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Energy Diplomacy, My Interviews

Energy Security of Azerbaijan: Perspectives and Challenges (Interview)

Interview with Prof. Bakhtiyar Aslanbayli [Professor of Baku State University, Expert on Security and Energy Policy]

1. How can you explain the impact of the geopolitical position of Azerbaijan over its energy security?

Being energy-full country, situating closer to the European countries and exporting to the European markets those resources emphasizes geopolitical importance of Azerbaijan. Other important factor increasing our geopolitical importance is our capacity to play bridge role between Central Asia and Europe.
Our first importance is being source of raw materials for European market, while second importance is having transit country status for exporting of Kazak oil and Turkmen natural gas to European and world market. All those factors emphasize the geopolitical importance of Azerbaijan at the regional and international context.

2. Should emerging Energy-power Russia and its energy policy be an example for Azerbaijan’s potential energy politics in and around the region?

I would not entitle energy policy of Russia as an example for Azerbaijan. Because, energy potential of both Russia and Azerbaijan is absolutely different and we can not compare their energy potential. Russia is one of the leading countries according to its proven oil and natural gas reserves and is in the first place due to its natural gas reserves – 24% of proven natural gas reserves of the world belong to Russia. However, world’s proven oil reserves in Azerbaijan estimated as 0.5%, while natural gas reserves as 0.7%. Therefore, it is purely unacceptable to compare them due to their energy capacity.

From the other hand, aim of the energy policy and foreign policy priorities of both Russia and Azerbaijan are also different. Our strategy to convert energy potential to the foreign policy dividend is different as well. So, I do not think that Russian energy policy could be sample for Azerbaijan.

However, cooperation between two countries is inevitable. Even though European market is our hope, we must also think about diversification of export and take into consideration Russian factor. For example, SOCAR and Gasprom signed an agreement on purchasing of natural gas of Azerbaijan in 2009 and according to this contract 0.8 bcm natural gas has been exported to Russia in 2010. According to the Addendum to this Contract in 2010, Azerbaijan has exported 1.5 bcm natural gas to Russia in 2011. According to the contract signed in January 2012, export volume of natural gas to Russia will be increased up to 3 bcm. In this context, cooperation between Azerbaijan and Russia is unavoidable in certain framework and should be continued.

3. Should Azerbaijan use energy card in the solution of Nagorno-Karabakh problem and how?

It is very complicated issue. There are different approaches on this issue. Theoretically, we do have certain capacity to use it, but, in my view, practically it is in minimum context. Because solution of the Nagorno-Karabakh issue should be implemented with influence of the certain super powers and Russian factor and its interests in the solution of conflict also should be considered. Obtaining access to energy resources of Azerbaijan is also including to the energy and economic interests of Russia. It is very complicated to convert the energy and economic interests to political interests in terms of solution of this conflict. Taking into consideration the fact of Russia does not vitally depend on the energy resources of Azerbaijan, contribution of energy potential of Azerbaijan to the solution of Nagorno-Karabakh issue is not realistic.

4. As it appears from the topic of my interview, how can you describe the energy map of Azerbaijan?

We can talk about two type of energy map. First one is the allocation map of the energy resources, while second one is the export routes map for transportation of energy resources of Azerbaijan to world market. But this goes beyond the geographical location of the Azerbaijan. First type of map includes itself economic aspects. Second approach is much more policy-oriented and we can entitle it as an export geography or an export map.

5. I consider all the energy related-projects (suchlike NABUCCO, ITGI and TAP) as a first step of active involvement process in South Caucasus and around Caspian basin by global actors in terms of politics. What do you think about it?

Main aim of those projects in terms of European energy security is to diminish energy dependence on Russian Federation. It is obvious that, they do not intend to run away from that dependence. Because, as I mentioned before, energy capacity of Russia is too much and fantastically in the highest level. So, in case of realization of EU-led pipelines projects (such  as NABUCCO, ITGI, TAP), it is possible to decrease the energy dependence of Europe from Russia delivering the natural gas of Caspian basin, but it will not completely able to abolish this dependence.

