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The Three Seas Initiative: an old solution for the contemporary challenges

Analytics | | 21-01-2019, 20:50

 

On September 17, 2018, the Third Summit of the so-called Three Seas Initiative was launched in Bucharest with U.S. Energy Secretary Perry, Assistant Secretary of Commerce Ian Steff, and German Foreign Minister Heiko Maas being present as keynote guests.  The Three Seas Initiative, as described by its website, is a flexible political platform, at Presidential level, established in 2015. Although it owes a great deal to Polish promotion and derives from interwar Polish foreign thinking associated with Marshal Josef Pilsudski it has been entirely revamped to take account of conditions in contemporary Central and Eastern Europe. The Initiative includes the 12 EU Member States located between the Adriatic, the Baltic and the Black Seas: Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.  The Dubrovnik Summit in 2016 opened the dialogue under the aegis of the Three Seas Initiative, followed in 2017 by the Warsaw Summit, where the 12 Three Seas Initiative states were joined by the US President, Donald Trump.

 

The Initiative’s started intention, shared by all the member states, is to stimulate more rapid development of the region bracketed by between the Baltic, Black and Adriatic Seas through both high level and multi-stakeholder, i.e. multilateral commitment to boosting connectivity among Member States, with special focus on infrastructure, energy and digital interconnectivity. Thus, the overarching rationale for the Initiative is to facilitate achieving real convergence among EU member states, thereby contributing to enhanced EU unity, increased EU cohesion and coherence, further EU integration, as a basis for the re-launching of the European project.  At the same time, the involvement of the U.S. is important and relevant. America’s regional economic presence alongside the security dimension it provides through NATO provides a catalyst for strengthened cooperation, among the states of the region and as part of the Transatlantic Partnership in general.  Therefore, in the minds of its organizers this initiative is also a regional contribution to strengthening the transatlantic link.

 

In this context, it bears noting that in his speech to the summit in Warsaw in 2017 President Trump singled out several crucial infrastructural projects across this area.  Specifically he listed the floating LNG terminal on the Croatian island of Krk. the Greece-Bulgaria Interconnector, and the Bulgaria-Romania, Hungary-Austria (BRUA) pipeline bringing gas from the Black Sea to Central Europe.  But these are only some of the existing and potential energy and infrastructure projects that could promote economic-political integration from the Ukraine to Austria and the Baltic to the Black Sea.  Other such projects could include the Via Baltica highway from Warsaw to Tallinn, and the possibility of linking it with other north-south or east-west highways across Europe, the Lithuanian and Polish gas terminals at Klaipeda and Swinoujscie respectively, the Trans-Adriatic Pipeline TAP, that is about to take Azeri gas from Turkey along the Adriatic coast to Italy, and other existing and new projects.

 

Apart from these projects new possibilities are beginning to emerge for both infrastructural, transportation, and energy projects.  The recent Caspian convention has opened the way for a trans-Caspian gas pipeline otherwise known as the Southern Gas Corridor (SGC) to bring gas through the Caucasus and Black Sea to Turkey and from there through member states of the 3 Seas Initiative to the rest of Europe. Indeed, this convention makes control of the Black Sea a much more urgent issue for all the littoral countries as we can see from Russia’s naval activities to block Ukraine’s maritime commerce in the Sea of Azov and the Black Sea. 

By the same token recent discoveries of large gas deposits in the Eastern Mediterranean, an area close to Southeastern Europe also create opportunities for diversifying gas suppliers. Thus, a 2016 Congressional Research Service Report summarized recent developments in that particular context.

Since 2009, a series of large natural gas discoveries in the Levant Basin have altered the dynamics of the Eastern Mediterranean region. Israel’s discovery of the Tamar Field and subsequent discovery of the larger Leviathan Field created the potential for the country to become a regional player in the natural gas market. Since the initial Israeli discoveries, Cyprus and Egypt have also found new gas deposits in the Mediterranean. The Aphrodite Field was discovered by U.S. firm Noble Energy in Cypriot waters in late 2011 and the massive Zohr Field was found in Egyptian waters by Italian firm ENI in 2015.  These discoveries create the potential for Cyprus to export gas and for Egypt to meet more of its domestic gas needs. Lebanon has not yet discovered recoverable gas reserves, but geologic data indicates that there is the potential for Lebanon to possess significant gas resources.

