Gas combinations of Baku and Ankara

By Victoria Panfilova, a commentator for Nezavisimaya Gazeta, exclusively for Vestnik Kavkaza

Azerbaijan has started negotiations with Iraq to adjoin it to European gas projects. Azerbaijani Foreign Minister Elmar Mammadyarov has recently made an unscheduled visit to Baghdad to discuss the problem. Indistinct Baku media sources say that Azerbaijan wants to expand its ambitious plans and invite countries of the Middle East to join the projects.

Mammadyarov offered his Iraqi counterpart Hoshyar Zebari to join the Trans-Anatolia Pipeline (TANAP) project to transport gas from Shah Deniz from the Georgian-Turkish border to the western borders of Turkey and then deeper into Europe through Greece and Italy.

Gulnara Rzayeva, an expert of the Azerbaijani Presidential Center for Strategic Studies, said that “export of Iraqi gas to the European market via TANAP will first of all boost profitability of the project. If the pipeline operates at full capacity, it will definitely affect profitability of the project and bring good dividends to shareholding companies, including the State Oil Company of Azerbaijan (SOCAR), the operator of TANAP.”

According to various evaluations, exports of Iraqi gas may reach 16 billion cubic meters a year. Data of the International Energy Agency says that the unconfirmed gas potential of the country totaled 7.5-8.5 trillion cubic meters. The indicators inspire prospects. However, Turkey has decided to play its own gas game.

The Turkish agency Haberler has recently published an article stating that Ankara considers switching from the Azerbaijani gas to that of Iraq. The latter will be ready to start exports, specialists say, by 2016. Haberler, insisting that such reorientation will save Turkey big funds due to low prices of Iraqi gas, assures that it is cheaper than gas in Azerbaijan, Russia and Iran. Iraqi gas fields are much closer to Turkey. Such decisions of Ankara will disappoint its gas partners and, according to Minister for Energy and Natural Resources Taner Yildiz, Turkey has started talks with Iraq to supply itself with gas and transport gas to Europe with the help of Turkish company BOTAS. Should Turkey realize the plans, they will affect Azerbaijan.

Baku does not draw attention to this and views negotiations of Turkey and Iraq as the path of two strategic partners towards a common goal. Gulmira Rzayeva believes that TANAP is the only project Turkey can use to deliver gas to Europe. The pipeline is peculiar because it does not belong to Turkey, its operator is an Azerbaijani company. “The technical potential of BOTAS does not allow deliveries of gas to Europe,” assumes Rzayeva. In her words, Azerbaijan is capable of fulfilling European gas needs and it would give the republic economic and political benefits.

Mikhail Krutikhin, a Russian expert and partner of RusEnergy, believes that expectations of Azerbaijan are exaggerated. “It seems that Baku mistakes the wish for the reality. The location of Iraqi gas plays an important role. The fields are located in the Iraqi Kurdistan. In this light, it is more logical to think that they will most likely negotiation with Turkey, which has more capabilities for a dialogue with them without the TANAP project,” Krutikhin told Vestnik Kavkaza. In his words, the Azerbaijani side may present the situation in such a way that the Turkish side will talk with Iraq and, as soon as BOTAS ‘realizes’ is does not have enough capacity, they will come to help the Turkish friend with TANAP. “But where is TANAP itself? It will be, as planned, in 2016? Does Azerbaijan have the gas volume needed to fill it? As logic suggests, it will run through Shah Deniz-2, so the pipeline will be unnecessary until 2018-2019 because Shah Deniz-2 will start giving ‘big’ gas only then,” supposes Krutikhin.

On the other hand, it seems Azerbaijan is positive if Turkey decides to start with Iraqi gas. It probably does not care much who will be given credit for success in negotiations with Baghdad. What matters is to see gas go to Europe through its pipeline. As Gulmira Rzayeva noted, it will be a source of both economic profit and big political dividends.