What about realization of the projects, it is impossible to realize NABUCCO in the initial step. In the initial step, NABUCCO was considered as a continuation of Southern Gas Corridor (Baku-Tiflis-Erzurum pipeline). This pipeline considered to be run along with certain route constructed over Turkey and Europe and delivered to the Baumgarten (Austria). However, after the Memorandum of Understanding dated 25 October 2011, on realization of Trans-Anatolia pipeline, made the implementation of NABUCCO doubtful along with previous route. Because, the infrastructure will already be existed to deliver the natural gas to the western border of Turkey.

The main issue remains about on which route export of natural gas will be oriented after the western border of Turkey (as an continuation of TANAP). Hereafter, if New Nabucco or Mini-Nabucco will be implemented, so, realization of Nabucco will be possible. ITGI and TAP projects are still on the agenda. The noteworthy point is the discussion of new route – Southern Eastern European route – for transportation of energy resources of the Caspian Sea to Europe. In this regard, Southern Eastern European Pipeline concept of BP and transportation projects of SOCAR establishing of joint venture with BulgarGas to deliver natural gas to Eastern Europe via interconnector pipelines connecting current pipeline network of Bulgaristan with the network of the neighbor states are in spotlight.

6. As we know, recently, Republic of Azerbaijan and Turkey signed Memorandum of Understanding to build the Trans-Anatolia Gas Pipeline. What is the difference and perspectives of this project in comparison with other three EU-led projects?

Disagreement between Azerbaijan and Turkey on the sale of Azeri gas to Turkey and transit issues was settled with the signing of Memorandum of Understanding between Azerbaijan and Turkey in 7 June, 2010. Memorandum of Understanding on the establishment of Consortium for Trans-Anatolia Pipeline (TANAP) revived the energy cooperation between two countries. Initial partners of the Consortium are SOCAR (80%), BOTAS (10%) and TPAO (10%). Other companies also considered to be involved to Shah-Deniz project.

Realization of TANAP (for 2012-2017) will be essential step on the transportation of the natural gas of the Caspian basin to Europe. Notwithstanding long-term negotiations and disputes, there are some obstacles such as financing of the project, its political dimensions, indecisiveness of NABUCCO Consortium Members, lack of the European Commission’s support. But the realization of the TANAP will not depend on aforementioned obstacles. Consequently, essential part of the Southern Gas Corridor highly supported by European Union and eager for its implementation will be realized without any penny of European Union.

From the other hand, if Azerbaijan would be acted as a natural gas provider, but in case of realization of TANAP, Azerbaijan will be both an exporter and one of the owners of the pipeline.

7. Other current negotiated issue is the implementation of Trans-Caspian pipeline, which constitute the initial step of the Southern Gas Corridor. But it also seems a little bit fairytale because of reluctant behaviors of Russia.

Trans-Caspian Pipeline is very important project, because it enables to deliver Turkmen natural gas to Europe through Southern Gas Corridor. This project will become very important infrastructure combining the Turkmen Energy Sector through Baku to different pipeline network running along the different part of Europe. Simultaneously, implementation of the Trans-Caspian pipeline project will be very significance for both Azerbaijani and European consumer states.

According to the statistical estimates, annual natural gas production of Azerbaijan’s Shah-Deniz field is 7 bcm In the framework of Shah-Deniz II additional annual 16 bcm natural gas will be produced as well. 6 bcm of this volume will be sold to Turkey, while remaining 10 bcm will be exported to Europe and it needs to implement certain tasks on the enhancing of transportation volume of pipeline to transport this volume via Southern Gas Corridor pipeline. In case of Trans-Caspian pipeline project and transportation of Turkmen gas through Azerbaijan to Europe, enhancing of the transportation volume of the current pipeline in Azerbaijan will not be sufficient. In this regard, it needs to be constructed new pipeline.

From the other hand, Russia also protests to the realization of this project. For example, if it was possible to characterize the position of the coastal countries on the determination of juridical status as a formula of 3 (Russia, Kazakhstan and Azerbaijan) + 2 (Iran and Turkmenistan), but in Trans-Caspian project it is like in 2+2+1 format. Russia and Iran (2) protest, Azerbaijan and Turkmenistan (2) support and Kazakhstan (1) keeps its neutrality. Principally, if political willingness and decision exist and Azerbaijan and Turkmenistan are agreed, Russia will not able to do something in this context. Actually, there are very sensitive approaches to this issue, but I would like to mention there are enough consumer market in Europe both for Russian and Caspian natural gas and natural gas will being delivered from Caspian to Europe will not constitute rival to Russian natural gas.