 

But beyond initiatives that further link the Mediterranean, Central Asia, and the Caucasus with Europe through the Black Sea and then use or export those resources all the way to Central Europe or the Baltic, there are other opportunities also underway.  For example, Ukraine and the countries of the EU in Eastern Europe are now creating a single transport and railway link from Ukraine to Baltic destinations and to Hungary, and Poland that will accompany the maritime project begun in 2015. Similarly, the Polish, Slovakian, Hungarian, and Ukrainian governments have just signed four-power agreement called the Carpathian Strategy.  This document commits them to economic coordination and close cooperation, for instance in developing communications, tourist and ecological infrastructure.  In addition, the agreement aims to raise the competitive profile of the Carpathian region (which overlaps that of the 3 Seas Initiative) and improve living standards there.  Ultimately the signatories intend that the Carpathian region will become part of or a separate EU macro-regional strategy.  That means the region in question will be so designated following an agreement between the European Commission and the countries concerned.   Again, just like the 3 Seas Initiative Poland is the country behind the strategy. And Poland’s Investment and Development Minister Jerzy Kwieciński, commented that the members of the strategy, Poland, Romania, Hungary, Slovakia, and Ukraine aim to use this strategy to change the perception as well as the reality of the Carpathians as a peripheral macro-region. Although the 3 Seas Initiative is not intended to become a European macro-region, the support of the EU remains essential. It is needed in order to bring to life the interconnectivity projects that are critical for the region, by putting to good use existing EU mechanisms.  In other words, ultimately only the EU and the U.S., working collaboratively with the parties to the 3 Seas Initiative, are the only forces who can impart to this program a truly solid   foundation of political and economic resources, both expressions of real support and concrete, tangible investment projects, that can make it into a truly going concern and not just a paper expressing well-intentioned aspirations. From here we can see that the 3 Seas Initiative and accompanying plans like the Carpathian Strategy aim to integrate all the countries between Germany and Russia through coordinated energy, infrastructure, transportation, and potentially other projects.  In geostrategic terms these plans and projects strengthen these countries’ cooperation, integrates them more closely with the EU, create enormous economic opportunities, strengthen their internal resilience, weaken Russian efforts to use the energy weapon against them, and crate powerful forces of attraction pulling Ukraine into closer integration with its partners and thereby strengthening it domestically as well as enhancing its capability to attain eventual EU membership.  But beyond these considerations, these initiatives also will go far to strengthen the EU despite the sever attacks against it. In this climate of populism and attacks on the entire idea of more European integration, such projects should be welcomed as the U.S. has done.

However, for all this to come together and actually produce the desired outcomes it is necessary to move from plans and rhetoric to actually implemented projects and this requires financing, the point of getting the EU to buy into these programs.  With this in mind the Business Forum meeting that will occur simultaneously in Bucharest. The Forum will facilitate the gathering of representatives of companiesfrom the 12 participating states in the Initiative, the US, other EU Member States, the Western Balkans, the Republic of Moldova, Ukraine, Georgia and Turkey.  It will represent the occasion for direct contact between diverse business representatives from the region, with relevant Government officials from these countries and other economic stakeholders such as international financial institutions, in order to find new business and investment opportunities. Thus, the Forum will devise economic criteria to assess the compatibility of projects with the EU’s policies decide which projects should be pursued that could attract other states who are not members of the initiative (e.g. Germany and the U.S. whose support is crucial) and focus on projects that integrate economic actors form multiple countries making them truly multilateral cooperative projects, and prioritizing projects that are already included in different EU programs and project priority lists;  as well as projects that involve innovative safe and sustainable new technologies and/or are seeking to upgrade the existing infrastructure. Lastly, the Forum will create a network of Chambers of Commerce from the participating states to bring together key economic actors to support the Forum’s activities and coordinate multilateral projects. Although Poland originated the initiative, the emphasis on securing real project financing and tangible outcomes that can credibly stimulate large investors appears to have been largely a Romanian initiative.  Therefore the clear purpose of the summit in Bucharest is to move from declaratory actions to the establishment of concrete, economically credible, and financially supported programs that can have maximum visibility and economic-political payoffs for all concerned. Obviously for that goal to be achieved both Washington and Berlin need to support this initiative and these specific projects.

