oil reserves, the Kashgan field has special importance.“The EU’s most senior fording-policy figures defined Kazakhstan as the main target for European energy security concerns in Central Asia” (Youngs 2009,p.117). However,  critics  mention that some EU energy firms and other private foreign investors have become discouraged in recent years by harsh Kazakh government terms, taxes, and fines that some allege reflect corruption within the ruling elite. Turkmenistan and Kazakhstan are also the largest countries of Central Asia.

The second advantage of the Caspian region is its strategic location. In his article ‘Geopolitics and Energy Security’, Justynaproposes that the control of this area formed the basis for the domination of the Eurasian landmass. In other words, to establish strong relations with Azerbaijan, Turkmenistan and Kazakhstan will provide not only economic advantages for the EU but also assure geopolitical control of the region. It is clear that both the South Caucasus and Central Asia are backyard of Russia and this gives them a significant political control over the region. Its political control limits the spread of democratic values of the EU. In other words, with strong energy cooperation, the EU can effectively implement and spread its traditional ideas like rule of law, human rights and democracy. Also it can influence future foreign policy decisions of Caspian countries. Nevertheless, it is significant to note that the EU should not separate energy policy from human rights and democratization. As mentioned before, due to energy relations with Russia, some European countries limit criticism of Moscow and ignore several human rights abuses. If this situation is repeated in the Caspian region, these countries will use European money for increasing their authoritarian regimes. According to Sir Halford Mackinder, regarded as one of the founding fathers of geopolitics and geostrategy, “the Caspian region and its hinterland, can be called the Eurasian Heartland”(Misiagiewicz 2013, p.64). That is why, after the collapse of the USSR, Moscow implemented several aggressive politic and military policies to monopolize region’s control. Justyna claims that “the Caspian states, assisted by foreign aid, tried to limit their dependence on Russian-dominated infrastructure at the heart of Caspian geopolitics”(Misiagiewicz 2013,p.63). However, critics mention that Central Asian (Turkmenistan and Kazakhstan) states failed to accomplish this idea. According to Huseyinli“Kazakhstan and Turkmenistan are strongly under Russian influence”(Huseyinli 2013,p.26) Moscow knew that after the collapse of the USSR, the Caspian basin would gain foreign interest of great powers like theUnited States, China and the EU.

At the same time, newly independent Caspian states intended to explore and deploy their resources with support of Western countries. To prevent this, the Russian government aimed to monopolize the regional pipeline projects and make its land as a main energy transport route. In other words, strong European support for these countries is very significant because it will decrease the dependency of both the EU and the Caspian countries on Russia. According to experts,“the exploitation of energy resources and the future routes of pipelines from the oil and gas fields in the Caspian basin will also determine the future economic and politic development of the region (Misiagiewicz 2013,p.63).

Lastly, strong EU cooperation with the Caspian states will increase the strategic sphere of its partner United States. Contrary to the EU, the US has started to play an active role in both the Caucasus and the Caspian region since the collapse of the Soviet Union. Firstly, the U.S recognized their independence and then implemented several development and aid programs for post-Soviet countries. “In the late 1990s, the United States pushed hard for the construction of several oil and gas pipelines that would carry Caspian energy westward without transiting through Russia”(Baran 2007,p.136). The Washington intended to provide newly independent states with ‘non-Russian perspectives’ and also to decrease economic and pipeline monopoly of Russia. During the 1990s, Washington supported vital projects such as theBaku-Tbilisi-Ceyhan (BTC) pipeline is one of the first and most important energy project of the region.It is also called the “Contract of  the Century”. Although, the EU did not provide strong support for this project, for the U.S politicians accomplishment of it became very significant until the end. Another project was the ‘Trans Caspian’ pipeline project which was aimed to transport the Turkmenistan natural resources.

