Moscow's continuing success in monopolizing the the Caspian Sea region's vast oil and gas distribution networks. Russian-Azeri relations do not necessarily spell catastrophe for Armenia nor is it anything new. Russia already has very lucrative relations with Azerbaijan. As a matter of fact, despite Turkey's direct involvement in the Chechen insurgency, even Russian-Turkish bilateral trade have been very profitable for both nations. Economy is one thing, geopolitics is another. Moscow and Baku cooperate in the energy sector, politics, trade, etc. In reality, ever since the Alievs took power Baku has been very compliant to demands by Moscow. Therefore, if Russia was to abandon its strategic relations/alliance with the Armenian Republic it could/would have done so many-many years ago. However, what strategic value would that have had for Moscow? How would abandoning Armenia's alliance serve Russian interests? If Moscow today is getting what it wants from Baku, its only because Moscow holds the region's geopolitical/geoeconomic cards. It also holds the Nagorno Karabagh card. By contrast, Azerbaijan holds no real weight over Moscow. Azerbaijan is essentially a hostage to the Russian Federation. Baku knows that the Kremlin can essentially ruin Azerbaijan if it chose the path of belligerence. So, why would Moscow change what its been doing so successfully in the region? Why change the status quo? When the milk is free, why buy the cow?

Arevordi

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Russia: Courting Azerbaijan for Natural Gas


June, 2008

Summary

Russia’s Gazprom is in talks with Azerbaijan to purchase natural gas. Europe and Iran have also been courting Azerbaijan for its natural gas, but Gazprom has announced it is now willing to pay the same as, if not more than, the Europeans and Iranians are offering. If Azerbaijan reaches an agreement with Gazprom, it could cut off one of Europe’s options for diversifying its natural gas supplies away from Russia, while enabling Moscow to keep its natural gas exports flowing westward.

Analysis

Russian natural gas giant Gazprom is in talks with Azerbaijan to purchase natural gas. Russian Ambassador to the South Caucasus Vasily Istratov said June 4 that Gazprom CEO Alexei Miller met with Azerbaijani President Ilham Aliyev on June 2 in Baku. Gazprom is proposing to pay the same as — and possibly more than — Europe and Iran have offered for the natural gas. This marks one of the first times that Gazprom has actually said it will put up the cash to compete with other potential natural gas buyers. If Azerbaijan goes with the Russian suitor, it could cut off one of Europe’s options for further diversifying away from Russian energy supplies and could secure Moscow’s ability to continue its own westward exports.

Russia supplied Azerbaijan with natural gas until around 2006, when Azerbaijan’s own natural gas fields came online, eliminating the country’s dependence on Russian natural gas. But obviously the infrastructure is still in place, hooking Azerbaijan into Russia’s complex spider web of pipelines running from northern Russia and Central Asia to Europe, with spurs shooting down into the Caucasus. Each of the three lines running from Russia to Azerbaijan has an annual capacity of 10-13 billion cubic meters (bcm). One of those lines was turned into a line running through Georgia to Turkey, called the South Caucasus Pipeline, which takes natural gas from Azerbaijan’s Shah Deniz field to Europe.

Shah Deniz contains 1.2 trillion cubic meters of natural gas reserves and, in its first phase of production, pumps 8.6 bcm annually, which goes to Europe. The second phase of the field is expected to pump another 8.6 bcm annually starting in 2011. It is this second phase that is drawing bids not only from Europe, but also from Iran and now Russia. Russia differs from other bidders in that its structural links to Azerbaijan already exist; it would require a simple reversal of the natural gas flow through the Soviet-era pipelines to get Azerbaijani natural gas flowing to Russia and then Europe. If phase two is to produce natural gas for Europe, the Europeans will have to build a parallel line to the South Caucasus pipeline through Turkey, which is not really a difficult project financially for the Europeans.

The battle over Shah Deniz’s second phase thus comes down to who will put up the most cash for the natural gas supplies. Iran does not have the money to compete. In the past, the Europeans have always beaten Russia in bidding contests, because Moscow refuses to spend the money. But Gazprom has offered to pay $360 per thousand cubic meters, which is on the high end of what Europe is expected to pay for natural gas by 2011. Traditionally, Gazprom has bought cheap natural gas from former Soviet states; however, recently, countries such as Turkmenistan have hiked their prices, forcing Gazprom to adjust.

With the large amount of natural gas Russia sends to Europe — approximately a quarter of Europe’s consumption — Russia depends on supplies from Central Asia to help fill the orders. But Central Asian countries are looking eastward to China as a potential energy customer, making Moscow a little jittery about its ability to meet its export contracts in the long term. Azerbaijan could fill this void. If Russia can secure the second phase of Shah Deniz, it will mean that Europe failed to do so. Sure, Europe will end up with the natural gas supplies anyway, but it will still have to get it from Russia first — at whatever price Moscow demands.

