Will Nagorno-Karabakh conflict roil oil, gas supplies?

The fighting that has erupted between Armenia and Azerbaijan over the long-disputed Nagorno Karabakh region is unlike to affect critical pipelines transporting oil and gas to the global markets,  New Europe reports in its article Armenia, Azerbaijan Nagorno-Karabakh conflict won’t roil oil, gas supplies.

“There are no major oil or gas transit lines in the Nagorno Karabakh region and, at this stage, there is no reason to assume the conflict will move outside of the region to affect any significant oil or gas infrastructure,” Chris Weafer, the founding partner of Macro-Advisory in Moscow, said.

Weafer noted that the crude oil price had a small knee-jerk reaction to the news of the conflict, as it always does when such conflicts involve an oil or gas exporter. “But that move will be very short-lived. Oil traders will quickly return to the more important issues of demand and the OPEC+ production data,” he said, asked whether the deadly clashes between the two former Soviet republics in the South Caucasus was likely to boost oil prices.

“This is a conflict that neither Russia, Europe or the US wants to see develop much further. It is their collective worst nightmare,” Weafer argued. According to Weafer, Moscow is most unlikely to intervene in breakaway region of Nagorno Karabakh. “Moscow officials will be working overtime to try and bring this conflict to an end as quickly as possible and to get both sides around a table,” Weafer said.

The rising tension comes as Azerbaijan is about to start exports to southeast Europe from the second phase of giant offshore Shakh Deniz field, which is developed by a consortium led by BP. “Historically the very vocal Armenian diaspora – there is a large number in France – would have pushed for EU support. But, the fact that Azerbaijan is about to start pumping approximately 10 Bcm (billion cubic metres) of gas annually through the Southern Gas Corridor, primarily to Italy but also to the Balkans, complicates the position for Brussels. This is undoubtedly something that Baku is banking on,” Weafer said.