Azerbaijan Stands to Win Big in Europe’s Energy Crisis

That spells trouble in Nagorno-Karabakh.

By , a British journalist covering Eurasian politics and society.
An aerial view of an industrial settlement in a blue sea.
An aerial view of an industrial settlement in a blue sea.
A view of Neft Dashlari, or “Oil Rocks,” an industrial settlement in the Caspian Sea comprising a series of connected oil and drilling platforms, in 1997. The settlement was built in 1949 and was the first offshore oil platform in the world. Today, it is operated by the Azerbaijani state oil company SOCAR and continues to produce oil and gas. Reza/Getty Images

On March 9, the gas went off in Nagorno-Karabakh. “I remember waking up to find there was no heating and no breakfast,” said Irina Safaryan, a 29-year-old translator living in Stepanakert, the largest city in the disputed region. “We had been celebrating International Women’s Day,” she added sarcastically, “and this was the best present Azerbaijan could come up with for us.”

Since the collapse of the Soviet Union, Nagorno-Karabakh’s majority ethnic Armenian population has effectively governed itself as the unrecognized Republic of Artsakh, despite being inside Azerbaijan’s internationally recognized borders. In 2020, after a brief but bloody war that ended with a Moscow-brokered peace deal, the region’s Yerevan-backed separatists were forced to give up control of a number of towns and cities, but the core of their self-proclaimed state, including Stepanakert, remains under their control.

Although the war has ended, officials in Stepanakert have accused the Azerbaijani government of trying to freeze them out by cutting off their only natural gas pipeline, which runs through Baku’s newly captured territory. As temperatures in the mountain city plummeted below freezing, and without any heating, more than 100,000 people were left to stave off the icy cold as best they could over the two weeks that followed until supplies were restored. Many residents, like Safaryan, collected wood and burned fires in their homes, grilling meat and vegetables over the flames after their stoves stopped working. Others piled into basements to stay warm as the snow fell, their children in tow.

On March 9, the gas went off in Nagorno-Karabakh. “I remember waking up to find there was no heating and no breakfast,” said Irina Safaryan, a 29-year-old translator living in Stepanakert, the largest city in the disputed region. “We had been celebrating International Women’s Day,” she added sarcastically, “and this was the best present Azerbaijan could come up with for us.”

Since the collapse of the Soviet Union, Nagorno-Karabakh’s majority ethnic Armenian population has effectively governed itself as the unrecognized Republic of Artsakh, despite being inside Azerbaijan’s internationally recognized borders. In 2020, after a brief but bloody war that ended with a Moscow-brokered peace deal, the region’s Yerevan-backed separatists were forced to give up control of a number of towns and cities, but the core of their self-proclaimed state, including Stepanakert, remains under their control.

Although the war has ended, officials in Stepanakert have accused the Azerbaijani government of trying to freeze them out by cutting off their only natural gas pipeline, which runs through Baku’s newly captured territory. As temperatures in the mountain city plummeted below freezing, and without any heating, more than 100,000 people were left to stave off the icy cold as best they could over the two weeks that followed until supplies were restored. Many residents, like Safaryan, collected wood and burned fires in their homes, grilling meat and vegetables over the flames after their stoves stopped working. Others piled into basements to stay warm as the snow fell, their children in tow.

Baku has branded Stepanakert’s claims of turning off the taps as “baseless,” but amid a spate of clashes in recent weeks that have reportedly left Armenian service members dead, it is clear that the decades-long standoff is entering a dangerous new phase where energy could become part of the war of attrition. With the Armenian population of Nagorno-Karabakh increasingly under pressure, Baku seems eager to resolve the issue of the disputed territory once and for all, sparking fears that new fighting could see the separatists lose yet more ground and displace civilians across the border to Armenia.

Now, as much of Europe plans to sanction energy exports from Russia in the wake of its invasion of Ukraine, Azerbaijan has set its sights on exporting more gas to the continent. For decades, the European Union has depended on Russia for cheap gas, even after its 2014 annexation of Crimea. Boasting colossal Caspian Sea gas fields, connected to Italy and Greece via the Southern Gas Corridor pipeline network, Baku is in a prime position to help fill the gap left by Moscow.

Last month, as residents of Stepanakert were thawing out from around a dozen days without heat, Azerbaijan’s state-owned oil company SOCAR announced that it planned to increase exports of natural gas to Europe by 30 percent this year and had already delivered 2.6 billion cubic meters in the first quarter alone. “This adds value to Azerbaijan’s economy,” a SOCAR spokesperson said, “at the same time cementing the country’s standing as Europe’s reliable gas supplier.”

Baku is in a prime position to help fill the gap left by Moscow.

For Brussels, the offer could hardly come at a better time. Although negotiations among the 27 EU member states over a ban on all Russian fossil fuels have run aground because countries such as Hungary are holding out for exemptions on cheap crude oil imports, gas is one area in which almost every state agrees it is time to divest. This is in no small part due to the fact there is a wide availability of alternative providers.

On May 18, the European Commission presented its REPowerEU plan to wean its energy network off dependency on Moscow once and for all, admitting that “[h]igh amounts paid for Russia’s fossil fuels are helping Russia sustain its war against Ukraine.” As part of that, Brussels is pushing for a 30 percent reduction in gas consumption by 2030 across member states while also redoubling efforts to secure alternative providers as it phases in renewables.

