BusinessEU-Azerbaijan Energy Trade To Grow After Offensive

EU-Azerbaijan Energy Trade To Grow After Offensive


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On September 19th the armed forces of Azerbaijan led a 24-hour lighting offensive on Armenian-controlled Nagorno-Karabakh. In 2020, a 45-day war gave a first victory to the government in Baku, ending with a Russian-negotiated deal. Now Azerbaijan acted boldly, forcing an immediate surrender on the autonomous Republic of Artsakh.

European Council President Charles Michel was due to mediate a solution between Armenia and Azerbaijan in Granada, Spain next month. Some argue that the invasion is jeopardising a future agreement. However, it is probably precisely because of this meeting that Baku is planning to have the upper hand in its wake. At the negotiating table, the takeover of the Nagorno-Karabakh will be presented as a fait accompli. Powers interested in the region, from the EU to Russia and the US, enter the scene with the autonomous republic off the map.

The region is covered by pipelines, crossing from the Caspian coast to the west, though none are in proximity to Nagorno-Karabakh. The energy sector was still targeted during the 2020 war. In fact, threats to its infrastructure were used by Baku as a pretext to resume hostilities that year: fighting broke out just before the Southern Gas Corridor (SGC) started operations. For the EU, the SGC was of strategic importance as it is the first new natural gas supply in decades.

In the first half of 2023, Azerbaijan exported around 800,000 bpd. 76% flows through the Baku-Tbilisi-Ceyhan (BTC) pipeline via Georgia into Turkey’s southern coast. The rest is exported via Russia by pipeline and Georgia by rail. In the same period, the country exported 6 billion cubic meters of gas to Europe.

In much public discourse in the West, there is the view Azerbaijan is discussed as an aggressor that should be targeted with sanctions. Additionally, there are fears that ethnic cleansing could be carried out in the newly occupied lands. Calls for such measures have been made in the European Parliament. However, Brussels is falling short, instead just calling for an end to military activities. After Russia’s invasion of Ukraine, the EU is looking for alternative sources of fossil fuels.

The upgraded relationship between Brussels and Baku has been dubbed “a personal project of European Commission President Ursula von der Leyen”. In July, she visited President Ilham Aliyev and committed €60 million in EU funds, alongside a project that could mobilise up to €2 billion in investments. President von der Leyen hailed Azerbaijan as a “reliable, trustworthy partner” as Europe tries to break its reliance on Russian energy.

In the same meeting, it was agreed that Azerbaijan would plan to ship around 20 billion cubic meters of natural gas by 2027. This amounts to 18% of the bloc’s annual demand. Other energy projects were announced, regarding solar and hydrogen, as the EU’s demand for renewables grows.

President Aliyev likely sees this moment as an opportunity to set his house in order while he has the opportunity. Nagorno-Karabakh is within the de jure borders of Azerbaijan. Multiple European and US energy firms expect security for their investments, and they probably would favour a definitive end to the conflict. BP (UK), Equinor (Norway), ExxonMobil
(US), and TotalEnergies (France) are active in the country.

In 2020, President Vladimir Putin brokered a deal between Armenia and Azerbaijan, and Russian troops kept the peace —Moscow mostly had good relations with both Caucasian nations. However, with war in Ukraine, there are no resources —military, diplomatic, economic— to spare. Furthermore, since independence in the 1990s Azerbaijan has grown economically and demographically much faster than Armenia. Time has played on Baku’s side, and President Aliyev has seized the moment. At the moment, it seems unlikely whether any major power will interfere in the region beyond issuing words of condemnation.



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