Of course, Russia wants Turkmen natural gas to be delivered not through Azerbaijan, but through his own territories, to be bought and to be sold by Russia. But today is not the same period in which Turkmenistan faced during the USSR. Turkmenistan already seriously reviews and realizes its diversification opportunities. Along with Russia, there is a pipeline from Turkmenistan to China and Iran as well. But, anyway, Turkmenistan interests in its pipelines to be oriented to Europe as well.

I am optimist about the realization of Trans-Caspian. In addition, there are technological opportunities suchlike LNG (Liquefied Natural Gas) and CNG (Compressed Natural Gas).

8. What are the other alternatives of Azerbaijan beside EU-led projects to export its hydrocarbon resources to the foreign energy market? Maybe Asia, Far East, Gulf of Persia? Or where?

Principally, there are sufficient route to export our oil (Baku-Novorossiysk, Baku-Supsa, Baku-Tiflis-Ceyhan, Baku-Batumi with railway). In this regard there is not any problem for oil transportation.

The most relevant natural gas export market for Azerbaijan is Russian and European market. Recently, Azerbaijan has export opportunities on for direction. Today Azerbaijan exports its natural gas on four directions: Russia, Georgia, Iran and Turkey. Export volume to Iran and Georgia is not so serious. Natural gas exported to Iran aims to provide Nakchivan (by swap operation). But, figures in export sheet of natural gas to Russia are quite serious. At the present time, our main export market is Turkey. During 2010, 4.9 bcm, but in 2011, 4.5 bcm natural gas have been exported to Turkey. But to exit to Asian market we will need new Trans-Caspian pipeline.

Along with Azerbaijan-Georgia-Turkey, other direction in our diversification is Azerbaijan-Georgia-Black Sea route. Because, in case of emergency or any physical catastrophe (natural disasters, technological accidents, terrorist attacks etc.), we will have alternative pipeline to export our natural gas. So, if AGRI or White Stream will be realized, we are able to provide the activity of our diversification.

9. BTC, BTE, Baku-Supsa and Baku-Novorossisyk obviously were successful projects during the whole energy history of Azerbaijan since the collapse of Soviet Union. But even though intensive negotiations on energy-related issues, recent EU-led projects still remain on document and goes much slowly. Why?

First of all I would like to mention that, implementation of both Baku-Supsa and Baku-Novorossiysk pipelines were fulfilled restoring existing pipelines, they were not new-constructed pipelines. New-constructed pipelines were Baku-Tiflis-Ceyhan and Baku-Tiflis-Erzurum. Of course, we have to take into account the construction period of those pipelines. We have to take into consideration the geo-political realities, active support by U.S and active position of the Azerbaijani leadership during this period.

But, current challenge is lack of common energy policy and common approach in European Union, lack of U.S. support and changing of geo-political realities. Therefore, a group of country supports Northern Stream, while other group supports Southern Stream. The main problem remains as from which sources Russia will provide natural gas for Southern Stream.

Other essential challenge related to the lack of political will of European Union and no crucial step seems from European Commission concerning this issue. In my view, European Union must be very active actor in this issue and had to be. Both in lobbying and financing of those projects or in political support to the exporter countries in the selection of export routes. Although, there are serious negotiations, because of not being financial source, only title of “Nabucco” remains.

10. Oil and natural gas are not renewable energy resources and unfortunately Azerbaijan will not be able to feed all those aforementioned pipelines for a long time. Sooner or later they also will be depleted. In this case how will be geopolitical fortune of Azerbaijan?

I would like to add also economic fortune to the expression of geopolitical fortune. Taking into consideration of our transit status, our energy importance will remain for a long time. It means that, even if your natural resources will be depleted, we will able to play the transit country role for transportation of Central Asian energy resources. But, our geo-political, economic and energy performance after 30-40 years much more depends on how we will carry out our energy policy during these 30-40 years, on how we will manage the capital gained from the energy sector and its reflection in GDP, on our investment policy and on how we will develop our non-oil and service sector.

Original issue was published in the Diplomatic Insight Journal (London, UK). http://thediplomaticinsight.com/wp-content/uploads/2012/03/englishmarch2012.swf



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