PRIORITY FOR THE EUROPEAN UNION

The Southern Gas Corridor (SGC) is a completely new energy map, and the role of Azerbaijan is gradually growing, Azerbaijani President Ilham Aliyev said at a cabinet meeting to discuss the results of the first quarter of 2015. "As you know, the European Union has put forward a number of proposals on energy alliance, and Azerbaijan is already indicated as an important partner in the documents of the European Commission. Of course, we are keeping track of all this work. We know how important the role of Azerbaijan is. We know that at present Azerbaijani gas is the only new source for Europe. We are doing our job, and it is bearing fruit," he said.

The most important part of the SGC is the Trans-Anatolian gas pipeline TANAP. In March, work on its construction was started in the Turkish city of Kars with the participation of the presidents of Azerbaijan, Turkey and Georgia. Azerbaijan is a driver and a major shareholder of the project with a share of 58 per cent. The remaining 30 per cent are owned by the Turkish side and another 12 per cent belong to BP, which is the main shareholder of the development of the Sah Daniz [Shah Deniz] gas field. It is expected that in 2018 Azerbaijani gas from Sah Daniz will go to Turkey.

The final part of the SGC should be the Trans-Adriatic Pipeline (TAP), which will make it possible to transport Caspian gas through Greece, Albania and the Adriatic Sea to southern Italy and further to Western Europe. The construction of the pipeline is expected to begin in 2016. The initial capacity of the TAP pipeline will be 10bn cubic metres per year with possible expansion to 20bn.

However, after the government of the extremely left-wing bloc SYRIZA led by Alexis Tsipras came to power in Greece, which is now experiencing huge financial and economic difficulties, some intrigue began around TAP. They expressed a wish for greater benefits from the project for Greece, while Athens has no financial resources to increase the share of Greece in it, the rates were calculated according to current European standards and there are no plans to increase them in someone's favour. Alexis Tsipras did not get any support in Brussels on the cancellation or postponement of the giant public debt or other issues. Moscow, which the new Greek prime minister recently visited, gave him a bunch of promises and tried to entice him to join the Turkish Stream project backed by Russian Gazprom, but disapproved by the European Union. No decisions were announced, but Greeks are creating an element of uncertainty in the TAP project, although at the same time, they undermine their already not very good reputation as a responsible partner and participant in agreements that have been signed.

Commenting on the situation, President Ilham Aliyev said he was confident that the artificial obstacles to the implementation of the TAP project will be eliminated and that the European Union itself will resolve these questions. But to ensure that the Greek side is not tempted to resort to banal blackmail in order to get additional and unfounded concessions, Baku mentioned the possibility of an alternative route through the restoration of the Nabucco West project. Bulgarian Prime Minister Boyko Borisov and President Ilham Aliyev stated at a joint press conference following his visit to Sofia on 4 March that the parties intend to raise this issue with Brussels as another extension of the SGC.

At the time, one of the reasons Azerbaijan chose the TAP project was the desire not to encounter the Russian South Stream in one area of the European gas market. But after Brussels refused to authorize the South Stream, Gazprom announced plans to build the Turkish Stream gas pipeline with a capacity of more than 60bn cubic metres a year, thus invading the SGC route. But without the consent and support of Brussels it will be difficult to do it. The European Union has repeatedly stated that it intends to continue to receive Russian gas via pipelines in Ukraine, and, if necessary, is ready to perform the transaction directly on the country's border with Russia. Consequently, the prospects of Gazprom's Turkish Stream, like the construction of a gas hub, remain uncertain. This raises the question of responsibility for the billions of dollars spent on building useless gas infrastructure on the Black Sea, the pipes that were ordered, sea pipe-layers standing idle in the ports of Bulgaria and so on. In order to justify its mistakes, Gazprom is likely to build an offshore pipeline limited to 17bn cubic metres in order to replace the gas that is now going to Turkey via Ukraine. But to this end, Moscow and Ankara still need to agree on discounts on gas deliveries that suit the sides. 

And Ankara has its own trump cards. Baku and Ankara are steadfast in their commitment to build the Southern Gas Corridor, and the work that began on the central part of the Trans-Anatolian gas pipeline is clear evidence of that. Even now Azerbaijani gas remains the cheapest in Turkey: in 2014 Gazprom supplied gas for 425 per dollars 1,000 cubic metres, Iran - for 490 dollars and Azerbaijan - for 335 dollars.

