Russian pipeline, terror anxiety could rock commodities

  • Russia Makes Major Headway with South Stream Pipeline
  • Pakistani Supply Route Blockade Puts ISAF Forces at Risk
  • US Drones Kill Five German Nationals, Amid Europe-Wide Terror Alert
  • Bosnian Elections See Moderate Gains, but Little Hope for Change
  • Nigeria Attacks May Show Dangerous Rift in MEND
  • UK Diplomats Targeted in Yemen Attack

Russia Makes Major Headway with South Stream Pipeline

Russia's South Stream pipeline plans have increased momentum, netting formal agreements in the Balkans, most recently with Bosnia's Serb-dominated entity of Republika Srpska and Macedonia. The president of Bosnia's Republika Srpska entity, Milorad Dodik, and Russian Energy Minister Sergei Shmatko signed an agreement on 15 September in Moscow formally expressing interest in the construction of a branch of the South Stream pipeline through Republika Srpska.

If a feasibility study carried out by Russia's state-owned gas giant Gazprom over the next couple of months proves positive, Republika Srpska would build a 480-kilometer branch of the South Stream pipeline through northern Bosnia, carrying up to 1.5 billion cubic meters of gas annually. Dodik told news agencies after the signing of the agreement that he expected the feasibility study to be completed and the green light given for the project within a couple of months.

Then, on 1 October, officials in Macedonia met with a Russian delegation from Gazprom to discuss the feasibility of participating in the South Stream pipeline. Macedonia is interested in joining the project, with Macedonian Finance Minister Zoran Stavrevski telling local media on 2 October that the country's involvement would lead to long-term gas supply stability that is of "crucial importance for the country's economic development ... and foreign investment."

Gazprom Project Director Leonid Chungov said that the Russian state-owned gas giant was now considering the feasibility of Macedonia's involvement in the pipeline, telling reporters that "we have come to a joint conclusion that, due to rising gas demand, we need to consider the option of a gas pipeline transiting Macedonia." Slovenia signed on to the project in November 2009, and Croatia signed on in March 2010.

Analytical Note: Macedonia's involvement in the South Stream gas pipeline is still unclear. Gazprom officials say that it will take at least a year to determine the feasibility and type of role Macedonia could play. At the same time, the Macedonian finance minister told reporters that constructing a branch of the pipeline through the country might not be an option as it would necessarily automatically involve neighboring countries Albania and Kosovo.

Unlike its main competitor, the Nabucco pipeline - a Western endeavor seeking to transport Middle Eastern, Central Asia, and Caucasian gas to Europe, bypassing Russia - Russia's South Stream pipeline has met with fewer political and logistical obstacles. The South Stream pipeline, which should be operational by 2015, will transport Russian gas to the Black Sea and then on to Europe.

Serbia, Bulgaria, Hungary, and Greece are all formal participants, while Croatia, Slovenia and Bosnia having formally expressed interest pending further discussions and feasibility studies. The race to complete both pipelines will largely determine the balance of power in the Balkans and the wider region.

While Nabucco has the support of Turkey, Bulgaria, Romania, Hungary, and Austria, the South Stream has the support of Italy, Serbia, Macedonia, Slovenia and Greece. Presently, Russia's South Stream pipeline plans are more concrete, though in recent months, Nabucco has made some progress.

That said, the back-and-forth between Turkey and the European Union over the former's membership in the bloc could set more obstacles in the way of the pipeline's progress. The South Stream pipeline has not been plagued with such disagreements. Serbia stands to become a key regional hub in the South Stream energy setup. Republika Srpska's participation in the South Stream pipeline became inevitable in 2009 when Serbia's state-run Srbijagas acquired a 40% share in Republika Srpska's Gaspromet.

Once the South Stream pipeline is fully operational, Serbia will, as such, control much of Bosnia's natural gas supplies. In Bosnia, Federation entity gas authorities have criticized the Republika Srpska plan to join the South Stream pipeline as being politically motivated and financially unsound because there is not a large enough consumer base to support the project.

Now, delivery of Federation gas comes only from Serbia, but plans are underway for a pipeline connection to Croatia, according to Federation authorities. According to the director of BH-Gas - the Federation's gas distributor - Almir Becarevic, European institutions marked the feasibility study for the construction of a 250-kilometer pipeline connecting the Federation with Croatia as the most profitable, and a large share of the financing for that project has already been arranged with the European Bank for Reconstruction and Development (EBRD).-- By Jen Alic for the Global Intelligence Report. www.GlobalintelligenceReport.com.

