FUELing Problems in Iran-Azerbaijan: Europe in the Losers' Circle

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“Israel” is currently increasing its political and security presence in the region, with rising cooperation with Iraqi Kurdistan and Azerbaijan. In terms of energy security, Europe’s increasing dependence on Russia, whose market share in gas sales to the former is estimated to rise up to 40% by 2040, means that Europe must necessarily diversify its resources in order to avert a possible energy crisis.

This short article is a modest attempt to present the geopolitics of natural gas security in the region to get an idea of how things may play out in the future, particularly with regards to Iran, Turkey, Russia, Azerbaijan, and “Israel".

Russia; the elephant in the room

First of all, the elephant in the room. Russia is by far Europe’s largest supplier of natural gas. In 2018, up to 40% of the EU’s natural gas imports were Russian, and despite the EU's attempts to diversify its energy sources to prevent any energy crisis that may stem from future political tensions, it is still expected that Russia will be its main supplier for years to come, especially with the inauguration of the Nord Stream 2 pipeline.

Nord Stream 2 doubled Russia’s gas export capacity across the Baltic Sea to 110 Bcm (billion cubic meters), which is more than half of Russia’s total pipeline gas supplies to Europe. For reference, the first quarter of 2021 saw a natural gas consumption of 141.8 Bcm in the EU.

In terms of LNG (Liquefied Natural Gas), the US is Europe’s main supplier, with 24% of Europe's LNG imports coming from the US and 21% coming from Russia. In order to further limit dependency on Russia’s pipeline natural gas, European countries will have to invest in regasification plants that will allow them to further cooperate with other non-Russian countries that can export LNG.

So how can Europe better diversify its imports?

Quite simply, there are three emerging markets that the EU can cooperate with in order to secure its growing energy needs. The first being North Africa, from which Europe imports 13% of its natural gas (and 10% of its oil). Recently, the UK has decided to invest in Morocco’s green energy capabilities in order to further cement its independence from fluctuations in hydrocarbon prices. More EU countries are expected to follow suit, using North Africa’s vast desert regions to that end.

The problem with these markets is that they’re prone to future instability, due to regional quarrels, Libya’s continued destabilization, and the expansion of ISIS in North and West Africa. 

The Eastern Mediterranean is also another emerging market, but work is only just beginning there. Plans are ready to construct the EastMed pipeline, which is forecasted to supply 10% of Europe’s energy needs from occupied Palestine's offshore fields. The problem here lies in the fact that the Israeli occupation is operating in a very tense part of the world. It so follows that work on EastMed may render the situation even tenser, or may itself grind to a halt, if the Israeli occupation decides to pursue aggressive policies in stealing Lebanese oil and gas, or if the Palestinian Resistance decides to target the Israeli oil and gas infrastructure in a retaliation scenario.

The Caucasus – Western Asia

This is where it’s all at, where all of the recent developments come into play. It’s not just a matter of geopolitics, but also energy security.

In 2007, Iran inaugurated the operations of the Iran-Armenia gas pipeline. Facing the expansion of Iran’s role, which could possibly expand beyond Armenia into the Caucasus and the European Union, Russia’s Gazprom (and its offshoot Itera) bought a majority share of 68% in the Armenian section of the pipeline. Doing so allowed Russia to reduce the Iran-Armenia pipeline’s diameter from 1,420 mm, which would have allowed it, later on, to export to Europe, to 700 mm. This confined Iran to the Armenian market.

Though Russia did block Iran’s attempts to rival it in European markets, Iran’s strategic position allowed it to divert its output toward Asian markets through an agreement with Russia, as evidenced by Russia’s joint venture cooperation with the Islamic Republic to develop its gas fields at the time.

Where it gets tricky

The TANAP (Trans-Anatolian Natural Gas Pipeline) was inaugurated in June 2018, stretching from Azerbaijan to Turkey, passing through Georgia. The pipeline is linked with the Southern Gas Corridor (SGC), which supplies gas to Italy. Upon the completion of this pipeline, Azerbaijan became Georgia’s largest gas supplier, with the SGC delivering more than 10 Bcm of gas per year to the EU for the next 25 years, 8 Bcm of which are exported to Italy and 2 Bcm delivered equally to Greece and Bulgaria.

"Israel"; the biggest threat to Europe's energy security

Azerbaijan’s growth in the hydrocarbon sector and its gas deliveries to Europe will surely allow Europe to diversify its gas imports. But the main impediment here is “Israel’s” relation with Azerbaijan, and how this reflects on the future of Europe’s energy security.

The Israelis' rising cooperation with Azerbaijan in the security sector against neighboring Iran threatens to destabilize no one but Azerbaijan, which is greatly dependent on its energy sector. In 2016, “Israel” sold Iran’s neighbor to the north close to $5 billion in military equipment, with other negotiations beginning in August 2021 to buy another $2 billion in weapons.

Iran's recent "Fatehan-e Kheybar" maneuvers signaled very clearly to Azerbaijan that the Islamic Republic will defend its sovereignty. In 2009, a memo released by WikiLeaks has Deputy Chief of the US Embassy in Baku, Donald Lu, quoting Azerbaijan's Aliyev as saying that his country's relationship with "Israel" is like an iceberg; "nine-tenths of it is below the surface."

US intelligence officials believe that "Israel" has gained access to abandoned former Soviet airbases in Azerbaijan years ago, which it has long planned on using as advanced forward bases from which it can launch strikes on Iran. Though such a scenario is farfetched given international developments, nothing prevents "Israel" from using these airfields to conduct other kinds of operations, especially in light of Azerbaijan acquiring Israeli drones.

Chaos in the Caucasus is payday for the US and "Israel"

"Israel" sees Azerbaijan as a military ally. On the other hand, the former is also Azerbaijan's second-largest oil customer. If any chaos was to emerge, it would only damage Azerbaijan's oil and gas sales, which account for 40% of its GDP and 86% of its exports. This, in turn, will necessarily place all countries in need of Azerbaijan's oil on the losing side of the game that "Israel" has nothing to lose in.

Taking into consideration the fact that the Caucuses seem to be the most stable route through which Europe can secure its gas imports, as North Africa and the Eastern Mediterranean become even more fragile by the day, Europe has a lot to lose from “Israel’s” foray into Iran’s neighborhood.

The SGC is a crucial project for the EU’s need of diverse gas supplies, at least when it comes to Italy, Greece, and Balkan countries, but it offers no prospects for Western European countries. The problem herein further highlights Europe’s disunity on the diversification of gas supplies: Eastern European countries are trying to break away from Russia’s dominance in the energy sector, while Western European countries, especially now that Nord Stream 2 is completed, will only become more dependent on it.

The only powers standing to gain anything from a destabilization of the Caucuses are the US and “Israel,” if we take into consideration their animosity towards Iran on the one hand, and the increased sales in gas they stand to make, particularly if the SGC were to suffer any supply issues. The powers that stand to lose the most are the Europeans, especially Eastern Europe.