Azerbaijan’s Energy Diplomacy and Western Competition over Caspian Gas

The seminar on Azerbaijan's Energy Diplomacy and Western Competition over Caspian Gas, which the IAI held in Rome on 2 November 2011 at the Palazzo de Carolis, was part of the project South Caucasus and the West: Towards Close Cooperation? launched by the institute in early 2011.

The seminar offered the opportunity for an extensive exchange of views on the Azeri energy policy and the wider Caspian energy scenario as well as on the challenges and implications of the Western efforts to diversify gas supplies through energy cooperation with Azerbaijan and other regional actors. The debate focused on the prospects of the various pipeline projects for the transportation of the Caspian gas of Shah Deniz field II to the European markets: Nabucco, the Interconnector Turkey-Greece-Italy (Itgi), the Trans-Adriatic Pipeline (Tap) and the South East Europe Pipeline. Both the commercial and geopolitical rationales underpinning these projects were examined.

By analysing the geopolitical context of the Western initiatives, the two papergivers agreed that the upcoming decision by Azerbaijan on transportation of Caspian gas will have wide-ranging implications for EU-Russia relations and the EU's economic and political presence in the Caspian-Caucasian region. However they offered different views on the pros and cons of the various transportation projects. According to Elnur Soltanov, of the Azerbaijan's Diplomatic Academy, the Shah Deniz field II gas will surely flow westward. In his view, the South East Europe Pipeline is the most convenient transportation option, as it is cheaper than others and would be able to carry enough gas to supply markets more in need of energy diversification. By contrast, Michael Denison, research director of the Control Risks, emphasised the comparative advantages of Nabucco: it could transport additional gas from Turkmenistan and enable the EU to establish close political and commercial relationships with the Caspian producers.

The two discussants, Pinar Ipek, professor at the Bilkent University in Ankara, and Nicolò Sartori, researcher at IAI, underlined the shortfalls of the European action, both in implementing the badly needed integration of the internal gas market and in ensuring a level playing field in the competition over the southern gas corridor.