 

This is hardly surprising given Romania’s position as an independent energy producer in Eastern Europe. Since conservative estimates of gas discoveries off Romania’s Black Sea coast are at least 40BCM and some say200 BCM, Romania could become a major regional exporter in Europe.  Inasmuch as Romania’s overall energy program is wholly oriented towards securing its energy independence and potentially that of Moldova from Russia and becoming not only independent but an exporter to other EU members it depends not only on there being security in and around its offshore energy facilities but on foreign investors. Therefore, as Prime Minister Victor Ponta declared in 2014, Romania not only expects the U.S. to defend Romania’s territorial security and independence through NATO, it also expects American assurances of energy independence against Russia. Thus, the BRUA pipeline for gas and the AGRI Interconnector (Azerbaijan, Georgia, Romania, Interconnector) could bring Black Sea gas and oil to the Balkans and Central Europe as well as potentially serve as conduits for Central Asian and Caucasian energy flows to Europe. Moreover, with these systems either already operating or being under construction, if tangible progress can be made building further interconnectors across Eastern Europe we could see in the future a network of pipelines, interconnectors, and terminals that could bring gas and oil to Europe from producers other than Russia and reduce Moscow’s ability to use energy as a corrupting and leveraging instrument of power and policy.

 

It is well known that Hungary and Bulgaria, for instance, are almost totally dependent on Russian gas, oil, and nuclear energy and that Moscow has used the leverage accruing to it from this dependence to corrupt their politics and support anti-liberal and anti-democratic tendencies in both countries and across all of Central and Eastern Europe. So clearly the development of region-wide infrastructures and pipelines connecting suppliers to producers and terminals, like the existing ones in Poland, Croatia, and Lithuania would reduce Russian leverage and encourage the development of a truly global gas market or at least a Eruopean and/or Eurasian gas market where gas becomes nothing more than a freely traded commodity, not a political weapon. The opportunities to promote such a development over time are there as the gas market of producer states has become increasingly globalized, with African, Latin American countries, and most prominently the U.S. adding to existing Middle Eastern a gas and oil suppliers.  And with the new opportunities in regard to shipping gas to Europe form the Caucasus and Central Asia investments that will strengthen the projects envisioned in the 3 Seas initiative now become possible. For Europe, probably the single most important player in this emerging new landscape is the U.S.  For example, in the recent EU-U.S. agreement on talks to reduce all tariffs and trade barriers on all non-automotive industrial goods the EU also expressed its desire to import more U.S. LNG.  That desire fully comports with the Trump Administration’s ambitions to export more gas to Europe, an ambition that on both sides of the Atlantic was first expressed in 2014 and has apparently grown since then.   Indeed, according to Obama Administration officials they had already succeeded in lowering Ukraine’s dependence on Russian gas by 2014 when Russia invaded Crimea and the Donbass. Moreover, the policy of aggressively championing U.S. LNG exports to Europe also entailed helping U.S. oil companies help countries develop their own resources as Exxon is now doing with Romania.

 

To be sure, there are obstacles to greater U.S. shipments beyond Russian resistance and support form Russia from interested lobbies in Central and Eastern Europe.  The U.S. must relieve legislative and administrative obstacles to gas exports, build more terminals and work to make its price more competitive with that of Russian and other suppliers for at present U.S. gas is visibly more expensive, especially when transportation costs are factored in.  So the success of U.S. policy can only take place over time.  Nevertheless the trend lines are there and the building of the kinds of infrastructure supported by the 3 Seas Initiative and the already existing Lithuanian and Polish terminals.  Indeed, U.S. LNG has already gone to Poland and the U.S. and Polish governments are already discussing a long-term agreement on U.S. gas supplies for Poland. Such exports, even where they do not displace Russian supplies force other suppliers like Russia to slash prices as Gazprom did by 20 Percent for Lithuania due to the credible threat offered by U.S. competition. And reportedly other prices on European contracts also went down as a result of America’s presence in the European gas market so tangible economic benefits from that presence have already made themselves felt.

While it may be too late to stop the Nord Stream II Russo-German pipeline through the Baltic whose economic rationale is decidedly dubious, since construction has just begun on that pipeline, the projects of the 3 Sea initiative, combined with the globalization of gas production and U.S. support in both political and economic terms may well mitigate the negative political and economic consequences of Nordstream II. In other words, while U.S. gas exports alone are not a magic wand that will suddenly eliminate Russia’s gas presence in Eastern Europe, in tandem with improved infrastructure and ending obstacles listed above will make it easier and potentially less expensive to get that gas whose mere presence constitutes what economists call a credible threat to a competitor.

Thus the impetus of the 3 Seas Initiative towards credible infrastructural projects, along with the possibility of gas coming from Romania, the Caucasus, Central Asia, the Mediterranean, Middle East, and the U.S. helps overcome the obstacles that a currently exist.   Even analyses that cast doubt on the benefits of U.S. gas exports to Europe ultimately observe that local actions can significantly affect prices and make it possible for U.S. and other competitors’ gas exports to either replace Russian exports or to force prices down. And of course, either alternative benefits European governmetns and consumers. In actuality, few of these states would benefit from increased U.S. exports.

