Europe and Central Asia are experiencing multiple parallel developments in their respective energy markets. Russian energy company Gazprom is currently fighting to safeguard its market share in Europe by pushing for new projects and diversifying transit routes. Russia provides about a third of the EU natural gas energy supply, about half of which is shipped through Ukraine. Along with drastic deterioration of Russia-Ukraine relations after Russian annexation of Crimea last year and the rise of pro-Russian rebels in Eastern Ukraine, Ukraine is no longer regarded as a stable energy route. Alternatively, Russia has pushed for the Nord Stream II project, indicated by Gazprom’s signing of a shareholders’ agreement with five European companies on building a pipeline under the Baltic Sea to Germany. Russian President Vladimir Putin has claimed that Nord Stream II is not directed at cutting Ukraine out of its current role as a pipeline hub for Europe. European leaders have remained ambivalent on the project, inducing the Russian side to offer more lenient pricing. As a result, Gazprom has issued a statement on its readiness to sell more natural gas in Europe at current spot prices in exchange of European support of Nord Stream II project.

Additionally, Moldova very recently became another member of the Gas Connectivity (CESEC) initiative, the European Commission project for central-eastern and south-eastern Europe aimed at diversifying gas routes in the region. The CESEC comprises several EU members Austria, Bulgaria, Croatia, Greece, Hungary, Italy, Romania, Slovakia, Slovenia as well as non-EU states – Albania, Macedonia, Serbia, Ukraine and Moldova. In the CESEC framework, Moldova plans to build a pipeline delivering Romanian natural gas to Chisinau to decrease dependence on Russian energy.

Diversification of energy supply remains a major issue for Turkmenistan as well. The country, which remains under a stranglehold of Chinese gas exports (its only customer being China), is attempting to contract other external clients, particularly setting eyes on European market via the Trans-Caspian pipeline project, which is at this point in its pre-planning phase. Proclaiming his support for the project, Turkmen President Gurbanguly Berdimuhammadov stated that the possibility of advancing the project is under discussion. The project implies laying a 300 km pipeline under the Caspian Sea along the coast of Azerbaijan to deliver natural gas first to Turkey and then further to Europe.

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News Briefs:

• The OSCE assessed the Belarusian presidential elections as non-democratic. OSCE experts stressed that prior positive developments such as release of political prisoners and welcoming their observers did not sustain in further expectations. Observers concluded that flaws in counting and tabulation undermined the integrity of elections. In addition they recommended a minor challenge to Lukashenko’s candidacy and appealed for reforming legal framework to ensure competitive political environment. The framework was formerly assessed as incompatible with OSCE and international standards on free and fair elections.

• Kazakhstan and China agreed on bilateral Special Forces cooperation. Chinese Defense Minister Chang Wanquan announced increasing military presence and activities in Kazakhstan at the meeting with president Nursultan Nazarbayev in Astana. Prospective developments include donation of military trucks to Kazakhstan and joint special forces training for combating asymmetric threats such as terrorism and guerilla groups. Kazakhstan has undertaken similar training exercises in the past but always in the framework of Shanghai Cooperation Organization (SCO). The new agreement has bilateral character and takes two countries’ relations to a new level of cooperation – as Nazarbayev’s office announced.

• Along with increased record of violence in Nagorno-Karabakh, OSCE prepares a meeting of Armenian and Azerbaijani presidents. OSCE Secretary General, Lamberto Zannier, has expressed his concern about growth of violent activities in the region as well as at Azerbaijani-Armenia bordering territories and underlined importance of international support. Meanwhile, Azerbaijan’s permanent representation in the OSCE blames the OSCE Minsk Group for lack of support and particularly Armenia for resisting its initiatives to revitalize the group activities. OSCE diplomatic activities were particularly intensified after Armenian president Serzh Sargsyan made a statement about Nagorno-Karabakh being integral part of Armenia.

• The European Commission and the High Representative will start negotiations over a new agreement with Armenia replacing EU-Armenia partnership and cooperation agreement. Negotiations over the proposed legally-binding agreement will launch by the end this year and will commit to further development of cooperation with Armenia in the areas of mutual interest. Armenian Foreign Minister Edward Nalbandian issued a statement on importance of negotiations on creating a new legal basis in EU-Armenia relations.

• Azerbaijan, that largely relies on oil exports for its revenue, is considering adoption of floating exchange rate for its national currency, the manat. The currency is under heavy influence of global oil prices and finance policies of its trade partners. The chairman of the Azerbaijani Central Bank emphasized a severe drop of foreign reserves which amounts 7$ billion this year and is twice as small as the reserves held last year. Kazakhstan also relies on oil revenues, introduced the same change to the way its exchange rate is managed in August. Its currency, the tenge, has lost 30% of its value as a result.

• Ankara warned Russia and the USA over its possible reaction to Kurdish territorial gains in north-western Syria near Turkish borders. Turkish authorities suspect that Kurdish militias are getting closer to both US and Russia. Ankara warned of its intolerance towards Kurdish Militia YPG’s political wing, PYD movement to capture land between Jarablus and Azaz wth Russian help. On the other hand, the USA has supported YPG fighters as an effective force against Islamic State. Ankara fears that their advancement will incite Kurdish separatist ambitions on its southeastern territories. However, it has not specified possible actions.