Can Azerbaijan help solve the gas crisis in Europe?

The Russian-Ukrainian war has disrupted global supply chains and weakened economies around the world, but it represents an opportunity for Azerbaijan, the hinge of Europe and Asia. The United States and Europe have sanctioned Russian oil and natural gas, but Azerbaijan is on track to increase gas exports in 2022 and the following years, via the 3,500 kilometer long Southern Gas Corridor (SBC) which crosses seven countries and supplies Turkey and Europe. Currently, Azerbaijan supplies 10 billion cubic meters (bcm) of natural gas to Europe and 6bcm to Turkey via SGC.

To meet demand, Azerbaijan will also commission two new gas fields and is open to investment for increase capacity of the CMS, for example by installing additional compressor stations which can double the gas flow. But the Azerbaijani Minister of Economy says European “underinvestment” can slow down the country’s ability to supply more gas.

This week, Azerbaijan energy minister told the World Utilities Congress in Abu Dhabi: “We are currently working very intensively with the European Commission…we are working on ways, in a relatively short period of time, to modernize this infrastructure and subsequently increase our energy supply in Europe. in terms of natural gas.

The Azerbaijani Baku-Tbilisi-Supsa pipeline on the Black Sea was temporarily close (until the end of June) and the product was rerouted to the Baku-Tbilisi-Ceyhan pipeline on the Mediterranean coast of Turkey. Redirecting oil to Ceyhan will also strengthen Turkey’s position as it is also home to the middle leg of the SGC, the Trans-Anatolian Natural Gas Pipeline.

Ground transportation is being reorganized to avoid Russian and Western sanctions.

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The East-West railway line from China to Turkey, the Transcaspian International Transport Routealso known as the “Middle Corridor”, bypasses Russia and connects Xi’an, China to Istanbul via a rail link via Kazakhstan, a jump to Azerbaijan across the Caspian Sea and a rail link to through Georgia to Turkey.

The route, which has yet to reach its potential, may finally have a chance to adapt, as sailing through Central Asia and the Caucasus grow six times in 2022 compared to 2021. In April, the shipping company Maersk announcement revamped rail service “in response to customers’ ever-changing supply chain needs during these extraordinary times” and began operating the new service with a train on April 13 from Xi’an to Germany.

Other regional shipping options are western Afghanistan to Turkey via Turkmenistan, Azerbaijan and Georgia via the “Lapis Lazuli Corridor,” and from western Azerbaijan to Turkey via the Zanguezur Corridor through Armenia, although the ongoing dispute between Azerbaijan and Armenia may cause a long delay in completing this route.

Estate agents say it’s always “location, location and location”. Will Baku be able to capitalize on its usefulness to send freight and energy to the West to ensure a final settlement of the Nagorno-Karabakh conflict?

After the end of the 2020 Nagorno-Karabakh war, Azeri President Ilham Aliyev met the co-chairs of the Mink Group of the Organization for Security and Cooperation in Europe (OSCE) and told them: “Azerbaijan has resolved the conflict that has lasted almost thirty years” and “Unfortunately [the] The Minsk group played no role in resolving the conflict.

In January 2022, Aliyev said that the Minsk group should play no other role in the resolution of the Nagorno-Karabakh matters because “it’s solved”. Aliyev may feel this because, as Rasmus Canbäck reported, the OSCE did not prioritize resources necessary to produce a peace agreement between Azerbaijan and Armenia and the priority was “the maintenance of a functioning armistice”.

While many members of the Minsk Group – France, the Russian Federation, the United States, Belarus, Finland, Germany, Italy, Sweden, Turkey as well as Armenia and Azerbaijan – may not be in a hurry – it’s only been 29 years! – Azerbaijan may have another card to play as Kazakhstan have announced they will stop natural gas exports in 2023 due to increased domestic demand.

Baku can now step in and offer to help meet Europe’s energy needs and snatch a decades-long purchase deal from the Old Country to secure funding to expand the SGC. Baku is expected to press its advantage as the United States and Europe let the mediation process slip away for nearly three decades and then became distracted by the Russian-Ukrainian war.

Representatives of Azerbaijan, Armenia and Russia met in early June to discuss the opening of regional transport links. At the same time, representatives of Azerbaijan and Armenia met in Brussels with European and American officials who refuse to meet the Russians. This may satisfy the impulses of Brussels and Washington, but it is also a signal for Baku (and Yerevan) that peace in Nagorno-Karabakh remains a lower priority than the current crisis in Ukraine, and some of the The parties in Minsk can hijack the process to frustrate or isolate Russia, to finally secure the great victory over Moscow they claim eluded them with the peaceful end of the Cold War in 1991.

The West’s priorities are in the numbers: Ukraine has received $54 billion help from the United States, but all Azerbaijan and Armenia got was three decades of meetings.

Azerbaijan does not want antagonistic or fierce relations with its neighbors Russia and Iran, and will not be a platform for NATO action against Russia, or an Israeli strike against Iran’s nuclear program. . Baku sent humanitarian aid to Ukraine but did not openly criticize Russia, no doubt to the anger of Washington and Brussels. Azerbaijan can be a reliable source of energy and transport for Europe, but will have to consider its powerful neighbors and therefore will not always join the chorus of amen in Brussels and Washington, DC, especially since the two capitals have never given priority to peace in the South Caucasus, and are allies of convenience and not of conviction.

By James Durso for Oilprice.com

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