written by Cagla Tuna printable version send your friend

Friday, 12 February 2010

By signing natural gas agreements with Russia and Iran, Azerbaijan diversifies its energy transmission routes. Turkey especially is influenced by these new Azerbaijani policies. In the 21^st century as an energy era, Azerbaijan is aware of its growing importance in the world. Although the Middle East is known to be the most energy-rich region, its insecure and unstable conditions make it necessary to find alternative energy resources. At this point Azerbaijan comes forward with its 1.5 trillion cubic meters of proven natural gas reserves, including the Shah-Deniz field located in the Azerbaijan’s sector of the Caspian Sea. As for recoverable reserves of natural gas, these are more than 1.3 trillion cubic meters. However, gas consumption in Azerbaijan accounts for only 10-11 billion cubic meters in a year. Therefore, the remaining gas reserves are exported to other countries. Today, approximately fifty percent of the Azerbaijani budget revenue is gained from the energy sector. In spite of the global economic crisis, the growth rate of Azerbaijan was 9.3 percent in 2009. Thanks to the energy exportation related to these economic developments, the head of the Azerbaijani state, Ylham Aliyev, declared Azerbaijan the most important country in the Caucasus. Accordingly, agreements for diversified energy routes support Azerbaijan’s new position in the region and increase its self-confidence against other countries. 

Although Azerbaijan and Russia have had poor relations since the collapse of the Soviet Union - related to Russia’s support for the NagornoKarabakh problem- they recently set out to improve their collaboration by depending on Russia’s coordinated foreign energy policy. Accordingly, Gazprom and the State Oil Company of Azerbaijan (SOCAR) signed an energy agreement on 14 October 2009.[1] This agreement has a great importance as it is the first Russia-Azerbaijan gas agreement. As we can remember, in 1988 Armenia made territorial demands against Azerbaijan, which Russia upheld. In 1990 Russia assaulted many Azerbaijanis who protested Armenian demands. This event became a national day of mourning and a symbol of heroism for the Azerbaijani people. The opposition to Russian intervention brought together Azerbaijani people in a national mood. When Armenia occupied NagornoKarabakh and the surrounding seven districts in 1992 and they signed a ceasefire in 1994, Armenia always got support from Russia and this weakened Azerbaijan’s rightful situation. In spite of Aliyev’s balanced policy in international relations, the two states were unable to collaborate until 2000. In the mean time, Russia protested Azerbaijan owing to the fact that Azerbaijan had signed an oil contract with Western firms.

Turkey had been the most significant supporter of Azerbaijan in the NagornoKarabakh problem in the international arena until the protocols were signed between Turkey and Armenia on 10 October 2009. One of the reasons that Turkey did not want to open its border with Armenia was the NagornoKarabakh problem. However, Azerbaijan perceived that Turkey was ignoring its brother’s interests with the protocols. Some argue that this situation urged Azerbaijan to turn away from Turkey. In this regard, the energy agreement between Russia and Azerbaijan comes into prominence with the diversified Azerbaijani energy policies. The Russian-Azerbaijani gas agreement was signed just four days after Turkey and Armenia had signed protocols. It was like a reprisal to the Turkish government’s actions.  By January, the transmission of 1 billion cubic meters of natural gas from the Shah-Deniz region to Russia began pursuant to the long-term agreement. Gazprom Management Committee Chairman Alexey Miller stated: ‘‘Russia will buy gas from Azerbaijan as much as Azerbaijan supply.’’[2]

There is no doubt that with this agreement Azerbaijan aims both to gain Russian support on the NagornoKarabakh problem and to display that it might have alternative energy partners apart from Turkey.  Nabucco, the natural gas project supported by Western states, is expected to transport Caspian natural gas to the Western countries passing through Turkey. Turkey has many transition interests on this project as an energy bridge, but the agreement transferring Caspian gas to Russia can endanger the future of Nabucco. Besides, Aliyev stated last week that Turkey was buying natural gas from Azerbaijan at a very low price and Azerbaijan was not satisfied this situation anymore. He also complained about the Nabucco project and its complicated future with regard to indefinite circumstances such as the countries supporting the project, marketing policy and volumes and prices of gas which will be transferred. Which country will take the lead on the project is also uncertain since the agreement was signed on 13 June 2009. There is an unquestionable need for reliable leader in order to persuade Nabucco supplier states, such as Azerbaijan, and therefore Azerbaijan is lacking the confidence to depend on Turkey and the Western countries. These all can be perceived as Azerbaijan wanders away from Turkey especially by getting closer to Russia.  If Russian efforts for solution on NagornoKarabakh problem via the OSCE Minsk Group are observed, the dimension of relations can be understood more easily. Russia changed its primary attitudes on the issue of course because of the expectations of participation in energy projects in Azerbaijan. In this way two states seem to have met their recent needs.

As for Iran, SOCAR and the Iranian National Gas Export Company have signed a short-term contract on 13 January 2010 for Azerbaijani gas supplies to Iran. According to the agreement 100 million cubic meters of natural gas will be supplied to Iran’s northern region, which is far from major gas fields, for three months. The negotiations for a long-term agreement will continue. If the long-term agreement is provided, it will conclude 500 billion cubic meters of natural gas per year.[3] It is really thought provoking that how Azerbaijan will support Nabucco project while it is transporting its all gas to Russia and Iran. Agreements signed one after the other demonstrate that Azerbaijan can sacrifice Turkey priority position.

The sense of both agreements signed with Russia and Iran underlies Aliyev’s statement in Davos. When he went to the World Economic Forum on 29 January 2010, he declared his anger about the Turkish-Armenian protocols by saying: ‘‘Azerbaijan has three energy routes apart from Turkey; Iran, Russia and Georgia.’’ It was a reflection of Azerbaijan’s reprisal to the protocols in front of the many international press members, and it was a threat to Turkey by showing Azerbaijan doesn’t need Turkey for transportation. Azerbaijan’s desire to increase natural gas prices is also another challenge to Turkey, although Erdo?an has declared that in the process of the approval of the protocols Azerbaijan could not be neglected.  Accordingly, this week the Turkish Minister of Energy, Taner Yyldyz, declared that Turkey and Azerbaijan settled on the new gas price. In the new agreement, Turkey will pay $300 dollars per one thousand cubic meters of natural gas, instead of $120 dollars. The agreement is also retroactive, so Turkey will make back payments beginning from 15 April 2008.

In conclusion, even though Turkey and Azerbaijan are historically, culturally and economically linked together, Azerbaijan can manipulate its foreign energy policies to threaten Turkey, estranging the two countries. Aliyev, perceiving Azerbaijan as the most important state in the Caucasus, is diversifying his country’s energy routes, especially for political reasons.  Whether the protocols will be approved or not will probably determine Turkish-Azerbaijani energy relations. There is no doubt that Azerbaijan will maintain its energy policy by diversified routes. However, the question here is when will Russia or Iran back Azerbaijan?