EU-Azerbaijan gas deal is a repeat mistake – POLITICO
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Gligor Radečić is a gas campaign manager at CEE Bankwatch Network.
As part of the European Union’s mission to get rid of Russian fossil gas, in mid-July European Commission President Ursula von der Leyen and Azerbaijani President Ilham Aliyev signed a memorandum aimed at doubling exports of Azerbaijani gas to the block.
According to the document, by 2027, the Caspian Petrostate will supply Europe with at least 20 billion cubic meters of fossil gas each year through the Southern Gas Corridor (SGC) – a 3,000 kilometer chain of gas pipelines carrying gas to the EU.
But this deal runs counter to the EU’s own climate goals and human rights standards.
As civil society groups have argued before, supporting the expansion of gas extraction will only enrich the autocratic regime in Azerbaijan, known for its endemic corruption and repression of any opposition in the country.
What is little discussed, however, is that the essential infrastructure needed to extract and transport the gas from the Caspian Sea to Europe is co-owned by Lukoil – a Russian oil and gas giant with close ties to the regime. of Russian President Vladimir Putin.
One of the largest oil and gas companies in the world, Lukoil itself claims to be one of the three biggest taxpayers in Russia, having paid more than $200 billion in taxes in 2019 alone. Lukoil also does part of the companies on the US sanctions list.
Vagit Alekperov, former CEO of Lukoil and former deputy oil and gas minister of the Soviet Union, had even made outspoken statements in the past suggesting that he considered the company’s goals to be closely aligned with those of the Russian government. . He then resigned after the UK and Australia imposed sanctions on a group of Russian elites and oligarchs who, in the words of the Australian foreign minister, are “close to Putin;[and] facilitate and support its actions.
Lukoil has been operating in the Azerbaijani oil and gas sector since 1994. In the early 2000s, it focused its efforts in Azerbaijan on developing the Shah Deniz fossil gas fields, which are among the largest in the world.
In fact, days before Russia invaded Ukraine, Lukoil completed the acquisition of Malaysian Petronas’ stake in Shah Deniz for $1.45 billion, increasing its stake in the project from 10% to 19.99% and becoming the second largest shareholder after British Petroleum. (PB).
Besides Shah Deniz, which will be the main export area in the coming decades, Lukoil is also pursuing other potential developments in Azerbaijan. In 2021, the company purchased a 25% stake in the Shallow Water Absheron Peninsula (SWAP) exploration project from BP.
And after 30 years of dispute, in January of the same year, when Azerbaijan and Turkmenistan agreed on the joint development of the Dostluk field – located on the border of their respective sectors of the Caspian Sea – Alekperov was discussing options for investment for Lukoil with the Turkmens. President Gurbanguly Berdymukhamedov barely a month later, in order to participate in the joint effort of Azerbaijan and Turkmenistan.
In addition to Azerbaijan’s source of fossil gas to the EU, Lukoil is also a shareholder in the South Caucasus pipeline, the easternmost section of the SGC. And he owns a 15.992% share in the Azerbaijan Gas Supply Company, a shipper and seller of Azerbaijani fossil gas destined for Europe via SGC.
Meanwhile, promoted by the Commission under the guise of mitigating Europe’s dependence on Russian fossil gas, the SGC itself has faced major opposition from civil society for breaching a series EU policies. And, as Bankwatch already warned in 2015, Moscow was involved from the start.
The SGC is the only route connecting the Caspian Sea gas fields to the EU, and Azerbaijan started exporting gas to Europe through it in 2020. The corridor passes through Georgia, Turkey, Greece, Albania and Italy to other EU markets, and it consists of the South Caucasus Gas Pipeline, Trans-Anatolian Gas Pipeline, Trans-Adriatic Gas Pipeline and other branch lines, while its main active gas field is currently the Shah Deniz gas field in the Caspian Sea.
Worth an estimated $45 billion, the SGC was, among other things, supported by public funds through the EU’s Connecting Europe Facility, the European Investment Bank and the European Bank for Reconstruction and development.
According to von der Leyen, Azerbaijan is “a crucial and reliable partner for our security of supply”. Yet Russia’s involvement in key parts of the Azeri gas supply chain en route to Europe casts doubt on any claims of energy security.
Not only is Lukoil a major taxpayer in Russia, which is able to use its profits from gas from Azerbaijan to finance Putin’s war machine, but its position in many Azeri projects gives the company access to information that could be used to support Russia’s continued arming. its own fossil fuel exports.
This deal simply cannot help the EU deal with potential gas shortages now. The increase in gas production and transmission capacity is technically impossible to implement in less than five yearsand the EU must already start to drastically reduce its demand for gas in order to meet its own climate targets.
It is high time for the Commission to start learning from its past mistakes regarding energy diversification and energy security on the basis of the agreements it has made with autocratic regimes. They only serve to perpetuate Europe’s fixation on fossil fuels, exactly when it desperately needs to end.