Page 6 - FSUOGM Week 31 2022

FSUOGM COMMENTARY FSUOGM

Azeri-Armenian clashes jeopardise

EU's Caspian gas import plans

If the clashes spiral into a crisis, Russia will gain from

undermining the EU justification for Azeri gas and

disattracting attention away from Ukraine

AZERBAIJAN RENEWED military clashes between Azerbaijan fail-proof energy plan.”
and Armenia over the disputed Nagorno-Kara- Should hostilities escalate, Coutts argues that
bakh region have undermined the EU’s plan to this would represent a geopolitical win for Rus-
bring more gas from the Caspian region to phase sia, not only by making it harder for the EU to
WHAT: out Russian imports, and should a full-blown justify reaching out to Azerbaijan for gas supply,
There has been renewed conflict once again break out, it would mark a but also distracting the world’s attention away
fighting between major geopolitical victory for Moscow. What is from Ukraine.
Azerbaijan and Armenia more, it remains unclear where any extra Cas-
over the Nagorno- pian gas might be sourced for the European mar- The supply question
Karabakh region. ket, unless it is simply removed from Azerbaijan’s Another important question is whether Azer-
domestic market. If that happened, Azerbaijan baijan can deliver the gas that the EU is hoping
WHY: would simply import more gas from Russia, for. BP has been drilling exploration wells in the
Both sides accuse the frustrating the EU’s effort to deprive Moscow of Caspian Sea over the past couple of years, but
other of violating the export revenues. has not yet announced a commercial discovery.
ceasefire, but Moscow At least three soldiers are understood to Its partner, Azerbaijan’s state-owned SOCAR,
has blamed Azerbaijan. have been killed in fresh fighting that broke out reported in May last year that the pair had found
in Nagorno-Karabakh. Both sides blame each a gas condensate discovery at the offshore Shaf-
WHAT NEXT: other for violating the 2020 ceasefire agreement, ag-Asiman block, but the UK major did not con-
A greater crisis would brokered by Moscow, that ended six weeks of firm. BP also withdrew from the Shallow Water
benefit Russia. fighting and resulted in Armenians ceding ter- Absheron Peninsula (SWAP) block in the Cas-
ritory in the enclave within Azerbaijan. For its pian last month, after drilling three exploration
part, Russia blamed Azeri troops for violating wells, none of which found commercial volumes
the truce. of gas.
For the EU, the timing of the renewed fight- Azerbaijan has other significant sources of
ing is unfortunate. Just weeks earlier, the Euro- gas supply. BP has said before that deeper drilling
pean Commission signed a memorandum of at the Shah Deniz field that currently flows gas
understanding with Baku on ramping up gas to Europe via the Southern Gas Corridor could
sales from Azerbaijan, which would entail an unlock extra resources, but it is unclear how
expansion in the capacity of the Southern Gas much, and further research is needed. There is
Corridor pipeline system. Brussels is looking to also the TotalEnergies-operated Absheron field,
eliminate gas imports from one country waging but that currently serves Azerbaijan’s domestic
war with its neighbour by expanding supplies market. An expansion in its capacity could free
from another one. up extra volumes, but some of that gas would
Risk intelligence company Verisk Maplec- have to cover Azerbaijan’s rising gas demand at
roft notes that the renewed fighting “under- home.
scores the failure of the EU’s mediation efforts, Besides that, the options are limited. Turk-
warning that the peace deal “looks in danger of menistan, Iran and Azerbaijan could expand gas
unravelling.” swaps around the Caspian Sea, but the Turkmen
“Moscow has been quick to point the fin- government’s dealings with its neighbours are
ger at Baku as the aggressor. This looks like a characterised by distrust and obstinance. For the
deliberate strategy aimed at undermining the same reason, and many other political and com-
EU-Azerbaijan gas supply deal,” Maplecroft mercial reasons, the prospect of a trans-Caspian
analyst Ophelia Coutts said in a research note. pipeline to bring gas from Turkmenistan directly
The clashes are “highly embarrassing for the to Azerbaijan looks dim. Russia would do what
EU,” she continued. “Replacing Russian gas it could to block the project, and the long trans-
with a supply from a country also engaged in port distance would drive up the price of the gas
an inter-state conflict with its neighbour isn’t a substantially. ™

P6 www. NEWSBASE .com Week 31 05•August•2022