After Russia’s attack on Ukraine in 2022, the EU will strengthen sanctions against Russia and has decided to reduce dependence on Russian energy resources, which implies diversification of energy supplies. Europe is already actively addressing this issue and although Russia remains the main supplier of hydrocarbon resources to Europe, its share has decreased.
In September 2023, Russia’s fossil fuel exports fell to their lowest monthly level since the beginning of the war in Ukraine.[i] Shipments from Africa are growing most noticeably. They now account for 37% of total imports. Libya’s share is growing most strongly, while shipments from the Middle East were the highest since May 2019. In general, there are talks to increase supplies from the Middle East and Central Asia, but these states have large contracts with the PRC, which limits the opportunities and actions of some countries, which means that Europe needs other suppliers.
Azerbaijan, in turn, wants to expand its oil and gas supplies, realizing the prospects of the European market in the current situation, and also wants to be an important part of the so-called “Middle Corridor” from Central Asia to Europe, helping, for example, Kazakhstan to supply its energy carriers to the EU. This strategy is confirmed by the actions and statements of Azerbaijani President Ilham Aliyev. Speaking at the opening ceremony of the Serbia-Bulgaria gas interconnector in the Serbian city of Nis, Aliyev said that in 2023 Azerbaijani gas supplies to Europe will amount to 12 billion cubic meters. This is a significant figure if we take into account that Azerbaijan supplied 8 billion cubic meters in 2021. And by the looks of it the supplies will increase and Azerbaijan considers cooperation with Europe on a strategic scale, for example, Serbian Minister of Mines and Energy Dubravka Djedovic Handanovic predicted that by 2037 the import of Azerbaijani gas may triple.
We can also recall Aliyev’s words that the country is actively increasing energy supplies to the European Union against the background of the war in Ukraine and sanctions against Russia. Ilham Aliyev said that the construction of the “Southern Gas Transportation Corridor” allowed expanding the geography of supplies, and today Azerbaijan supplies gas, for example, to Italy, Romania and Bulgaria, and has already signed agreements with Hungary and Serbia, so that supplies to the EU will grow. He also noted that the gradual introduction of the exploitation of renewable energy sources will provide the EU with “green electricity”.[ii]
Since the year 2024 has already started, it is possible to summarize the results and assess with the help of statistics how effectively the above plans have been implemented. Azerbaijan’s Energy Minister Pyarviz Shahbazov stated. Azerbaijan in January-November 2023 increased gas exports by 9% – up to 22.05 billion cubic meters. And currently the main buyers of Azerbaijani gas in Europe are Italy, Greece, Bulgaria, Romania and Hungary.[iii] This information shows that Azerbaijan is really increasing its energy exports and more and more countries want to become consumers of these resources.
However, such ambitious plans require a major increase in mineral production. To increase gas exports to Europe, Baku must both increase gas production and increase the capacity of the three transit pipelines that together make up the Southern Gas Corridor, which transports Azerbaijani gas from the Caspian Sea to European markets. And some projects aimed at further increasing production are underway.[iv] But all these projects require large investments. And to make such investments one needs agreements with gas buyers in Europe, confirming that they will buy gas when it becomes available. Therein lies the problem, Azerbaijani officials complain, as European buyers have been slow to commit to buying the additional gas that Azerbaijan has promised to supply to the EU by 2027. There may be several reasons for this, firstly, all supplies will go through the pipeline, which in the future may put European countries back on the “gas needle”, which may lead to dependence on a new supplier. That is why many European countries are looking more positively at importing liquefied gas from Qatar and the USA, because the system with LNG terminals allows for mobile deployment and curtailment of supplies in a short period of time without concluding long-term contracts, but such gas imports are more expensive, slower and will be available only in a few years.
Secondly, many European countries do not yet risk concluding contracts with Azerbaijani companies because of Azerbaijan’s military operation in Karabakh, which has caused mixed reactions in the EU and agreements with Azerbaijan may negatively affect the image of certain European politicians. Nevertheless, there is no clear indication that the EU will be willing to give up such opportunities, most likely these contracts will be concluded, but when the various political differences subside and when EU companies are able to calculate their benefits in more detail.
In the meantime, Azerbaijan has options on how to increase gas exports without significant investments (which depend on contracts with the EU), for example, it has been stated that Baku has ambitious plans to generate electricity, which, if realized, would significantly reduce the country’s gas consumption. The government has signed agreements to develop 10 gigawatts of renewable energy. An additional step would be the purchase of cheap gas for domestic needs. Thus, by reducing domestic gas consumption and utilizing the Southern Pipeline, Baku could more quickly begin to increase transit of hydrocarbon resources to the EU.
Summarise, Azerbaijan has sufficient resources to cover the EU’s needs and, accordingly, despite the existing problems, has great prospects to become an important part of Europe’s plan to diversify its energy imports to the EU. Considering Russia’s attack on Ukraine and strained relations with the EU, Europe’s need to find alternative energy sources will continue. If Azerbaijan is able to conduct its foreign policy correctly and achieve the signing of contracts and as a consequence be able to invest in this industry, the plans to double gas exports by 2027 can become a reality.
[i] “Monthly Analysis On Russian Fossil Fuel Exports And Sanctions”, CREA, https://energyandcleanair.org/september-2023-monthly-analysis-on-russian-fossil-fuel-exports-and-sanctions/, (Date of Accession: 18.10.2023).
[ii] “Presidents of Azerbaijan And Kazakhstan Share Their Views On Economic Strategy And Geopolitics”, Euronews, https://www.euronews.com/2023/12/08/presidents-of-azerbaijan-and-kazakhstan-share-their-views-on-economic-strategy-and-geopoli, (Date of Accession: 08.12.2023).
[iii] “Azerbaijan Increased Gas Exports By 9% In January-November”, INTERFAX, https://www.interfax.ru/world/935960, (Date of Accession: 13.12.2023).
[iv] “Azerbaijan Says On Target To Double Gas Exports To Europe”, Eurasianet, https://eurasianet.org/azerbaijan-says-on-target-to-double-gas-exports-to-europe, (Date of Accession: 18.12.2023).
