On September 14, 2010, the Romanian, Azerbaijani and Georgian presidents and the prime minister of Hungary signed the Baku Declaration on the implementation of the Azerbaijan-Georgia-Romania Interconnector (AGRI) energy project. This project, which is expected to transport liquefied natural gas from Azerbaijan to Europe via the Black Sea, has received little media coverage, and was almost entirely absent at some important events on energy issues such as the 2010 Baku Caspian Oil and Gas Conference. Experts have been skeptical about the chances of carrying out the AGRI project, which was initially interpreted as a means for Baku to exert pressure on Ankara during a difficult period in Azerbaijani-Turkish relations.
BACKGROUND: In 2009, Azerbaijani-Turkish relations were hampered by Turkey's initiative to normalize its relations with Armenia, which had been frozen since the 1990s. This political step, backed by the new U.S. administration, worried Azerbaijani officials, to whom a resolution of the Nagorno-Karabakh conflict is a prerequisite for the normalization of Turkish-Armenian relations. In May 2009, the Azerbaijani Foreign Minister, Elmar Mammedyarov, stated that it was “impossible to achieve progress in the region without taking Azerbaijan’s position into consideration and without a solution to the Nagorno-Karabakh conflict”.
The political tensions influenced the ongoing process of negotiations on the conclusion of a new Azerbaijani-Turkish gas agreement after the expiration of the previous bilateral gas supply contract. In April 2009, the CEO of the Azerbaijani state oil company (SOCAR) called for a revision of the price for gas delivered to Turkey because the price agreed in 2001 was below international rates. His position was supported by the Azerbaijani president, who added in October 2009 that given the stalemate with Ankara, Baku would consider alternative options for its new gas exports from Shah Deniz-2. These statements followed the announcement of provisional roadmap for the normalization of relations between Turkey and Armenia on April 22, 2009 and the signature of the Zurich Protocol on establishing Diplomatic relations between Armenia and Turkey on October 10, 2009.
The persistence of difficulties in the Azerbaijani-Turkish bilateral relationship became a serious obstacle to the achievement of EU-backed energy projects such as Nabucco, ITGI and TAP, which were conditioned by Azerbaijani-Turkish bonne entente.
Consequently, Romania made a proposal to Azerbaijan regarding the transport of liquefied gas to Europe via the Black Sea. Azerbaijan initially accepted its involvement in the AGRI project, seeing it as a bargaining chip in its political and energy negotiations with Ankara. Since the transit terms and conditions for Azerbaijani gas exports were the main problem between Azerbaijan and Turkey, Baku sought to demonstrate to Ankara that it was considering alternatives to its gas exports via Turkey.
In April 2010, the Azerbaijani Minister of Energy signed the intergovernmental memorandum on production and transportation of Azerbaijani LNG via the Black Sea with his Romanian and Georgian homologues, which was approved by an Azerbaijani presidential decree in May 2010. Despite the signature of an Azerbaijani-Turkish gas agreement on June 7, 2010, Baku continued to take its participation in the AGRI project seriously. The downturn in Azerbaijani-Turkish relations thus induced Azerbaijan to seriously consider a third energy route to Europe, independent of Russia and Turkey alike. The question is how Turkey and Russia will react to the development of an energy link which is susceptible to damage their geopolitical interests.
IMPLICATIONS: Most Turkish and Russian analysts have expressed doubts over the realization of AGRI, which according to them could face financial, security and political problems. Firstly, they are questioning who will fund this project estimated at US$ 6-7 billion considering the EU’s recent economic problems. On the Russian side, some experts also mention the security aspects of AGRI, because it must transit Georgia, whose political and geopolitical situation is still fragile after the August 2008 war. Turkish analysts discuss the political aspects of this project and how it will affect the strategic partnership between Azerbaijan and Turkey. According to a Turkish expert, the solid relations between the two states have recently been reconfirmed by the creation of a Strategic Council for high level cooperation. During the signing ceremony on September 15, Azerbaijan's president said that the Supreme Council for Strategic Cooperation “will strengthen and deepen cooperation between the two countries”, ensuring that “future generations will carry forward this friendship and brotherhood”. Consequently, from a Turkish point of view the completion of an energy project like AGRI bypassing Turkish territory is highly unlikely.
Turkish and Russian officials or energy company representatives have so far not officially commented on the AGRI project. A European energy analyst noted a “mysterious” attitude a toward the AGRI project on Turkey’s part during the CIS Oil and Gas Transportation Conference held on October 2010 in Istanbul, which gathered political officials and energy company representatives of Turkey, Russia and CIS countries. Accordingly, representatives of the Turkish energy companies are very diplomatic in their comments on AGRI project, saying that they are “not concerned by it as long as they are not involved with it”. In Russia, there were a few slight reactions in the media according to which Moscow would “welcome” the accomplishment of this project, because it is not viewed as a threat to Russian interests. On the contrary, it would deprive Russia's main cause of concern, the Nabucco project, of gas. Yet, some Russian experts called for a substitution of the South Stream project with a LNG transport project to Europe from Russian Black Sea ports to Turkey.
In spite of these modest reactions, AGRI will likely affect Russian and Turkish long term interests. Turkey’s ambitions are to maintain and reinforce its status as a Eurasian energy pivot while Russia is seeking to keep and strengthen its status as the main Eurasian energy player. Both want to retain their energy leverage with the EU, even though Turkey’s European integration is no longer Ankara’s first priority and Moscow does not perceive the EU as a threat or a strong rival. The AGRI project could revolutionize the regional energy equations, because it could become the first stage of the Southern energy corridor, bypassing Turkey’s territory and reducing the Russian energy monopoly on European markets. In the long term, it could become an attractive alternative for other countries of the Caspian region, which are hostage to their geography and regional geopolitics. The Romanian president has already suggested to the Eastern Caspian Sea countries to join the AGRI project with reference to Kazakhstan and most importantly to Turkmenistan, whose president was recently invited to Bucharest. In light of the unresolved demarcation of the Caspian Sea and the obstacles this may pose against the construction of a Trans-Caspian pipeline, the AGRI project could establish the necessary regional infrastructure for transporting Central Asian gas to Europe.
CONCLUSIONS: On the one hand, the AGRI project seems to be advantageous commercially, politically and strategically to Azerbaijan, which is seeking to diversify its energy routes to Europe. It is also highly attractive to European countries who are trying to reduce their energy dependence on Russia, and is likely to be completed sooner than the Nabucco gas pipeline which is still searching for sufficient gas supply. Yet, Azerbaijan needs to consider several regional parameters and political priorities, since energy export it is its main foreign policy tool. Neighboring two strong and ambitious actors like Russia and Turkey, Azerbaijan is forced to continue its balanced regional game to avoid angering both of them simultaneously. Since Turkey is a more important partner for Azerbaijan than is Russia, the realization of AGRI depends on the evolution of Azerbaijani-Turkish relations and more specifically, on Baku's ability to ensure Ankara that the second stage of the Southern Energy Corridor will transit Turkish territory.
AUTHOR’S BIO: Inessa Baban is a Ph.D. candidate in geopolitics at Paris-Sorbonne University. She is a former visiting scholar at the Center for Strategic Studies under the President of Azerbaijan.