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Foreign Policy of Azerbaijan Is At the Crossroads: Energy Security as Key Instrument Promoting Dialogue between West and East

Foreign Policy of Azerbaijan Is At the Crossroads: Energy Security as Key Instrument Promoting Dialogue between West and East

By Dr. Vakhtang Maisaia, Professor, Caucasus International University (CIU)

The New Cold War has already demonstrated that the South Caucasus plunged into geopolitical cleavage or sever foreign policy interests clash of Russia and USA. The South Caucasus has already transformed of being new “Rimland” geopolitical frontline where the two global power centers – Russia and USA are engaging to increase their own zones of influences and turn on their sides as many nations as possible. The main battle of the great powers is concentrating on getting access to the natural resources, mainly energy resources in the Eurasian space, where the Caspian Sea basin resources are attracting much great attention.

The natural resources of Caspian Sea started to be considered by the West as a possible alternative to the monopoly of newly born Russia and as a source supplementary to reserves of the Middle East. Enabling the countries of the Caucasus to export gas and oil independently from Russia was in line with NATO’s interests to build stable, relatively strong and pro-western states in the former soviet republics to fully dismantle the Cold War order. From the perspective of the EU, the existence of any independent suppliers of gas and oil decreases Europe’s dependence on Russian supplies and limits Russia’s capability to use this dependence as a tool of political threat.

At time being, the game of “ideological or foreign policy” warfare at the regional level is won by the Russian side, mainly with adopting new regional security modality “3+3” and having considered last geostrategic battle of the Azerbaijan incumbent authority to get under their own control occupied territories in and round the Nagorno Karabakh. The trend stipulates to fostering strategic relations between Azerbaijan and the Western community, including EU and USA actors, and having considered the factor it should be mentioned that the score is 2:0 in favour to the Azerbaijan’s foreign policy. The tendencies that reflected of destabilization in relations with USA and EU from Azerbaijani side could be outlined in pointing out the following concrete facts:

  • Currently the relations between USA and Azerbaijan are getting improved and Biden’s Administration demonstrates its willingness to fostering the relations up to the strategic level. The President Biden has notified Congress the Administration is extending a waiver allowing U.S. assistance to Azerbaijan that is necessary to support U.S. efforts to counter international terrorism; or is necessary to support the operations readiness of the United States Armed Forces or coalition partners to counter international terrorism; or is important to Azerbaijan’s border security. Lately, the USA has provided to Azerbaijan more than $100 million in military aid. It seems so that the USA is seeking regaining its position in the Caspian Sea Basin, including from energy security standpoint;
  • As it is known, the EU and Azerbaijan are key partners. The EU-Azerbaijan relations are currently regulated by the 1999 Partnership and Cooperation Agreement; whereas the EU is Azerbaijan’s first trading partner and its biggest export and import market, representing 48.6 % of Azerbaijan’s total trade and constituting its largest source of foreign direct investment; whereas Azerbaijan is a strategic energy partner for the EU, allowing for a diversification of the EU’s energy sources. The EU is vitally interested in realization of the TAP (Trans Adriatic Pipeline) and TANAP* (Trans Anatolian Pipeline) projects for transmitting the energy from Shahdeniz. The European Union is dependent on Russia for its energy needs while other sources were under Iran’s control; therefore Azerbaijan is still the most reliable country for the EU in the region. Before this short-period of time when the relations suddenly and steadily worsen, Azerbaijan was very closely cooperating with EU high-level officials in sake for fostering and promoting anti-Russian energy mega-project “NABUCCO” and official Baku is even ready to take very active role in “Eastern Partnership” strategy implementation for further re-approaching policy-making processes and political close dialogue between both sides as well as for accepting Associate Membership status-quo with EU for Azerbaijan in similar manner as it occurred with Georgia on 28 November, 2013;

