Nabucco's Kurdish Oil Deal Blocked

Nabucco, the natural-gas pipeline running from Central Asia to Austria via the Balkans and Turkey, has run into trouble from an unexpected quarter. The European Union hopes Nabucco will help break its dependence on Russian gas. However, since the project's inception, there have been nagging doubts that Caspian Sea countries will be able to provide enough gas to fill the pipeline at its source. Azerbaijan already peddles most of its gas to Turkey, while other Central Asian countries have recently pledged to sell their reserves to Russia's Gazprom. To remedy that shortfall, a consortium of gas companies from Austria, Hungary and the United Arab Emirates recently struck an $8 billion deal with Iraq's Kurds to source gas from their region, run it into the pipeline via Turkey and thus solve Nabucco's supply problems.

The deal quickly drew criticism from Baghdad and Ankara, which have actively sought to block Kurdistan's oil ambitions over fears that independent energy revenue could help bolster the region's bid for political autonomy. Earlier this month the Iraqi government vetoed the Kurds' Nabucco arrangement, saying that the Kurdish regional government could not strike its own energy deals without violating Iraq's Constitution. Baghdad offered to supply Europe from another field instead—one not under Kurdish control—but it couldn't promise gas until 2014 at the earliest. Oil has long been a source of simmering tensions between the Kurds and the central Iraqi government, which has also moved to bring border controls in the Kurdish region under Baghdad's authority.

Turkey, too, has expressed its unhappiness over the Nabucco deal. Rather than allowing Iraqi Kurds to enrich themselves with gas money—which would likely bolster their de facto independence from Baghdad—Turkey prefers to bank on the chance that its ally Azerbaijan will be able to produce enough gas to fill the pipe.

Either way, Nabucco's backers are being forced back to the drawing board. Even with €250 million pledged by the European Commission for its funding, and even with Turkey easing the terms by which gas will transit its territory, there's little point in building an expensive new pipeline if there's not enough gas at the source to put in it. And with Moscow making progress on its South Stream gas pipe, which is planned to run under the Black Sea to Bulgaria and on to the Balkans and Italy to deliver gas by 2015, Europe's attempts to break free from Russian gas dominance may turn out to be only a pipe dream.