In the name of Nabucco

Ilham Aliyev is ready to spur Ankara and Brussels at the expense of Moscow

The Russian gas monopolist Gazprom has signed a long-awaited agreement on the supply of Azerbaijani gas to Russia. For this purpose, President Dmitry Medvedev flew to Baku yesterday for several hours. He met with his Azerbaijani counterpart Ilham Aliyev as recently as early June at the St. Petersburg Economic Forum. However, the issues of supplies of Azerbaijani gas and the problems of peaceful resolution of the conflict in Nagorno-Karabakh do not allow the two presidents to part for a long time.

Negotiations between the European participants in the Nabucco pipeline project, Turkey and Azerbaijan as a fundamental source for filling the new pipeline bypassing Russia have again dragged on (the signing of an intergovernmental agreement, which was planned in the first half of the year, has been postponed to a later date). Baku, therefore, has an incentive to intimidate potential buyers from Europe with a contract with Gazprom, and Moscow to scare them away from Azerbaijani gas with a fairly high, “competitive”, as Alexey Miller called it, price. A price that, according to the calculations of the Russian side, should make it unprofitable to purchase gas from Azerbaijan for supplies through Georgia and Turkey to Europe via a new expensive pipe.

The current document between Gazprom and SOCAR, the head of the Russian concern Alexey Miller told reporters, is legally binding. From January 1 next year, the company will annually purchase 500 million cubic meters of Azerbaijani gas. Even before leaving, he assumed that the volumes would be small, but “trouble has begun.” The price, Mr. Miller explained, is “commercially profitable” for Azerbaijan. According to him, the economic benefit of the Russian concern will consist in optimizing transport costs. Physically, Azerbaijani gas will be consumed in the neighboring southern regions of Russia, which will free up volumes of gas of Russian origin for export supplies. Approximately the same scheme operated in the field of purchases of Central Asian gas. According to Vremya Novostei calculations, if the price of oil does not fluctuate significantly until the end of September, in the first quarter of 2010 Gazprom will not be able to buy Azerbaijani gas at more than $220-230 per thousand cubic meters, so as not to incur losses from this operation .

In the future, the agreement provides for an increase in supply volumes - Gazprom is included in the list of potential buyers of gas that will be produced at the second stage of the Shah Deniz field (export of 12-14 billion cubic meters of gas). “All other things being equal, Gazprom will have priority in purchasing compared to other buyers. Other buyers will have to be offered more favorable conditions,” the head of Gazprom stated with satisfaction. Thus, the agreement will allow Azerbaijan to keep buyers on their toes, if not take them out of the game altogether.

The interests of Baku are also generally respected. Firstly, Azerbaijan will supply gas through the existing infrastructure, which does not require significant investments in the country. Secondly, the price will be tied to the prices of Gazprom’s European contracts. Thirdly, it will force potential buyers from the EU and Turkey to more actively seek Azerbaijani gas favors within the framework of supplies from the second phase of Shah Deniz.

Of course, Moscow's strategic goal is to convince Baku to abandon participation in the Nabucco project. But unlike usual practice, the Russian authorities are trying to achieve this goal using economic rather than political arguments. And this is bearing certain fruits, because Baku is in no hurry to announce its refusal to participate in Nabucco, but has not yet given its consent.

“For manufacturers, diversification of supplies is as important as diversification of sources of raw materials for consumers,” Ilham Aliyev said at the final press conference, noting that “this is a new page in our relations.” “This is just the beginning. But it’s a good start to further engage in cooperation in the gas sector,” Dmitry Medvedev peacefully supported him.

The presidents also talked about how to maintain trade turnover despite the crisis. Trade turnover last year increased by 39.3% and amounted to $2.4 billion. However, in January-April of this year the drop was almost 17%. At the same time, the structure of trade turnover is one of the most diversified, because Azerbaijan does not need Russian oil and gas. Almost 28% of Russian exports to Azerbaijan are machinery and equipment, and 26% are food products. “A slight reduction in trade turnover is a temporary factor. And taking into account the signed documents, I am confident that next year there will be growth,” said Mr. Aliyev.

The frozen conflict in Nagorno-Karabakh is also a constant focus of the negotiations between the two presidents. And the point is not only that frozen conflicts, as history shows, sooner or later flare up again. Russia is extremely interested in strengthening its influence in the region. For this, it is Moscow, and not Washington or Brussels, that must play the main role in resolving the conflict. Moreover, to achieve results exclusively through diplomatic means, and not through a peace enforcement operation. It is impossible in Karabakh - it has long existed in a de facto autonomous regime from Azerbaijan.

“This conflict has every chance of being resolved in a fairly close historical perspective,” Mr. Medvedev said at the final press conference yesterday. “Russia is ready to continue to help this process,” he said. The President of Russia noted that conflicts of this kind can only be resolved on the basis of a solid legal framework and general principles of international law. “The most important thing is not that these principles exist, no one denies them, but that the parties are ready to consider all issues in this spirit and resolve the conflict on the basis of basic principles,” he said. This, according to Mr. Medvedev, gives hope that the complex and long conflict has a chance of being resolved. “The last meeting that took place in St. Petersburg showed, in our opinion, that the participants in the negotiations, I mean Azerbaijan and Armenia, are ready to gradually eliminate the differences that exist in positions on certain issues and move forward.” , said the Russian President.

“We continue to count on Russia’s active participation as a mediator, as Azerbaijan’s neighbor, in resolving this complex issue,” Ilham Aliyev said in turn. “Today the negotiation process is entering its final phase,” he added. Mr. Aliyev also believes that the parties will be able to resolve the problem. He thanked Russia and personally Dmitry Medvedev for their active participation in the process of resolving this problem. According to the leader of Azerbaijan, the Nagorno-Karabakh conflict must be resolved on the basis of the international legal framework, but taking into account the territorial integrity of Azerbaijan. “The principle of self-determination of peoples can be successfully implemented within the framework of the territorial integrity of a single Azerbaijani state,” the Azerbaijani president said.

Vera SITNINA, Baku, Alexey GRIVACHS