The construction of these pipeline projects provided significant freedom for region states and decreased Russian energy monopolization over these countries. In addition, successful construction of BTC led to the implementation of other energy projects such as the Baku- Tbilisi- Erzurum gas pipeline. “The gas is extracted from Shah Deniz field in Azerbaijan, crosses Turkish territory to Greece and from there it is to be extended toward Italy”(Misiagiewicz 2013,p.72). Meanwhile, Trans Adriatic (TAP)  and Nabucco pipeline project are two crucial future oriented projects that bypass Russia. ”Once built, TAP will play a part in helping secure Europe’s energy future. One of the most important energy infrastructure projects, TAP will allow Caspian natural gas to flow into Europe’s energy markets”(Tap-ag.com, 2014). “Nabucco project is also a big pipeline which aims at directly connecting the Caspian and Middle East gas resources to the EU gas market”(Huseyinli 2013, p.27). Despite Nabucco was signed in 2009, due to some disagreement between project states, its construction process is progressing too slowly. However, it is important to note that both South Caucasus and Caspian Sea are in the backyard of Russia. “It is also the largest trading partner of the newly independent states.”(Misiagiewicz 2013, p.66). With respect to this, the Caspian states don’t want to endanger their relations with Russia. That’s why, they prefer to have strong energy cooperation particularly with the EU. In other words, US is a strong economic, political and military competitor of Russia but the EU is not and it has strong trade relations with Russia. So that, for Caspian states, cooperation with the EU is more attractive than direct involvement of the US.

Challenges of the Caspian Sea Countries

However, there are several problems of Caspian countries. The first problem is the status of the Caspian Sea that hasn’t been decided since the 1990. During the Cold War, Caspian Sea was divided by the Soviet Union and Iran but the  problem with boundaries in the basin appeared with the dissolution of the Soviet Union. Critics mention that it is also a risk that investors have to consider in doing business in the region. Secondly, there are several frozen conflicts in the South Caucasus like NagornoKarabakh and Abkhazia. Especially, theCaucasus is a very sensitive region because there is a significant nationalistic feeling among countries. “That is why Zibgniew Brzezinski called it the “Eurasian Balkans”(Misiagiewcz 2013,p.64). Therefore, stability and peace of the region are as important as security of energy. In additionMisiagiewcz. mentions that there was a lack of clearly defined mechanism for preventing regional conflicts and instability within new states.

Conclusion

The paper has explained that besides Russia there are significant external and internal challenges that prevent the EU fromestablishingsuccessful energy policies toward Caspian countries. In light of this, the paper suggests three conclusions. Firstly, the lack of solidarity anddisunity between member states is the most important internal obstacle to the implementation of a single European energy policy. It also provides advantages to Russia that by using this internal problem Moscow is increasing their bilateral dependency. In addition, Russia is both a trade partner and an obstacle of the EU.  On the one hand, Russian’s economy highly depends on the EU’s money and trade agreements and meanwhile, the EU needs Russian energy. In other words, mutual vulnerability makes them partners. On the other hand, the monopolized energy policy of Russia is another important reason that prevents both member states and the Caspian countries from establishing energy relations with each other. Gazprom, the biggest state controlled energy company in Russia, is particularly playing an active role in the Caspian’s energy politics. For Gazprom, local state companies of the Caspian states are the potential competitors and it does not want to lose its energy market in Europe to these companies. In light of this, during the end of the 1990s, Russia allowed Turkmenistan to utilize its pipelines, if it would sell energy only to CIS states. Meanwhile, Gazprom has significant partnership relations with the EU states. For instance, it is supplying a third of the Germany’s natural gas by the ‘Nord Stream Pipeline’ and also it has an agreement with the French company Gas de France. In other words, the ambitions of the Gazprom are wider than just the Caspian Sea. Meanwhile, transportation of the Caspian resources is another problem that makes the Russian pipelines an alternative. The world energy markets are far from the Caspian Sea which requiringthe largeamount of foreign investment to construct the expansive infrastructures.

Finally, there are three main advantages of Caspian energy resources. First, the Caspian Region is energy rich. The European Union can utilize the resources ofthe  Caspian basin as one of the alternative energy diversifications.. With respect to this, the EU should support the important pipeline projects of the region like NABUCCO. Thegeostrategic location of the Caspian Sea is another significant advantage. In other words, the region lies along the traditional Silk Road and the ‘Eurasian Heartland’. To establish coherent relations with post-Soviet Caspian countries will provide an opportunity to increase the EU’s political and economic influence over them.Lastly, strong relations with the EU and the Caspian region directly influences and reinforces the political position of the United States.