 

The obstacles to U.S. exports areas follows: many, if not most of the members of the initiative are landlocked so U.S exports cannot reach them directly. This highlights the need for interconnectors to link them up to terminals such as the ones in Poland, Lithuania, and Croatia or for building pipelines like the BRUA that will connect countries to non-European suppliers. Second, U.S. prices are still higher than Russian prices.  While this is admittedly true, U.S. and other suppliers’ mere presence in the market clearly exercises a downward pressure on prices, so even if they still buy Russian gas   their terms are better, prices are cheaper, and economic leverage vis-à-vis Moscow is enhanced. Those trends free up more resources for investments relating to energy infrastructure, including power generation, which is an overlooked sector but where multilateral collaboration can probably lower prices and improve supplies without relying on Moscow’s tender mercies.  Therefore support for the 3 Seas and similar Initiatives helps Central and Eastern European states do what they need to do to lower energy costs and their dependence upon Russia, and thus Russian leverage over them. For Eastern European nations to strengthen energy security — and thus, national security — traditional tools are most likely to be successful — diversification of energy sources, building of gas storage, dual-fuel capacity of power plants and more. For this reason, the U.S. should not allow exuberance over increased gas exports to distract from the critical need to continue partnering with Europe in strengthening traditional energy security efforts. Although success here strengthens regional and multilateral cooperation and cohesion in the EU, provides domestic bulwarks to Russian subversion and corruption through energy and other economic-political means, and strengthens these states’ identification with the EU, the objective is not merely anti-Russia and pro-EU.  While admittedly depriving Moscow of leverage in the energy and economic fields will antagonize the Kremlin, in fact any action taken by an Eruopean state to defend itself will be regarded by Putin et al as provocative etc.  But these projects will not deprive Russia of energy revenue for its gas is still cheaper than that of the U.S. and its infrastructure is up and running.  However, as is already the case Russia will have to heed market and EU forces as well as the enduring impact of potential U.S. exports that have been a major focus of the Trump Administration’s strategy. The ultimate objective, at least as far as gas markets go is to make them like the oil market, a purely commercial market where gas is bought and sold and political considerations are minimized.  That outcome, whose contours can already be glimpsed by the growing globalization of productive energy capacities benefits liberal, open economies by depoliticizing and thus reducing the corrupting influence of politics upon energy transactions.  Russia makes its money but its political clout is clearly reduced. Meanwhile, the cohesion and resilience of   the 3 Seas Initiative’s members are enhanced by such trends and by the economic-political benefits of their infrastructural investments.

 

Ultimately, if the ideal of a purely commercial market is reached Russia will be able to continue supplying anyone who cares to buy its product and there will be many takers for it.  But the political leverage it has gained thereby will be attenuated if not eliminated over the long-term by the successful implementation of the projects associated with the initiatives discussed here.  That is all to the benefit of Europe, including Russia as it also reduces the hold of   anti-market forces whose behavior would become increasingly counterproductive over time, and it strengthen chances for peace in Europe, the resilience of Eastern and Central European societies and states, Ukrainian independence and reform, and thus democratic and free market tendencies across the continent. Therefore, improvement of the infrastructure connections of the 12 states is an essential condition for building an area of stability and prosperity, which in turn can greatly contribute to wider EU stability and prosperity. Setting a new dynamic of cooperation among the countries lying at the Eastern border of the EU on the North – South Axis will advance economic growth and help to bridge the East – West economic gap, within the EU.

 

Thus, the objectives embodied in the 3 Seas Initiative and in the Bucharest Summit clearly comport not only with the interests of the members but also of the EU and the United States over a considerable period of time. The drive for new energy exports to Europe, despite Trump’s vocal championing of them, was already taking place under the Obama Administration. Likewise the idea of strengthening European ability to resist Moscow’s efforts to use energy as a political and economic weapon date back to 2009 or 2006 when the Ukrainian energy crises of that time demonstrated the necessity of doing so.  Moreover, the fact that Moscow uses its revenues d contracts with European governmetns in energy to insert itself in and corrupt their media and politics have long been recognized.  So it is all to the good that the U.S. and its allies like the UK, Germany, France, and Italy, major energy consumers and /or investors support this regional initiative to strengthen regional economic development, overall European cohesion and transatlantic ties. The fact that a strong delegation is attending the Bucharest summit also shows that the U.S. is sensitive to the organizers’ objective of having U.S. support catalyze stronger transatlantic economic as well as political and military ties.  This support is necessary given the threats to the organizers of the Summit and the overall initiative.