Source: http://www.stratfor.com/analysis/rus...an_natural_gas

Gazprom blocks plans to pump Caspian gas to EU bypassing Russia

"Moves by the European Commission and the United States on the Caspian have forced Russian natural gas monopoly Gazprom to act. Yesterday its CEO Alexei Miller proposed to Azerbaijan's President Ilham Aliyev that Russia would buy gas from the republic at market prices under a long-term agreement. A source familiar with the proposal said purchases could start next year. Gazprom is ready to buy any amount offered by Azerbaijan at world prices, which may rise beyond $300. Previously, Azerbaijan imported Russian gas. In 2005, the monopoly sold t 4.5 billion cubic meters at $60 per 1,000 cubic meters, and in 2006, at $110. In 2007, gas supplies were cut by two thirds after prices rose to the average market figure of $230. Azerbaijan chose to increase its own production by exploiting the Shah Deniz gas field and agree a redistribution of gas quotas with Georgia and Turkey. Azerbaijan has 1.5 trillion cubic meters in known reserves, including 1.3 million in recoverable resources on the Shah Deniz field, located in the Azeri sector of the Caspian shelf. Azerbaijan consumes 11-14 billion cubic meters of gas per year. Despite this, the field's export potential, even in the first phase, is estimated at 12 billion cubic meters. During the second phase there are plans to increase exports by 5 to 7 billion cubic meters. In view of high transportation costs to Turkey and beyond through pipelines not yet built, whose estimated costs are rising all the time, Azerbaijan will find it difficult to compete with Gazprom. According to information available to Vremya Novostei, Aliyev said he would consider the proposal. After all, it opens a window of opportunity for further bargaining with gas buyers - Turkey, Greece, Italy and Austria. The fixed and moderately priced contracts have been concluded only with Turkey's Botas, and for 6.6 billion cubic meters. On the other hand, Baku is the main bastion of Western diplomacy in the Caspian region. Until now it was Azerbaijan that led the support for plans to create corridors for shipping energy resources to Europe bypassing Russia. There is a mix of interests here: first, transit (Azerbaijan and Turkey are linked by the Baku-Tbilisi-Ceyhan oil pipeline and Baku-Tbilisi-Erzerum gas pipeline, which are far from operating at full capacity), political relations (especially with Washington) and a sort of grievance against Gazprom. In addition, to agree to Russia's proposal would mean leaving its own pipeline to Turkey empty."

Source: http://en.rian.ru/analysis/20080603/109170654.html

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Dear reader,

Arevordi will be taking a sabbatical to tend to personal matters. New blog commentaries will henceforth be posted on an irregular basis. The comments board however will continue to be moderated on a regular basis.

The last 20 years or so has also helped me see Russia as the last front against scourges of Westernization, Globalism, American expansionism, Zionism, Islamic extremism and pan-Turkism. I have also come to see Russia as the last hope humanity has for the preservation of classical western civilization, Apostolic Christianity and the traditional nation-state. This compelled me to create this blog in 2010. Immediately, this blog became one of the very few voices in the vastness of cyberia that dared to preach about the dangers of Globalism and the Anglo-American-Jewish alliance, and the only voice preaching the strategic importance of Armenia remaining within Russia's orbit. From about 2010 to 2015 I did monthly, at times weekly, commentaries about Russian-Armenian relations and Eurasian geopolitics in general. It was very difficult for me because I had no assistance from anywhere. The time I put into this blog therefore came at the expense of work and family. But a powerful feeling inside urged me to keep going; and I did. When Armenia joined the EEU and integrated into Russia's military structures a couple of years ago I finally felt a deep sense of relaxation, as if a very heavy burden was lifted off my back. And when Prime Minister Karen Karapetyan reemerged in Armenian politics, I finally felt that my personal mission was accomplished. I therefore felt I could take a step back as I really needed the rest.

Simply put: I have lived to see the institutionalization of Russian-Armenian alliance. Also, I feel more confident now that Armenians are collectively recognizing the strategic importance of Armenia's ties with Russia. Moreover, I feel satisfied knowing that, at least on a subatomic level, I had a hand in the outcome. As a result, I feel a strong sense of mission accomplished. I therefore no longer have the internal urge to continue as in the past. In other words, the motivational force that had propelled me in previous years has been gradually dissipating because I feel that this blog has lived to see the realization of its stated goal.

Going forward, I do not want to write merely for the sake of writing. Also, I do not want to say anything if I have nothing important to say. I feel like I have said everything I needed to say. Henceforth, I will post seasonal commentaries about topics I find important. I will however moderate the blog's comments section on a regular basis; ultimately because I'm interested in what readers of this blog have to say and also because it's through readers here that I am at times made aware of interesting developments. To limit clutter in the comments section, I kindly ask all participants of this blog to please keep comments coherent and strictly relevant to the featured topic of discussion. Moreover, please realize that when there are several anonymous visitors posting comments simultaneously, it becomes very confusing (not to mention extremely annoying) trying to figure out who is who and who said what. If you are here to engage in conversation, make an observation, express an idea or just attack me, I ask you to at least use a moniker to identify yourself.

Please appreciate the fact that I have put an enormous amount of information into this blog. In my opinion, most of my blog commentaries and articles, going back ten-plus years, are in varying degrees relevant to this day and will remain so for a long time to come. Posts in this blog can therefore be revisited by longtime readers and new comers alike. I therefore ask the reader to treat this blog as a depository of important information relating to Eurasian geopolitics. Russian-Armenian relations and humanity's historic fight against Globalism and Westernization.

Thank you for reading.