"WE ARE WRITING HISTORY"

Russia increases fourfold the volume of gas it purchases from Azerbaijan, raising it to 2 billion cubic metres or more. One result of Russian President Dmitriy Medvedev's visit to Baku was the signing of addenda to last year's gas contract between Gazprom and the State Oil Company of Azerbaijan (SOCAR). Under the new arrangements, the Russian side will purchase up to 2 billion cubic metres of gas in 2011; from 2012, the volume will increase - the contract does not stipulate an upper limit. And the price of Azerbaijani gas will be the highest in the CIS - up to $245 per thousand cubic metres.

Immediately after the news broke, experts raised a cacophony of views about the political implications of the agreement. Allegedly, Russia is trying to leave Nabucco without gas, monopolizing Caspian gas supplies to Europe, or Azerbaijan is trying to bypass Turkey in selling its gas etc. But these speculations were dispelled in under two weeks; Baku reaffirmed its multi-faceted foreign policy and demonstrated its reliability as a partner to Western consumers.

Presidents Ilham Aliyev of Azerbaijan, Traian B?sescu of Romania, Mikheil Saakashvili of Georgia and Prime Minister Viktor Orb?n of Hungary signed the Baku Declaration on implementation of the Azerbaijan-Georgia-Romania Interconnector (AGRI) gas transportation project, under which Caspian gas will be supplied to South-east and Central Europe in liquefied form.

"We are writing history here," the Azerbaijani president said in his speech following the signing ceremony. He noted that diversification is an important element of the country's energy security, emphasizing the presence of sufficient resources and infrastructure in Azerbaijan.

Ilham Aliyev said that Azerbaijan has seven oil and gas pipelines, which transport energy in different directions. This year the country plans to produce 28 billion cubic metres of gas, of which 11-10 billion will meet domestic demand, while the rest will be pumped into depots and exported.

The presidents of Romania and Georgia, as well as the prime minister of Hungary, spoke in the same optimistic spirit about the prospects of AGRI at a meeting with journalists. The president of Romania and Hungary's prime minister made clear the European Union's full support for the project. They said that Hungary's participation in the project made AGRI even more attractive to European consumers. "Hungary's inclusion in the project is an important element of its reliability," said President Traian B?sescu.

The leaders of member countries of the AGRI project launched a process to develop a feasibility study and address the financing of the project. Participants in the Baku Energy Summit noted that the basic infrastructure for the project is almost ready, and it only remains to build the essential elements - terminals and plants to liquefy and dilute gas at the Georgian port of Kulevi and the Romanian port of Constanta.

The AGRI project involves the transportation of Azerbaijani gas through pipelines to the Black Sea coast of Georgia. There, the gas will be liquefied and transported by tankers to a terminal at the Romanian port of Constanta. Then the Azerbaijani gas will be diluted and transported further along the gas transportation systems of Romania, Hungary etc.

The project, depending on terminal capacities, will cost member countries from 1.2 to 4.5 billion euros. In this way, and for the first time, it will be possible to export up to 8 billion cubic metres of liquefied Caspian gas.

Thus, Europe has a new opportunity to ensure its energy security, avoiding various political risks. For its part, Azerbaijan nullifies the possibility of transit countries, through which the pipelines pass, dictating their terms.

A further strategically important aspect of AGRI is that the project opens the way for the second phase of exploitation of the Sah Daniz deposit. The Sah Daniz 2 project needs about $ 20 billion in investment. Funding for the project depends on the availability of guaranteed markets for gas. And AGRI opens the way to stable European markets. At the same time, Azerbaijan's resource reserves enable it to maintain the full volume of gas exports to Turkey and Russia.

In addition, AGRI will have sufficient capacity to transport gas from the eastern shore of the Caspian Sea. Even without building a Trans-Caspian gas pipeline, gas from Turkmenistan could be delivered in compressed form to Baku by sea and then to the Black Sea coast of Georgia by pipeline and on to Romania.

As can be seen, even a cursory analysis of the pros and cons of the AGRI project shows that it is beneficial, both commercially and politically. Given the fact that gas is also a political commodity, then, of course, this project will increase the number of Azerbaijan's friends.