Azerbaijan’s pledge to provide alternative gas supplies chimes well with the European Union’s (EU’s) long-held goal to break its reliance on Russian gas. In return, the EU market of 450 million consumers has promised bumper opportunities for the oil- and gas-rich country.
Good news all around, you might think. But the situation is far more complicated and may threaten both future European energy supplies and Western attempts to shut off Russian gas exports, which aim to throttle funding for its war of aggression against Ukraine.
Last year, EU leaders trumpeted new deals with Azerbaijan as they scrambled to replace supplies. Ursula von der Leyen agreed to double Azeri gas imports by 2027 and described the country as a trustworthy partner.
But the EU’s hopes that its new supplier would play nice were always optimistic. Azerbaijan is dominated by President Ilham Aliyev, who has been in power for 20 years. The country is profoundly corrupt and authoritarian. The issue came home to roost in September, when Aliyev’s forces smashed the Armenian statelet in Nagorno-Karabakh in just over a day, and a population of more than 100,000 fled lands they had inhabited for two millennia.
The EU’s calls to halt military activities in the breakaway province were ignored. Stunned, many members of the European Parliament (MEPs) are now calling for sanctions, including sanctions on Azeri gas imports, but it remains to be seen whether European governments are willing to take such measures as winter approaches.
Worse, the dilemma created by the extinguishing of Nagorno-Karabakh may turn out to be merely the first problem in a series.
A growing alignment of interests with Russia and Turkey should trigger alarm in the EU.
The emergence of an Azerbaijan-Turkey-Russia coalition of self-interest has been notable; Azerbaijan’s recent offensive would not have succeeded without calculated Russian passivity, and Turkey’s open political and military support.
The three also share interests in gas supplies. Azerbaijan and Turkey could provide a convenient and covert backdoor for Russian gas, potentially bringing widespread corruption amid opaque dealings with Europe and denting the EU’s ability to confront authoritarian regimes.
Although Azerbaijan and Russia have been competitors in the European gas market, with Russia repeatedly being accused of trying to foil rival EU-backed projects involving Caspian gas, the energy crisis of 2022 has reset their relations.
When Russia cut its gas exports to Europe by 80% last year, effectively weaponizing the fuel in its hybrid war against the West, it lost its most important market, facing the prospect of billions of cubic meters of gas being stranded and profits curtailed. Gazprom’s export revenues fell by half in 2022 and may halve again this year.
So it makes sense for Russia to flood Eastern Europe with gas whitewashed in Azerbaijan or Turkey, as has been happening in recent months.
Buyers in Central Europe and Italy have been knocking on Azeri doors to ask for another 20bcm to be supplied before the end of the decade, on top of current deliveries to Southern Europe and Turkey estimated at around 20bcm this year.
Considering that Azerbaijan’s annual consumption is projected to increase to 15bcm/year, combined internal and external demand would exceed the country’s ability to serve it by at least 5bcm/year, raising questions about how the excess demand would be covered.
Azerbaijan is struggling to serve internal and external demand but has recently signed supply or swap deals with Russia and Iran.
Like Azerbaijan, Turkey has been signing deals to supply EU countries, even though it relies almost entirely on imports for its own needs. It has signed deals with Hungary, Romania, and Moldova in recent weeks.
It’s very likely much of this gas is being piped to Turkey from Russia. The Kremlin understands that as long as it continues its war against Ukraine, without offering the firm promise of withdrawing its troops to pre-2014 borders and paying for the widespread destruction it had caused, European buyers will refrain from signing any deals with it directly.
It also knows that there is only a short window of opportunity to recapture at least some of its lost market before 2026, when more US or Qatari liquefied natural gas production (LNG) reaches global markets. Azerbaijan and Turkey are proving more than willing to assist the Kremlin.
In exchange, Russia may have agreed to watch passively as Azerbaijan’s troops stormed Nagorno-Karabakh. Turkey meanwhile seeks to expand its regional influence both in the Caspian region and in Eastern Europe through a putative gas hub, which Russia has enthusiastically supported.
The result? Eastern Europe will be choking on a rising tide of Russian gas whitewashed in Azerbaijan and Turkey, which will thwart the EU’s ambitions to phase it out by 2027 and render superfluous plans by local producers such as Romania to develop their own Black Sea offshore gas projects.
More worryingly, it will limit Europe’s ability to leverage its interests not only in regions such as Nagorno-Karabakh but also right on its doorstep.
Turkey’s announced deal with Moldova was signed with a company whose management is reportedly connected to the sanctioned Moldovan oligarch Vladimir Plahotniuc, accused of helping to steal $1bn from Moldovan banks. Plahotniuc lives in Turkey.
The EU as a whole, member states, and individual companies could have stopped the emergence of this alliance.
This would have involved banning Russian gas, verifying supplies from countries such as Turkey which transits them but does not apply EU rules, providing firm signals to encourage long-term LNG supplies from global producers, and fast-tracking the scaled-up deployment of renewables.
It still has a final window of opportunity to exert its leverage and protect its interests from the consequences of this latest alignment of interests. Right now, however, there is little sign it has the will to do it.
Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider.
The views expressed are her own.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.