TANAP will reduce the excessive dependence of Turkey on gas supplies from Russia, and at the same time, the Azerbaijani-Turkish tandem will become a modest but important player on the European gas market. In addition to the already existing Baku-Tbilisi-Ceyhan oil pipeline, the Baku-Erzurum gas pipeline and the Baku-Tbilisi-Kars railway, TANAP will be another steel thread that firmly links Turkey and Azerbaijan and increase the geopolitical weight of the fraternal countries in the region and worldwide.

The construction of TANAP and TAP will make it possible to supply Azerbaijani gas to distribution networks in Turkey, Greece and Bulgaria, in which SOCAR shows interest. As a result of the implementation of large-scale petrochemical projects in Azerbaijan and Turkey, SOCAR has the potential to become not only an extractive, but also a powerful and vertically integrated multinational energy company. For Turkey, these projects will yield investment worth billions of dollars, make it possible to keep production and building facilities fully occupied, create jobs and get additional revenues for the budget and relatively cheap gas.

It is no secret that the capacities of the Southern Gas Corridor are more than enough not only for Azerbaijani energy resources. Therefore, from the very outset the European Union and Turkey have shown interest in Turkmenistan joining it. Russia reduced purchases from the previous 50bn cubic metres to 10bn last year, and announced plans to buy 4bn cubic metres in the current year. Not surprisingly, Ashgabat has an increased interest in transporting its gas to Europe via the Trans-Caspian gas pipeline, but the negotiations, which are being conducted on the matter, have not yielded a particular result yet.

But now Iran may also join the SGC. As a result of negotiations in Lausanne between the so-called "six" and representatives of the Islamic Republic of Iran, a "joint comprehensive plan of action" regarding Iran's nuclear programme was agreed upon. On this basis, the parties must prepare a specific agreement, the adoption of which will allow the UN Security Council to lift the sanctions imposed on Iran. If the subsequent negotiations are productive and they sign the relevant agreement until 30 June, Iran can increase production of substantial quantities of gas in a relatively short period of time as it is second to Russia in terms of gas reserves in the world.

Taking into account this fact, the head of SOCAR and then the Turkish energy minister declared their readiness to involve Iran in TANAP through the sale of a stake in the project. At the same time, Armenian and some Russian media maliciously interpreted these proposals as indirect recognition of the futility of TANAP. But a sober look is enough to understand that the reality is exactly the opposite. The lifting of sanctions on Iran will open up an opportunity for gas supplies from this country to Europe, and the best route of its delivery is TANAP. This raises the efficiency of the project rather than devalues it, as unscrupulous "analysts" in Yerevan and Moscow are raving. They seem to have forgotten that Iran owns 10 per cent in the project to develop Sah Daniz, and its original participation in TANAP was prevented only by sanctions. With their cancellation, Tehran could get a stake in the newly-built gas pipeline, but, as SOCAR President Rovnaq Abdullayev said, under commercial conditions, i.e. by offering a good price. Smear campaigns against Azerbaijani pipeline projects are not new. Similar pessimistic forecasts were made in respect of the Baku-Tbilisi-Ceyhan pipeline. However, ill-wishers were confounded, and BTC was built in a timely manner and brings stable income to its shareholders and transit countries. The prospects of TANAP are no worse. And if the project is joined by Iran and Turkmenistan, which have large gas reserves, its effectiveness and commercial attractiveness will only increase. And plus, the sale of a stake in the project, while SOCAR retains the controlling parcel, will provide additional income and at the same time, reduce the investment burden of Azerbaijan and Turkey.

The "grandiose" projects for the transit of Iranian oil and gas through the territory of Armenia if the sanctions are lifted, voiced by the Yerevan media, politicians and analysts, sound absolutely ridiculous. The question is where? If it is to Georgia, then it does not need it, as it fully meets its demand for oil and gas through Azerbaijan with the lowest rates in the region. Building pipelines to Armenia in order to turn them to Turkey is pointless as Iran and Turkey have a long common border and there has been a direct pipeline for a long time.

The successful implementation of large-scale regional projects initiated by Azerbaijan in partnership with Georgia and Turkey has created their reputation as responsible and business partners. In addition to natural gas reserves and the geographical location, it is an additional resource of confidence, which is very important for involving new partners such as Turkmenistan and Iran in the Southern Gas Corridor project. If the European Union is also consistent and insistent in its support for this project, its implementation will diversify gas supplies to consumers, increase their stability and significantly enhance the energy security of Europe.