 

For example, Romania, for some time has been acutely aware that Russia’s seizure of the Crimea and buildup in the Black Sea makes its maritime zone contiguous to that of Russia and that this puts it at great risk from both maritime operations and land attacks to the Dniester or beyond. Indeed, the treaty on Crimea’s annexation to the Russian Federation states that, “the demarcation of Black Sea territorial waters is established based on the international treaties made by the Russian federation.” According to the Munich-based expert, Vladimir Socor, “This vague wording appears to imply that Russia deems the agreements made with Ukraine on territorial demarcation with other countries are no longer valid, and suggest that Russia might try to negotiate and modify the current demarcation agreements.” Thus, Romania now experiences what one writer calls  “periodic threats of annihilation for hosting American ballistic missile defense, exercises simulating Romania’s invasion, and repeated violations of air (and naval) space." But Russian pressure is not confined to military threats either by land through Transnistria and Moldova or by sea and air from the Black Sea.  Russia’s maritime and other incursions or probes also seem to be directed against Romania’s efforts to secure its energy independence and integrate fully with Western energy institutions and companies. It is quite likely that Moscow, for example wants to prevent Moldova from escaping its dependence on Russian gas transmissions from Ukraine or perhaps from Russian gas in general as President Igor Dodon has now expressed interest in alternative gas routes like the Iasi –Ungehni (Romania)-Chisinau gas pipeline.

 

Inasmuch as Romania’s overall energy program is wholly oriented towards securing its energy independence and potentially that of Moldova from Russia and becoming not only independent but an exporter to other EU members it depends not only on there being security in and around its offshore energy facilities but on foreign investors. Russian threats put all of this into jeopardy.  And the 3 Seas Initiative is a response to those threats. At a time when the linked projects of the democratic integration of Europe and the Transatlantic Alliance are under constant attack, this initiative, like other, smaller ones associated or connected to it, e.g. the Carpathian Strategy, display the abiding faith of the participating governmetns in the viability and vitality of those projects.  Therefore they advance the classical interests of the United States, free markets, democratic polities, and European integration and peace in ways that will not only help defend against Russian threats but also against potential new flashpoints like a failure of European integration in the Western Balkans or across the entire Balkans, or successful Russian aggression against Ukraine and Romania. Russia’s efforts to sponsor and promote coups in Montenegro and Macedonia, as well as its aggression in Ukraine and threats to Romania demonstrate what Europe and we have to expect if projects like this one fail for lack of support. But beyond these European considerations, an integrated energy market in the Balkans and Eastern Europe replete with interconnectors to make energy deliveries to one country accessible to others is clearly also very much in the interest of energy exporters like Azerbaijan.  With the impending opening of the TANAP-TAP pipeline (Trans-Anatolian-Trans-Adriatic Pipeline) it becomes possible for Azerbaijan to supply more oil and gas to Eastern European countries at competitive prices, especially as such contracts reduce both sides’ dependence upon the vagaries of the Russian government’s policies.  At the same time such integration strengthens Azerbaijan’s ties with Europe at both the economic and political level.  Those outcomes fully comport with both American, European, and even Azeri interests because of the guarantee of stable markets for Azeri energy and the strengthening of its ties with Europe and with regional and sub-regional security associations like those described here. In other words, to the degree that the vistas described here are realized they provide a win-win outcome not only for Europe but also for countries like Azerbaijan.

 

Today, the entire area from the Black Sea to the Baltic Sea is facing myriad threats many of which are either aggravated by or directly caused by Russia.  But many others are due to domestic problems that have been left unattended or that were mishandled. To the extent that the 3 Seas Initiative and projects associated with it address both sets of problems in ways that are based on shared values and interests of the members and of the EU and the U.S. and do so through non-violent, free market means, these projects deserve staunch, bipartisan, and enduring U.S. support.

 

 

About the author:

Dr. Stephen Blank is a Senior Fellow at the American Foreign Policy Council in Washington. From 1989-2013 he was a Professor of Russian National Security Studies at the Strategic Studies Institute of the U.S. Army War College in Pennsylvania. Dr. Blank has been Professor of National Security Affairs at the Strategic Studies Institute since 1989. In 1998-2001 he was the Douglas MacArthur Professor of Research at the War College.