Oil & Gas

15 Aug 2022

The Burgeoning Energy Partnership Between Azerbaijan and the EU

15 Aug 2022  by   
On July 18, the European Commission signed the new Memorandum of Understanding on a Strategic Partnership in the Field of Energy with Azerbaijan to increase imports of Azerbaijani natural gas to Europe by at least 20 billion cubic meters (bcm) annually by 2027. “Today … we are opening a new chapter in energy cooperation with Azerbaijan, a key partner in our efforts to move away from Russian fossil fuels,” said European Commission President Ursula von der Leyen in a press conference with Azerbaijani President Ilham Aliyev in Baku. “Issues of energy security today are more important than ever before” said President Aliyev, whose country exported 8.1 bcm to the EU in 2021—the first year after the launch of the Southern Gas Corridor, the pipeline through which Azerbaijani gas is carried to the European market. EU Energy Commissioner Kadri Simson added that Azerbaijan is “expected” to deliver an extra 4 bcm of gas to the European Union this year (bringing the total to 12 bcm). For President von der Leyen, “This will help compensate for cuts in supplies of Russian gas and contribute significantly to Europe’s security of supply”.

Along with the gas exports, the two partners expressed interest also in promoting cooperation in the areas of renewable energy and connectivity. The Azerbaijani territories liberated from the Armenian occupation in 2020 have significantly increased Azerbaijan’s renewable energy potential. For President Aliyev, “In the liberated areas of Karabakh and Eastern Zangazur, the potential of solar and wind power plants is 9,200 megawatts, and the potential of wind in the Caspian Sea is 157 gigawatts”. In the agreement, cooperation in renewable energy is mentioned as a key pillar for future EU-Azerbaijani relations. President von der Leyen, affirming this potential, stated, “Gradually, Azerbaijan will evolve from being a fossil fuel supplier to becoming a very reliable and prominent renewable energy partner to the European Union”.

Both sides also discussed deepening cooperation in the connectivity sector. Against the backdrop of disruptions in trans-Russia transportation routes connecting Asia and Europe, the key role of the Trans-Caspian International Transportation Route (TITR), or Middle Corridor, is rising exponentially. In her speech, President von der Leyen confirmed the EU’s interest in building connections with Central Asia and beyond through this transportation passageway. The Middle Corridor holds the potential to also become an alternative energy route between Central Asia and Europe if efforts to bring Turkmenistani and Kazakhstani hydrocarbon resources to the western side of the Caspian Sea succeed. Russia’s temporary block it recently imposed on the transit of Kazakhstani oil through its territory to Europe reaffirmed the increased salience of the TITR initiatives.

In general, the new deal between Baku and Brussels reaffirmed Europe’s interest in the South Caucasus, which has significantly grown since the start of the Russian-Ukrainian war. This is primarily related to the fact that the EU is going through a critical energy crisis, and the South Caucasus appears to be an alternative supplier and a gate to Central Asia’s massive energy potential. Azerbaijan has proven itself to be a reliable partner in this field having consistently exported oil and gas to the European market for several years, despite the challenges posed by some outside forces.

Azerbaijan’s standout as an alternative for the EU - in the context of Russian efforts to leverage its energy resources as seemingly the only effective instrument for pressure against the West—is seen by some as a potential source of conflict between Baku and Moscow. Azerbaijani gas plays a critical role in the energy security of some Eastern European countries whose gas demand is relatively low, and as such, Azerbaijani gas can be instrumental in reducing dependency on the Kremlin. For example, Bulgaria, the Black Sea country to which Russia halted gas supply in response to Sofia’s refusal to pay for energy in rubles, seeks to increase its import of Azerbaijani gas.

To this end, Bulgarian Prime Minister Kiril Petkov paid a visit to Baku three days after the signing of the EU-Azerbaijani energy deal. In early July 2022, following the opening ceremony for the Gas Interconnector Greece-Bulgaria (IGB), Azerbaijani Energy Minister Parviz Shahbazov declared, “Gas exports to Bulgaria in January–June 2022 amounted to 160 mcm [million cubic meters], and it is planned to increase that to 600 mcm by the end of the year. Azerbaijan has been exporting 2.6 mcm of natural gas to Bulgaria every day since July 1.” The IGB connects Bulgaria with the Southern Gas Corridor. Serbia, which is fully dependent on Russian gas, is another regional country that is currently in talks with Azerbaijan and hopes to import Azerbaijani gas by 2023.

The fact that Azerbaijani gas exports cannot completely substitute Russian exports to the EU, which, until recently, amounted to more than 150 bcm annually, has so far helped assuage concerns in Moscow. “We never planned to replace Russian gas. This is not possible due to incomparability of volumes,” President Aliyev said at a conference in April 2022, answering a question about the possibility of such competition between the Kremlin and Baku. Aliyev added, “Our energy policy has never raised questions in Russia. We have never had any questions or discussions in any form. I am sure that this will not have a negative impact on our relations with Russia.” However, as Azerbaijan’s role in Europe’s energy security expands, this situation is likely to change in the future. As such, a shift in relations between Baku and Moscow will necessitate the pursuit of more cautious foreign policy on Azerbaijan’s part and stronger support from the EU in Baku’s efforts to effectively handle the challenges that this new strategic partnership in energy is sure to bring.


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