Vol. 4, No. 2 (January 15, 2011)

Azerbaijan to take lead in supplying Europe with natural gas

Paul Goble
Publications Advisor
Azerbaijan Diplomatic Academy

Just as it earlier took the lead in promoting the construction of new pipelines to carry Caspian basin oil to the West, now Azerbaijan has committed itself to supply “substantial volumes” of its own natural gas production to the European Union, something that will boost Baku’s standing with that powerful economic group, thus building upon Azerbaijan’s drive to become a major player in an ever broader region and lessen the EU’s current dependence on the flow of natural gas through the Russian Federation, a development that could complicate relations between Baku and Moscow—even though Russia’s Gazprom has committed itself to purchasing more Azerbaijan gas next year.

On January 13, Azerbaijani President Ilham Aliyev and European Commission head Jose Manuel Barroso signed a joint declaration committing themselves to the joint development of several pipeline routes that are collectively called “the southern corridor.”  Barroso celebrated the signing as “a major breakthrough” because President Aliyev committed Azerbaijan to provide “sufficient gas” to make the corridor an attractive place for investment and an important diversification of gas flows out of Central Asia and the Caspian to Europe.

As part of the program outlined in the declaration, the European Union will provide much of the funding for the Nabucco route which is to carry gas from the Caspian basin through Turkey to Austria.  Azerbaijan has agreed to provide most of the initial flow, although other countries, including Turkmenistan, will eventually come on stream.  But the declaration also makes reference to the far more ramified network of pipeline projects in the southern corridor, without specifying which of these will receive priority in the immediate future.  Consequently, the January 13 declaration marks the beginning of a new stage of competition among projects even as it does commit both Brussels and Baku to the expansion of the southern corridor, although everyone involved is hopeful that gas will flow westward two or three years from now.

Because debates about these various routes are certain to continue, many will be likely to dismiss the rhetoric around the January 13 event.  If one focuses only on the question of pipeline routes, that may be appropriate given that the exact routes, despite this agreement on Nabucco, could change during the coming months.  But the geopolitical consequences of this accord are enormous, possibly even larger than the oil-based “Deal of the Century” of more than a decade ago, and certain—or at least as certain as anything can be in what is an increasingly fluid international system.

Three consequences clearly will flow from this accord.  First, Azerbaijan’s standing and influence in Europe is going to rise.  Brussels is increasingly going to view Baku as the regional power, not only in the South Caucasus but as the key intermediary between Europe and the countries of Central Asia and especially Turkmenistan, potentially one of the largest suppliers of natural gas in the world.  That will change the balance of power between Azerbaijan and Turkey at least in the eyes of Europe, and it will mean that Azerbaijan will find its positions, including on Nagorno-Karabakh and the occupied territories, enjoying increasing support among European states.  Indeed, the last several months have provided a great deal of evidence on that point.

Second, because the southern corridor by definition represents a challenge to Russian control of the gas flows to the West, Moscow is likely to view it as a threat to its power and influence on the continent.  That will create a potentially delicate situation in which Azerbaijan will have to navigate carefully as the Russian powers that be use both carrots—more gas purchases and pressure on the Armenians—and sticks—greater Russian support for Yerevan and various efforts to block investments in the southern corridor project.

And third, this accord along with other events of the past year confirm the wisdom of President Ilham Aliyev’s balanced foreign policy and particularly his push for a dramatically expanded Azerbaijani diplomatic and business presence abroad.  That policy and that push have now yielded some real dividends.  But they have another consequence, one that Azerbaijani officials and commentators are going to be wrestling with in the coming months.  Given its new power and influence, Azerbaijan is certain to be judged by others by different standards than it has been in the past.  In some cases, this will lead Europeans to be less critical of aspects of Azerbaijani life they have been critical of, but in others, it will mean that because of the increased attention Azerbaijan can now expect to receive, others, including some governments and many NGOs, are likely to become increasingly critical of exactly the same things.  Navigating that, too, is going to be a challenge.

But however any of these developments do work out singly or in combination, January 13th was truly a red letter day for Baku, an announcement to the world that Azerbaijan has arrived and is ready to play in much bigger leagues politically and economically than many had thought possible only a few months ago.