OPINION: Azerbaijan’s energy diplomacy pivots to the Balkans

OPINION: Azerbaijan’s energy diplomacy pivots to the Balkans
Azerbaijan's President Ilham Aliyev (left) and his Bulgarian counterpart Rumen Radev open the new SOCAR office in Sofia. / president.az
By Fuad Shahbazov in Durham May 23, 2023

Azerbaijan has adjusted its foreign policy agenda to target the Balkan region that is more vulnerable to the energy crisis than the states of Central and Western Europe.

Energy has long been the core element of Azerbaijan's pragmatic foreign policy, and recently it gained more impetus as European nations sought additional energy suppliers to replace Russian fossil fuel exports. Although the EU’s leading member countries are able to compensate for energy shortages by using energy reserves, employing alternative energy sources and importing additional gas volumes from alternative suppliers, the less developed Balkan states are struggling to adapt to the energy deficit. 

More gas for the Balkans

On April 26, a signing ceremony for the memorandum of understanding on encouraging cooperation among Bulgartransgaz (Bulgaria), Transgaz (Romania), FGSZ (Hungary), Eustream (Slovakia) and the State Oil Company of the Azerbaijan Republic (SOCAR) was held in Sofia. The memorandum paves the way for additional Azeri gas volumes to flow to the Balkans amid the unprecedented energy crisis in Europe caused by Russia's invasion of Ukraine. Moreover, the document highlighting Azerbaijan’s strategic partnership with the Balkan nations will ease the cooperation between the local authorities and the transmission and distribution system operators. 

With the expansion of multilateral ties, President Ilham Aliyev’s recent visits to Albania, Bosnia & Herzegovina, Bulgaria and Serbia — with which Baku has established individual partnerships — fit into a broader framework, with Azerbaijan increasingly pivoting toward the Balkans. 

The cooperation is along similar lines to Azerbaijan's engagement with the EU, which is based on energy. Substituting for Russian gas 

According to the recent EU-Azerbaijan deal signed in February 2023, Baku plans to double natural gas exports by 2027, while the first steps are being made to start exporting green energy to European countries. Moreover, Azerbaijan's natural gas export increased from 19bn cubic metres (bcm) to 22.6 bcm in 2022. 

Despite Azerbaijan’s increasing exports and its natural gas reserves, it is not able to fully substitute for Russia at the pan-European level in terms of gas supply. However, it can play a crucial role in promoting the energy security of individual states, both in the European Union and in the EU's immediate neighbourhood, by reducing their dependence on Russian gas. Before the Ukraine war, Russia provided roughly 40% of all imported gas to the EU, while recently the exports fell around 30% last year. In 2022, European nations mainly compensated with LNG from the US, which accounted for 64% of Europe’s LNG imports.  

Baku plans to pump additional gas volumes to Europe after extracting the first gas from the Absheron gas field, which will be a key step in increasing gas production in Azerbaijan. According to estimates, the gas field possesses around 350 bcm of natural gas and 45mn tonnes of gas condensate. Various forecasting models indicate that gas production in Azerbaijan will be about 49.2 bcm in 2024 and 49.7 bcm in 2025. 

Shared resources

It is questionable whether Azerbaijan would be able to increase gas flow simultaneously to the EU and the Balkans and meet growing domestic consumption.

However, considering the EU's strong commitment to peace and stability in the European continent, it supports Azerbaijan's engagement with the economically vulnerable Balkan states. 

Moreover, Azerbaijan's activities in the Balkans are welcomed due to natural gas exports and its capability to help boost the development of green energy and transmission of energy from renewable sources to the European market. According to local media, Azerbaijan plans to increase the share of renewable energy sources in the country's overall energy production to 30% by 2030.

In this regard, a new agreement between Azerbaijan, Georgia, Hungary and Romania was signed in December 2022 to develop the 1,100-kilometre-long Black Sea strategic submarine electricity cable aimed at transporting energy from Azerbaijan to the European Union through Georgia. 

Moreover, Azerbaijan’s rapprochement with the Balkan countries is not limited only to fossil fuel exports and green energy but also to large investment projects in the region. For example, in 2023, Azerbaijan is set to invest significantly in gas infrastructure in Albania amid the ongoing expansion into the region’s gas distribution network. Although Albania is a transit country for Azerbaijan's Southern Gas Corridor, being one of the countries on the Trans-Adriatic Pipeline (TAP), the country mainly relies on hydropower, as well as smaller amounts of solar and fossil energy imports.

A few years earlier, Azerbaijan announced similar plans to invest in the gas infrastructure of Bulgaria, another loyal customer of Azeri natural gas. In this vein, it should not come as a surprise that Azerbaijan inaugurated the new headquarters of its State Oil Company (SOCAR) in early May 2023, as the company steadily became an effective tool of Azerbaijan’s soft power in the Black Sea basin.

Hence, the Black Sea region is gradually becoming an area of particular importance in Azerbaijan's diplomacy due to its strategic importance and geographical proximity to Europe. Increased energy supply to Europe and further development of critical connectivity projects, namely the Middle Corridor, will only serve to advance Baku’s aspirations and opportunities.

Fuad Shahbazov is a Chevening FCDO scholar at the University of Durham School of Government and International Affairs (SGIA). 

Opinion

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