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Southern Gas Corridor: unique project of common interests to all parties - ANALYSIS

Baku – APA. Gas extracted from Shah Deniz field within the Southern Gas Corridor project will be delivered to Turkey in 2018 and to Europe a year later. Through the $45 billion Southern Gas Corridor project it is planned to export 16 billion cubic meters (bcm) gas a year, 10 billion of which are planned to be supplied to Europe and 6 billion – to Turkey.

Azerbaijan with 2.5 trillion cubic meters of proven natural gas resources has the ability to increase the transportation of natural gas to Europe up to 20 bcm. Taking into consideration the possible involvement of Iraq and Iran in this project after the solution of political problems, it is not difficult to imagine how important the Southern Gas Corridor project is.  

 

The uniqueness of this project lies in the fact that it meets the interests of all parties. Historical experience shows that if any energy project changes the situation in the market, it can strike at least one of the participants in the market. The Southern Gas Corridor conforms not only to the interests of project parties, but also to regional powers. The reason is changes in the global political system, as well as the fact that Azerbaijan in the process took a position in which fully meets its interests.

 

What will the Southern Gas Corridor project contribute to Azerbaijan, Russia that is not directly involved in the project, Turkey which is rapidly becoming a state of energy and Europe which is extremely interested in diversifying energy transportation routes?

 

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Via the Southern Gas Corridor project, Azerbaijan fulfills an important mission of diversifying energy resources. This project will bring a double dividend in terms of increasing either the country’s revenues in its domestic policy or Azerbaijan’s importance in foreign policy. Furthermore, Azerbaijan began to play an important role in diversification of not only energy transportation routes but energy resources as well. Another strategic importance of the project is that the Southern Gas Corridor affects the economic situation of about 30 countries (producing, transit and consuming countries). This means that the relations between these countries will reach a new level and conflicts will recede into the background. In this sense, Azerbaijan, the initiator of the project, will indirectly contribute to the restoration of stability in Asia and Europe. Therefore, the Southern Gas Corridor should also be regarded as the project of peace, political and economic stability.

 

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Azerbaijan’s energy policy, based on the principles of healthy competition, has turned Russia not its competitor but its partner. Russia has already perceives this project not as a loss of their positions in the gas market, but as a normal market competition.  Europe's energy demand is growing each year, and Russia comprehends that it is unable to meet this demand alone in the current situation due to both economic and political reasons. In this sense, the entry of a partner country such as Azerbaijan into the market is beneficial for Russia. At the same time, the Southern Gas Corridor opens up extra maneuvering capabilities and advantages for Russia in its confrontation with the West. Either the Southern Gas Corridor or Turkish Stream project quintupled the importance of Turkey in gas supplies to Europe. Supporting these projects, Russia pulls (or neutralizes) an important country as Turkey on its side in the confrontation with the West.

 

The second point is about Ukraine, which is a transit country for the delivery of Russian gas to Europe, and has a near-monopoly position in the gas transit. It is one of the main reasons why the West supports Ukraine in the conflict. The Southern Gas Corridor shows Russia that there are alternatives for gas supplies to Europe.

 

The third point is that Russia has abandoned the policy of construction of new pipelines in Europe due to a severe economic crisis. In fact, "Gazprom" will not actually participate in the construction of new pipelines in the coming years. Moscow's policy means “take and pay”, so construction of new pipelines having further advantages without participation of Russia meets its interests.

 

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The projects designed for the transportation of Azerbaijan's hydrocarbon resources to Europe over past 20 years increases the importance of Turkey both as state of energy and transit country. Following the "Turkish Stream" project, the Southern Gas Corridor also will strengthen strategic position of Turkey. Within this project, Turkey will also have the opportunity to buy natural gas for domestic consumption at lower prices. So this project is irreplaceable for Ankara in terms of both the crisis that has hit the world and increasing the country’s competitiveness. And the third point is that Turkey, which has turned out to be one of the main figures for the gas supply of Europe, will get an opportunity to make an extra maneuver in relations with the EU. Considering Ankara almost lacks the opportunities of such pressure in its relations with Europe, it would be possible to guess the importance of the Southern Gas Corridor project for Turkey.

 

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The problem of natural gas supply has always troubled the European Union. This problem was the basis of relations with Russia for last decades. The diversification of energy transportation routes has always been the main part of the policy pursued by the EU.

 

Europe seems to have come to understand that

 

a) it will never be able to completely solve the problem of energy dependence

b) this issue will always be used as a tool for pressure on it

c) the issue of natural gas supply is a threat to the integrity of Europe and helps separatist moves intensify

 

The establishment of the Common Gas Union that is meant to distribute the gas being supplied to Europe from a single center is the result. In this respect, Europe is interested in the creation of an alternative energy route in any case.

 

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As can be seen, the Southern Gas Corridor corresponds to the interests of all participating states and regional powers. The all sides in the process understand that Azerbaijani gas is the sole new gas sources of European participants, and thus accept Azerbaijan as the main contributor to the Southern Gas Corridor and a country that is implementing this project.

 

Vugar Masimoghlu, APA Analytic Center

 

 

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