Analysis: Azerbaijan’s oil factor in geopolitics

Tony Hayward, the CEO of the world’s oil giant company British Petroleum, arrived in Azerbaijan on July 6 and the same day the State Oil Company of Azerbaijan (SOCAR) unveiled its intention to increase gas deliveries to Russia. SOCAR President Rovnag Abdullayev told journalists that Baku had offered to Russia’s state-controlled natural gas monopoly Gazprom to increase supplies from 1 to 2 billion cubic meters of natural gas in 2011.

Analysts discuss whether this decision has political implications or everything is connected with the huge oil spill from a ruptured BP well in the Gulf of Mexico. The thing is that BP, which suffers billions of dollars’ worth of losses because of the continuing spill of oil and cleanup has announced its intention to sell part of its assets in the world to compensate for the losses. However, by the end of his visit to Baku, the British Petroleum CEO said he was not going to sell the company's assets in oil-rich Azerbaijan.

At present, British Petroleum is the operator of three major energy projects in Azerbaijan: the oil field of Azeri-Chirag-Guneshli (more than 34 percent), the gas field Shah Deniz (25.5 percent) and the Baku-Ceyhan pipeline (just over 30 percent). The total investment of the company in Azerbaijan reaches several billion dollars.

The political motivation of the process seems more likely. The statements by U.S. Secretary of State Hillary Clinton during her tour of the South Caucasus region, as Turkish newspapers write, have left no hopes for Azerbaijan for a resolution of the Karabakh conflict according to the Baku scenario. Arguably, Russia had promised Azerbaijan’s President Ilham Aliyev more than Clinton did, and so he’s finally decided to turn towards Moscow.

In any case, something has changed. Gazprom officials have repeatedly said they are ready to buy all the natural gas produced by Azerbaijan at European prices. However, the Azerbaijani side had originally promised to its Russian partners only 500 million cubic meters of natural gas, then one billion cubic meters. The main supplies of natural gas from Azerbaijan currently are made to Turkey via Georgia, along the Baku-Tbilisi-Erzurum line (which is a part of Nabucco, an EU and US-backed gas pipeline project).

It is possible that the head of BP had visited Baku, as Russia’s Deputy Prime Minister Igor Sechin asserts, because he is going to leave his post, and was visiting to introduce the new head of the company. (The BP press office has denied this report.)

The head of Gazprom Alexei Miller, meanwhile, has said that his company has a particular interest in BP projects in Azerbaijan, in particular, that it is ready at any time to discuss possible participation in the project of developing the Azerbaijani Shah Deniz gas field.

The significance of Azerbaijani sources of natural gas and oil to the West is clearly falling. In any case, in his letter to his Azeri counterpart, U.S. President Barack Obama defined the role of Azerbaijan for the United States as a transport corridor, and not a major supplier of raw materials. Only time will show what impact the changes in the oil sector will have on geopolitics.