Pakistani Supply Route Blockade Puts ISAF Forces at Risk

Last week, in apparent retaliation for NATO's cross-border air strikes on Pakistani territory, which were conducted without advance discussions with Pakistani officials, Islamabad imposed a blockade on NATO's Afghan supply route. On 5 October, a NATO container truck was damaged by a small blast near the border after a bomb was placed underneath the truck, which was waiting in a convoy of thousands of tankers and trucks stuck on the border. On 6 October, insurgents burned 22 tankers carrying fuel for NATO's forces in Afghanistan, killing one truck driver on the outskirts of Pakistan's southwestern city of Quetta. In the past week, Taliban forces have taken advantage of the blockade, destroying over 40 NATO supply trucks. The Taliban have vowed more attacks on the NATO supply route if Islamabad continues to allow NATO supplies through. NATO and Pakistani officials met in Brussels on 4 October, but no agreement was reached. On 6 October, NATO officials said Pakistan may soon re-open the supply route, following the release of the Alliance's investigation into the 30 September helicopter strikes on Pakistani territory (three Pakistani soldiers were killed in the strikes).

Analytical Note: Some 40% of NATO's supplies for the war in Afghanistan come through Chaman in southwest Balochistan province and through Torkham in northwest Khyber Pakhtunkhwa province. Islamabad's blockade of NATO's Afghan supply route is largely a reflection of the tenuous position of the government and President Asif Ali Zardari, who is under pressure over his failure to adequately deal with the massive floods in the face of a strong military that is pushing for his removal. Blocking the Afghan supply route should score him some points among the public, which is outraged over what it views as US incursions on its territory and the violation of its sovereignty. Lifting the blockade will require a strongly worded public apology from Washington, and guarantees that future air strikes will not be conducted without communications from Pakistani security forces. What will not ease the situation is a report released by Washington on 6 October criticizing Pakistan's efforts to fight militants on its territory. The White House report strongly criticizes President Zardari, and could result in Congress cutting support for billions in aid to Pakistan. This report will make it difficult for Zardari to save public face and re-open the Afghan supply route.

US Drones Kill Five German Nationals, Amid Europe-Wide Terror Alert

Five to eight German nationals were killed on 5 October in a CIA drone strike in Pakistan's tribal region bordering Afghanistan. The strikes were apparently part of a stepped-up CIA campaign said to be targeting credible threats of attacks on Europe by al-Qaeda. The strikes coincide with the US issuance of a Europe-wide terror alert said to be linked to intelligence that came from an Afghan-born German militant. The German nationals killed were reportedly of Arab and Pakistani origin. Washington reportedly has given Germany precise information on potential terrorist targets, including the central railway station and the television tower, as well as the Brandenburg Gate. While Washington is flooding the press with serious terror alerts for Europe, European officials are more sober.

Analytical Note: The drone attacks spiked in September, mostly in Pakistan's tribal North Waziristan, and have continued their momentum since. Pakistani officials refute Washington's claims of the numbers of 'foreign' fighters operating in the region. The timing of the US terror alert could be suspect: terror attack fears could boost the case for increased defense budgets. But it could also be a move designed to force Pakistan to take swifter action against militants in its own backyard. Europe should take the warnings seriously, but reactions should be sober and with precedents in mind.

Bosnian Elections See Moderate Gains, but Little Hope for Change

More than 8,000 candidates from 39 political parties and 11 coalitions competed for seats in Bosnia-Herzegovina's central parliament and tripartite presidency during 3 October elections. The Bosnian Croat and Bosniak seats look set to go to supporters of a unified Bosnia, while the Bosnian Serb representative is vowing more strength for entities - a situation that has created deadlock in the work of the presidency over the past four years. The moderate Social Democrat Party's (SDP) Zeljko Komsic won the presidency's Croat seat, beating ethno-nationalist Croat Democratic Union (HDZ) candidate Borjana Kristo. The Bosniak front-runner was Bakir Izetbegovic, of the predominantly ethno-nationalist Bosniak Party for Democratic Action (SDA). Komsic's victory was disputed by Croat nationalists who said he earned it thanks to Bosniak, not Croat voters, and vowed to press for an early election in two years. In the lead for Bosnian Serb post was the incumbent Nebojsa Radmanovic, of the Alliance of Independent Social Democrats (SNSD), the party which during the election campaign raised the possibility of seceding from the country. While Komsic and Radmanovic hold on to their presidential seats, Izetbegovic will replace Haris Silajdzic, who came in third, and whose Party for Bosnia and Herzegovina (SBiH), burdened with several corruption affairs, failed in the 3 October poll. Even though Izetbegovic is seen as more moderate than Silajdzic, it is hard to expect any major progress. Preliminary results for the central parliament are showing that the only change from the last elections in 2006 will happen in the areas where Bosniaks are the majority, gaining mostly at the expense of Bosniak ethno-nationalist parties. Most of the SBiH and SDA votes were taken by the newly founded Party for Better Future (SBB), led by media mogul Fahrudin Radoncic, who came up as the main surprise of the elections. With some 70% of votes counted, SDP is slightly ahead of SDA. But in the areas where Bosnian Serbs and Bosnian Croats are the majority, the elections were swept by Republika Srpska President Milorad Dodik's SNSD and
HDZ. SNSD's leader Milorad Dodik, who is leading in the presidential elections in Republika Srpska, and whose party won most of the Bosnian Serb votes on all levels.

