Category: Russian Federation

Perceived cooling in relationship between Ankara and Baku may have ramifications for the latter’s energy strategy.

By Seymur Kazimov in Baku (CRS No. 490, 24-Apr-09)

The refusal of Azerbaijan’s president to attend an international conference in Istanbul earlier this month has sparked speculation that Baku may be using its energy resources to exert pressure on its old Turkish ally.

Ilham Aliev reportedly declined to attend the meeting of the Alliance of Civilisations initiative on April 6-7, aimed at fostering dialogue between the West and Muslim countries, in protest against Turkey’s perceived new policy on Armenia

While not going to Istanbul, Aliev accepted his Russian counterpart Dmitry Medvedev’s invitation to visit Moscow on April 16 to talk about closer cooperation in the gas field.

That day, the Turkish foreign minister, Ali Babajan, took part in a meeting of the Black Sea Economic Cooperation organisation, BSEC, in Yerevan, Armenia.

Until now, Azerbaijan has been selling gas to its ally Turkey at half the market price of 380-430 US dollars per thousand cubic metres.

This favourable price is now expected to go up, especially as Russia has said it is willing to buy Azeri gas for what it costs in the world market.

Russia and Azerbaijan have been sounding each other out over closer energy ties for some months now.

The chairman of Gazprom, Aleksei Miller, visited Azerbaijan to formalise Russia’s interest in buying natural gas from Azerbaijan last June.

On March 27, the State Oil Company of Azerbaijan, SOCAR, and the Russian energy giant signed a memorandum, pursuant to which Azerbaijan is to start supplying gas to Russia from January 2010.

Opinions vary on what has prompted Azerbaijan to seek closer cooperation with Russia in the energy field.

Some experts suggest Aliev is revising his options with Turkey, in response to the prospect of the latter reopening its border with Armenia.

Turkey closed the border with Armenia in 1993 in sympathy with Azerbaijan over the dispute over Nagorny-Karabakh.

Russia has hitherto been seen as an ally of Armenia rather than Azerbaijan in the region.

However, Baku political analyst Ilgar Mamedov downplays talk that Azerbaijan is using its gas wealth to take a form of diplomatic revenge on Turkey.

He believes Aliev is more concerned about Turkey’s stance on selling transited gas than on the possible unsealing of the Turkish-Armenian border, or the Karabakh issue.

“Azerbaijan wants its gas from the Shah-Deniz gas field to reach Europe via Turkey but Turkey wants to [remain able to] buy this gas for 150 dollars and then sell it on to Europe for 400,” he explained.

“That scheme does not sit well with Aliev… That’s where the cause of the tension lies.”

Mamedov said Turkey’s position on reselling the gas was justifiable, however, because it had closed its borders with Armenia for 16 years now, damaging ties with European countries and the US as a result.

“It would be wrong to fault Turkey’s position on the gas issue,” he said. “Aliev has allowed himself to be guided by commercial interests alone and has launched a campaign against Turkey that is absolutely unacceptable.”

The same expert said Aliev might have calculated that by selling gas to Russia he would secure Moscow’s sympathy over the dispute with Armenia, while Turkey would continue to support Azerbaijan over Nagorny Karabakh in any case.

But the expert warned that if Azerbaijan now increased the price of gas for Turkey, the latter might rethink its entire stance on the conflict between Armenia and Azerbaijan.

The Turkish newspaper Hurriyet was the first to suggest that Azerbaijan had declared a “gas war” against Turkey, and that Ankara was reviewing its relationship with Baku in consequence.

Sources in Azerbaijan’s industry and energy ministry quickly denied the Turkish media reports, saying the Azeri authorities would have already come up with a response “if the information had been true”.

But another Turkish newspaper, Yenicag, has carried similar information. It also suggested that Turkey’s ruling Justice and Development Party, the AKP, was now also questioning Turkey’s role in the planned Nabucco gas pipeline.

This is intended to pump gas from Azerbaijan and other states in Central Asia to Europe via Georgia and Turkey, circumventing Armenia.

The pipeline has been touted as a much-needed alternative route for natural gas to reach Europe, now increasingly worried about its heavy dependence on Russia for gas.

While freeing Europe from energy dependence on Russia, the pipeline is also seen as a key strategic and economic weapon for Azerbaijan, strengthening its hand against landlocked, energy-poor Armenia.

Azerbaijan’s discovered natural gas reserves are estimated at around 1.5 trillion cubic metres.

Companies participating in the 12.4 billion US dollars’ worth Nabucco project are OMV of Austria, MOL of Hungary, Bulgargaz of Bulgaria, Transgaz of Romania, BOTAS of Turkey and RWE of Germany.

Construction was initially supposed to start in 2009 and be completed by 2013, though the world economic crisis has put a dampener on those plans.

Ilham Shaban, head of the Oil Research Centre in Azerbaijan,
dismisses criticism in the Turkish and western press of Azerbaijan’s energy policies as ungrounded.

He also denies that growing energy ties between Azerbaijan and Russia will come at the expense of Baku’s old ties to Turkey.

The two countries, Shaban says, had long been supplying each other with electricity. “Negotiations are underway between Azerbaijan, Russia and Turkey regarding the gas issue,” he continued.

“I assess the agreement between Azerbaijan and Russia as highly important, because ethnic Azerbaijanis make up 11 per cent of Russia’s population.”

Political analyst Haleddin Ibragimli said he doubted deeper energy ties with Russia would much affect the drive to settle the Karabakh conflict.

Azeri officials, meanwhile, reiterate that Azerbaijan is a sovereign state that pursues an independent policy and needs no advice on what countries it should cooperate with in the field of energy.

In Moscow, Aliev said Azerbaijan and Russia would be protecting their energy security and their interests as producers and exporters of energy.

Answering a question from the Interfax new agency about new agreements on transit and cooperation in the gas field, Aliev cautioned that the whole issue still remained under discussion.

“Gazprom and the State Oil Company of Azerbaijan are busy discussing an agreement,” he said.

“As is known, a memorandum has already been signed that corroborates the existence of mutual interests. For our part, there will be no restrictions to cooperation in the gas field.”

Later, the president said the two countries also planned to work more closely together over oil, increasing the volume being pumped into the pipeline that runs from Baku to Novorossiysk in Russia.

Another potential agreement concerns upgrading the gas pipeline from Baku to Novo-Filya in the near future. This 200 km-long pipeline runs via the capital of Azerbaijan along the Caspian Sea coast to the border with Russia.

Fariz Huseinov of Memphis University says Turkey stands to lose out more than Azerbaijan, if Ankara alienates Baku over Armenia. This is because Turkey’s role as a transit country for Azerbaijan’s gas is negotiable.

According to Huseinov, Azerbaijan had already signed an energy agreement with Ukraine that potentially relieved Azerbaijan from any dependence on Turkey as a transit country.

Huseinov was referring to the one-on-one meeting between Aliev and his Ukraine counterpart Viktor Yushchenko in Baku earlier this month, where a number of protocols were signed for closer cooperation in 2009-10.

“That would mean we could reach Europe otherwise than via Turkey,” he said. “We might use a route linking Georgia the Black Sea and Ukraine, detouring both Russia and Turkey.”

Seymur Kazimov is an IWPR contributor.