Seven years after the concept of a pipeline to pump gas from the Caspian Sea into the European Union was first given shape as the Nabucco project, the five transit countries that the pipeline would pass through signed the intergovernmental accord laying its foundations.

The deal was struck after repeated delays and numerous rounds of talks aimed at solving the disputes over the transit terms. In the end, Turkey reportedly dropped its demand to keep 15 per cent of all gas deliveries for domestic consumption or export, in exchange for making the pipeline run both ways and giving Ankara access to gas from the EU.

Supporters of the pipeline, which has been backed by both the EU and US as a means to lessen the bloc’s reliance on deliveries from Russia, said that the accord signed in Ankara on July 13 would give the project the boost it needed to stay on schedule – starting construction in 2011 and launching commercial operation in 2014.

"We have started to confound the skeptics, the unbelievers," European Commission president Jose Manuel Barroso was widely quoted as saying. "Now that we have an agreement, I believe that this pipeline is inevitable rather than just probable."

EU energy commissioner Andris Piebalgs said: "Politically, it is all wrapped up. There is nothing more to be done because now we are at a totally commercial stage that hinges on the open season [...] and the construction of the pipeline."

The 3300km pipeline would run from eastern Turkey to eastern Austria, via Bulgaria, Romania, and Hungary, pumping about eight billion cu m annually when it starts operation and 31 billion cu m when it reaches maximum capacity. The accord detailed issues such as transit and taxes in the five countries that the pipeline will pass through. What it does not reveal, as skeptics eagerly pointed out, was where the gas would come from and how financing would be raised to build the pipeline.

Nabucco’s biggest opponent, Russia, whose South Stream planned pipeline mirrors much of Nabucco’s route, re-iterated its stance that it was a politically-driven affair without sufficient economic grounding.

"We are of the opinion that any gas pipeline network should be based not on geopolitical considerations, but on economic realities [...] which is not the case for Nabucco," Agence France Presse quoted an unnamed Russian diplomat as saying. "The realisation of this project is unreasonably politicised and often used without basis to exaggerate the issue of overcoming European countries’ excessive energy dependence on Russia," the diplomat said.

Falling commodity prices could see a downward revision of Nabucco’s 7.9 billion euro price tag as early as autumn, however, giving it one more advantage over the more expensive South Stream.

Russian officials were invited to attend the signing of the agreement in Ankara, but did not.
Officials from Iraq, Syria and Egypt did attend the ceremony and have said they would be interested in supplying gas to the new pipeline, with Azerbaijan and Turkmenistan making similar pledges on July 10, the Wall Street Journal reported. The exact amounts, however, remain to be agreed.

The US opposes Iran as a potential source of gas, even though when Nabucco was first put on the drawing board, it was seen as a key supplier. Instead, it could be replaced by Iraq, whose prime minister Nouri al-Maliki said at the signing ceremony that his country could provide about 15 billion cu m every year for the EU market via Turkey, as quoted by Reuters.

Two officials, Turkish prime minister Tayyip Recep Erdogan and his Bulgarian counterpart Sergei Stanishev, were even optimistic that Russia could be brought on board to use the pipeline, Russian business daily Kommersant reported.

With five governments in agreement, the next step is for them to ink individual deals with the Nabucco Gas Pipeline International Company, expected to happen by the end of the year.