Analytical Note: According to the results, the deep ethnic divisions will be maintained and offer no solution to the ongoing political stalemate. There is also little hope that the election results will introduce new leaders that could launch badly needed political reforms set by the EU. Most of the same political personalities and parties were voted into power. Aside from an increase of votes for the moderate party among the Bosniak voters, ethno-nationalists remain popular in the Bosnian Serb-dominated Republika Srpska entity and areas dominated by Bosnian Croats. Given the differences among the sides, it is hard to expect any progressive cooperation on the state level. The results of the elections could actually further entrench ethnic divisions as many candidates have put ethno-nationalist slogans at the heart of their electoral campaigns, which voters recognized and supported. Even though Bosniak voters recognized the need for change and voted for the SDP, which doubled its performance compared with the 2006 elections, overall, this is not as significant as it may appear, since the party will have to ally with other parties, which very well may not share their moderate views.

Nigeria Attacks May Show Dangerous Rift in MEND

Two suspects have been named in car bombings that killed more than a dozen people in the Nigerian capital of Abuja on 1 October on the occasion of the country's 50th independence anniversary. The suspects are said to be Nigerian, though President Goodluck Jonathan had earlier suggested that the group behind the attack was from outside the country. Also earlier, the Movement for the Emancipation of the Niger Delta (MEND) had allegedly claimed responsibility for the attack. Hours before the attack, MEND allegedly dispatched emails to various media houses, threatening that they would bomb the anniversary venue. MEND spokesman Jomo Gbomo had claimed that several explosive devices had been "successfully planted" in and around the venue, warning guests to leave the area by 10:30 a.m. The warning, which some newspapers published online, was not heeded by security forces. MEND leader Henry Okah was arrested in Johannesburg on 4 October. Okah told reporters that his group was not responsible for the attack.

Analytical Note: The original alleged statement from MEND claiming responsibility for the attack signifies possible internal complications. Okah has denied responsibility and even condemned the attacks. Last year, the group signed a ceasefire agreement with the government. That deal also called for amnesty and cash settlements for former fighters who turned in their weapons. This has apparently caused an internal rift within MEND, splitting it into factions. As such, the statement of responsibility could have come from one faction of MEND. MEND seeks to redistribute the massive oil wealth of the Niger Delta and ensure that the local population reaps some of the benefits from their natural resources. If MEND, or a faction of the group, was indeed behind the attacks in Abuja, it would be the first time the capital was targeted in such a way by the group and would signify major changes within the original group's repertoire.

UK Diplomats Targeted in Yemen Attack

On 6 October, the British deputy ambassador and four other embassy personnel were targeted in a rocket-propelled grenade attack in the capital Sana'a. One of the embassy personnel was slightly injured from shrapnel as were two civilian bystanders. Al-Qaida is being blamed for the attack. It was the second attack on British diplomats in Yemen this year. In April, militants targeted British Ambassador Tim Torlot in a suicide bombing that injured three bystanders. British forces have a fairly high profile in Yemen, playing a key role in economic and political development. Ambassador Torlot, targeted in April's assassination attempt, is due to be replaced in the coming weeks by Jon Wilks. Wednesday's attack came after Yemeni authorities boosted security around embassies in the capital city based on intelligence that al-Qaeda in the Arabian Peninsula (AQAP) was planning new attacks. The group on 25 December 2009 is believed to have been behind the Nigerian 'underpants bomber', who attempted to blow up a commercial airplane en route from Chicago to Amsterdam.

Analytical Note: According to Dr Dominic Moran, an expert with The Global Intelligence Report and ISAIntel, al-Qaeda in the Arabian Peninsula has become emboldened of late, with its Yemen-based claiming responsibility for the April assassination attempt against the British ambassador, the December 2009 commercial jet bombing attempt. Wednesday's attack is most probably a continuation of al-Qaeda attacks on foreign legations and representatives, which picked up pace over the last couple of years, following the collapse of alleged al-Qaeda understandings with the government after US pressure on Sana'a to step up the fight against the group. The group has also been emboldened by the arrival of al-Qaeda fighters from neighboring Saudi Arabia, following a major crack down there. In the past, the government of Yemen has used al-Qaeda to help fight Houthi rebels - al-Qaeda's sectarian rivals - in the south. Since late 2009, however, the government, under US pressure, has allegedly severed those links and begun targeting al-Qaeda. But the situation is a complex one, and the government's relationship with al-Qaeda was an important tool in the al-Houthi rebellion. As such, it is impossible to confirm with any real accuracy whether the government has indeed severed ties with al-Qaeda, or whether its new security sweeps have simply netted low-profile al-Qaeda figures in an attempt to ease US pressure. The increased number of attacks, likely by al-Qaeda forces, however, could signal that the government has indeed been working to sever those ties, which in turns means that more attacks can be expected in the near future.

Analysis by Global Intelligence Report staff

The Global Intelligence Report is a private news and intelligence service for sophisticated news consumers, investors and energy market participants. Our breaking stories are often ahead of the mainstream media and our reports do a lot more than just deliver the news. To find out more please visit: www.GlobalintelligenceReport.com.

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