EU countries and Turkey on Monday signed a transit deal for the Nabucco gas pipeline, aimed at cutting Europe’s energy dependence on Russia, a major political step backers say will boost the project.
The agreement irons out details over transit and tax issues for pipeline hosts, but analysts said the trickiest issues — including where to find gas to fill Nabucco — remained unsolved.
Transit states Turkey, Bulgaria, Romania, Hungary and Austria signed the accord for the 7.9 billion euro ($11 billion) project to supply Europe with Caspian and Middle Eastern gas.
“The Nabucco project is being labeled a pipe dream,” Turkish Prime Minister Tayyip Erdogan told Nabucco partner countries and regional countries in Ankara. “This project will be a success story that will prove the doubters wrong,” Erdogan said.
The signing of the long-delayed transit agreement is a major boost for a project that has been stymied by political infighting and is still dogged by questions over supply and financing. Progress of a rival Russian plan, South Stream, has also added doubts to the feasibility of Nabucco.
Erdogan said he believed that gas from Russian export monopoly Gazprom could also be transported to the European markets via Nabucco.
Analysts say Gazprom’s more practical strategy — signing basic cooperation agreements with supplier countries — gives the South Stream pipeline a competitive edge by building relationships between companies.
“We are starting to confound the skeptics, negotiations once seemed irrevocably blocked. … I believe this pipeline is inevitable, not impossible,” European Commission President Jose Manuel Barroso said.
“Politically it is all wrapped up. There is nothing more to be done because now we are at a totally commercial stage … and the construction of the pipeline,” EU Energy Commissioner Andris Piebalgs said.
The five governments have pledged a “50-year stable transit arrangement” for the pipeline, which is very important for future suppliers, Richard Mitschek, chief executive of Nabucco Gas Pipeline International, told the same news conference.
The EU has supported the project as a way of reducing its reliance on Russian gas, especially after a dispute over prices and debt last winter led Russia to cut off supplies to Ukraine, including those destined for Europe.
The EU on May 6 approved 200 million euros in investment for Nabucco after the European Investment Bank said in January that it might finance as much as 25 percent of the project.
No concrete supply deals have yet been signed for Nabucco, which plans to pump 31 billion cubic meters of gas to Europe by 2014. The Vienna-based consortium is looking at Azerbaijan and maybe Russia and Turkmenistan as sources for gas, but doubts remain.
“The agreement itself is nothing major, it doesn’t really clarify the issues of supply, the different branches, the timing. The agreement also keeps away from some of the more politically sensitive points,” said Ana Jelenkovic at Eurasia Group.
“As it currently stands we are no different than where we were yesterday. The kinds of things that are still blocking Nabucco have not been addressed,” she said.
Turkmen President Gurbanguly Berdymukhammedov said Friday that his country might participate in Nabucco as a supplier.
Werner Auli, the head of Austrian firm OMV’s gas and power division, said Azeri and Iraqi supplies looked promising and that tenders to buy capacity should start in the fourth quarter of this year.
The other partners in the project are Bulgaria’s Bulgargaz, Turkey’s Botas, Germany’s RWE, Hungary’s MOL.
Azerbaijan’s Industry and Oil Minister Natik Aliyev said Azerbaijan was interested in Nabucco.
Erdogan said he wanted Iranian gas for Nabucco “when conditions allow,” despite strong U.S. objections. 
Turkey had held up progress on Nabucco by demanding 15 percent of the pipeline’s capacity for domestic usage or re-export. But it dropped that demand after winning a right to take a share from the gas flowing through Nabucco.