In this respect, Azerbaijan very successfully realizes its energy security objectives and missions and in case of foreign policy-making, the energy security remains vital relevance in promotion the ones. Azerbaijan has the most gas and oil in the Caucasus. Its economy depends primarily on those natural resources. Azerbaijan has 57 oil fields, 18 of which are offshore, in the Azerbaijani sector of the Caspian Sea. The essential part of the company’s revenue comes from the giant ACG oil field complex and Shah Deniz gas field. In 2007, mining and hydrocarbon industries accounted for well over 95 percent of the Azerbaijani economy and over 80% of export in 2009. Energy security of the whole Caucasus depends on Azerbaijan. It has potential to increase its exports even more. Some analysts have provided a concise summary of Azerbaijani oil and gas sector in 2012. According to their research Azerbaijani oil exports originate primarily in the Azeri Chirag Guneshli (ACG) field complex, which held around 84% of crude oil reserves in 2009. Oil from ACG is exported predominantly to Georgia and Russia through the pipelines described in the later sections. Particular fields in this complex were discovered between 1977 and 1986. What sets Azerbaijan apart from other Caspian coastal states is the fact that unlike its Caspian neighbors, more than 90% of its both gas and oil production originates in offshore facilities. The most important entity controlling Azerbaijani energy resources is State Oil Company of Azerbaijan Republic, commonly known as SOCAR, a fully state-owned oil and gas company. It operates the country’s only oil refinery, one gas processing plant, and operates several oil and gas export pipelines throughout the country. In 2013, Azerbaijan produced 43.48 million tons (318.74 million barrels) of oil, of which 8.31 million tons (60.95 million barrels) belong to SOCAR. During the same period, Azerbaijan’s natural gas production reached a record 29.46 billion cubic meters, of which SOCAR’s share is 7.14 billion cubic meters. Earnings of SOCAR are the main source of funds for SOFAZ, Azerbaijan’s sovereign wealth fund, which accumulates and manages energy-related earnings for present and future generations. Its financial reserves are $34 and they can be used for strategically important infrastructure projects, but not for government borrowing. SOFAZ finances key Azerbaijani pipeline projects mentioned in the next sections.

As for Georgia which becomes the most vital strategic partner in energy security strategy framework of Azerbaijan, provides key fora in developing bilateral strategic partnership in economic and geoeconomic project realization. Georgia has no significant natural resources that are enough for export. But it is a gateway to export markets for Azerbaijan (pipelines + sea ports). In 2007, Georgia’s natural gas consumption was 1.8 billion cubic meters. Natural gas used to be supplied to Georgia by Russia. In recent years, however, Georgia has managed to eliminate its dependence on Russian imports through increased hydroelectric power generation and the availability of natural gas sources from Azerbaijan. In addition, all Russian gas exports to Armenia pass through the Georgian pipeline system. Georgia collects 10% of this gas as a transit fee. Georgia reportedly has more than 400 Mt of coal resources. The Black Sea coast in Adjara Autonomous Republic of Georgia, is thought to contain large gas fields with 8.5 billion cubic meters of resources already explored and potential resources estimated to be 125 billion cubic meters. Georgia’s main role in the world mineral supply was to serve as a transport route for oil and gas shipments out of the Caspian region to world markets. The vast majority of Transcaucasia’s energy resources are located in Azerbaijan, but this fact also works for Georgia, through which oil and gas pipelines run. Three of the new large oil and gas export pipelines that had been or were being constructed in the Caspian region pass through Georgia. These three are the Baku-Tbilisi-Ceyhan, the Baku-Tbilisi-Erzurum, and the Baku-Supsa (“Western Early Oil Route”) pipelines. No routes were planned to cross Armenia owing to Azerbaijan’s troubled relationship with the country. Georgia obtains its natural gas through three main transit energy pipelines – two from Azerbaijan (one from Baku-Tbilisi-Erzurum gas pipeline and one from Kazakh-Gardabani gas local pipeline) and one from Russia.

On its own turn,Azerbaijan having considering its European and Euro-Atlantic foreign policy implications also fortifies its geopolitical connection with Eurasian direction. However, there are some insights that Azerbaijan is going to get more close to Eurasian community and somehow find out a comprehensive balanced foreign policy balance against Western pressure on Baku. There are some interesting facts on how it could happen:

  1. Azerbaijan joins as “Partner Observer” status quo Shanghai Cooperation Organization (SCO) where Russia and China hold leading geopolitical position;
  2. China has become the biggest energy consumer in the world. Its primary type of energy source is coal, which is slowly being replaced by oil and gas, respectively 20% and 8% of its total consumption in 2019. 41% of its imported oil comes from the Middle East, which is known for its very unstable political climate. Those two facts increased China’s interests in the resources of Central Asia, which are protected by land masses inaccessible to the US Navy that could influence maritime trade from the Persian Gulf. Chinese infrastructure projects in Central Asia countries are also aligned with a wider strategy of “One Belt, One Road” (OBOR) initiative aimed at increasing connectivity of Eurasia with China as a leader. Namely in case of Azerbaijan’s participation in the mega geoeconomic OBOR project, China is ready to invest more than $800 million in national oil and gas sector. Moreover, in May 2017, during the “Belt and Road” Forum for International Cooperation, CNPC, the China Development Bank, and SOCAR signed a memorandum of understanding on the GPC Project. The total amount of the investment in the framework of this project is more than the US $ 4 billion;
  3. Azerbaijan fortifies with intense formal visits of high-level officials its linkage with Turkish authorities and expresses more interests toward Eurasian direction. The Turkish Solidarity principle and active involvement into activities of the Cooperation Council of Turkic Speaking States which was founded in Azerbaijan is the vivid illustration of the trend.

These only some assumptions why and where official Baku is perceiving to gain with relations with the West and with Eurasian powers. Maybe these are only assumptions – who knows???