Too early to write off Azeri gas

Interview with Euractiv

Can Azerbaijan afford to stop gas supplies to the EU if the EU starts playing hardball against the Baku regime and defends Armenia’s position (there is a call for sanctions from the European Parliament, and France is already supplying weapons to Yerevan)?

Neither Azerbaijan will stop supplies nor the EU purchases. The European Union could agree to halt gas supplies from Russia, which terrorised Ukraine and killed over 300,000 Ukrainians and as many Russian citizens, let alone the Azeri gas. The idea of the EU playing ‘hardball’ against Azerbaijan is unlikely to find many supporters, especially among EU governments receiving Azeri gas. The EU is overwhelmed by the war in Ukraine. In the long term, there may be consequences as the EU’s sensitivity to regimes that pursue power politics and wars is growing. US LNG could replace Azeri gas if the EU and the US agree on a sanctions policy. After all, the EU has managed to overcome a dependence on over 150 billion cubic metres of Russian gas; it will overcome a 15 billion cubic metre dependence on Azeri gas. It all depends on Baku’s reactions and how much they understand the risks of alienating Europe.

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What are the risks for Bulgaria and the Balkans in this situation?

They are not small, but they are not directly related only to the Armenians fleeing Nagorno-Karabakh. After all, in the wake of this conflict, Azerbaijan sharply increased its dependence on Turkey and spent valuable and, in many ways, irretrievable political capital in Europe. Figuratively speaking, the Azeri leadership bathed in attention and special treatment from Brussels, which is independent of Turkey. Today, Russian oil and Russian gas are ‘laundered’ through Turkey, and direct contracts for supplying Azeri oil and gas to Europe could be in jeopardy, in principle. With SOCAR’s decision to obtain a massive loan from Lukoil to purchase and process large quantities of Russian Urals-type crude oil in its refinery in Turkey, red lights have gone off in Brussels. In Bulgaria, the moves of Azeri politicians and companies and the strengthening of connectivity with Russia and Turkey, at the expense of the EU, are also being watched very closely. Such moves, at least at this stage, are hardly encouraging. Under the circumstances, Baku is simply handing over to Ankara the right to negotiate with the EU on energy, which means there is a growing likelihood that more Azeri gas will enter the Turkish gas export mix to the EU at the expense of direct contracts. The question is how the EU will view Turkey’s role in the process and whether it will impose sanctions. That is where the rub lies, especially as Iranian gas will also enter the Turkish mix in addition to Russian and Azeri gas. I expect the war between Hamas and Israel to have repercussions, especially in light of Russia’s heightened interest in diverting attention from Ukraine. Baku has to decide where it stands.

Who can Azerbaijan sell its gas to if it does not dispose of it to the EU?

It is too early to write off Azeri gas – there are long-term contracts in Italy, Bulgaria and Greece. If you think Serbia and Hungary will shy away from buying Azeri gas because of the ethnic cleansing of Nagorno-Karabakh, you are mistaken. I do not expect anything dramatic, especially if the Azeri leadership realises it has crossed a line of tolerance, not so much towards the Balkan countries, but towards the EU. And Bulgaria, as a member of the EU, will inevitably comply with EU-wide policy.

The interview in incorporated in this article