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A new chapter in EU Azerbaijani relations against the backdrop of the Russian invasion of Ukraine

The EU’s relationship with Baku has long been marred by disagreement over Azerbaijani domestic policy. However, the Russian invasion of Ukraine has resulted in a renewed bilateral focus on energy. A recent decision to sign a new gas deal shows that the nature of relations may truly be changing.

July 29, 2022 - Murad Muradov - Articles and Commentary

President of the European Commission Ursula von der Leyen and President of Azerbaijan Ilham Aliyev. Photo: Presidential Administration of Azerbaijan.

The President of the European Commission Ursula von der Leyen’s recent visit to Azerbaijan was crowned with the signing of a new gas export deal between the EU and Baku. This has been a very significant event for the region in a number of ways. The parties agreed upon expanding the volume of gas exports from Azerbaijan to Europe from last year’s level of eight billion cubic metres to around 20 bcm by 2027. They also agreed to work on boosting Azerbaijan’s export potential in the renewable energy sector (including water and hydrogen). Speaking in Baku, von der Leyen emphasised the EU’s long-term partnership with Azerbaijan and declared it “a reliable partner”, specifically comparing the state to an aggressive and untrustworthy Russia. She only briefly touched upon issues related to human rights and media freedom that have long spoiled relations between Baku and Brussels. In his speech, President Aliyev praised the country’s level of partnership with the EU and expressed hope for its sustainable improvement and growth. But what are the larger implications of this important milestone for Azerbaijan and the region at large?

First of all, von der Leyen’s speech underlines Brussels’s turn to a more pragmatic foreign policy in general and in the South Caucasus in particular. The inability to prevent or stop Russian aggression against Ukraine, coupled with other geopolitical developments such as the hasty American exit from Afghanistan last year, forced European decision-makers to confront a harsh reality. They must now make pragmatic choices and expand their geopolitical clout to ensure better protection from numerous risks, with energy shortage being only one of them. This reality was exacerbated by Europe’s long-term failure to take a proactive position in the South Caucasus, which made it very difficult for Brussels to compete with major power brokers in this complex and conflict-ridden region. A newfound commitment to change this state of affairs and gain political influence has been aptly demonstrated by the EU’s efforts to act as an honest mediator in the Azerbaijani-Armenian negotiations. Since April, the two countries’ leaders have met twice in Brussels under the auspices of European Council President Charles Michel. It is noteworthy that Mr. Michel’s latest statements on the issue avoided referring to the “status” of Nagorno-Karabakh. In fact, he called the region “Karabakh” in line with requests made by Baku. This shift in Brussels’s position regarding the issue most critical to Azerbaijan attests to the sense of urgency the EU now attaches to improving bilateral relations. At the same time, European leaders must realise that without peace Moscow will always try to use the conflict between the two countries to create further chaos and raise its energy pressure on Europe.

Alternative sources

Indeed, after the shock of the first months of the war in Ukraine, European bureaucracy is now better prepared for the worst-case scenarios. These include the total disruption of Russian gas exports and the prospect of a cold winter and economic hardships. Hence, ensuring as much alternative supply as possible is currently the primary goal of European diplomacy. Russian gas accounted for almost 40 per cent of EU gas consumption in 2021, and though there has already been a significant decline in imports from Russia without Europe running into shortages, its spare reserves are now probably as low as they have ever been.

Whilst American LNG is now considered to be the major alternative to Russian imports, the magnitude of the potential shortage is such that Europe must secure as many sources as possible, with a particular focus on diversification. This is very well understood in Baku. In his recent speech at the Baku Energy Week, President Aliyev referred to the possibility of expanding the capacity of the TANAP pipeline. However, the newly-signed memorandum envisages expanding output by eight to ten bcm by 2027. This is beyond current forecasts regarding the Azerbaijani gas industry. London-based economist Gubad Ibadoghlu has estimated the maximum possible increase in capacity at five to seven bcm.

Though new fields are periodically being discovered, raising the figure of estimated reserves, Baku will likely intensify its attempts to include gas from Kazakhstan and Turkmenistan. There are a lot of telling signs regarding this development. For example, there has been a significant increase in trilateral cooperation between Ankara, Baku and Nur-Sultan. On June 27th, the three states signed a declaration on transport and communication that highlights the need to improve trade and economic relations between the countries with a focus on opening rail and road corridors. Shortly afterwards, Russia temporarily blocked the transit of Kazakhstani oil through its territory, which amounts to a critical 80 per cent of the country’s export to Europe. Although the transit was soon restored, it is clear that Moscow is displeased with Kazakhstan’s growing assertiveness. Sources close to the country’s government now admit that the failure to build any transit infrastructure via the Caspian to Azerbaijan has been a huge mistake. Whilst dealing with Turkmenistan is much harder, certain achievements have been reached. For example, in 2021 the state officially became an observer to the Organisation of Turkic States. However, the January events in Kazakhstan have exposed the fragility of even the richest and most influential of the Central Asian states. For Europe to seriously bet on boosting energy imports from this region, it subsequently has to work on decreasing the area’s security and economic dependence on Russia.

Risks and rewards

There is another geopolitical risk regarding Azerbaijani ambitions to gain a larger place on the European energy map. This is namely ongoing tensions between Turkey and Greece, which seem to be capable of deteriorating into a full-fledged conflict. There are reports of growing military force concentration not only in the East Aegean where the actual dispute is focused, but along the land border as well. Greece is not only one of the largest consumers of Azerbaijani gas but also a hub where part of the gas is redirected. For example, Bulgaria, whose prime minister just visited Baku to discuss raising gas sales, receives its share through the interconnector in Greece. Should a conflict between Turkey and Greece occur, export routes may be at risk, particularly given Baku’s close alliance with Ankara. Hence, we should expect more tangible steps from Brussels to alleviate these tensions and persuade Athens to soften its rhetoric.

For Azerbaijan, the recent agreement with the EU means three things. First of all, it alleviates criticism of the country’s continued (though gradually diminishing) dependence on its hydrocarbon reserves as its major engine of development. It also demonstrates that pessimistic attitudes about Azerbaijani gas reserves (which, according to some sceptics, have been grossly exaggerated by the government) are baseless. Baku may count on steady currency inflows, which would be crucial for financing reconstruction projects in Karabakh. This is especially true in light of the grim economic outlook for much of the world, as the war in Ukraine is only set to continue. Secondly, the new approach of the European Commission is completely in line with the Azerbaijani vision: pragmatic cooperation aimed at gradual rapprochement and strengthening ties rather than outright integration. Moreover, the EU seems to have revised its previous policy of making bilateral partnership conditional on domestic politics, which caused significant discontent in Baku and embittered mutual relations for a number of years. Finally, the inclusion of cooperation on alternative energy, with prospects for Azerbaijan to become a net exporter to Europe, shows that Brussels views Azerbaijan as a country fit for investment and long-term cooperation. Overall, the EU now recognises the country’s strategic stability in a very unstable and complicated region.

Murad Muradov is the co-founder and deputy director of the Topchubashov Center, a Baku-based think tank. His areas of expertise cover European politics, the politics of identity and nationality, and international political economy.


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