Meanwhile, disruption has already caused shortages and rising costs for consumers across Europe, driving a wave of populism, protests, and unrest, as well as a burgeoning cost of living crisis. The shortages even became a defining issue in April’s French presidential election, as incumbent Emmanuel Macron faced criticism from far-right challenger Marine Le Pen over the price ordinary people are paying for sanctions on Russia.

Against that tense backdrop, this month at a meeting in Brussels, Elnur Soltanov, Azerbaijan’s deputy energy minister, held talks with Cristina Lobillo Borrero, the EU’s energy policy director. “A dedicated meeting took place to discuss ongoing gas cooperation and prospects for increasing export volumes of Azerbaijani gas to the EU,” the European Commission’s official readout concluded.

The potential benefits for Baku, whose oil and gas revenues made it the fastest-growing economy in the world from 2000 to 2014, are enormous. According to the Finland-based Centre for Research on Energy and Clean Air, Moscow has received almost $25 billion in payments by EU nations for gas alone in the months since Russian President Vladimir Putin invaded Ukraine. That sum, now effectively on offer to other nations that can meet demand, is roughly 10 times Azerbaijan’s total gas revenues in 2019.

The country is unlikely to ever be able to match Russia’s vast total output, according to Gubad Ibadoghlu, an Azerbaijani economist and senior visiting fellow at the London School of Economics. “At best, in five years, the country will be able to transport 20 billion cubic meters of gas to Europe within the second phase of the Southern Gas Corridor,” he said. That’s just an eighth of the 155 billion cubic meters the EU bought from Russia in 2021. Still, Baku’s ability to ramp up production shows it stands to increase its share in the lucrative market.

The energy arrangement may be mutually beneficial for both the EU and Azerbaijan, but it comes just two months after the European Parliament voted in favor of a resolution “strongly condemn[ing] Azerbaijan’s continued policy of erasing and denying the Armenian cultural heritage in and around Nagorno-Karabakh.” According to the motion, which passed in a 635-2 vote, this includes “historical revisionism and hatred towards Armenians promoted by the Azerbaijani authorities, including dehumanisation, the glorification of violence and territorial claims against the Republic of Armenia which threaten peace and security in the South Caucasus.”

Those condemnations, however, were shelved during the most recent round of high-level energy talks this month. In Nagorno-Karabakh—where accusations that Azerbaijan has been using its control over energy to push its political priorities and pressure its opponents have reached a fever pitch in recent months—the idea that Baku could strengthen its influence in the West is cause for consternation.

“We are concerned that Europe is deepening its dependence on authoritarian Azerbaijan, which is perpetrating crimes against humanity,” Artak Beglaryan, the state minister and de facto leader of the self-declared Republic of Artsakh, told Foreign Policy. By failing to take action against Baku over the alleged gas shutoff in Nagorno-Karabakh, he said, “the international community has turned a blind eye to continuous and harsh human rights and humanitarian law violations, just so as not to have difficulties with its own gas and oil supply.”

“If democracy and human rights, as well as regional stability, matter to the West, there should be conditions set as part of gas negotiations with Azerbaijan,” Beglaryan said. He admitted that this may be unlikely given the pressures European nations are facing but believes even outside of energy talks that “a minimum should be having genuine international guarantees on preventing new aggressions and crimes.”

This month, European Council President Charles Michel held renewed talks with both Azerbaijan and Armenia on the prospect of a peace treaty that would finally put an end to the conflict. Writing on Twitter, he said that “[t]angible progress” had been made on issues including the humanitarian situation. Despite that, few in Stepanakert are hopeful that such talks will lead to a lasting settlement.

For the time being, energy exports are enabling Azerbaijan to bankroll its ambitions to become a major regional power. A year on from capturing swaths of territory in Nagorno-Karabakh, Baku has continued to plow funds into its armed forces, allocating around $2.6 billion for defense and national security in 2022. That’s more than 5 percent of its GDP—the fifth-highest figure of any country in the world. It has also become a major buyer of advanced hardware such as Turkey’s Bayraktar TB-2 drones, which have gained a fearsome reputation in Ukraine targeting Russian troops. The spending is matched by increasingly tough rhetoric about the need for Azerbaijan to resolve the status of its border with Armenia and eliminate the “separatist terrorists” in charge in Stepanakert.

“They are increasing the money allocated from the state budget for the military to help with the restoration of liberated territories and strengthen defense capacity,” said Ibadoghlu, the Azerbaijani economist. Yet although the EU is helping to fund this expansion, Ibadoghlu is skeptical that it will become too politically dependent on Azerbaijani gas. “When it comes to alternatives to decrease its dependency on Russian gas, Azerbaijan’s capabilities seem weak compared to the U.S., Qatar, Algeria, and even Iran,” he added.

That list of states that stand to gain from the collapse of Russia’s reputation as a reliable energy provider is growing, and, like Azerbaijan, many have had turbulent relationships with the West in the past.

While the Kremlin has shown it is ready and willing to use energy as a weapon, it is clear that it may not be the only fossil fuel exporter to come up with the strategy of leveraging Western dependency to forestall its critics and drive its military ambitions. As Ukraine can attest, access to cheap energy can go a long way toward helping the world turn a blind eye to territorial ambitions and human rights transgressions. Now, many in Nagorno-Karabakh fear the same mistake is being made once again.

Gabriel Gavin is a British journalist covering Eurasian politics and society. Twitter: @GabrielCSGavin

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