Azerbaijan and Russia are competing for Southern Europe’s gas demand. A long-term supply disruption of the former's gas exports would prolong Moscow’s gas monopoly in European markets.
Azerbaijan’s vital energy infrastructure is under stress after the frozen conflict over Nagorno-Karabakh entered a new phase of escalation. Azerbaijan accuses Armenia of continuously staging attacks to disrupt critical points in the energy stream.
Southern Europe is closely watching the conflict, partly because of its proximity to pipelines that carry Azerbaijani oil and gas to Europe. The country is just months away from delivering natural gas to Europe, significantly diversifying the continent’s gas supply. Azerbaijan’s Baku-Tbilisi-Ceyhan pipeline, although pumping 600,000 barrels per day on average, has been important for Europe and Israel because of its close distance and usefulness during moments of tension in the Middle East. Azerbaijani crude oil is traded into global markets, and any disruption would affect international oil supply and benchmark prices. Although Yerevan denied the allegations that it attacked energy infrastructure, nothing can be entirely ruled out in an undeclared all-out war.
Azerbaijan has been cultivating strong relations with Italy, which will be the biggest buyer from the Trans Adriatic Pipeline (TAP) after it starts operating. The European Council on Foreign Relations (EFCR) called Italy “almost an ally” of Azerbaijan after President Ilham Aliyev’s state visit to Italy in February. Interestingly, the joint declaration of both countries on a “multidimensional strategic partnership” didn’t mention the Minsk Group, of which Italy is a permanent member, as a way to solve the Karabakh crisis. This was an unexpected turn from Italy after both countries signed 28 agreements in various fields, including military cooperation and energy exports. Azerbaijan finds the Minsk Group ineffective in solving the crisis in the region, and hence Italy’s decision not to name Minsk Group in the declaration was a crucial diplomatic win for Aliyev.
When the Azerbaijani foreign minister, Jeyhun Bayramov, visited Italy on Oct. 1, after the clashes started, his Italian counterpart Luigi Di Maio called the status quo in Nagorno-Karabakh as unsustainable. Azerbaijan, thinking that Europe's policy on the Karabakh issue has been counterproductive, welcomed the statement. Having the energy and trade route to Asia between Russia and Iran, Azerbaijan thinks that the West doesn't understand its geopolitical importance.
The two countries’ special relationship in regard to the Karabakh crisis is nothing new. Italian diplomat Mario Rafaelli, who was the first chairman of the Minsk Group, had played an important role in the adoption of the 1993 United Nations Security Council resolution demanding the withdrawal of Armenian troops from Karabakh. Azerbaijan didn’t forget it.
An Italian diplomat, who talked on the condition of anonymity, told me that Italy is worried about the reported attacks on Azerbaijan’s energy infrastructure.
TAP’s construction ended just this week after four and a half years. It is ready to go soon, although there is no official date for the beginning of the operations. Energy major BP plans to ship gas from Azerbaijan’s Shah Deniz field to Europe by the end of this year. BP is one of the important shareholders in the TAP. Azerbaijan’s Southern Gas Corridor has European Commission's support as it curbs Europe’s dependence on Russian gas, according to Reuters.
Apart from TAP's bright prospects, "Italy cannot but be concerned about the security of pipelines along the Caucasian-Anatolian axis, especially considering that around one-fifth of annual oil imports traditionally come from the Baku-Tbilisi-Ceyhan pipeline," Carlo Frappi, a researcher in Asian history and institutions at Ca' Foscari University of Venice, told me. “However,” Frappi said, “A successful attack targeting the pipeline seems unlikely to occur – due to the Azerbaijani protection measures as well as to the counterproductive impact this would diplomatically have on Armenia herself.”
This has been yet another example of how the European Union has failed and become disengaged from an international conflict. Members of the European Parliament saw the conflicts as an opportunity to accuse Turkey of trying to build neo-Ottoman-nationalist empire while their countries officially recognise that Nagorna-Karabakh is Azerbaijan’s land. The EU consumed its energy once again in regular diplomacy calls and members’ domestic policy interests.
“TAP is the last link in the Southern Gas Corridor which delivers Azerbaijan's Caspian gas to Europe. While this cannot replace any major supplier, it provides the EU more diversity in suppliers and in supply routes. However, as the current Nagorno-Karabakh war shows, Azerbaijan's pipeline link is vulnerable to Russian interference,” said Michael Tanchum, a senior fellow at the Austrian Institute for European and Security Policy.
Both Azerbaijan and Russia are competing for Southern Europe’s gas demand. A short-term disruption to Azerbaijani gas would not be seen as a problem. Yet a case of long-term supply disruption would mean that Europe continues to be a gas market dominated by Russia. Since the pipelines are not far from the Karabakh clash zone, Armenia can try to disrupt them as long as possible as the last resort to win the conflict.
According to Tanchum, the Southern Gas Corridor will need to be competitive compared with both Russian piped gas and LNG gas which experts believe will be the dominant form of traded gas before the end of the decade.
Although Azerbaijan’s largest natural gas field is Shah Deniz, newly discovered young fields such as Umid, Babek, Absheron, Asiman, Shafag are proof that any worry for the gas supply will be out of the question for a long time.
The real concern lies on the energy routes. Polad Muradlı, energy expert at Topchubashov Center, told me that the TAP would be operating at the end of the year or earlier next year.
“The Italian-Albania underwater pipeline has already finished. According to my information, a small part inside Albania is yet to be finished,” he said last week before TAP announced TAP’s completion. Italy is the second-largest natural gas importer in Europe after Germany. Most of Italy’s natural gas is imported from Russia via pipelines from Ukraine and southeastern Europe. If operated, Azerbaijan will be the third largest source of Italian natural gas imports. The second is Algeria.
At the first stage, the TAP will carry 10 billion cubic metres to Europe. About 8 billion of it will be delivered to Italy. With additional investment in the pipeline, it is estimated that TAP can carry between 20 billion-25 billion cubic metres to Italy after 2025. Europe depends on Russian natural gas for 40 percent of its needs. In total, almost 200 billion cubic metres of natural gas is now imported from Russia annually due to declining European production and rising demand.
Magsud Mammad, the external relations director of the TANAP pipeline, told me that TANAP had an immediate impact on the Turkish gas market. Azerbaijan has become Turkey’s major gas supplier in the last months. According to the last Natural Gas Market Sector Report published by the Energy Market Regulatory Authority (EPDK) for July, Azerbaijan supplied 35 percent of Turkey’s gas exports, a 21 percent increase compared with July 2019. However, Russia’s gas exports decreased by 28 percent compared to the last year. Mammad emphasizes that the TANAP pipeline is not used in its full capacity yet.
Azerbaijan’s growing strategic importance has not yet been grasped by the European Union. Consumed by the internal disagreements and political rhetoric that is intended to satisfy the domestic audience of member countries, the EU looks anything but relevant to yet another crisis.
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