Azerbaijan-Russia

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Overview

According to Azerbaijani blogger Shahin Abbasov in 2013, over the past two years relations between Azerbaijan and Russia steadily deteriorated, on the back of Russia's decision to not renew its lease on the Gabala radar station and the loss of its military presence in Azerbaijan. Abbasov also noted the lack of interest from Baku in joining the Putin-backed Eurasian Economic Union and a failure to conclude a Nagorno-Karabakh peace settlement as further factors in the increased tensions.

In his analysis, Russia's 'soft power' is particularly prominent in the energy sphere, where Russia is eager to retain its dominant position in gas supply routes to Europe, while Azerbaijan signed an agreement with Turkey on construction of the Trans-Anatolian pipeline (TANAP), part of the 'Southern Corridor' project to circumvent routes through Russia.[1]

Oil trade

Azerbaijan exports oil to Russia via the Baku-Novorossisk oil pipeline. In February 1996 a contract was signed between the AIOC international consortium, SOCAR and Russian state-controlled Transneft on the transportation of Azerbaijani oil to Russia's Black Sea port.[2]

However in March 2013 Baku-based Turan news agency reported that volumes transported along this route were falling and that both sides were losing interest in the infrastructure. While the pipeline was initially planned to pump 5 million tons of oil a year, in 2012 it pumped only 2 million tons, as Azerbaijan production was freed up for the BTC pipeline.[3]

Gas supply

In October 2009 Azerbaijani state oil company SOCAR and Russian Gazprom finalised a deal on gas purchase and sale. Pursuant to the contract, the initial volumes of gas that Gazprom would buy would be 500 million cubic metres per year, with potential to increase.[4]

This agreement for the first time turned Azerbaijan from an importer of Russian gas to an exporter of gas to Russia, coming on the back of increasing production in Azerbaijan. The framework agreement covers the years 2010-2014 and starting from January 2010, the volumes were exported through the Mozdok–Makhachkala–Kazi Magomed pipeline (also known as the Baku-Novo Filya pipeline) for use in Russia's North Caucasus territories. This pipeline was historically used in reverse to supply gas from Russia to Azerbaijan, before Azerbaijan began producing natural gas itself.[5]

According to reports by RIA Novosti, Russia offered to buy Azerbaijan's gas at a record high price of US $350 per 1,000 cubic metres ($50 higher than the price offered to Turkmenistan and Uzbekistan earlier in the year). The report suggests that this was a move to delay or disincentivise the EU-backed Nabucco project, which would bypass Russian territory.[6]

According to analysis by the Jamestown Foundation, this deal was a strategic move on Azerbaijan's to diversify export options and send a message to Turkey that they do not have a monopoly on transportation of Azerbaijani gas.[7]

References

  1. Azerbaijan: Is the Kremlin Up to Old Tricks?Eurasianet, 12 March 2013.
  2. Baku-Novorossiysk Oil PipelineCaspian Weekly, 4 March 2010.
  3. Baku-Novorossiysk – divorce Italian styleTuran Information Agency, 7 March 2013.
  4. Gazprom and SOCAR sign purchase and sale contract for Azerbaijani gasGazprom, 14 October 2009.
  5. Azerbaijan-Russia Gas Agreement: Implications for Nabucco ProjectJamestown Foundation, 15 October 2009.
  6. Russia ready to buy Azerbaijani gas at record priceRIA Novosti, 30 June 2009.
  7. Azerbaijan-Russia Gas Agreement: Implications for Nabucco ProjectJamestown Foundation, 15 October 2009.